##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended: March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission file No.: 1-12996
 Advocat Inc.
 (exact name of registrant as specified in its charter)
 Delaware
    
    62-1559667(State or other jurisdiction ofincorporation or organization)
    
    (IRS Employer Identification No.)
 1621 Galleria Boulevard, Brentwood, TN 37027  (Address of principal executive offices) (Zip Code)
 (615) 771-7575  (Registrants telephone number, including area code)
 
 (Former name, former address and former fiscal year, if changed since last report.)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and a smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting Company þ(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
 5,718,298(Outstanding shares of the issuers common stock as of April 30, 2010)




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TABLE OF CONTENTS  Part I. FINANCIAL INFORMATIONITEM 1    FINANCIAL STATEMENTSITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4.CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGS.ITEM 1A.RISK FACTORSITEM 6. EXHIBITSSIGNATURESEX-10.1EX-10.2EX-10.3EX-10.4EX-31.1EX-31.2EX-32    Table of Contents  
 Part I. FINANCIAL INFORMATION
 
 ITEM 1
    
    - FINANCIAL STATEMENTS
 ADVOCAT INC.
 INTERIM CONSOLIDATED BALANCE SHEETS
(in thousands)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    10,709
    
    
    $
    8,609Receivables, less allowance for doubtful
accounts of $2,741 and $2,566, respectively
    
    
    22,476
    
    
    
    21,559Receivable for leased facility construction costs
    
    
    722
    
    
    
    1,406Prepaid expenses and other current assets
    
    
    2,267
    
    
    
    2,498Deferred income taxes
    
    
    4,827
    
    
    
    4,792Current assets of discontinued operations
    
    
    3,076
    
    
    
    2,870Total current assets
    
    
    44,077
    
    
    
    41,734PROPERTY AND EQUIPMENT, at cost
    
    
    76,702
    
    
    
    76,270Less accumulated depreciation
    
    
    (41,564
    )
    
    
    (40,461
    )Discontinued operations, net
    
    
    1,457
    
    
    
    1,553Property and equipment, net
    
    
    36,595
    
    
    
    37,362OTHER ASSETS:Deferred income taxes
    
    
    13,838
    
    
    
    13,804Deferred financing and other costs, net
    
    
    909
    
    
    
    639Other assets
    
    
    1,850
    
    
    
    1,963Acquired leasehold interest, net
    
    
    9,668
    
    
    
    9,764Total other assets
    
    
    26,265
    
    
    
    26,170$
    106,937
    
    
    $
    105,266
   2




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ADVOCAT INC.
 INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)
(continued)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)CURRENT LIABILITIES:Current portion of long-term debt
    
    $
    635
    
    
    $
    2,278Trade accounts payable
    
    
    4,858
    
    
    
    4,537Accrued expenses:Payroll and employee benefits
    
    
    10,403
    
    
    
    9,314Current portion of self-insurance reserves
    
    
    7,839
    
    
    
    7,860Other current liabilities
    
    
    3,208
    
    
    
    4,171Current liabilities of discontinued operations
    
    
    1,786
    
    
    
    1,240Total current liabilities
    
    
    28,729
    
    
    
    29,400NONCURRENT LIABILITIES:Long-term debt, less current portion
    
    
    23,850
    
    
    
    22,551Self-insurance reserves, less current portion
    
    
    12,369
    
    
    
    12,235Other noncurrent liabilities
    
    
    15,815
    
    
    
    15,195Total noncurrent liabilities
    
    
    52,034
    
    
    
    49,981COMMITMENTS AND CONTINGENCIESSERIES C REDEEMABLE PREFERRED STOCK
$.10 par value, 5,000 shares authorized, issued and
outstanding, stated value of $4,918 including premium
of $849 and $1,274, respectively
    
    
    5,767
    
    
    
    6,192SHAREHOLDERS EQUITY:Series A preferred stock, authorized 200,000 shares,
$.10 par value, none issued and outstanding
    
    
    
    
    
    
    Common stock, authorized 20,000,000 shares, $.01 par
value, 5,950,000 and 5,949,000 shares issued, and
5,718,000 and 5,717,000 shares outstanding,
respectively
    
