Advocat Announces 2008 Third Quarter Results


BRENTWOOD, Tenn., Nov. 6, 2008 (GLOBE NEWSWIRE) -- Advocat Inc. (Nasdaq:AVCA) today announced its results for the third quarter and nine months ended September 30, 2008.

Highlights for Third Quarter 2008

Key Highlights for the third quarter of 2008 compared to the third quarter of 2007 include the following:



    * Revenue increased 13.0% to $72.2 million in 2008, compared to
      $63.9 million in 2007.
    * Same center occupancy decreased to 77.7% in 2008, compared to
      79.1% in 2007, and same center Medicare census as a percent of
      total census decreased to 13.0% in 2008, compared to 13.3% in
      2007.
    * Medicare rates increased 8.9% compared to 2007 on a same center
      basis.
    * Operating income was $1.9 million in 2008, compared to $3.9
      million in 2007.
    * Net income from continuing operations was $0.7 million in 2008,
      compared to $2.0 million in 2007, or $0.10 per diluted common
      share in 2008 compared to $0.32 in 2007.
    * Funds provided by operations were $2.3 million in 2008, compared
      to $4.2 million in 2007.

For the third quarter of 2008 compared to the second quarter of 2008:



    * Revenue increased 1.9% to $72.2 million in the third quarter of
      2008, compared to $70.8 million in the second quarter of 2008.
    * Total occupancy increased to 75.3% in the third quarter of 2008,
      compared to 74.6% in the second quarter of 2008.  Medicare
      census as a percent of total census decreased to 12.6% in the
      third quarter of 2008, compared to 13.9% in the second quarter
      of 2008.
    * Operating income increased to $1.9 million in the third quarter
      of 2008, compared to $1.7 million in the second quarter of 2008.
    * Net income from continuing operations was $0.7 million in both
      the third and second quarters of 2008.
    * Funds provided by operations were $2.3 million in the third
      quarter of 2008, compared to $2.7 million in the second quarter
      of 2008.

Other Highlights for the Third Quarter 2008

The Company completed the acquisition of the leasehold interests and operations of seven skilled nursing facilities in Texas (SMSA Acquisition) on August 10, 2007. Effective November 1, 2007, the Company entered into a lease for a skilled nursing facility in Texas. Financial and statistical data reported in this earnings release for these eight facilities ("New Texas Facilities") include the results of their operations from the date of acquisition in the case of the SMSA Acquisition, and beginning November 1, 2007 for the new leased facility. Accordingly, the third quarter data referenced in comparisons below for the New Texas Facilities is comparing the full quarter of 2008 to a partial quarter in 2007.

Revenues increased to $72.2 million in 2008 from $63.9 million in 2007, an increase of $8.3 million, or 13.0%. Revenues related to the New Texas Facilities were $13.3 million in 2008 and $6.6 million in 2007. Same center patient revenues increased to $58.9 million in 2008 from $57.3 million in 2007, an increase of $1.6 million, or 2.8%. This increase is due primarily to Medicare rate increases, increased Medicaid rates in certain states and increased private pay and managed care rates and census, partially offset by the effects of lower Medicaid and Medicare census.

The following table summarizes key revenue and census statistics for the quarterly reporting periods and segregates effects of the New Texas Facilities.



                                               Three Months Ended
                                                  September 30,
                                             ----------------------
                                                2008        2007
                                             ----------  ----------
 Skilled nursing occupancy:
    Same center                                 77.7%       79.1%
    New Texas Facilities                        67.8%       68.4%
    Total continuing operations                 75.3%       77.6%
 Medicare census as percent of total:
    Same center                                 13.0%       13.3%
    New Texas Facilities                        11.4%       12.0%
    Total continuing operations                 12.6%       13.1%
 Medicare revenues as percent of total:
    Same center                                 30.1%       29.7%
    New Texas Facilities                        31.6%       33.1%
    Total continuing operations                 30.4%       30.0%
 Medicaid revenues as percent of total:
    Same center                                 55.9%       57.9%
    New Texas Facilities                        47.9%       46.0%
    Total continuing operations                 54.5%       56.7%
 Medicare average rate per day:
    Same center                               $382.96     $351.51
    New Texas Facilities                      $398.02     $375.13
    Total continuing operations               $385.86     $354.12
 Medicaid average rate per day:
    Same center                               $146.66     $142.04
    New Texas Facilities                      $113.91     $109.62
    Total continuing operations               $140.19     $138.59

