ORLANDO, Fla., April 2 /PRNewswire-FirstCall/ -- PainCare Holdings, Inc. , one of the nation's leading providers of pain-focused medical and surgical solutions and services, today announced results for its fiscal year ended December 31, 2006.
Key Financial Highlights: * 2006 revenues from continuing operations remained relatively flat at $63.7 million compared to 2005 revenues from continuing operations of $63.6 million. Total revenues, as reflected in the financial statements filed with the SEC today on Form 10-K, exclude operating revenues of $20.4 million and $5.1 million, respectively, from Amphora, LLC and the Company's three ambulatory surgery centers (ASCs) held for sale; these have been accounted for as "discontinued operations". PainCare rescinded its acquisition of Amphora in December, 2006 and, as previously disclosed, is currently marketing for sale its ASCs located in Florida and Maryland. * A $34.0 million non-cash impairment charge was booked in 2006 primarily due to a reduction in the carrying value of certain physician practices previously acquired by the Company. * During 2006, professional fees increased to $7.9 million, up from $4.8 million in the prior year. Of the $3.1 million year-over-year increase, approximately $2.4 million was related to the Company's financial restatements and Sarbanes-Oxley compliance. * Consolidated adjusted EBITDA decreased to $8.6 million in 2006 compared to $8.8 million in the prior year. * As of December 31, 2006, the Company had approximately $3.6 million in cash, approximately $12.4 million in receivables from continuing operations and approximately $100 million in total stockholders' equity. 2006 Operational Highlights: * The Company completed the restatement of its previously issued December 31, 2004 and 2003 in the filing of the December 31, 2005 10-KA. * PainCare responded to all comment letters received from the SEC and subsequently received formal notification that the SEC had completed its review of the Company's financial filings. * Several initiatives were implemented to reduce costs and mitigate material weaknesses in the Company's financial reporting systems, including centralizing cash management of all its business interests under the corporate finance department. * Seven physicians and nine physician assistants were recruited to the PainCare organization to increase facility productivity and practice efficiencies. * The Company resolved the derivative law suit related to its financial restatements; the Court is set to grant final approval of the resolution on April 28, 2007. * On September 20, 2006, a motion to dismiss the pending securities class action was filed with the Federal District Court. Subsequently, the District Court referred the matter to a Federal Magistrate for a hearing, report and recommendation. On January 17, 2007, the Magistrate held a hearing and took the matter under submission. On March 26, 2007, the Magistrate issued a report which recommended that the District Court dismiss all outstanding claims with leave to amend. While the Company is confident that the District Court will adopt the recommendation in whole, the recommendation is subject to possible objection by the plaintiff and review by the District Court before becoming a final order. The District Court could adopt, modify or reject the Magistrate's recommendation. * Integrated Pain Solutions, LLC (IPS) was founded by PainCare to pursue new business opportunities in Medical Managed Services, with a specific focus on the treatment of musculoskeletal pain. IPS is the nation's first pain-focused managed services organization that is dedicated to achieving value-based, patient-centric care through a multi-disciplinary network of highly privileged providers and specialists; its proprietary, evidenced-based clinical pathways for the treatment of acute and chronic musculoskeletal pain; an IT platform used to capture, track, analyze and report outcome data; and a fully-integrated support and service platform to provide telephonic and electronic utilization management, case management and care coaching services. RESTRUCTURING UPDATE:
Randy Lubinsky, PainCare's Chief Executive Officer, stated, "There is no avoiding the fact that 2006 proved to be a highly challenging year for PainCare -- a year defined by a series of events that, at times, stridently tested our resolve in building a national health services company capable of advancing and elevating the quality and effectiveness of care for people suffering from acute or chronic pain."
"However, everything we have faced and worked to overcome has not deterred us; rather it has served to strongly reaffirm our vision and our intent to succeed. Today, our business decisions and the tactical execution of our growth strategies are being dictated by only best industry practices in all that we do. Moreover, superior performance and personal accountability is now demanded from everyone associated with our Company -- whether they are a shareholder, physician, employee, business partner or vendor.
"With a goal of establishing a national network of critically-acclaimed Centers of Excellence in key geographic regions around the Country, each supported by our proprietary Managed Services Organization, Integrated Pain Solutions (IPS), PainCare believes it can play a role in achieving better pain treatment outcomes for its patients; use in-depth outcome analysis to improve the quality and effectiveness of care; and deliver cost savings and benefits to both payors and providers.
"As we have previously shared, a critical element of our financial restructuring strategy is the divesture of our ambulatory surgery centers located in Maryland and South Florida. In this regard, we have made progress in our discussions with several suitors and believe that we could complete these sales transactions in the second quarter. In addition, we continue to work with our existing senior lender as we work through this restructuring process.
"As previously noted, IPS will serve as a central player in our strategy to support a national network of pain-focused Centers of Excellence. Having completed the development of the prescribed clinical pathways to be administered through our regionalized provider networks, IPS is now proceeding with the build-up of its IT and operational infrastructure, as well as pursuing discussions with a wide range of potential business partners who may be tasked with certain outsourced support functions, including utilization management services and bio-statistical data mining. By compiling and analyzing data related to patient treatment and resulting outcomes over full care cycles, IPS is expected to be able to measure and improve the performance of its clinical pathways; empower providers with 'best practices' knowledge on how to enhance care delivery based on actual outcome data; and achieve cost savings for payors through an interventional approach to the treatment of pain.