    
    59
    
    
    
    59Treasury stock at cost, 232,000 shares of common stock
    
    
    (2,500
    )
    
    
    (2,500
    )Paid-in capital
    
    
    17,827
    
    
    
    17,647Retained earnings
    
    
    5,021
    
    
    
    4,487Total shareholders equity
    
    
    20,407
    
    
    
    19,693$
    106,937
    
    
    $
    105,266
  3




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts, unaudited)
 Three Months Ended March 31,2010
    
    
    2009PATIENT REVENUES, net
    
    $
    70,152
    
    
    $
    67,735EXPENSES:Operating
    
    
    55,402
    
    
    
    53,337Lease
    
    
    5,602
    
    
    
    5,368Professional liability
    
    
    1,414
    
    
    
    2,905General and administrative
    
    
    4,702
    
    
    
    4,453Depreciation and amortization
    
    
    1,416
    
    
    
    1,320Total expenses
    
    
    68,536
    
    
    
    67,383OPERATING INCOME
    
    
    1,616
    
    
    
    352OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    
    
    
    
    (85
    )Other income
    
    
    
    
    
    
    549Interest income
    
    
    2
    
    
    
    75Interest expense
    
    
    (398
    )
    
    
    (482
    )Debt retirement costs
    
    
    (127
    )
    
    
    (523
    )
    
    
    57INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    1,093
    
    
    
    409PROVISION FOR INCOME TAXES
    
    
    (386
    )
    
    
    (154
    )NET INCOME FROM CONTINUING OPERATIONS
    
    
    707
    
    
    
    255NET INCOME FROM DISCONTINUED OPERATIONS:Operating income, net of taxes of $206 and $69, respectively
    
    
    378
    
    
    
    108Loss on disposal, net of taxes of $(96) and $0, respectively
    
    
    (177
    )
    
    
    DISCONTINUED OPERATIONS
    
    
    201
    
    
    
    108NET INCOME
    
    
    908
    
    
    
    363PREFERRED STOCK DIVIDENDS
    
    
    86
    
    
    
    86NET INCOME FOR COMMON STOCK
    
    $
    822
    
    
    $
    277NET INCOME PER COMMON SHARE:Per common share  basicContinuing operations
    
    $
    0.11
    
    
    $
    0.03Discontinued operations
    
    
    0.03
    
    
    
    0.02$
    0.14
    
    
    $
    0.05Per common share  dilutedContinuing operations
    
    $
    0.11
    
    
    $
    0.03Discontinued operations
    
    
    0.03
    
    
    
    0.02$
    0.14
    
    
    $
    0.05COMMON STOCK DIVIDENDS DECLARED PER SHARE
OF COMMON STOCK
    
    $
    0.05
    
    
    $
    WEIGHTED AVERAGE COMMON SHARES:Basic
    
    
    5,717
    
    
    
    5,672Diluted
    
    
    5,913
    
    
    
    5,730
  4




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands and unaudited)
 Three Months Ended March 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    908
    
    
    $
    363Discontinued operations
    
    
    201
    
    
    
    108Net income from continuing operations
    
    
    707
    
    
    
    255Adjustments to reconcile net income from continuing
operations to net cash provided by operating activities:Depreciation and amortization
    
    
    1,416
    
    
    
    1,320Provision for doubtful accounts
    
    
    488
    
    
    
    727Deferred income tax provision (benefit)
    
    
    (54
    )
    
    
    173Provision for (benefit from) self-insured professional
liability, net of cash payments
    
    
    71
    
    
    
    695Stock based compensation
    
    
    196
    
    
    
    224Amortization of deferred balances
    
    
    76
    
    
    
    95Provision for leases in excess of cash payments
    
    
    225
    
    
    
    345Non-cash gain on settlement of contingent liability
    
    
    
    
    
    
    (549
    )Payment from lessor for leasehold improvement
    
    
    120
    
    
    
    Foreign currency transaction loss
    
    
    
    
    
    
    85Debt retirement costs
    
    
    127
    
    
    
    Non-cash interest income
    
    
    
    
    