On a same center basis, the Company's average rate per day for Medicare Part A patients increased 8.9% in 2008 compared to the same period in 2007 as a result of annual inflation adjustments and increased acuity levels of Medicare patients in our nursing centers, as indicated by RUG level scores, which were higher in 2008 than in 2007. Our average rate per day for Medicaid patients increased 3.3% in 2008 compared to 2007 as a result of increasing patient acuity levels and other rate increases in certain states.

Operating expense increased to $58.3 million in 2008 from $49.3 million in 2007, an increase of $9.0 million, or 18.4%. Operating expense related to the New Texas Facilities was $12.2 million in 2008. Same center operating expense increased to $46.1 million in 2008 from $43.3 million in 2007, an increase of $2.8 million, or 6.5%. This increase is primarily attributable to cost increases related to wages and benefits and other cost increases as discussed below. On a same center basis, operating expense increased to 78.3% of revenue in 2008, compared to 75.6% of revenue in 2007.

The largest component of operating expenses is wages, which increased to $34.6 million in 2008 from $29.4 million in 2007, an increase of $5.2 million, or 17.8%. Wages related to the New Texas Facilities were approximately $7.4 million in 2008 and $3.4 million in 2007. Same center wages increased approximately $1.2 million, or 4.6%, primarily due to increases in wages as a result of competitive labor markets in most of the areas in which we operate, regular merit and inflationary raises for personnel (increase of approximately 4.6% for the period).

In addition to increased wages, workers' compensation insurance expense was approximately $0.2 million higher in 2008. The Company has had increases in claim costs related to certain prior year claims during 2008 resulting in higher expense. Operating costs were also impacted by higher food and utility expenses. Food costs were approximately $0.2 million higher on a same center basis, an increase in expense per patient day of 17.9%. Utility costs were approximately $0.1 million higher, or approximately 8.6%.

The Company's three Houston area nursing centers incurred additional costs in 2008 as a result of Hurricane Ike. The Company incurred approximately $0.2 million in incremental operating costs.

The remaining increases in same center operating expense are primarily due to the effects of increases in patient acuity levels as indicated by RUG level scores, which were higher in 2008, resulting in greater costs to care for these patients.

General and administrative expense increased to $4.6 million in 2008 and 2007. As a percentage of revenues, general and administrative expense decreased to 6.4% of revenue in 2008, compared to 7.2% of revenue in 2007. General and administrative expense related to the New Texas Facilities was $0.2 million in 2008 and $0.4 million in 2007, including $0.3 million for post acquisition integration costs in 2007. Same center general and administrative expense increased to $4.4 million in 2008 from $4.2 million in 2007, an increase of $0.2 million, or 5.7%. Compensation costs increased by approximately $0.2 million, including normal merit and inflationary increases and new positions added to improve operating and financial controls. Travel costs increased by approximately $0.1 million. These increases were offset by a decrease in incentive compensation expense of $0.3 million.

Professional liability resulted in an expense of $0.3 million in 2008, compared to a benefit of $6,000 in 2007, an increase in expense of $0.3 million. The benefit in 2007 resulted from a reduction in the accrual for prior year claims.

Funds provided by operations in 2008 decreased to $2.3 million from $4.2 million in 2007. The decrease was primarily due to lower operating income and increased cash payments for professional liability costs. Cash payments for professional liability costs were approximately $1.0 million higher in the third quarter of 2008 compared to the third quarter of 2007. Funds provided by operations is a non-GAAP measurement and a reconciliation of this measurement to net income is included in the financial tables accompanying this press release.

