ATLANTA, Aug. 15, 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 six months
ended June 30, 2016.
Business Update
- Entered into a Purchase and Sale Agreement with affiliates of
Skyline Healthcare LLC for the sale of the Company's nine
Arkansas facilities for
$55.0 million, of which $52.0 million shall be paid in cash and
$3.0 million shall be paid by
promissory note. Completion of the sale is expected to occur on or
before August 31, 2016, and is
subject to customary termination provisions and closing conditions.
If the sale is completed, net proceeds from the sale after the
repayment of related mortgage indebtedness are expected to be
approximately $25.0 million
(including the $3.0 million
promissory note).
- Entered into a master sublease for three of the Company's
Georgia facilities with affiliates
of Peach Health Group LLC ("Peach Health").
- Transferred the operations of the Company's Savannah Beach facility located in Georgia from an affiliate of New Beginnings
Care, LLC to Peach Health.
- Recertification efforts for Oceanside and Jeffersonville facilities are
progressing.
- Completed the sale of all non-core assets, including three
office buildings and a parcel of excess land for $1.4 million in aggregate.
- Strategic review by the Board of Directors, with the assistance
of its financial advisor, is ongoing.
"In the second quarter, we continued to improve the value of our
real estate portfolio, reduced our general and administrative
expenses and strengthened our balance sheet to increase our
financial flexibility," commented Bill
McBride, AdCare's Chairman and Chief Executive Officer. "We
completed the sale of all assets we identified as non-core. If
completed, the sale of our nine Arkansas facilities, which is expected to
close during the third quarter, will enable increased management
focus on our remaining core operations."
"We continue to evaluate strategic alternatives with the
assistance of our financial advisor, while working to enhance our
portfolio to maximize shareholder value," continued Mr. McBride.
"In the context of the Board's review of strategic alternatives,
the Board will consider its options for the redeployment of the net
proceeds from the sale of the Arkansas properties, if completed."
Set forth below are operating metrics that management believes
measure the operating performance of the Company's leased and
subleased portfolio:
Portfolio
Operating Metrics (1)
|
For the Three
Months
Ended June 30, 2016
|
Occupancy
(%)
|
81.9%
|
Skilled Mix
(%)(2)
|
12.3%
|
Rent Coverage Before
Management Fees
|
1.3x
|
Rent Coverage After
Management Fees
|
0.9x
|
(1)
Excludes nine Arkansas facilities which are under contract for sale
and three Georgia facilities previously operated by affiliates of
New Beginnings Care, LLC.
|
(2)
Skilled Mix refers to Medicare A and Managed Care Resource
Utilization Groups (RUGs).
|
Summary of Financial Results for the Three Months and Six
Months Ended June 30, 2016
Revenues in the second quarter of 2016 were $7.2 million, up 61% from $4.5 million in the second quarter of 2015.
Revenues for the six months ended June 30,
2016, increased by 137% to $14.2
million from $6.0 million for
the six months ended June 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, and rental revenues for the three facilities leased
to affiliates of New Beginnings, Care LLC, for which revenue is
recognized based on cash rent received.
General and administrative costs decreased by $434,000, or 17%, to $2.1
million for the three months ended June 30, 2016, compared with $2.6 million for the same period in 2015. For the
three months ended June 30, 2016 and
2015, general and administrative costs include $240,000 and $229,000, respectively, of stock-based
compensation expense. General and administrative costs for the six
months ended June 30, 2016, decreased
by approximately $1.2 million, or
21%, to $4.7 million, compared with
$5.9 million for the same period in
2015. For the six months ended June 30,
2016 and 2015, general and administrative costs include
$720,000 and $432,000, respectively, of stock-based
compensation expense.
The loss from discontinued operations, net of tax for the
quarter was $3.8 million, compared
with $1.5 million for the prior‑year
period. Year-to-date, the loss from discontinued operations,
net of tax was $4.3 million, compared
with income from discontinued operations, net of tax of
$729,000 for the prior‑year period.
