ATLANTA, Aug. 12, 2015 /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
healthcare, today reported results for the second quarter ended
June 30, 2015. The company also
provided post-transition financial guidance.
Business Highlights
- On June 30, 2015, the Board of
Directors declared a cash dividend of $0.055 per share of common stock, payable on
July 31, 2015. This quarterly
dividend, if annualized, would represent an annual dividend of
$0.22 per share, or a dividend yield
of 5.7% (based on the closing stock price on August 11, 2015 of $3.85 per share).
- The company expects that 2015 dividends will be considered a
return of capital for federal income tax purposes.
- The company expects post-transition annual revenues between
$30.0 and $30.8 million.
- The company has entered into agreements for all 40 of the
healthcare facilities it owned, operated or managed before the
transition commenced. Of these, 32 facilities have been transferred
to third-party operators, or are under management agreements with
indefinite terms, and one has been sold. Transfer of operations of
six facilities remains in progress, and one facility is expected to
be sold during the fourth quarter.
"The mid-point of 2015 marks a
pivotal point in our company's evolution as we have effectively
completed what we set out to do nearly a year ago, to transition
our business model from an owner and operator of healthcare
facilities to a healthcare property holding and leasing company,"
stated Bill McBride, AdCare's
Chairman and Chief Executive Officer. "Witnessing the progress we
began making earlier this year, the company delivered on its
commitment to return capital to shareholders by declaring a
$0.05 per share dividend at the end
of the first quarter, followed by a $0.055 per share dividend at the end of the
second quarter."
"With all remaining facilities under lease agreements or sales
contracts and on track to transition to third-party operators or
close before year-end, the company now has the necessary
information to provide the investment community with an update to
its post-transition financial model," continued McBride.
"As we move forward, we believe we are now able to begin
focusing our attention on building a strong pipeline of potential
acquisition targets to expand our portfolio of properties beyond
the 39 we own, lease or manage today," McBride added. "Our next
step towards growth will be the active identification, screening
and evaluation of single facilities and larger portfolios of
properties that meet our defined criteria for shareholder returns
and portfolio management. Simultaneously, we are evaluating a
number of shareholder value-enhancing initiatives, including
modifying its current leases, refinancing existing indebtedness,
and other potential changes."
2015 Dividends
On March 31, 2015, the Board of
Directors declared a cash dividend of $0.05 per share of common stock, payable on
April 30, 2015. On June 30, 2015, the Board of Directors declared a
cash dividend of $0.055 per share of
common stock, payable on July 31,
2015. The most recent quarterly dividend, if annualized,
would represent an annual dividend of $0.22 per share, or a dividend yield of 5.7%
(based on the closing stock price on August
11, 2015 of $3.85 per
share).
Based on the company's projected current and accumulated
negative earnings and profits (E&P) tax position, the company
expects cash dividends paid to common stockholders for 2015 (and
until such time that the company may have positive current or
accumulated E&P) should be treated as a return of capital to
stockholders to the extent available for federal income tax
purposes.
Post-transition Financial Guidance
Once operations for the remaining six properties have been
transitioned to third-party operators, and the company closes on
the sale of a property in Oklahoma, the company expects:
- Annual Revenue between $30.0 and $30.8
million.
- Annual Rent expense of approximately $8.0 million.
- Annual General and Administrative expense between $4.5 and $4.8 million.
- Annual Net interest expense between $7.1
and $7.2 million.
- Annual Preferred dividends of approximately $5.9 million.
- Annual Adjusted FFO per share between $0.25 and $0.30.
(See "Use of Non-GAAP Financial Information" below for the
definition of Adjusted FFO, a non-GAAP financial measure, as well
as an important discussion about the use of this measure and its
reconciliation to GAAP net loss, the most directly comparable GAAP
financial measure).
Transition Summary
- The company has entered into agreements for all 40 of the
healthcare facilities it owned, operated or managed before the
transition commenced.
- Thirty-two facilities have transferred operations to
third-party operators or are under management contracts with an
indefinite term.
- One facility in Arkansas has
been sold.
- The transfer of operations of two facilities in Georgia is expected to occur on September 1, 2015, subject to receipt of landlord
consent and state regulatory approvals.
