ATLANTA, Nov. 14, 2016 /PRNewswire/ -- AdCare Health
Systems, Inc. (NYSE MKT: ADK) (NYSE MKT: ADK.PRA), a
self-managed healthcare real estate investment company that invests
primarily in real estate purposed for senior living and long-term
care, today reported results for the three months and nine months
ended September 30, 2016.
Business Update
- Completed sale of nine Arkansas properties
- Concluded its previously announced review of strategic
alternatives for the Company and is implementing a go-forward
strategy focusing on specific initiatives to increase shareholder
value
- Announced share repurchase programs for up to 1.0 million
shares of common stock and up to 100,000 shares of preferred
stock
- Reduced quarterly general and administrative expense to
$1.6 million in the third quarter,
down over 25% sequentially as compared to the second quarter
- Refinanced the conventional bank debt on its Georgetown facility with $3.7 million of HUD debt
On March 29, 2016, the Company
announced that the Board of Directors had begun to explore
strategic alternatives for the Company given that its transition to
a healthcare property holding and leasing company was complete.
After a thorough and objective review of all potential alternatives
and careful consideration, the Board of Directors, in consultation
with its financial advisor, Stifel, determined that continuation of
the Company's strategy, including portfolio improvement and the
redeployment of net cash proceeds from the sale of its nine
Arkansas facilities, is currently
the best alternative for enhancing shareholder value and is in the
best interest of shareholders.
"The Board has thoroughly and diligently evaluated a wide range
of strategic alternatives, including a sale or merger of the
Company," continued McBride. "We reached out to a significant
number of interested parties and received proposals from several
parties. The Board determined, following consultation with Stifel,
that such proposals would not provide adequate value to
shareholders and would not be in their best interest at this
time."
Strategic Plan
Management is focused on the following initiatives to increase
shareholder value, some of which are the result of feedback from
the review of strategic alternatives:
- Continue to work closely with its existing operators, including
making limited investments in the Company's facilities at
attractive returns on capital which will increase rent and help
improve the credit profile of the portfolio. In order to regain
recertification, the Company has invested in two facilities
currently operated by Peach Health Group and formerly operated by
New Beginnings Care LLC which filed for reorganization under the
Bankruptcy Code earlier this year. The Company anticipates
recertification of these facilities by the end of the year. In the
third quarter, the Company has begun to see an improvement in the
coverage ratios, as Rent Coverage Before Management Fees improved
sequentially from 1.3x to 1.5x and Rent Coverage After Management
Fees improved sequentially from 0.9x to 1.2x.
- Redeploy the net cash proceeds from the Arkansas sale to increase shareholder value.
This would include the repurchase of common and preferred stock,
repayment of debt and selective acquisition of facilities. The
Board has approved a 1.0 million share common stock repurchase
program and a 100,000 share preferred stock repurchase program. As
part of its acquisition strategy, AdCare will pursue opportunities
to acquire facilities currently leased by AdCare and subleased to
third-party operators. During the strategic review, the valuations
on leasehold interests were significantly discounted by interested
parties even though the leases have over 10 years remaining. The
Company has the right of refusal on nine of its 11 leased
facilities.
- The Company will continue to reduce overhead costs and continue
to resolve, when possible, the remaining professional liabilities
resulting from its discontinued operations business. During the
third quarter the Company has further reduced its overhead from
$2.1 million to $1.6 million, a 25.2% reduction.
"Our portfolio operating metrics, particularly rent coverages,
continue to improve as our local and regional operator tenants have
been implementing their operating strategies," added Mr. McBride.
"From an operational perspective, in the third quarter we further
reduced our general and administrative expenses by more than
$500,000 or 25% from the second
quarter of 2016 as a result of planned headcount reduction and
lower other expenses. We expect further reductions in G&A as
activity related to our legacy business diminishes. We refinanced
conventional bank debt (interest rate of 4.71%) associated with our
Georgetown facility with
$3.7 million of debt guaranteed by
the US Department of Housing and Urban Development at an interest
rate of 2.98%. The steady improvement in the overall credit profile
of our property portfolio, along with lower G&A costs and debt
refinancing activity, creates additional value for
shareholders."
Under the new share repurchase programs announced today, shares
may be purchased from time to time in open market transactions at
prevailing market prices, in privately negotiated transactions or
by other means in accordance with federal securities laws. The
actual timing, number and value of shares repurchased under the
programs will be determined by the Company in its discretion and
will depend on a number of factors, including the market price of
the shares, general market and economic conditions, and applicable
legal and contractual requirements. The share repurchase programs
may be suspended, discontinued or terminated at any time without
prior notice.