The losses in the three and six month periods ended June 30, 2016 were primarily due to increased
reserves for professional general liability claims in connection to
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
second quarter of 2016 was $6.8
million, compared with $6.5
million in the second quarter of 2015, or $0.34 and $0.33 per
basic and diluted share for each respective period. For the six
months ended June 30, 2016, the net
loss attributable to AdCare common stockholders was $10.5 million, or $0.53 per basic and diluted share, compared with
a net loss of $12.2 million, or
$0.63 per basic and diluted share, in
the year-ago period.
Cash and cash equivalents at June 30,
2016, totaled $3.2 million,
compared with $2.7 million at
December 31, 2015. Restricted cash
and investments at June 30, 2016,
totaled $5.0 million, excluding
$3.0 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
June 30, 2016, totaled $116.0 million, compared with $122.8 million at December
31, 2015 (including $32.2
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 June 30, 2016 and December
31, 2015, respectively).
Conference Call and Webcast
AdCare will hold a conference call to discuss its second quarter
2016 financial results on Monday, August 15,
2016, at 10 a.m. ET.
- Date and time: Monday, August 15,
2016 at 10 a.m. ET
- Dial-in number: 1-888-282-4570 (domestic) or 1-719-325-2355
(international). Reference passcode: 6794807
- Replay number: Dial 1-877-870-5176 (domestic) or 1-858-384-5517
(international). Reference passcode: 6794807. The replay will be
available until August 22, 2016.
- Webcast link: http://public.viavid.com/index.php?id=120619
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 38 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, all statements regarding the
sale of our Arkansas facilities,
the options and use of the net proceeds from the sale of the
Arkansas facilities (if
completed), the recertification of our Oceanside and Jeffersonville facilities, our Board's review
of strategic alternatives and our efforts to enhance 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 pay dividends, 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 impact of required regulatory approvals of transfers of
healthcare properties; 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)
|
|
|
June 30,
|
December
31,
|
ASSETS
|
2016
|
2015
|
|
(Unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
3,249
|
$
2,720
|
Restricted
cash
|
1,443
|
9,169
|
Accounts
receivable, net of allowance of $10,700 and $12,487
|
3,994
|
8,805
|
Prepaid
expenses and other
|
1,817
|
3,214
|
Assets of
disposal group held for sale
|
49,353
|
1,249
|
Total current assets
|
59,856
|
25,157
|
|
|
|
Restricted cash and
investments
|
3,535
|
3,558
|
Property and
equipment, net
|
79,617
|
126,676
|
Intangible assets -
bed licenses
|
2,471
|
2,471
|
Intangible assets -
lease rights, net
|
3,087
|
3,420
|
Goodwill
|
2,105
|
4,183
|
Lease
deposits
|
1,411
|
1,812
|
Other
assets
|
3,352
|
1,996
|
Total
assets
|
$
155,434
|
$
169,273
|
|
|
|
LIABILITIES AND
DEFICIT
|
|
|
|
|
|
Current
liabilities:
|
|
|
Current
portion of notes payable and other debt
|
$
19,306
|
$
50,960
|
Current
portion of convertible debt
|
7,700
|
-
|
Accounts
payable
|
4,340
|
8,741
|
Accrued
expenses and other
|
5,329
|
3,125
|
Liabilities of
disposal group held for sale
|
32,160
|
958
