Little Rock-based CARTI's bond outlook upgraded

Fitch Ratings, an international bond-rating service, has revised its rating outlook for CARTI from negative to stable.

The Austin, Texas, service maintained its BB+ rating on the Central Arkansas Radiation Therapy Institute's $48.3 million in 2013 Pulaski County Facilities Board health facilities revenue bonds, which is considered to be junk bond status.

"The revision of the outlook to stable reflects operating improvements achieved through expense controls and continued revenue growth in fiscal 2017 and 2018 unaudited," said George Stimola, Fitch's primary analyst for CARTI, and Emily Wadhwani, secondary analyst, in the report.

CARTI has a consistent history of operating deficits in each of the past five fiscal years, Fitch said in the Thursday report. Revenue growth has historically lagged expense growth, especially after the completion of CARTI's $90 million Little Rock cancer center in late 2015, Fitch said. That effectively consolidated many core operations that had been conducted in separate leased spaces, Fitch said.

Audited financials should be completed in September.

"We are confident year-end financials will show solid margins on operations," said Adam Head, who took over as CARTI's chief executive officer in September, in a prepared statement. "This is particularly remarkable in light of the fact that we lost nearly $6 million on operations last year."

Head was aware of CARTI's financial situation when he was hired.

"I looked at how we got here operationally and looked at the culture we had, our leadership, working with our team and our physicians," Head said in an interview. "Essentially we had to shore things up on all of those counts. Everything was evaluated and looked at."

Fitch said CARTI had total unaudited revenue of $188 million in fiscal 2018, which ended June 30, compared with $166 million in revenue the year before.

Head estimated that CARTI's income on operations for fiscal 2018 would be slightly positive, compared with the loss of $6 million in fiscal 2017.

Fitch changed the way it rates CARTI, which contributed to increasing the outlook from negative to stable.

CARTI previously had been rated under the "U.S. Not-for-Profit Hospitals and Health Systems Rating Criteria." Now it is rated using "Rating Criteria for Public Sector Revenue-Supported Debt."

Fitch saw enough change at CARTI to upgrade the outlook, Head said.

CARTI is a leader in outpatient cancer services in Little Rock and the surrounding market, Fitch said.

CARTI's core is taking care of cancer patients with medical oncologists, radiation oncologists, radiologists and surgical oncologists, Head said.

"We're driven by the motivation that the stakes are really high in Arkansas," Head said.

There are 16,000 to 18,000 newly diagnosed cases of cancer every year in Arkansas, Head said.

"Arkansas consistently ranks among the top five states in the nation with the highest occurrence of cancer," Head said.

CARTI is renovating clinics in Conway and North Little Rock.

In Conway, CARTI is combining two clinics into one facility for medical and radiation oncology as well as diagnostic imaging. The 13,400-square-foot center should open in late September. A 24,000-square-foot cancer center in North Little Rock is scheduled to open next summer.

CARTI offers chemotherapy in Little Rock, North Little Rock, Benton, Clinton, Conway, El Dorado, Heber Springs, Russellville and Stuttgart. Radiation therapy is offered in Little Rock, North Little Rock, Conway, Mountain Home and Searcy.

Business on 07/07/2018

Upcoming Events