Revenue and Income Highlights for Nine Months

Revenue increased 23% to $214.5 million in 2008 from $173.9 million in 2007. Revenues related to New Texas facilities were $38.8 million in 2008 and $6.6 million in 2007.

Net income from continuing operations was $4.5 million for nine months ended September 30, 2008 compared to $7.7 million for the same period in 2007. The diluted income per common share from continuing operations was $0.71 and $1.21 for 2008 and 2007, respectively.

Facility Renovation Update

Nine facilities have been renovated since commencing the facility renovation program in the third quarter of 2005, including one completed in October 2008. Our tenth renovation is expected to be completed in November 2008. There is one additional renovation project in progress, with completion expected in 2009.

Third quarter occupancy for the eight facilities with renovations completed before the beginning of the quarter increased from 63.2% to 70.7%, and Medicare average daily census increased from a total of 81 to 88, each as compared to the last twelve months prior to the commencement of renovation.

Amendment to Debt Agreement

As of September 30, 2008, the Company was not in compliance with the Minimum Fixed Charge Coverage Covenant related to the Company's bank term loan. On November 3, 2008 the Company received a covenant waiver from the bank effective for the period ending September 30, 2008 through the earlier of October 1, 2009 or the date the Company amends the Minimum Fixed Charge Coverage Covenant. The Company and the bank are currently in discussions to amend the provisions of the Minimum Fixed Charge Coverage Covenant, and the terms of the waiver require that this amendment be completed by December 31, 2008. It is anticipated that the amendment will be completed in the fourth quarter of 2008 and that the Company would be in compliance with the proposed covenant for at least the next twelve months.

CEO Remarks

William R. Council, III, noted, "I am pleased with the progress in the third quarter compared to the second quarter of this year. We continue to work to improve the Texas operations. Also, the Renovation Program is continuing to provide positive results. Our average daily census (ADC) increased to 4,392 for the month in September 2008, compared to 4,295 for the month in June 2008 and in the New Texas Facilities increased to 948 from 899 in this same period. Our Medicare ADC increased to 568 for the month in September 2008, compared to 545 for the month in June 2008 and in the New Texas Facilities increased to 107 from 95 in this same period. The summer months can be slower seasonally, making these improvements noteworthy.

"We also believe that our efforts may have been offset by the impact of the economic downturn, which is resulting in fewer elective surgical procedures and downward pressure on Medicare census. We are seeing pressures on costs, including inflation in food and energy costs, and we are generally seeing lower Medicaid rate increases this year than we realized last year.

"The positive dynamics of the business include the increasing number of elderly and the continuing decline in the industry of available beds to serve this population segment. Looking ahead, we are working hard to improve performance at the acquired Texas facilities and to diligently control costs throughout the Company."

Conference Call Information

A conference call has been scheduled for Friday, November 7, 2008 at 9:00 A.M. Central time (10:00 A.M. Eastern time) to discuss third quarter 2008 results.

The conference call information is as follows:



      Date:                       Friday, November 7, 2008
      Time:                       9:00 A.M. Central, 10:00 A.M. Eastern
      Webcast Links:              www.streetevents.com
                                  www.earnings.com
                                  www.irinfo.com/avc

      Dial in numbers:            888-713-4216 (domestic) or
                                  617-213-4868 (international)
      Passcode:                   14490362

Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory, but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the call. Pre-registration takes only a few minutes and you may pre-register at any time, including up to and after the call start time. To pre-register, please go to: https://www.theconferencingservice.com/prereg/key.process?key=P8J74FFHH

A replay of the conference call will be accessible two hours after its completion through November 14, 2008 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 91253493.