    
    (24
    )Changes in other assets and liabilities affecting operating
activities:Receivables, net
    
    
    (721
    )
    
    
    (1,339
    )Prepaid expenses and other assets
    
    
    229
    
    
    
    (812
    )Trade accounts payable and accrued expenses
    
    
    390
    
    
    
    1,607Net cash provided by continuing operations
    
    
    3,270
    
    
    
    2,802Discontinued operations
    
    
    682
    
    
    
    385Net cash provided by operating activities
    
    
    3,952
    
    
    
    3,187CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (649
    )
    
    
    (1,575
    )Payment for construction in progress  leased facility
    
    
    
    
    
    
    (1,267
    )Net cash used by continuing operations
    
    
    (649
    )
    
    
    (2,842
    )Discontinued operations
    
    
    (45
    )
    
    
    (90
    )Net cash used by investing activities
    
    
    (694
    )
    
    
    (2,932
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of debt obligations
    
    
    (3,807
    )
    
    
    (553
    )Proceeds from issuance of debt
    
    
    3,463
    
    
    
    Financing costs
    
    
    (373
    )
    
    
    (12
    )Construction allowance receipts  leased facility
    
    
    
    
    
    
    1,267Proceeds from exercise of stock options
    
    
    
    
    
    
    2Proceeds from issuance of restricted share units
    
    
    62
    
    
    
    76Payment of common stock dividends
    
    
    (286
    )
    
    
    Payment of preferred stock dividends
    
    
    (86
    )
    
    
    (86
    )Payment for preferred stock restructuring
    
    
    (131
    )
    
    
    (127
    )Net cash provided (used) by financing activities
    
    
    (1,158
    )
    
    
    567
  5




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands and unaudited)
(continued)
 Three Months Ended March 31,2010
    
    
    2009NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    $
    2,100
    
    
    $
    822CASH AND CASH EQUIVALENTS, beginning of period
    
    
    8,609
    
    
    
    7,598CASH AND CASH EQUIVALENTS, end of period
    
    $
    10,709
    
    
    $
    8,420SUPPLEMENTAL INFORMATION:Cash payments of interest, net of amounts capitalized
    
    $
    338
    
    
    $
    398Cash payments of income taxes
    
    $
    57
    
    
    $
    67
  6




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ADVOCAT INC.
 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010 AND 2009
 1. BUSINESS
   2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
   3. REVOLVING CREDIT AGREEMENT
  7




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4. INSURANCE MATTERS
 Professional Liability and Other Liability Insurance-
   Reserve for Estimated Self-Insured Professional Liability Claims-
   8




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Accrual atMarch 31,
    
    
    December 31,2010
    
    
    2009Policy Year End:May 31, 2010
    
    $
    4,426,000
    
    
    $
    3,763,000March 9, 2009
    
    
    8,627,000
    
    
    
    8,713,000March 9, 2008
    
    
    4,323,000
    
    
    
    4,377,000Marcy 9, 2007
    
    
    739,000
    
    
    
    1,060,000March 9, 2006
    
    
    357,000
    
    
    
    357,000March 9, 2005 and earlier
    
    
    232,000
    
    
    
    232,000$
    18,704,000
    
    
    $
    18,502,000
  Other Insurance
  9




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5. STOCK-BASED COMPENSATION
   6. DISCONTINUED OPERATIONS
   10




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7. EARNINGS PER COMMON SHARE
 Information with respect to basic and diluted net income per common share is presented below:
 Three Months EndedMarch 31,2010
    
    
    2009Net income per common share:Per common share  basicIncome from continuing operations
    
    $
    0.11
    
    
    $
    0.03Income (loss) from discontinued operationsOperating income, net of taxes
    
    
    0.06
    
    
    
    0.02Loss on disposal, net of taxes
    
    
    (0.03
    )
    
    
    Discontinued operations, net of taxes
    
    
    0.03
    
    
    
    0.02Net income
    
    $
    0.14
    
    
    $
    0.05Per common share  dilutedIncome from continuing operations
    
    $
    0.11
    
    
    $
    0.03Income (loss) from discontinued operationsOperating income, net of taxes
    
    
    0.06
    
    
    