- The company expects to transition operations of one facility in
Arkansas to a third-party operator
in the third quarter of 2015, subject to receipt of state
regulatory approvals.
- The transfer of operations of one facility in Georgia is subject to HUD approval and receipt
of state regulatory approvals and is expected to occur in the third
quarter of 2015.
- The company expects to transition operations of two facilities
in Oklahoma to a third-party
operator during the fourth quarter of 2015, subject to receipt of
state regulatory approvals.
- The company expects to close the sale of one facility in
Oklahoma in the fourth quarter of
2015, subject to certain termination provisions and closing
conditions.
Summary Financial Results for the Three and Six Months Ended
June 30, 2015
Tables reporting the full financial results, reflecting the
legacy business model, are included in this press release and in
the company's Quarterly Report on Form 10-Q, to be filed with the
U.S. Securities and Exchange Commission. Beginning with the quarter
ended June 30, 2015, AdCare began
reporting the operations that have been transitioned to third-party
operators as discontinued operations. For facilities that were
transferred during the period, patient care revenues and expenses
have been reported as discontinued operations up to the date of
transfer; subsequent to date of operations transfer, rental
revenues were recognized.
Revenues in the second quarter of 2015 were $23.3 million, up 16.2% from $20.1 million in the second quarter of 2014.
Rental revenues of $4.2 million
represented 18.0% of total revenues in the second quarter of 2015
compared with $296,000, or 1.5% of
total revenues, in the prior year period. Revenues for the first
six months of 2015 were $44.1
million, up 9.4% from $40.3
million in the prior year period. Rental revenues of
$5.5 million represented 12.6% of
total revenues in the first six months of 2015 compared with
$593,000, or 1.5% of total revenues,
in the prior year period.
Adjusted EBITDA from continuing operations in the second quarter
of 2015 totaled $2.2 million compared
with $(0.8) million in the second
quarter of 2014. Adjusted EBITDA from continuing operations for the
first six months of 2015 totaled $2.0
million compared to $(1.4)
million for the first six months of 2014. (See "Use of
Non-GAAP Financial Information" below for the definition of
Adjusted EBITDA from continuing operations, a non-GAAP financial
measure, as well as an important discussion about the use of this
measure and its reconciliation to GAAP net loss, the most directly
comparable GAAP financial measure).
The net loss attributable to common stockholders-continuing
operations totaled $3.4 million, or
$0.17 per basic and diluted share, in
the second quarter of 2015 compared with a net loss of $7.4 million, or $0.43 per basic and diluted share, in the second
quarter of 2014. For the first six months of 2015, the net loss
attributable to common stockholders-continuing operations totaled
$9.4 million, or $0.48 per basic and diluted share, compared with
a net loss of $14.0 million, or
$0.81 per basic and diluted share in
the year ago period.
Cash and cash equivalents at June 30,
2015 totaled $15.3 million
compared with $10.7 million at
December 31, 2014. Restricted cash
and investments at June 30, 2015
totaled $14.4 million, as compared
with $8.8 million at December 31, 2014. Total debt outstanding at
June 30, 2015 totaled $146.3 million (which includes $9.4 million in liabilities of disposal group
held for sale and $5.9 million in
liabilities of a variable interest entity held for sale), as
compared with $151.4 million at
December 31, 2014 (which includes
$4.0 million in liabilities of
disposal group held for use, $5.2
million in liabilities of disposal group held for sale and
$6.0 million in liabilities of a
variable interest entity held for sale).
Conference Call and Webcast
AdCare will hold a conference call to discuss its second quarter
financial results today, Wednesday August
12, 2015 at 9 a.m. ET.
- Dial-in number: 1-888-428-9498 (domestic) or 1-719-325-2462
(international)
- Replay number: Dial 1-877-870-5176 (domestic) or 1-858-384-5517
(international). Please use passcode 8582292 to access the replay.
The replay will be available until August
19, 2015.
- Webcast link: http://public.viavid.com/index.php?id=115628
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. The company currently owns, leases or manages for
third parties 39 facilities, primarily in the Southeast. 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 press release
that are forward-looking include, among other things, statements
regarding the company's transition to a healthcare facilities
holding and leasing company, statements regarding the transfer of
operations to third-party operators, statements regarding
acquisition opportunities, statements regarding any dividend, and
statements regarding the company's future financial condition or
results of operations. 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, including
AdCare's Annual Report on Form 10-K for the year ended December 31, 2014. There is 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.