FORWARD-LOOKING STATEMENTS

The "forward-looking statements" contained in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. These forward-looking statements reflect our current views with respect to future events and present our estimates and assumptions only as of the date of this release. Actual results could differ materially from those contemplated by the forward-looking statements made in this release. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors, many of which are beyond our ability to control or predict, could cause our actual results to differ materially from the results expressed or implied in any forward looking statements, including but not limited to, our ability to integrate the acquired skilled nursing facilities into our business and achieve the anticipated cost savings, our ability to successfully construct and operate the Paris replacement facility, our ability to increase census at our renovated facilities, changes in governmental reimbursement, government regulation and health care reforms, the increased cost of borrowing under our credit agreements, a failure to comply with covenants contained in those credit agreements, ability to control ultimate professional liability costs, the accuracy of our estimate of our anticipated professional liability expense, our ability to control costs, changes to our valuation allowance for deferred tax assets, changes in occupancy rates in our facilities, the impact of future licensing surveys, the outcome of regulatory proceedings alleging violations of laws and regulations governing quality of care or violations of other laws and regulations applicable to our business, the effects of changing economic and competitive conditions, changes in anticipated revenue and cost growth, changes in the anticipated results of operations of the Company, the effect of changes in accounting policies, as well as other risk factors detailed in the Company's Securities and Exchange Commission filings. The Company has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as well as in its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors. These assumptions may not materialize to the extent assumed, and risks and uncertainties may cause actual results to be different from anticipated results. These risks and uncertainties also may result in changes to the Company's business plans and prospects. Advocat Inc. is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.

Advocat provides long term care services to patients in 50 skilled nursing centers containing 5,773 licensed nursing beds, primarily in the Southeast and Southwest. For additional information about the Company, visit Advocat's web site: http://www.irinfo.com/avc.



                             ADVOCAT INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (In thousands)

                                                 Sept. 30,   Dec. 31,
                                                   2008        2007
                                                 ---------  ---------
                                                (Unaudited)
 ASSETS:
 Current Assets
   Cash and cash equivalents                     $   9,967  $  11,658
   Receivables, net                                 23,585     26,444
   Current portion of note receivable                4,685        629
   Deferred income taxes                             2,298      2,110
   Other current assets                              3,484      3,364
                                                 ---------  ---------
      Total current assets                          44,019     44,205

   Property and equipment, net                      35,269     31,658
   Deferred income taxes                            16,107     16,568
   Note receivable, net                                 --      4,983
   Acquired leasehold interest, net                 10,245      9,492
   Other assets, net                                 3,328      3,184
                                                 ---------  ---------
 TOTAL ASSETS                                    $ 108,968  $ 110,090
                                                 =========  =========

 LIABILITIES AND SHAREHOLDERS' EQUITY:
 Current Liabilities
   Current portion of long-term debt             $   4,122  $   1,942
   Trade accounts payable                            5,732      6,636
   Accrued expenses:
      Payroll and employee benefits                 11,052     11,360
      Current portion of self-insurance reserves     4,637      4,597
      Other current liabilities                      5,006      3,993
                                                 ---------  ---------
      Total current liabilities                     30,549     28,528
 Noncurrent Liabilities
   Long-term debt, less current portion             28,805     32,513
   Self-insurance reserves, less current portion    13,755     17,578
   Other noncurrent liabilities                     11,411      9,137
                                                 ---------  ---------
      Total noncurrent liabilities                  53,971     59,228

 PREFERRED STOCK                                     8,316      9,590

 SHAREHOLDERS' EQUITY                               16,132     12,744
                                                 ---------  ---------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $ 108,968  $ 110,090
                                                 =========  =========


                             ADVOCAT INC.
                    CONSOLIDATED INCOME STATEMENTS
                              (Unaudited)
                 (In thousands, except per share data)