    0.02Loss on disposal, net of taxes
    
    
    (0.03
    )
    
    
    Discontinued operations, net of taxes
    
    
    0.03
    
    
    
    0.02Net income
    
    $
    0.14
    
    
    $
    0.05
  8. SUBSEQUENT EVENT  CHANGE IN COMPANY
EXECUTIVE
  11




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Divestitures
   Basis of Financial Statements.
 12




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Critical Accounting Policies and Judgments
 
 Update of Critical Accounting Policies and Judgments
  Health Care Industry
   13




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Three Months Ended March 31,2010
    
    
    2009Medicaid
    
    $
    37,674
    
    
    
    53.7
    %
    
    $
    35,880
    
    
    
    53.0
    %Medicare
    
    
    21,425
    
    
    
    30.5
    
    
    
    21,854
    
    
    
    32.3Managed care
    
    
    2,273
    
    
    
    3.2
    
    
    
    1,920
    
    
    
    2.8Private Pay and other
    
    
    8,780
    
    
    
    12.6
    
    
    
    8,081
    
    
    
    11.9Total
    
    $
    70,152
    
    
    
    100.0
    %
    
    $
    67,735
    
    
    
    100.0
    %
  Three Months Ended March 31,2010
    
    
    2009Medicaid
    
    
    2,880
    
    
    
    69.1
    %
    
    
    2,814
    
    
    
    69.5
    %Medicare
    
    
    548
    
    
    
    13.2
    
    
    
    553
    
    
    
    13.7Managed care
    
    
    66
    
    
    
    1.6
    
    
    
    54
    
    
    
    1.3Private Pay and other
    
    
    671
    
    
    
    16.1
    
    
    
    629
    
    
    
    15.5Total
    
    
    4,165
    
    
    
    100.0
    %
    
    
    4,050
    
    
    
    100.0
    %
  Medicare and Medicaid Reimbursement
   14




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Licensure and other Health Care Laws
  Contractual Obligations and Commercial Commitments
  Less than
    
    
    1 to 3
    
    
    3 to 5
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    26,313
    
    
    $
    1,685
    
    
    $
    24,628
    
    
    $
    
    
    
    $
    Series C Preferred Stock (2)
    
    $
    5,090
    
    
    $
    5,090
    
    
    $
    
    
    
    $
    
    
    
    $
    Elimination of Preferred Stock Conversion feature (3)
    
    $
    5,838
    
    
    $
    687
    
    
    $
    1,374
    
    
    $
    1,374
    
    
    $
    2,403Operating leases
    
    $
    593,379
    
    
    $
    22,122
    
    
    $
    45,830
    
    
    $
    48,090
    
    
    $
    477,337Required capital expenditures undermortgage loans and operating leases (4)
    
    $
    22,975
    
    
    $
    621
    
    
    $
    853
    
    
    $
    771
    
    
    $
    20,730Total
    
    $
    653,595
    
    
    $
    30,205
    
    
    $
    72,685
    
    
    $
    50,235
    
    
    $
    500,470
 
 (1)
    
    Long-term debt obligations include scheduled future payments of principal and
interest of long-term debt and amounts outstanding on our revolving line of credit. 16




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(2)
    
    Series C Preferred Stock includes quarterly dividend payments and redemption value at
the preferred shareholders earliest redemption date.(3)
    
    Payments to Omega for the elimination of the preferred stock conversion feature in
connection with restructuring the preferred stock and master lease agreements. Monthly
payments of approximately $57,000 will be made through the end of the initial lease
period that ends in September 2018.(4)
    
    Includes annual expenditure requirements for capital maintenance under mortgage loan
covenants and annual capital expenditure requirements under operating leases.  Results of Operations
   (in thousands)
    
    Three Months Ended March 31,2010
    
    
    2009
    
    
    Change
    
    
    %PATIENT REVENUES, net
    
    $
    70,152
    
    
    $
    67,735
    
    
    $
    2,417
    
    
    
    3.6EXPENSES:Operating
    
    
    55,402
    
    
    
    53,337
    
    
    
    2,065
    
    
    
    3.9Lease
    
    
    5,602
    
    
    
    5,368
    
    
    
