AdCare Health Systems, Inc. (NYSE Amex: ADK),
a leading long-term care provider, has signed definitive purchase
agreements for two skilled nursing facilities in Oklahoma for a
total consideration of $11.6 million.
The facilities have an aggregate of 239 beds in service and
generate an estimated $10.3 million in gross annualized revenues
according to their most recent financial statements. The
transaction is expected to be completed in the next 90 days. AdCare
plans to finance the acquisition of the facilities with traditional
bank loans.
"Including the two new acquisitions announced today, we have a
total of 12 skilled nursing facilities we expect to close in
established markets over the next 120 days," said Boyd Gentry,
AdCare's president and chief executive officer. "Together, these
facilities have existing estimated gross annualized revenues of
$49.0 million, which is prior to our optimization process that we
believe will increase sub-acute census and revenues.
"We are especially excited about the significant upside of our
Arkansas expansion, which includes three Little Rock facilities.
One of these is a recently fully renovated 157 bed facility that we
will open exclusively as a sub-acute facility. Once fully
optimized, this facility's revenues are anticipated to exceed $15
million. This transaction is scheduled to close at the end of this
month."
AdCare's M&A program is driven by management's commitment to
acquire, develop and manage facilities where it can leverage
operational efficiencies and improve profitability -- even in a
more conservative Medicare environment. In line with this strategy,
the company recently terminated an agreement to acquire or lease 15
skilled nursing facilities in South Carolina, North Carolina,
Virginia, and Tennessee that was announced in June of last year,
following further due-diligence and renegotiation efforts.
"AdCare will no longer pursue this acquisition as it has become
significantly more expensive as consent negotiations with
third-party landlords progressed," continued Gentry. "Although we
tried to negotiate suitable terms, we eventually decided it was in
our best interest to focus on the other numerous acquisitions we
have identified which could quickly take its place."
The company plans to continue pursuing an aggressive M&A
program throughout 2012, focused on acquiring facilities that fit
within its optimization strategy and have the ability to increase
the company's overall Medicare census and patient acuity.
"Our pipeline of potential acquisitions is as robust as ever,
and we are working on several opportunities for owned facilities
that we expect to announce soon," added Gentry. "All of these
facilities are within our existing seven state footprints, where we
can leverage our existing regional operations teams."
Combining the company's current annualized run-rate with
transactions in the process of closing, AdCare's estimated
annualized revenue run-rate is expected to exceed $246 million.
This would represent an increase of more than 62% over the
company's revenues in 2011, and an increase of more than 8 times
revenues since initiating its M&A campaign in the fall of
2009.
"As our portfolio of skilled nursing facilities expands, we
continue to focus on cost reduction strategies that improve margins
going forward," continued Gentry. "We recently lowered our contract
therapy costs, are currently leveraging a GPO program for our
medical supplies and food purchases, negotiating with pharmacy
providers and are in the final stages of outsourcing a large part
of our IT infrastructure. We estimate that when fully implemented
these cost reduction initiatives will save $4 million
annually."
Chris Brogdon, AdCare's vice chairman and chief acquisitions
officer, commented: "Today's new signing brings the total number of
facilities we've put under contract to 47 since we began our
current M&A program. This transaction also increases the total
number of facilities we've put under contract to 12 in Oklahoma.
With our M&A program and the integration of new facilities
remaining our major focus in 2012, we continue to evaluate a number
of opportunities that fit our acquisition strategy. And we
demonstrated today that we are willing to walk away from those
transactions that we discover are not aligned with this
strategy."
About AdCare Health Systems AdCare Health
Systems, Inc. (NYSE Amex: ADK) is a recognized innovator in senior
living and health care facility management. AdCare develops, owns
and manages long-term care facilities and retirement communities,
and since the company's inception in 1988, its mission has been to
provide the highest quality of healthcare services to the elderly,
including a broad range of skilled nursing and sub-acute care
services. For more information about AdCare, visit
www.adcarehealth.com.
Important Cautions Regarding Forward-Looking
Statements Statements contained in this press release that are
not historical facts may be forward-looking statements within the
meaning of federal law. Such statements can be identified by the
use of forward-looking terminology, such as "believes," "expects,"
"plans," "intends," "anticipates" and variations of such words or
similar expressions, but their absence does not mean that the
statement is not forward-looking. Statements in this announcement
that are forward-looking include, but are not limited to,
statements made by Mr. Gentry that the company expects better
results, and statements by Mr. Brogdon that the company continues
to expect its new facilities and those pending acquisitions to
improve the company's overall EBITDAR margin, as well as other
statements regarding the signing and closing of expected
acquisitions, and the company's expected annualized run-rate. Such
forward-looking statements reflect management's beliefs and
assumptions and are based upon information currently available to
management and involve known and unknown risks, results,
performance or achievements of AdCare, which may differ materially
from those expressed or implied in such statements. Such factors
are identified in the public filings made by AdCare with the
Securities and Exchange Commission and include, among others,
AdCare's ability to secure lines of credit and/or an acquisition
credit facility, find suitable acquisition properties at favorable
terms, changes in the health care industry because of political and
economic influences, changes in regulations governing the health
care industry, changes in reimbursement levels including those
under the Medicare and Medicaid programs and changes in the
competitive marketplace. There can be no assurance that such
factors or other factors will not affect the accuracy of such
forward-looking statements. Except where required by law, AdCare
undertakes no obligation to revise or update any forward-looking
statements to reflect events or circumstances after the date of
this press release.
In addition, facilities mentioned in this press release are
operated by a separate, wholly owned, independent operating
subsidiary that has its own management, employees and assets.
References to the consolidated company and its assets and
activities, as well as the use of terms such as "we," "us," "our,"
and similar verbiage, is not meant to imply that AdCare Health
Systems, Inc. has direct operating assets, employees or revenue or
that any of the facilities, the home health business or other
related businesses are operated by the same entity.
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Company Contacts Boyd Gentry, CEO Chris Brogdon, Vice
Chairman & CAO David A. Tenwick, Chairman of Board AdCare
Health Systems, Inc. Tel (937) 964-8974 Email Contact Investor
Relations Ron Both or Geoffrey Plank Liolios Group, Inc. Tel
(949) 574-3860 Email Contact
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