                           For the Three Months   For the Nine Months
                            Ended September 30,   Ended September 30,
                              2008       2007       2008       2007
                           ---------  ---------  ---------  ---------
 PATIENT REVENUES, NET     $  72,206  $  63,884  $ 214,517  $ 173,857
                           ---------  ---------  ---------  ---------
 EXPENSES:
   Operating                  58,297     49,253    169,832    132,903
   Lease                       5,753      5,162     17,203     14,369
   Professional liability        278         (6)       636     (2,961)
   General and
    administrative             4,642      4,580     13,848     12,920
   Depreciation and
    amortization               1,355      1,033      3,914      2,874
                           ---------  ---------  ---------  ---------
                              70,325     60,022    205,433    160,105
                           ---------  ---------  ---------  ---------
 OPERATING INCOME              1,881      3,862      9,084     13,752
                           ---------  ---------  ---------  ---------
 OTHER INCOME (EXPENSE):
   Foreign currency
    transaction gain (loss)     (126)       330       (293)       743
   Interest income                91        264        371        771
   Interest expense             (692)      (956)    (2,226)    (2,548)
   Debt retirement costs          --       (116)        --       (116)
                           ---------  ---------  ---------  ---------
                                (727)      (478)    (2,148)    (1,150)
                           ---------  ---------  ---------  ---------
 INCOME FROM CONTINUING
  OPERATIONS BEFORE INCOME
  TAXES                        1,154      3,384      6,936     12,602
 PROVISION FOR INCOME TAXES     (480)    (1,363)    (2,452)    (4,940)
                           ---------  ---------  ---------  ---------
 NET INCOME FROM CONTINUING
  OPERATIONS                     674      2,021      4,484      7,662
 DISCONTINUED OPERATIONS:
   Operating loss, net of
    tax provision (benefit)
    of $(4), $(10), $(23),
    and $(10), respectively       (4)      (100)       (35)      (101)
   Loss on sale, net of tax
    provision of $0, $17,
    $0, and $(6),
    respectively                  --         28         --         (7)
                           ---------  ---------  ---------  ---------
 NET INCOME (LOSS) FROM
  DISCONTINUED OPERATIONS         (4)       (72)       (35)      (108)
                           ---------  ---------  ---------  ---------
 NET INCOME                      670      1,949      4,449      7,554
 PREFERRED STOCK DIVIDENDS        86         86        258        258
                           ---------  ---------  ---------  ---------

 NET INCOME FOR COMMON
  STOCK                    $     584  $   1,863  $   4,191  $   7,296
                           =========  =========  =========  =========
 NET INCOME PER COMMON
  SHARE:
   Per common share - basic
     Income from continuing
      operations           $    0.10  $    0.33  $    0.74  $    1.26
     Loss from discontinued
      operations                  --      (0.01)        --      (0.02)
                           ---------  ---------  ---------  ---------
                           $    0.10  $    0.32  $    0.74  $    1.24
                           =========  =========  =========  =========

   Per common share -
    diluted
     Income from continuing
      operations           $    0.10  $    0.32  $    0.71  $    1.21
     Loss from discontinued
      operations                  --      (0.02)        --      (0.02)
                           ---------  ---------  ---------  ---------

                           $    0.10  $    0.30  $    0.71  $    1.19
                           =========  =========  =========  =========
 WEIGHTED AVERAGE COMMON
  SHARES:
     Basic                     5,671      5,877      5,700      5,874
                           =========  =========  =========  =========
     Diluted                   5,859      6,136      5,919      6,131
                           =========  =========  =========  =========


                             ADVOCAT INC.
           SAME CENTER STATEMENTS OF INCOME FROM CONTINUING
                    OPERATIONS BEFORE INCOME TAXES
                             (Unaudited)
                            (In thousands)

                           For the Three Months   For the Nine Months
                            Ended September 30,   Ended September 30,
                              2008       2007       2008       2007
                           ---------  ---------  ---------  ---------
 PATIENT REVENUES, NET     $  58,919  $  57,289  $ 175,744  $ 167,262
                           ---------  ---------  ---------  ---------
 EXPENSES:
   Operating                  46,139     43,313    134,767    126,964
   Lease                       4,731      4,634     14,168     13,841
   Professional liability        139       (90)        556     (3,045)
   General and
    administrative             4,412      4,174     13,177     12,513
   Depreciation and
    amortization               1,065        944      3,093      2,785
                           ---------  ---------  ---------  ---------
                              56,486     52,975    165,761    153,058
                           ---------  ---------  ---------  ---------
 OPERATING INCOME              2,433      4,314      9,983     14,204
                           ---------  ---------  ---------  ---------
 OTHER INCOME (EXPENSE):
   Foreign currency
    transaction gain (loss)     (126)       330       (293)       743
   Interest income                91        264        371        771
   Interest expense             (560)      (819)    (1,784)    (2,411)
   Debt retirement costs          --       (116)        --       (116)
                           ---------  ---------  ---------  ---------
                                (595)      (341)    (1,706)    (1,013)
                           ---------  ---------  ---------  ---------
 INCOME FROM CONTINUING
  OPERATIONS BEFORE INCOME
  TAXES                    $   1,838  $   3,973  $   8,277  $  13,191
                           =========  =========  =========  =========