    234
    
    
    
    4.4Professional liability
    
    
    1,414
    
    
    
    2,905
    
    
    
    (1,491
    )
    
    
    (51.3
    )General and administrative
    
    
    4,702
    
    
    
    4,453
    
    
    
    249
    
    
    
    5.6Depreciation and amortization
    
    
    1,416
    
    
    
    1,320
    
    
    
    96
    
    
    
    7.3Total expenses
    
    
    68,536
    
    
    
    67,383
    
    
    
    1,153
    
    
    
    1.7OPERATING INCOME
    
    
    1,616
    
    
    
    352
    
    
    
    1,264
    
    
    
    359.1OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    
    
    
    
    (85
    )
    
    
    85
    
    
    
    100.0Other income
    
    
    
    
    
    
    549
    
    
    
    (549
    )
    
    
    (100.0
    )Interest income
    
    
    2
    
    
    
    75
    
    
    
    (73
    )
    
    
    (97.3
    )Interest expense
    
    
    (398
    )
    
    
    (482
    )
    
    
    84
    
    
    
    17.4Debt retirement costs
    
    
    (127
    )
    
    
    
    
    
    
    (127
    )
    
    
    N/M(523
    )
    
    
    57
    
    
    
    (580
    )
    
    
    (1,017.5
    )INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    1,093
    
    
    
    409
    
    
    
    684
    
    
    
    167.2PROVISION FOR INCOME TAXES
    
    
    (386
    )
    
    
    (154
    )
    
    
    232
    
    
    
    150.6NET INCOME FROM CONTINUING OPERATIONS
    
    $
    707
    
    
    $
    255
    
    
    $
    452
    
    
    
    177.3
 17




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Three Months EndedMarch  31,Percentage of Net Revenues
    
    2010
    
    
    2009PATIENT REVENUES, net
    
    
    100.0
    %
    
    
    100.0
    %EXPENSES:Operating
    
    
    79.0
    
    
    
    78.7Lease
    
    
    8.0
    
    
    
    7.9Professional liability
    
    
    2.0
    
    
    
    4.3General and administrative
    
    
    6.7
    
    
    
    6.6Depreciation and amortization
    
    
    2.0
    
    
    
    2.0Total expenses
    
    
    97.7
    
    
    
    99.5OPERATING INCOME
    
    
    2.3
    
    
    
    0.5OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    
    
    
    
    (0.1
    )Other income
    
    
    
    
    
    
    0.8Interest income
    
    
    
    
    
    
    0.1Interest expense
    
    
    (0.6
    )
    
    
    (0.7
    )Debt retirement costs
    
    
    (0.2
    )
    
    
    (0.8
    )
    
    
    0.1INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
    
    
    1.5
    
    
    
    0.6PROVISION FOR INCOME TAXES
    
    
    (0.5
    )
    
    
    (0.2
    )NET INCOME FROM CONTINUING
OPERATIONS
    
    
    1.0
    %
    
    
    0.4
    %
 Three Months Ended March 31, 2010 Compared With Three Months Ended March 31, 2009
 Patient Revenues
   Three Months EndedMarch 31,2010
    
    
    2009Skilled nursing occupancy
    
    
    77.5
    %
    
    
    75.7
    %Medicare census as percent of total
    
    
    13.1
    %
    
    
    13.7
    %Managed care census as percent of total
    
    
    1.6
    %
    
    
    1.3
    %Medicare revenues as percent of total
    
    
    30.5
    %
    
    
    32.3
    %Medicaid revenues as percent of total
    
    
    53.7
    %
    
    
    53.0
    %Managed care revenues as percent of total
    
    
    3.2
    %
    
    
    2.8
    %Medicare average rate per day
    
    $
    393.64
    
    
    $
    398.98Medicaid average rate per day
    
    $
    145.25
    
    
    $
    141.75Managed care average rate per day
    
    $
    383.15
    
    
    $
    377.94
 18




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Operating expense
       Lease expense
  Professional liability
  19




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##### Table of Contents



General and administrative expense
  Depreciation and amortization
  Foreign currency transaction loss
  Other income
  Interest expense
  Income from continuing operations before income taxes; income from continuing operations per common
share
  Liquidity and Capital Resources
 Liquidity
  20




