Arcadia fourth-quarter net loss decreases to $19.4 million

Jun 11 2010

Arcadia Resources, Inc. (NYSE Amex: KAD), a leading provider of innovative consumer health care services under the Arcadia HealthCare(SM) brand, today announced fourth quarter revenues of $25.5 million and a net loss of $19.2 million, or $0.11 per share, which compares to revenue of $25.9 million and a net loss of $36.7 million, or $0.27 per share for the same period in the fiscal 2009.  For the fiscal year ended March 31, 2010, the Company reported revenues of $103.6 million and a net loss of $31.1 million, or $0.19 per share, which compares to revenues of $106.1 million and a net loss of $46.5 million, or $0.35 per share for fiscal 2009.

"We achieved a number of important milestones this year, which set the foundation for continued growth for both our businesses and enhanced profitability in our DailyMed business," said Marvin R. Richardson, President and Chief Executive Officer of Arcadia.  "We sold off non-strategic business units to improve our focus, grew our DailyMed business by over 150% annually to 15% of total Company revenues and maintained consistent year-over-year profitability in the Services segment despite a decline in medical staffing revenue of over $10 million for the fiscal year."

Fourth-Quarter and Recent Highlights

• Pharmacy revenues increased 103.5% over prior year quarter and 7.7% over the third quarter
• DailyMed launched by Alliance Healthcare Partners to Medicare Advantage and high risk commercial members in Illinois and Iowa
• New prime vendor agreement and $5 million line of credit established with H.D. Smith

For the fourth quarter of fiscal 2010, Arcadia reported revenues of $25.5 million, compared with revenues of $25.9 million for the same period last year.  In its Pharmacy segment, Arcadia reported revenues of $4.4 million, or a 103.5% increase for its DailyMed medication management system for the fiscal 2010 fourth quarter, compared with the same period a year ago.  Revenue in the Services segment was $20.7 million, a decrease of $2.5 million, or 10.9%, 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 $19.4 million, or $0.11 per share, in the fourth quarter of fiscal 2010, compared to a net loss from continuing operations of $32.7 million, or $0.24 per share, in the same period in fiscal 2009.  The consolidated net loss, including discontinued operations, was $19.2 million, or $0.11 per share, in the fiscal fourth quarter in 2010 compared to a net loss of $36.7 million, or $0.27 per share, in the fiscal fourth quarter in 2009.  In the fourth quarter of fiscal 2010, Arcadia reported a one-time impairment charge to goodwill of $14.6 million related to the Company's Services segment which compares to a one-time impairment charge of $23.5 million in the fourth quarter of fiscal 2009 related to the Company's Pharmacy and Catalog segments.

Commenting further on important achievements Richardson continued.  "In our Pharmacy operations, we established a new prime vendor agreement with H.D. Smith which has already resulted in significant reductions in our branded and generic drug costs as well as the opportunity to participate in group purchase programs which also lowers our costs.  We moved into our new headquarters in May and will move our Indianapolis pharmacy operations into this same facility this month which will allow for greater capacity and efficiency for our pharmacy operations.  Finally, we have undertaken a number of new enrollment programs designed to streamline our new member acquisition capabilities."

Fiscal 2010 Fourth Quarter Results

Arcadia reported $25.5 million in revenue from continuing operations during the quarter, down slightly from $25.9 million during the same period a year ago.  The Company's gross margin from continuing operations was 27.1% during the fourth quarter, a decline of 2.0% 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.    

Pharmacy: Pharmacy segment revenues increased 103.5% to $4.4 million for the fourth quarter of fiscal 2010, compared to $2.2 million in revenues for the fourth quarter of fiscal 2009.  This growth was driven by the Company's DailyMed program and the continued roll-out of the program to high-risk Medicaid members. The program was launched in Virginia in August 2009 and was rolled out to California members late in fiscal fourth quarter 2010.

Pharmacy gross margin decreased to 12.3% in the fourth quarter of fiscal 2010 from 17.1% in the fourth quarter of fiscal 2009.  Gross margins were negatively affected by changes in payer, member and product mix.  

Services: The Company's Services segment, which includes Arcadia's home care and medical staffing business, reported revenues of $20.7 million for the 2010 fiscal fourth quarter compared to revenues of $23.2 million for the fourth quarter a year ago.  Within the Services segment, home care revenues decreased by $0.8 million, or 4.9%, to $16.5 million from $17.3 million in the same period last year.  The primary driver of the decrease in the Services segment was a decline in per diem medical staffing and travel nursing staffing revenue to $4.2 million in the current quarter, compared with $5.9 million during the fourth quarter of fiscal 2009.  Gross margins within the Services segment was essentially level with the same period last year.

Fiscal 2010 Annual Results

For the year ended March 31, 2010, revenues decreased to $103.6 million from $106.1 million in the prior year due to a decrease of $10.9 million, or 11.2%, in the Company's Services revenues offset by an increase of $9.1 million, or 151.8%, in the Company's Pharmacy revenues.  Gross profits decreased to $29.2 million, or 28.2% of revenue, for fiscal year 2010 from $31.8 million, or 29.9% of revenue, for the fiscal year 2009.  The reduction in gross margins was driven by a shift in mix towards Pharmacy revenue, which has lower margins than the Company's Services segment.  Gross margins in the Services business were 30.5% for both fiscal 2010 and 2009.  While the overall mix of higher margin home care business increased as a percentage of total revenues, this gross margin benefit was offset by several factors, including:  a reduction in margins on several state-sponsored home care programs, such as Arizona, North Carolina, Washington and California; a reduction in the percentage of business generated in some of the Company's higher margin offices and markets, including the state of Michigan; and an overall decline in the margins in the medical staffing business due to changes in staffing business mix.  Gross profits in the Company's Pharmacy segment increased to $2.1 million for fiscal year 2010, an increase of 107.6% compared to fiscal year 2009.  The increase in gross profit was due to higher Pharmacy revenues.  Gross margins declined to 14.0% in fiscal 2010 compared to 17.0% in fiscal 2009.  Gross margins were negatively affected by changes in payer, patient and product mix. Loss from continuing operations decreased to $30.0 million, or $0.18 per share, in fiscal 2010 from $43.0 million, or $0.32 per share in fiscal 2009.  The decrease in the loss was primarily due to the higher impairment charge taken in fiscal 2009 compared with fiscal 2010.  Net loss decreased to $31.1 million, or $0.19 per share, in fiscal 2010, from $46.5 million, or $0.35 per share in fiscal 2009.

Capital Resources and Liquidity

At March 31, 2010, the Company had total cash plus line-of-credit availability of $5.8 million. As previously announced on April 26, 2010, the Company secured a $5 million line of credit from H.D. Smith.  

Arcadia reported negative cash flow from total operations of $5.9 million during fiscal 2010, compared to positive cash flow of $778,000 for fiscal 2009. The increase in negative cash flow during fiscal 2010 was primarily driven by the loss of cash generated by the businesses that were disposed of during fiscal first quarter 2010.