   Note: The table above presents the unaudited statements of income
         from continuing operations before taxes for the three and
         nine month periods ended September 30, 2008 and 2007 on a
         same center basis, excluding the effects of the New Texas
         Facilities and discontinued operations.


                             ADVOCAT INC.
                     FUNDS PROVIDED BY OPERATIONS
                              (Unaudited)
                            (In thousands)

                            Three Months Ended     Nine Months Ended
                              September 30,          September 30,
                             2008        2007       2008       2007
                           ---------  ---------  ---------  ---------
 NET INCOME                $     670  $   1,949  $   4,449  $   7,554
 Loss from discontinued
  operations                      (4)       (72)       (35)      (108)
                           ---------  ---------  ---------  ---------
 Net income from continuing
  operations                     674      2,021      4,484      7,662

   Adjustments to reconcile
    net income from contin-
    uing operations to
    funds provided by
    operations:
   Depreciation and
    amortization               1,355      1,033      3,914      2,874
   Provision for doubtful
    accounts                     661        397      1,684        809
   Deferred income tax
    provision                    320      1,022        273      3,713
   Provision (benefit) for
    self-insured professio-
    nal liability, net of
    cash payments             (1,605)      (890)    (3,636)    (6,010)
   Stock-based compensation      234        195        645        454
   Amortization of deferred
    balances                     105         85        335        221
   Provision for leases in
    excess of cash payments      454        586      1,371      1,753
   Other                          99       (244)       197       (726)
                           ---------  ---------  ---------  ---------

 FUNDS PROVIDED BY
  OPERATIONS               $   2,297  $   4,205  $   9,267  $  10,750
                           =========  =========  =========  =========
 Reconciliation of funds
  provided by operations to
  cash flow from operating
  activities:
 Funds provided by
  operations               $   2,297  $   4,205      9,267  $  10,750
 Changes in other assets
  and liabilities affecting
  operating activities:
 Receivables, net               (283)    (6,631)     1,140     (7,520)
 Prepaid expenses and other
  assets                         558        252       (133)       872
 Trade accounts payable and
  accrued expenses             1,854      4,304     (1,365)     2,965
                           ---------  ---------  ---------  ---------
 Net cash provided by
  operating activities of
  continuing operations    $   4,426  $   2,130  $   8,909  $   7,067
                           =========  =========  =========  =========

 Advocat provides financial measures using accounting principles
 generally accepted in the United States (GAAP) and using adjustments
 to GAAP (non-GAAP). These non-GAAP measures are not measurements
 under GAAP. These measurements should be considered in addition to,
 but not as a substitute for, the information contained in our
 financial statements prepared in accordance with GAAP. Funds Provided
 by Operations is defined as cash flow from operating activities
 before changes in other assets and liabilities affecting operating
 activities. Management believes that Funds Provided by Operations is
 an important measurement of the Company's performance because it
 eliminates the effect of actuarial assumptions on our professional
 liability reserves, includes the cash effect of professional
 liability payments, and does not include the effects of deferred tax
 benefit and other non-cash charges. Since the definition of Funds
 Provided by Operations may vary among companies and industries, it
 should not be used as a measure of performance among companies.