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##### Table of Contents



Dividends
  Preferred Stock
  Professional Liability
  21




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##### Table of Contents



Capital Resources
     Level atRequirement
    
    
    March 31, 2010Minimum fixed charge coverage ratio
    
    
    ≥1.05:1.00
    
    
    
    1.29Debt service coverage ratio (mortgaged facilities)
    
    
    ≥1.30:1.00
    
    
    
    3.68
   22




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##### Table of Contents



Forward-Looking Statements
  23




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.CONTROLS AND PROCEDURES
  24




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25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
     
 ITEM 1A.RISK FACTORS
  Healthcare reform legislation could adversely affect our revenue and financial condition.
  26




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##### Table of Contents



ITEM 6. EXHIBITS
  27




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##### Table of Contents



SIGNATURES
  ADVOCAT INC.May 5, 2010
    By:
    /s/ William R. Council, IIIWilliam R. Council, IIIPresident and Chief Executive Officer, Principal Executive
Officer and
An Officer Duly Authorized to Sign on Behalf of the RegistrantBy:
    /s/ L. Glynn Riddle, Jr.L. Glynn Riddle, Jr.Executive Vice President and Chief Financial Officer, Secretary,
Principal Accounting Officer and
An Officer Duly Authorized to Sign on Behalf of the Registrant 28




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits3.1
    
    Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to
the Companys Registration Statement No. 33-76150 on Form S-1).3.2
    
    Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.5 to the
Companys quarterly report on Form 10-Q for the quarter ended September 30, 2006).3.3
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Companys Registration
Statement No. 33-76150 on Form S-1).3.4
    
    Bylaw Amendment adopted November 5, 2007 (incorporated by reference to Exhibit 3.4 to the
Companys annual report on Form 10-K for the year ended December 31, 2007).3.5
    
    Amendment to Certificate of Incorporation dated March 23, 1995 (incorporated by reference to
Exhibit A of Exhibit 1 to the Companys Form 8-A filed March 30, 1995).3.6
    
    Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.4 to the
Companys quarterly report on Form 10-Q for the quarter ended March 31, 2001).4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4 to the Companys
Registration Statement No. 33-76150 on Form S-1).4.2
    
    Amended and Restated Rights Agreement dated as of December 7, 1998 (incorporated by reference
to Exhibit 1 to Form 8-A/A filed December 7, 1998).4.3
    
    Amendment No. 1 to the Amended and Restated Rights Agreement dated March 19, 2005, by and
between Advocat, Inc. and SunTrust Bank, as Rights Agent, (incorporated by reference to
Exhibit 2 to Form 8-A/A filed March 24, 2005).4.4
    
    Second Amendment to Amended and Restated Rights Agreement, dated as of August 15, 2008,
between Advocat, Inc. and Computershare Trust Company, N.A., a federally chartered trust
company, as successor to SunTrust Bank, (incorporated by reference to the Companys
Registration Statement on Form 8-A/A filed on August 19, 2008).4.5
    
    Third Amendment to Amended and Restated Rights Agreement, dated as of August 14, 2009,
between Advocat, Inc. and Computershare Trust Company, N.A., a federally chartered trust
company, as successor to SunTrust Bank, (incorporated by reference to Exhibit 4 to the
Companys Registration Statement on Form 8-A/A filed on August 14, 2009).*10.1
    
    Employment Agreement effective April 5, 2010, by and among Advocat Inc., a Delaware
corporation, and Kelly Gill.10.2
    
    Second Amendment to Master Lease Dated March 2, 2010 between the registrant and OHI Asset
(FL), LLC, an affiliate of Omega Healthcare Investors.10.3
    
    $15 million revolving credit facility dated March 17, 2010 between the registrant and The
Privatebank and Trust Company.10.4
    
    Termination of Lease and Subleases dated April 1, 2010 between the registrant and




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##### Table of Contents



ExhibitNumber
    
    Description of ExhibitsOmega
Health Investors, Inc. and certain affiliates.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b).
 
 *
    
    Indicates management contract or compensatory plan or arrangement.