|
Total current liabilities
|
68,835
|
63,784
|
|
|
|
Notes payable and
other debt, net of current portion:
|
|
|
Senior debt,
net
|
48,614
|
54,742
|
Bonds,
net
|
6,547
|
6,600
|
Convertible
debt, net
|
1,352
|
8,968
|
Other debt,
net
|
295
|
531
|
Other
liabilities
|
4,078
|
3,380
|
Deferred tax
liability
|
389
|
389
|
Total
liabilities
|
130,110
|
138,394
|
|
|
|
Preferred stock, no
par value; 5,000 shares authorized; 2,657
and 2,427 shares issued and
outstanding, redemption amount $66,426 and $60,273 at June 30, 2016 and December 31, 2015,
respectively
|
59,261
|
54,714
|
|
|
|
Stockholders'
equity:
|
|
|
Common stock
and additional paid-in capital, no par value;
55,000 shares authorized;
19,907 and 19,861 issued and outstanding
at June 30, 2016 and December
31, 2015, respectively
|
61,366
|
60,958
|
Accumulated
deficit
|
(95,303)
|
(84,793)
|
Total
stockholders' deficit
|
(33,937)
|
(23,835)
|
Total liabilities and
stockholders\' deficit
|
$
155,434
|
$
169,273
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Amounts in 000's,
except per share data)
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
Six Months Ended June
30,
|
(Amounts in
000's)
|
2016
|
2015
|
2016
|
2015
|
Revenues:
|
|
|
|
|
Rental
revenues
|
$ 6,890
|
$ 4,156
|
$ 13,739
|
$
5,496
|
Management fee
and other revenues
|
274
|
305
|
507
|
523
|
Total revenues
|
7,164
|
4,461
|
14,246
|
6,019
|
Expenses:
|
|
|
|
|
Facility rent
expense
|
2,168
|
1,329
|
4,347
|
1,816
|
Depreciation
and amortization
|
1,339
|
1,798
|
3,052
|
3,473
|
General and
administrative expense
|
2,135
|
2,569
|
4,677
|
5,900
|
Other
operating expense
|
969
|
119
|
1,172
|
221
|
Total expenses
|
6,611
|
5,815
|
13,248
|
11,410
|
|
|
|
|
|
Income (loss) from
operations
|
553
|
(1,354)
|
998
|
(5,391)
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
Interest
expense, net
|
1,751
|
2,279
|
3,576
|
4,769
|
Loss on
extinguishment of debt
|
-
|
-
|
-
|
680
|
Other
expense
|
9
|
193
|
51
|
481
|
Total other expense, net
|
1,760
|
2,472
|
3,627
|
5,930
|
|
|
|
|
|
Loss from continuing
operations before income taxes
|
(1,207)
|
(3,826)
|
(2,629)
|
(11,321)
|
Income tax
expense
|
-
|
-
|
-
|
20
|
Loss from continuing
operations
|
(1,207)
|
(3,826)
|
(2,629)
|
(11,341)
|
|
|
|
|
|
Income (loss) from
discontinued operations, net of tax
|
(3,775)
|
(1,537)
|
(4,303)
|
729
|
Net loss
|
(4,982)
|
(5,363)
|
(6,932)
|
(10,612)
|
|
|
|
|
|
Net loss attributable
to noncontrolling interests
|
-
|
270
|
-
|
500
|
Net loss attributable
to AdCare Health Systems, Inc.
|
(4,982)
|
(5,093)
|
(6,932)
|
(10,112)
|
|
|
|
|
|
Preferred stock
dividends
|
(1,801)
|
(1,437)
|
(3,578)
|
(2,083)
|
Net loss attributable
to AdCare Health Systems, Inc. Common Stockholders
|
$(6,783)
|
$(6,530)
|
$(10,510)
|
$(12,195)
|
|
|
|
|
|
Net loss (income) per
share of common stock attributable to AdCare Health Systems, Inc.
|
|
|
|
|
Basic and
diluted:
|
|
|
|
|
Continuing
operations
|
$
(0.15)
|
$
(0.27)
|
$
(0.31)
|
$
(0.69)
|
Discontinued
operations
|
$
(0.19)
|
$
(0.06)
|
$
(0.22)
|
$
0.06
|
|
$
(0.34)
|
$
(0.33)
|
$
(0.53)
|
$
(0.63)
|
|
|
|
|
|
Weighted average
shares of common stock outstanding:
|
|
|
|
|
Basic and diluted
|
19,907
|
19,775
|
19,896
|
19,499
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/adcare-health-systems-reports-second-quarter-2016-results-300313122.html
SOURCE AdCare Health Systems, Inc.