The new share repurchase programs announced today will terminate
on November 10, 2017. The
common stock repurchase program that was previously announced by
the Company on November 9, 2015 has
terminated. In September
2016, the Company ceased sales of its Series A Preferred
Stock under its previously announced at-the-market sales agreements
and related shelf registration statement and will not engage in any
such sales unless the preferred stock repurchase program announced
today has terminated.
Summary of Financial Results for the Three Months and Nine
Months Ended September 30,
2016
Revenues in the third quarter of 2016 were $7.2 million, up 16.9% from $6.1 million in the third quarter of 2015.
Revenues for the nine months ended September
30, 2016, increased by 76.2% to $21.4
million from $12.1 million for
the nine months ended September 30,
2015. The increase in revenues reflects the Company's
transition to a healthcare property holding and leasing company. In
accordance with accounting principles generally accepted in
the United States, the Company
recognized all rental revenues on a straight line rent accrual
basis, except rental revenues for the nine facilities leased to
affiliates of Skyline Healthcare LLC, for which revenue is
recognized based on cash rent owed (due to the pending sale of the
facilities at September 30, 2016),
and rental revenues for two facilities leased to affiliates of
Peach Health Group LLC for which rental revenues are not recognized
due to the current reimbursement status of the facilities.
General and administrative costs decreased by $516,000, or 24.4%, to $1.6 million for the three months ended
September 30, 2016, compared with
$2.1 million for the same period in
2015. For the three months ended September
30, 2016 and 2015, general and administrative costs include
$170,000 and $245,000, respectively, of stock-based
compensation expense. General and administrative costs for the nine
months ended September 30, 2016
decreased by approximately $1.7
million, or 21.7%, to $6.3
million, compared with $8.0
million for the same period in 2015. For the nine months
ended September 30, 2016 and 2015,
general and administrative costs include $890,000 and $677,000, respectively, of stock-based
compensation expense.
The loss from discontinued operations, net of tax for the
quarter was $2.2 million, compared
with $3.1 million for the prior‑year
period. Year-to-date, the loss from discontinued operations, net of
tax was $6.5 million, compared with
loss from discontinued operations, net of tax of $2.3 million for the prior‑year period. The
losses in the three and nine month periods ended September 30, 2016 were primarily due to
increased reserves for professional liability claims in connection
with legacy operations as well as higher bad debt expense related
to legacy patient care related receivables.
Net loss attributable to AdCare common stockholders in the third
quarter of 2016 was $3.9 million, or
$0.19 per diluted share, compared
with $6.3 million, or $0.32 per basic and diluted share for the third
quarter of 2015. For the nine months ended September 30, 2016, the net loss attributable to
AdCare common stockholders was $14.4
million, or $0.72 per basic
and diluted share, compared with a net loss of $18.5 million, or $0.94 per basic and diluted share, in the
year-ago period.
Cash and cash equivalents at September
30, 2016, totaled $1.5
million, compared with $2.7
million at December 31, 2015.
Restricted cash and investments at September
30, 2016, totaled $5.5
million, excluding $3.6
million of restricted cash included in assets of disposal
group held for sale, compared with $12.7
million at December 31, 2015.
Total debt outstanding at September 30,
2016, totaled $115.5 million,
compared with $122.8 million at
December 31, 2015 (including
$32.0 million and $958,000 in liabilities of disposal group held
for sale and net of $2.3 million and
$2.7 million of deferred financing
costs at September 30, 2016 and
December 31, 2015, respectively).
See our Current Report on Form 8-K, filed on October 11, 2016, for a discussion of the
completed sale of our nine facilities in Arkansas.
Conference Call and Webcast
AdCare will hold a conference call to discuss its third quarter
2016 financial results on Monday, November
14, 2016, at 4:30 p.m. ET.
- Date and time: Monday, November 14,
2016 at 4:30 p.m. ET
- Dial-in number: 1-800-311-6662 (domestic) or 1-719-325-2390
(international)
- Reference passcode: 8326469
- Replay number: Dial 844-512-2921 (domestic) or 1-412-317-6671
(international). Reference passcode: 8326469 to access the replay.
The replay will be available until November
21, 2016.
- Webcast link: http://public.viavid.com/index.php?id=121726
About AdCare Health Systems
AdCare Health Systems, Inc. (NYSE MKT: ADK) (NYSE MKT: ADK.PRA)
is a self-managed healthcare real estate investment company that
invests primarily in real estate purposed for senior living and
long-term healthcare through facility lease and sub-lease
transactions. AdCare currently owns, leases or manages for third
parties 29 facilities. For more information about AdCare, visit
www.adcarehealth.com.