"In addition, IPS continues to have discussions with several mid- to large-sized payor groups interested in working with us to provide managed services to their members. In accordance with our plan, we expect to launch the first IPS beta programs in late Q2/early Q3 of this year with a national roll-out anticipated for the following 12 months.
"I'd like to say that by sharing a renewed commitment to building an organization centered strictly on professional excellence and value-based care, we believe that the past year will ultimately be viewed as a difficult, but necessary, period in our history -- a year that served to fortify our foundational beliefs and growth expectations, and strengthen our resolve to succeed," concluded Lubinsky.
FINANCIAL CHARTS TO FOLLOW PAINCARE HOLDINGS, INC. Consolidated Statements of Operations For the years ended December 31, 2006, 2005 and 2004 2006 2005 2004 (Unaudited) (As restated) Revenues: Pain management $46,092,950 $43,269,382 $22,316,610 Surgeries 5,347,676 6,165,175 5,202,766 Ancillary services 12,288,256 14,113,756 10,398,524 Total revenues 63,728,882 63,548,313 37,917,900 Cost of revenues 20,270,361 11,549,973 6,663,945 Gross profit 43,458,521 51,998,340 31,253,955 General and administrative expense 39,828,569 38,510,708 20,408,656 Amortization expense 2,263,010 1,529,438 549,229 Impairment of goodwill 22,098,675 - - Impairment of intangible assets 11,895,837 - - Depreciation expense 2,361,378 1,424,793 837,484 Operating income (loss) (34,988,948) 10,533,401 9,458,586 Interest income (expense) (3,609,655) (4,308,502) (3,463,677) Derivative benefit (expense) 9,997,201 (7,055,502) (3,256,372) Other income (expense) 203,229 457,250 170,568 Income (loss) from continuing operations before income taxes (28,398,173) (373,353) 2,909,105 Benefit (provision) for income taxes 2,930,928 (5,110,651) (4,410,587) Loss from continuing operations (25,467,245) (5,484,004) (1,501,482) Discontinued operations: Income (loss) from discontinued operations (less applicable income tax (benefit) of $91,130 and ($184,972)) (336,465) 144,626 - Loss on disposal of discontinued operations (plus applicable income tax benefit of $1,112,918) (1,670,721) - - Income (loss) from discontinued operations, net of tax (2,007,186) 144,626 - Loss from cont. operations before cumulative effect of a change in accounting principle (27,474,431) (5,339,378) (1,501,482) Cumulative effect of a change in accounting principle (net of tax of $661,283 ) 991,925 - - Net loss per common share $(26,482,506) $(5,339,378) $(1,501,482) Basic loss per common share: Loss from continuing operations before cumulative effect of a change in accounting principle $(0.39) $(0.10) $(0.05) Loss from discontinued operations $(0.03) - - Cumulative effect of a change in accounting principle $0.01 - - Net loss per common share $(0.41) $(0.10) $(0.05) Diluted loss per common share: Loss from continuing operations before cumulative effect of a change in accounting principle $(0.39) $(0.10) $(0.05) Loss from discontinued operations $(0.03) - - Cumulative effect of a change in accounting principle $0.01 - - Net loss per common share $(0.41) $(0.10) $(0.05) Basic weighted average common shares outstanding 64,600,427 51,316,562 32,923,211 Diluted weighted average common shares outstanding 64,600,427 51,316,562 32,923,211
To supplement PainCare's consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), management continues to believe that an understanding of Consolidated Adjusted EBITDA is an important measure of operating performance, leverage capacity, its ability to service its debt, and its ability to make capital expenditures for our stockholders.
The Company uses Consolidated Adjusted EBITDA on a consolidated basis to assess its operating performance. Management believes it is meaningful because it provides investors a basis using criteria that are used by PainCare's internal decision makers. The Company's internal decision makers believe Consolidated Adjusted EBITDA is a meaningful measure, because it represents a transparent view of PainCare's recurring operating performance and allows management to readily view operating trends, perform analytical comparisons and benchmarking between segments. Additionally, management believes the inclusion of professional fees associated with litigation, accounting restatement, audit and tax work associated with the restatement process, and the implementation of Sarbanes-Oxley Section 404 and other non-ordinary course charges distort within EBITDA their ability to efficiently assess and view the core operating trends on a consolidated basis and within segments. PainCare reconciles consolidated Adjusted EBITDA to gain/(loss) from continuing operations.
