Third-quarter fiscal 2010 results announced by Arcadia Resources

Feb 5 2010

Arcadia Resources, Inc. (NYSE Amex: KAD), a leading provider of innovative consumer health care services under the Arcadia HealthCare(SM) brand, today announced net revenues of $26.1 million and a net loss of $3.2 million, or $0.02 per share for the fiscal third quarter ended December 31, 2009.

Third-Quarter Highlights

• Pharmacy revenues increased 169.0% over prior year quarter and 20.5% sequentially
• Pharmacy gross margins increase to 17.3%, or 226 bps over second quarter and 59 bps, over prior year quarter
• DailyMed™ and WellPoint's affiliated health plan launched a public awareness campaign in California

For the third quarter of fiscal 2010, Arcadia reported net revenues of $26.1 million, compared with net revenues of $26.7 million for the same period last year.  In its Pharmacy segment, Arcadia reported net revenues of $4.1 million, or a 169.0% increase for its DailyMed medication management system for the current quarter compared with the same period a year ago.  Additionally, Pharmacy gross margins increased to 17.3% during the third quarter compared to 16.8% in the third quarter of fiscal 2009.  Net revenue in the Services segment was $21.6 million, a decrease of $2.9 million, or 12.0%, compared to the same quarter last year due primarily to a decline in medical staffing revenue.

Arcadia reported a net loss from continuing operations of $3.0 million, or $0.02 per share, in the current quarter, compared to a net loss from continuing operations of $2.9 million, or $0.02 per share, in the same period in fiscal 2009.  The consolidated net loss, including discontinued operations, was $3.2 million, or $0.02, for both fiscal third quarters in 2010 and 2009.

"We continued to make solid progress in our Pharmacy business as an organization and in tandem with our customers.  As an example, just yesterday, we jointly launched a much anticipated state-wide public awareness campaign in Sacramento, California on the value of the DailyMed Pharmacy Program with WellPoint's affiliated health plan for its high-risk Medi-Cal members.  The event emphasized our interest in improving care while simultaneously reducing costs, and was aimed at lawmakers, regulators, providers and an initial 50,000 Medi-Cal members most likely to benefit from the program," said Marvin R. Richardson, President and Chief Executive Officer of Arcadia.  

Richardson continued, "This event follows on the successful launch of the DailyMed program in Virginia, where we are on track to achieve our enrollment goal of 15%-20% of the targeted members in WellPoint's affiliated health plans in the state.  In short, we are beginning to see quantifiable results, where our DailyMed program lowers health care costs through a reduction in unnecessary hospitalizations, emergency room visits and nursing home admissions, leading to a higher quality of life for our customers.  The committed outreach, growing enrollment and the results to date underscore the depth of this opportunity and further our commitment to achieve similar success in California and beyond."

"We continue to focus on narrowing our operating losses through both enhanced profitability of our Pharmacy business as well as a disciplined approach to our overall spending.  Through these efforts we reduced our operating losses by approximately $825,000 over the prior quarter," concluded Richardson.

Fiscal 2010 Third Quarter Results

Arcadia reported $26.1 million in revenue from continuing operations during the quarter, down slightly from $26.7 million during the same period a year ago.  The Company's gross margin from continuing operations was 28.6% during the third quarter, a 90 bps decline from the same period a year ago.  The reduction in gross margin was driven by a shift in mix towards Pharmacy revenue, which has lower margins than the Company's Services segment.    

Capital Resources and Liquidity

As previously announced on November 9, 2009, the Company entered into definitive agreements in connection with an $11.1 million equity financing.  Following the closing, after fees and debt extinguishment, the Company had an additional $7.9 million of cash to fund future operations.

At December 31, 2009, the Company had total cash plus line-of-credit availability of $7.8 million.

Arcadia reported negative cash flow from total operations of $5.5 million for the first nine months of fiscal 2010, compared to positive cash flow of $38,000 for the same period a year ago.  Negative cash flow from operations for the third quarter was $2.2 million compared to $1.7 and $1.6 million for the second and first quarter of the current fiscal year, respectively.  The increase in negative cash flow during the third quarter of fiscal 2010 was primarily related to additional working capital investments in the pharmacy business and one additional payroll period during October 2009.