AdCare Health Systems Reports Second Quarter 2017 Financial Results

Date : 08/14/2017 @ 4:05PM
Source : PR Newswire (US)
Stock : Adcare Health Systems (GA) (delisted) (ADK)
Quote : 0.91  0.0 (0.00%) @ 2:05AM
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AdCare Health Systems Reports Second Quarter 2017 Financial Results

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ATLANTA, Aug. 14, 2017 /PRNewswire/ -- AdCare Health Systems, Inc. (NYSE American: ADK) (NYSE American: 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 and six months ended June 30, 2017.

Business Update

  • Observed sequential improvements in underlying portfolio operating metrics
  • Reduced general and administrative expenses to $822,000 for the second quarter, below stated target of $1.0 million of general & administrative expenses per quarter
  • Extended the maturity of one mortgage loan totaling $1.2 million from 2017 to 2020
  • Reduced the number of professional and general liability cases from 44 to 41
  • Filed with the Securities and Exchange Commission (the "SEC") a notice of special meeting and a definitive proxy statement for a special meeting of shareholders to be held on September 20, 2017, to consider and vote upon an agreement and plan of merger pursuant to which AdCare would merge with and into Regional Health Properties, Inc., a wholly owned subsidiary of AdCare formed for the purpose of the merger ("RHE")

"Operating metrics of our portfolio again showed improvement during the second quarter with increases in our occupancy rate and rent coverage ratios," commented Allan Rimland, AdCare's President, Chief Executive Officer and Chief Financial Officer. "These continued improvements underscore the Company's rationale for transitioning from an owner and operator of senior housing assets to a property holding and leasing company, namely improved performance through partnering with regional operators with strong clinical, operational and financial capabilities. The Company's pipeline of potential acquisitions continues to strengthen, both in terms of the number and quality of potential transactions. Management is carefully evaluating these opportunities."

Management periodically monitors a number of facility performance metrics including rent coverages both before and after management fees. In the second quarter of 2017, excluding the impact of the recently acquired Meadowood facility, the Company's portfolio rent coverage before management fees was 1.76x (as compared with 1.71x in the first quarter of 2017) and rent coverage after management fees was 1.35x (as compared with 1.29x in the first quarter of 2017).

"We made significant progress during the quarter in reducing our G&A expenses to below our target through our continued efforts to streamline our overhead structure," added Rimland. "At the same time, we extended the maturities of a $1.2 million mortgage note and $0.5 million in other debt to strengthen our balance sheet and reduce refinancing risk. We are in the process of evaluating the refinancings of other senior secured mortgage debt."

Summary of Financial Results for the Three and Six Months Ended June 30, 2017

Total revenues in the second quarter of 2017 were $6.3 million, down 12.0% from $7.2 million in the second quarter of 2016. Total revenues for the six months ended June 30, 2017, decreased by 12.7% to $12.4 million from $14.2 million for the six months ended June 30, 2016. The decrease reflects the sale of nine Arkansas facilities in October 2016 partially offset by rental revenues from the Meadowood facility and facilities operated by affiliates of Peach Health Group. The acquisition of the Meadowood facility closed on May 1, 2017. The Company generally recognizes all rental revenues on a straight-line rent accrual basis.

General and administrative costs decreased by $1.3 million, or 61.5%, to $822,000 for the three months ended June 30, 2017, compared with $2.1 million for the same period in 2016. For the three months ended June 30, 2017 and 2016, general and administrative costs include stock-based compensation expense, net of restricted stock and warrant forfeitures. General and administrative costs for the six months ended June 30, 2017 decreased by approximately $2.2 million, or 47.7%, to $2.4 million, compared with $4.7 million for the same period in 2016. For the six months ended June 30, 2017 and 2016, general and administrative costs include $154,000 and $720,000, respectively, of stock-based compensation expense.

Interest expense decreased by $745,000, or 42.5%, to $1.0 million for the second quarter of 2017 compared with $1.8 million for the same period in 2016. Interest expense for the six months ended June 30, 2017 decreased by approximately $1.5 million, or 43.0%, to $2.0 million compared with $3.6 million for the same period in 2016. The decrease is mainly due to the repayment of $36.0 million of debt in connection with the sale of nine Arkansas facilities in October 2016 and $6.7 million principal repayment of convertible debt on January 10, 2017 and the remaining $1.0 million on April 30, 2017, partially offset by $4.1 million in new mortgage debt financing for the Meadowood facility.