The Company also uses Consolidated Adjusted EBITDA on a consolidated basis as a liquidity measure. Management believes this financial measure on a consolidated basis is important in analyzing the Company's liquidity because it is also a component of certain material covenants contained within and defined by its credit agreement. These covenants are material terms of these agreements because they govern the Company's credit agreement, which in turn represent a substantial portion of its capitalization. Non-compliance with these financial covenants under its credit facilities-its interest coverage ratio and its leverage ratio-could result in the lenders requiring the Company to immediately repay all amounts borrowed. Any such acceleration could also lead the investors in our public debt to accelerate their maturity. In addition, if PainCare cannot satisfy these financial covenants in the indenture governing the credit agreements, management cannot engage in certain activities, such as incurring additional indebtedness, making certain payments, acquiring and disposing of assets. Consequently, Consolidated Adjusted EBITDA is critical to the Company's assessment of our liquidity.
In general terms, the definition of Consolidated Adjusted EBITDA, per its credit agreement, is defined as consolidated net earnings (or loss), minus extraordinary gains and interest income, plus interest expense, income taxes, and depreciation and amortization for such period, in each case, as determined in accordance with GAAP.
However, Consolidated Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America, and the items excluded from Consolidated Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Consolidated Adjusted EBITDA should not be considered a substitute for net gain/(loss) from continuing operations or cash flows from operating, investing, or financing activities. Because Consolidated Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles in the United States of America and is thus susceptible to varying calculations, Consolidated Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenue and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the Company's consolidated financial statements filed on Form 10-K.
Reconciliation of Loss from Continuing Operations to Consolidated Adjusted EBITDA For the year ended December 31, 2006 2005 2004 (Unaudited) (Unaudited) (Unaudited) Loss from continuing operations (25,467,245) (5,484,004) (1,501,482) Provision for income tax expense (benefit) (2,930,928) 5,110,651 4,410,587 Depreciation and amortization 4,624,388 2,954,231 1,386,713 Impairment of goodwill 22,098,675 - - Impairment of other assets 11,895,837 - - Interest expense 3,609,655 4,308,502 3,463,677 Minority interest in earnings of consolidated affiliates - - - Other income (203,229) (457,250) (170,568) Consolidated Adjusted EBITDA before class action settlement expense and professional fees - restatement 13,627,153 6,432,130 7,588,927 Medical malpractice legal settlement 550,000 - - Professional fees - restatement 2,400,000 - - Non-cash compensation (7,975,675) 2,382,259 356,590 Consolidated Adjusted EBITDA 8,601,478 8,814,389 7,945,517 Reconciliation of Consolidated Adjustment EBITDA to Net Cash Provided by (used in) Operating Activities For the year ended December 31, 2006 2005 2004 (Unaudited) (Unaudited) (Unaudited) Consolidated Adjusted EBITDA 8,601,478 8,814,389 7,945,517 Professional fees - restatement (2,400,000) - - Medical malpractice legal settlement (550,000) - - Interest expense (3,609,655) (4,308,502) (3,463,677) Other income 203,229 457,250 170,568 Amortization of debt discounts 2,176,744 1,383,324 1,805,846 Amortization of deferred financing costs - (475,717) - Stock issued for interest payments 325,407 991,146 383,053 Current portion of income tax provision 5,729,369 (3,997,085) (3,661,964) Mark to market derivative (9,997,201) 7,055,502 3,256,372 Loss on disposal of property and equipment - 88,651 - Non-cash transactions (835) 28,143 30,415 Change in operating assets and liabilities, net of assets acquired (999,870) (1,426,358) (2,347,104) Net cash provided by (used in) operating activities attributed to discontinued operations (292,529) 562,354 - Net Cash Provided by (used in) Operating Activities (813,863) 9,173,097 4,119,026
This press release contains forward-looking statements that may be subject to various risks and uncertainties. Such forward-looking statements are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements, which may include statements regarding our future financial performance or results of operations, including expected revenue growth, cash flow growth, future expenses, future operating margins and other future or expected performance, are subject to the following risks: the acquisition of businesses or the launch of new lines of business, which could increase operating expenses and dilute operating margins; the inability to attract new patients by our owned practices, the managed practices and the limited management practice; increased competition, which could lead to negative pressure on our pricing and the need for increased marketing; the inability to maintain, establish or renew relationships with physician practices, whether due to competition or other factors; the inability to comply with regulatory requirements governing our owned practices, the managed practices and the limited management practices; that projected operating efficiencies will not be achieved due to implementation difficulties or contractual spending commitments that cannot be reduced; and to the general risks associated with our businesses.
In addition to the risks and uncertainties discussed above you can find additional information concerning risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements in the reports that we have filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent our judgment as of the date of this release and you should not unduly rely on such statements. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise after the date of this press release. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in the filing may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements.
FOR MORE INFORMATION, PLEASE CONTACT: Media Relations Suzanne Beranek at 407.475.0763 or via email at suzanne@beranekcommunications.com Investor/Shareholder Relations Dodi Handy, Elite Financial Communications Group, LLC at 407-585-1080 or via email at prz@efcg.net
PainCare Holdings, Inc.CONTACT: Media Relations - Suzanne Beranek, +1-407-475-0763,suzanne@beranekcommunications.com; or Investor/Shareholder Relations - DodiHandy, of Elite Financial Communications Group, LLC, +1-407-585-1080,prz@efcg.net
Web site: http://www.paincareholdings.com/