Important Cautions Regarding Forward-Looking
Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Words such as "expects," "intends," "believes,"
"anticipates," "plans," "likely," "will," "seeks," "estimates" and
variations of such words and similar expressions are intended to
identify such forward-looking statements. Statements in this press
release regarding future events and developments and our future
performance, as well as management's expectations, beliefs, plans,
estimates or projections relating to the future, are
forward-looking statements. Forward-looking statements in this
press release include, among others, statements regarding the new
share repurchase programs, improving the credit profile of the
portfolio, timing and prospects of recertification of two
Georgia facilities, the
acquisition of facilities, the reduction of overhead costs, the
resolution of professional liability claims and increasing
shareholder value.
Forward-looking statements, by their nature, involve estimates,
projections, goals, forecasts and assumptions and are subject to
risks and uncertainties that could cause actual results to differ
materially from those projected or contemplated by our
forward-looking statements due to various factors, including, among
others: our dependence on the operating success of our operators;
the significant amount of, and our ability to service, our
indebtedness; covenants in our debt agreements that may restrict
our ability to make investments, incur additional indebtedness and
refinance indebtedness on favorable terms; the availability and
cost of capital; our ability to raise capital through equity and
debt financings or through the sale of assets; the effect of
increasing healthcare regulation and enforcement on our operators
and the dependence of our operators on reimbursement from
governmental and other third-party payors; the relatively illiquid
nature of real estate investments; the impact of litigation and
rising insurance costs on the business of our operators; the impact
on us of litigation relating to our prior operation of our
healthcare properties; the effect of our operators declaring
bankruptcy, becoming insolvent or failing to pay rent as due; the
ability of any of our operators in bankruptcy to reject unexpired
lease obligations and to impede our ability to collect unpaid rent
or interest during the pendency of a bankruptcy proceeding and
retain security deposits for the debtor's obligations; our ability
to find replacement operators and the impact of unforeseen costs in
acquiring new properties; and other factors discussed from time to
time in our news releases, public statements and documents filed by
us with the Securities and Exchange Commission from time to time,
including our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K. These forward-looking
statements and such risks, uncertainties and other factors speak
only as of the date of this press release, and we expressly
disclaim any obligation or undertaking to update or revise any
forward-looking statement contained herein, to reflect any change
in our expectations with regard thereto or any other change in
events, conditions or circumstances on which any such statement is
based, except to the extent otherwise required by applicable
law.
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS
(Amounts in 000's)
|
|
|
|
|
September
30,
|
December
31,
|
ASSETS
|
2016
|
2015
|
|
(Unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
1,457
|
$
2,720
|
Restricted
cash
|
1,796
|
9,169
|
Accounts receivable,
net of allowance of $10,303 and $12,487
|
3,327
|
8,805
|
Prepaid expenses and
other
|
2,130
|
3,214
|
Assets of disposal
group held for sale
|
49,824
|
1,249
|
Total current assets
|
58,534
|
25,157
|
|
|
|
Restricted cash and
investments
|
3,682
|
3,558
|
Property and
equipment, net
|
79,320
|
126,676
|
Intangible assets -
bed licenses
|
2,471
|
2,471
|
Intangible assets -
lease rights, net
|
2,920
|
3,420
|
Goodwill
|
2,105
|
4,183
|
Lease
deposits
|
1,426
|
1,812
|
Other
assets
|
3,855
|
1,996
|
Total assets
|
$
154,313
|
$
169,273
|
|
|
|
LIABILITIES AND
DEFICIT
|
|
|
|
|
|
Current
liabilities:
|
|
|
Current portion of
notes payable and other debt
|
$
11,464
|
$
50,960
|
Current portion of
convertible debt
|
7,700
|
-
|
Accounts
payable
|
4,041
|
8,741
|