The loss from discontinued operations, net of tax for the second quarter of 2017 was $604,000, compared with $3.8 million for the prior-year period. Year-to-date, the loss from discontinued operations, net of tax was $1.0 million, compared with loss from discontinued operations, net of tax of $4.3 million for the prior-year period. The losses in the three and six-month periods ended June 30, 2017 were lower compared with the prior year periods primarily due to lower bad debt expense.

Net loss attributable to AdCare common stockholders in the second quarter of 2017 was $1.9 million, or $0.10 per basic and diluted share, compared with $6.8 million, or $0.34 per basic and diluted share, for the second quarter of 2016. For the six months ended June 30, 2017, the net loss attributable to AdCare common stockholders was $4.7 million, or $0.24 per basic and diluted share, compared with a net loss of $10.5 million, or $0.53 per basic and diluted share, in the year-ago period.

Cash and cash equivalents at June 30, 2017 totaled $2.0 million compared with $14.0 million at December 31, 2016. Restricted cash and investments at June 30, 2017 totaled $3.7 million compared with $5.5 million at December 31, 2016. Total debt outstanding at June 30, 2017 totaled $74.2 million compared with $80.0 million at December 31, 2016 (net of $2.1 million and $2.2 million of deferred financing costs at June 30, 2017 and December 31, 2016, respectively). 

Conference Call and Webcast

AdCare will hold a conference call to provide a business update and discuss its second quarter 2017 results on Monday, August 14, 2017 at 4:30 p.m. ET.

  • Date and time: Monday, August 14, 2017 at 4:30 p.m. ET
  • Dial-in number: 1-888-811-5448 (domestic) or 1-719-457-1035 (international)
  • Reference passcode: 4606390
  • Replay number: Dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). Reference passcode: 40606390 to access the replay. The replay will be available until August 21, 2017.
  • Webcast link: http://public.viavid.com/index.php?id=125781

About AdCare Health Systems

AdCare Health Systems, Inc. (NYSE American: ADK) (NYSE American: 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 30 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 special meeting of shareholders, the proposed merger of AdCare with and into a wholly owned subsidiary, target or anticipated improvements in our portfolio operating metrics (including occupancy rates and rent coverage ratios) and reductions in our general and administrative expenses, anticipated refinancing of certain mortgage debt and our ability in general to refinance our senior secured mortgage debt on favorable terms, the impact of the pending professional and general liability claims against us, portfolio growth, the operational risk of our tenants, the nature of our acquisition pipeline and our ability to make acquisitions, and the reduction of our overhead costs.

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 SEC 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. 

Additional Information

RHE has filed with the SEC a registration statement on Form S-4 containing a proxy statement of AdCare and a prospectus of RHE with respect to the proposed merger. The registration statement became effective on August 1, 2017. AdCare filed with the SEC a notice of a special meeting and a definitive proxy statement/prospectus, which was mailed on or about August 3, 2017 to holders of AdCare's common stock as of the July 13, 2017 record date. INVESTORS ARE URGED TO READ THE FORM S-4 AND PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. You will be able to obtain documents free of charge at the website maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the SEC by AdCare free of charge if you write or call AdCare at the following address or telephone number: Corporate Secretary, AdCare Health Systems, Inc., 454 Satellite Blvd. NW, Suite 100, Suwanee, Georgia 30024, (678) 869-5116, or you may visit the investor relations section of AdCare's website at www.adcarehealth.com for copies of any such document.

AdCare, its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies from holders of AdCare's common stock in connection with the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of proxies in connection with the proposed Merger is included in the Form S-4 and definitive proxy statement/prospectus. INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE OFFICERS OF ADCARE AND THEIR OWNERSHIP OF CAPITAL STOCK OF ADCARE IS ALSO SET FORTH IN ADCARE'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016. INVESTORS MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE INTERESTS OF SUCH PARTICIPANTS BY READING THE FORM S-4 AND DEFINITIVE PROXY STATEMENT/PROSPECTUS FOR THE PROPOSED MERGER.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Investors should read the Form S-4 and definitive proxy statement/prospectus carefully before making any voting or investment decisions.

ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in 000's)



June 30,

December 31,

ASSETS

2017

2016


(Unaudited)


Current assets:



Cash and cash equivalents

$           2,001

$         14,045

Restricted cash

1,361

1,600

Accounts receivable, net of allowance of $4,267 and $7,529, respectively

1,496

2,429

Prepaid expenses and other

1,554

2,395

Total current assets

6,412

20,469




Restricted cash and investments

2,308

3,864

Property and equipment, net

83,227

79,168

Intangible assets - bed licenses

2,471

2,471

Intangible assets - lease rights, net

2,420

2,754

Goodwill

2,105

2,105

Lease deposits

911

1,411

Other assets

9,398

7,244

Total assets

$       109,252

$       119,486




LIABILITIES AND DEFICIT






Current liabilities:



Current portion of notes payable and other debt

$           2,639

$           4,018

Current portion of convertible debt, net

1,494

9,136

Accounts payable

3,555

3,037

Accrued expenses and other

7,935

9,077

Total current liabilities

15,623

25,268




Notes payable and other debt, net of current portion:



Senior debt, net

62,887

60,189

Bonds, net

6,529

6,586

Other debt, net

628

41

Other liabilities

3,627

3,677

Deferred tax liability

226

226

Total liabilities

89,520

95,987




Preferred stock, no par value; 5,000 shares authorized; 2,812 and 2,762 shares issued and outstanding, redemption amount $70,288 and $69,038 at June 30, 2017 and December 31, 2016, respectively

62,434

61,446




Stockholders' deficit:



Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 19,762 and 19,927 issued and outstanding at June 30, 2017 and December 31, 2016, respectively

61,610

61,643

Accumulated deficit

(104,312)

(99,590)

Total stockholders' deficit

(42,702)

(37,947)

Total liabilities and stockholders' deficit

$       109,252

$       119,486

 

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,


2017

2016


2017

2016

Revenues:






Rental revenues

$              5,945

$              6,890


$            11,720

$            13,739

Management fee and other revenues

359

274


719

507

Total revenues

6,304

7,164


12,439

14,246

Expenses:






Facility rent expense

2,170

2,168


4,341

4,347

Depreciation and amortization

1,171

1,339


2,306

3,052

General and administrative expense

822

2,135


2,444

4,677

Other operating expenses

323

969


878

1,172

Total expenses

4,486

6,611


9,969

13,248







Income from operations

1,818

553


2,470

998







Other expense:






Interest expense, net

1,006

1,751


2,038

3,576

Loss on extinguishment of debt

-

-


63

-

Other expense

188

9


283

51

Total other expense, net

1,194

1,760


2,384

3,627







Income (loss) from continuing operations before income taxes

624

(1,207)


86

(2,629)

Income tax expense

-

-


1

-

Income (loss) from continuing operations

624

(1,207)


85

(2,629)







Loss from discontinued operations, net of tax

(604)

(3,775)


(1,017)

(4,303)

Net income (loss)

20

(4,982)


(932)

(6,932)







Preferred stock dividends

1,912

1,801


3,790

3,578

Net loss attributable to AdCare Health Systems, Inc. Common






Stockholders

$           (1,892)

$           (6,783)


$           (4,722)

$         (10,510)







Net loss per share of common stock attributable to AdCare Health Systems, Inc.






Basic and diluted:






     Continuing operations

$             (0.07)

$             (0.15)


$             (0.19)

$             (0.31)

     Discontinued operations

(0.03)

(0.19)


(0.05)

(0.22)


$             (0.10)

$             (0.34)


$             (0.24)

$             (0.53)







Weighted average shares of common stock outstanding:






     Basic and diluted

19,766

19,907


19,795

19,896

 

ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES

SUPPLEMENTAL OPERATING METRICS (1)



Three Months Ended

Three Months Ended

Three Months Ended

Three Months Ended

Portfolio Operating Metrics (2)

September 30, 2016

December 31, 2016

March 31, 2017

June 30, 2017

Occupancy (%)

82.6%

82.6%

82.6%

83.1%

Quality Mix (3)

23.7%

23.1%

26.6%

26.5%

Rent Coverage Before Management Fees

1.53

1.53

1.71

1.76

Rent Coverage After Management Fees

1.12

1.12

1.29

1.35




(1)

Operator-supplied data



(2)

Excludes nine Arkansas facilities (which were sold on October 6, 2016), three Georgia facilities previously operated by affiliates of New Beginnings Care, one assisted living facility recently acquired in Alabama, and three managed facilities in Ohio.



(3)

Quality Mix refers to all payor types less Medicaid.

 

View original content:http://www.prnewswire.com/news-releases/adcare-health-systems-reports-second-quarter-2017-financial-results-300503952.html

SOURCE AdCare Health Systems, Inc.

Copyright 2017 PR Newswire

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