                             ADVOCAT INC.
                     SELECTED OPERATING STATISTICS
                          SEPTEMBER 30, 2008
                              (Unaudited)

                                         For the Three Months Ended
                                             September 30, 2008
                                    ----------------------------------

                                     Skilled
                   As of             Nursing       Occupancy
             September 30, 2008      Weighted       (Note 1)
            -----------------------  Average   ----------------------
             Licensed    Available    Daily     Licensed   Available
 Region        Beds        Beds       Census      Beds        Beds
 --------------------------------------------------------------------
 Alabama        711         697         576       81.0%       82.6%
 Arkansas     1,311       1,165         891       68.0%       76.5%
 Florida        502         462         401       79.8%       86.7%
 Kentucky
  (Note 4)      775         742         681       87.9%       91.8%
 Tennessee      617         586         502       81.4%       85.7%
 Texas        1,857       1,646       1,299       70.0%       78.9%
              -----       -----       -----       -----       -----
 Total        5,773       5,298       4,350       75.3%       82.1%
              =====       =====       =====       =====       =====


                   For the Three Months Ended September 30, 2008
            ----------------------------------------------------------
                                             Medicare      Medicaid
                                 2008        Room and      Room and
                                  Q3          Board         Board
                                Revenue      Revenue       Revenue
                                ($ in          PPD           PPD
                 Medicare       millions)      2008          2008
 Region         Utilization     (Note 2)      (Note 3)      (Note 3)
 ---------------------------------------------------------------------
 Alabama           12.2%         $10.4       $388.32       $157.12
 Arkansas          13.8%          14.3        360.53        138.91
 Florida            9.2%           7.2        418.18        153.89
 Kentucky                                            
 (Note 4)          13.9%          13.3        399.07        169.82
 Tennessee         15.7%           8.5        376.52        135.56
 Texas             11.2%          18.2        394.39        112.75
                 -------       -------       -------       -------
 Total             12.6%         $71.9       $385.86       $140.19
                 =======       =======       =======       =======


 Note 1: The number of "Licensed beds" is based on the licensed
         capacity of the facility. The Company has historically
         reported its occupancy based on licensed beds. The number of
         "Available Beds" represents "licensed beds" less beds removed
          from service. "Available beds" is subject to change based
         upon the needs of the facilities, including configuration of
         patient rooms and offices, status of beds (private, semi-
         private, ward, etc.) and renovations. Occupancy is measured
         on a weighted average basis.

 Note 2: Total revenue for regions excludes approximately $0.3 million
         of ancillary services and other revenue for the three month
         period ended September 30, 2008.

 Note 3: These Medicare and Medicaid revenue rates include room and
         board revenues but do not include any ancillary revenues
         related to these patients.

 Note 4: The Kentucky region includes nursing centers in Kentucky,
         West Virginia and Ohio.



                              ADVOCAT INC.
          SELECTED OPERATING STATISTICS OF RENOVATED FACILITIES
                           SEPTEMBER 30, 2008
                               (Unaudited)

                                                      Medicare Average
                                    Occupancy(1)        Daily Census
                                    Q3      LTM(2)       Q3     LTM(2)
   Renovation -- Completion Date   2008     Prior       2008    Prior
 ---------------------------------------------------------------------
 1st renovation - January 2006     87.4%     64.9%      15.2     8.1
 2nd renovation - July 2006        80.3%     71.2%      12.5    12.3
 3rd renovation - August 2006      63.4%     45.1%       8.4     5.3
 4th renovation - October 2006     81.9%     71.9%      12.3     8.6
 5th renovation - February 2007    64.0%     56.2%       8.4     8.0
 6th renovation - April 2007       48.8%     47.5%      10.3    12.7
 7th renovation - July 2007        78.1%     85.0%      12.2    17.4
 8th renovation - January 2008     60.4%     50.9%       8.9     8.9
                                   -----     -----     -----   -----
          Total                    70.7%     63.2%      88.2    81.3
                                   -----     -----     -----   -----


    (1) Occupancy based on licensed beds.
    (2) Last Twelve Months prior to commencement of construction.


            

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