Accrued expenses and
other
|
6,089
|
3,125
|
Liabilities of
disposal group held for sale
|
32,036
|
958
|
Total current liabilities
|
61,330
|
63,784
|
|
|
|
Notes payable and
other debt, net of current portion:
|
|
|
Senior debt,
net
|
56,174
|
54,742
|
Bonds, net
|
6,566
|
6,600
|
Convertible debt,
net
|
1,394
|
8,968
|
Other debt,
net
|
169
|
531
|
Other
liabilities
|
4,346
|
3,380
|
Deferred tax
liability
|
389
|
389
|
Total liabilities
|
130,368
|
138,394
|
|
|
|
Preferred stock, no par value; 5,000 shares
authorized; 2,764 and
2,427 shares issued
and outstanding, redemption amount $69,096
and $60,273 at
September 30, 2016 and December 31, 2015, respectively
|
61,504
|
54,714
|
|
|
|
Stockholders'
deficit:
|
|
|
Common stock and additional paid-in capital, no par
value; 55,000
shares authorized;
19,892 and 19,861 issued and outstanding at
September 30, 2016
and December 31, 2015, respectively
|
61,611
|
60,958
|
Accumulated
deficit
|
(99,170)
|
(84,793)
|
Total stockholders'
deficit
|
(37,559)
|
(23,835)
|
Total liabilities and stockholders' deficit
|
$
154,313
|
$
169,273
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF OPERATIONS
(Amounts in 000's, except per share
data) (Unaudited)
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(Amounts in
000's)
|
2016
|
2015
|
2016
|
2015
|
Revenues:
|
|
|
|
|
Rental
revenues
|
$ 6,912
|
$ 5,826
|
$ 20,651
|
$ 11,322
|
Management fee and
other revenues
|
253
|
304
|
760
|
827
|
Total revenues
|
7,165
|
6,130
|
21,411
|
12,149
|
Expenses:
|
|
|
|
|
Facility rent
expense
|
2,176
|
1,736
|
6,523
|
3,552
|
Depreciation and
amortization
|
1,124
|
1,911
|
4,176
|
5,384
|
General and
administrative expense
|
1,598
|
2,114
|
6,275
|
8,014
|
Other operating
expense
|
241
|
309
|
1,413
|
530
|
Total expenses
|
5,139
|
6,070
|
18,387
|
17,480
|
|
|
|
|
|
Income (loss) from
operations
|
2,026
|
60
|
3,024
|
(5,331)
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
Interest expense,
net
|
1,801
|
1,830
|
5,377
|
6,599
|
Loss on
extinguishment of debt
|
-
|
-
|
-
|
680
|
Other
expense
|
-
|
268
|
51
|
749
|
Total other expense, net
|
1,801
|
2,098
|
5,428
|
8,028
|
|
|
|
|
|
Income (loss) from
continuing operations before income taxes
|
225
|
(2,038)
|
(2,404)
|
(13,359)
|
Income tax
expense
|
3
|
-
|
3
|
20
|
Income (loss) from
continuing operations
|
222
|
(2,038)
|
(2,407)
|
(13,379)
|
|
|
|
|
|
Loss from
discontinued operations, net of tax
|
(2,210)
|
(3,057)
|
(6,513)
|
(2,328)
|
Net loss
|
(1,988)
|
(5,095)
|
(8,920)
|
(15,707)
|
|
|
|
|
|
Net loss attributable
to noncontrolling interests
|
-
|
284
|
-
|
784
|
Net loss attributable
to AdCare Health Systems, Inc.
|
(1,988)
|
(4,811)
|
(8,920)
|
(14,923)
|
|
|
|
|
|
Preferred stock
dividends
|
(1,879)
|
(1,499)
|
(5,457)
|
(3,582)
|
Net loss attributable
to AdCare Health Systems, Inc. Common
|
|
|
|
|
Stockholders
|
$(3,867)
|
$(6,310)
|
$(14,377)
|
$(18,505)
|
|
|
|
|
|
Net loss per share of
common stock attributable to
|
|
|
|
|
AdCare Health
Systems, Inc.
|
|
|
|
|
Basic and
diluted:
|
|
|
|
|
Continuing
operations
|
$
(0.08)
|
$
(0.18)
|
$
(0.39)
|
$
(0.86)
|
Discontinued
operations
|
$
(0.11)
|
$
(0.14)
|
$
(0.33)
|
$
(0.08)
|
|
$
(0.19)
|
$
(0.32)
|
$
(0.72)
|
$
(0.94)
|
|
|
|
|
|
Weighted average
shares of common stock outstanding:
|
|
|
|
|
Basic and diluted
|
19,917
|
19,838
|
19,909
|
19,617
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES SUPPLEMENTAL OPERATING
METRICS
|
|
|
|
|
|
Three Months
Ended
|
Three Months
Ended
|
Three Months
Ended
|
Portfolio Operating
Metrics (1)
|
March 31,
2016
|
June 30,
2016
|
September 30,
2016
|
Occupancy
(%)
|
82.3%
|
81.7%
|
82.6%
|
Skilled Mix
(2)
|
13.2%
|
12.3%
|
12.1%
|
Rent Coverage Before
Management Fees
|
1.34
|
1.32
|
1.51
|
Rent Coverage After
Management Fees
|
0.98
|
0.93
|
1.17
|
|
|
|
|
(1)
|
Excludes nine
Arkansas facilities, which were sold on October 6, 2016, three
Georgia facilities currently operated by Peach Healthcare Group, and three Ohio
facilities currently managed by the Company.
|
|
|
|
|
|
(2)
|
Skilled Mix refers to
Medicare A and Managed Care Resources Utilization Groups (RUGs)
census. Includes one assisted
living facility in Ohio.
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/adcare-health-systems-reports-third-quarter-2016-results-300362357.html
SOURCE AdCare Health Systems, Inc.