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.
Use of Non-GAAP Financial Information
For purposes of the Securities and Exchange Commission's
regulations, a non-GAAP financial measure is a numerical measure of
a company's historical or future financial performance, financial
position or cash flows that excludes amounts, or is subject to
adjustments that have the effect of excluding amounts, that are
included in the most directly comparable financial measure
calculated and presented in accordance with GAAP in the statement
of operations, balance sheet or statement of cash flows (or
equivalent statements) of the company, or includes amounts, or is
subject to adjustments that have the effect of including amounts,
that are excluded from the most directly comparable financial
measure so calculated and presented.
"Adjusted EBITDA from continuing operations" is a measure of
operating performance that is not calculated in accordance with
U.S. generally accepted accounting principles ("GAAP"). The
company defines "Adjusted EBITDA from continuing operations" as net
income (loss) from continuing operations before interest expense,
income tax expense, depreciation and amortization (including
amortization of non-cash stock-based compensation), loss on
extinguishment of debt and other non-routine adjustments.
Adjusted EBITDA from continuing operations should not be considered
in isolation or as a substitute for net income, income from
operations or cash flows provided by, or used in, operations as
determined in accordance with GAAP.
The company believes Adjusted EBITDA from continuing operations
is useful to investors in evaluating the company's performance,
results of operations and financial position for the following
reasons:
- It is helpful in identifying trends in the company's day-to-day
performance because the items excluded have little or no
significance to the company's day-to-day operations;
- It provides an assessment of controllable expenses and afford
management the ability to make decisions which are expected to
facilitate meeting current financial goals as well as achieve
optimal financial performance; and
- It provides data that assists management to determine whether
or not adjustments to current spending decisions are needed.
Funds from Operations ("FFO") and Adjusted Funds from Operations
("Adjusted FFO") are also measures of operating performance that
are not calculated in accordance with GAAP. The company calculates
and reports FFO in accordance with the definition and interpretive
guidelines issued by the National Association of Real Estate
Investment Trusts ("NAREIT"), and consequently, FFO is defined as
net income (loss) from continuing operations attributed to common
stockholders, adjusted for the effects of asset dispositions and
certain non-cash items, primarily depreciation and amortization and
impairments on real estate assets. Adjusted FFO is calculated as
FFO adjusted for the impact of non-cash stock-based compensation
and other non-routine adjustments. The company believes this
measure provide an enhanced measure of the operating performance of
the Company's core portfolio. The Company's computation of Adjusted
FFO is not comparable to the NAREIT definition of FFO or to similar
measures reported by many REITs, but the company believes that is
appropriate measure for this company.
The company believes that FFO and Adjusted FFO are important
supplemental measures of its operating performance. Because the
historical cost accounting convention used for real estate assets
requires depreciation (except on land), such accounting
presentation implies that the value of real estate assets
diminishes predictably over time, while real estate values instead
have historically risen or fallen with market conditions. The term
FFO was designed by the real estate industry to address this issue.
FFO described herein is not necessarily comparable to FFO of real
estate investment trusts that do not use the same definition or
implementation guidelines or interpret the standards differently
from the company.
The company uses FFO and Adjusted FFO among the criteria to
measure the operating performance of its business. The company
further believes that by excluding the effect of depreciation,
amortization, impairments on real estate assets and gains or losses
from sales of real estate, all of which are based on historical
costs and which may be of limited relevance in evaluating current
performance, FFO and Adjusted FFO can facilitate comparisons of
operating performance between periods and between the company and
many REITs. The company offers these measures to assist the users
of its financial statements in analyzing its operating performance
and not as measures of liquidity or cash flow. FFO and Adjusted FFO
are not measures of financial performance under GAAP and should not
be considered as measures of liquidity, alternatives to net income
or indicators of any other performance measure determined in
accordance with GAAP. Investors and potential investors in the
company's securities should not rely on this measure as a
substitute for any GAAP measure, including net income.
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE
SHEETS
|
(Amounts in
000's)
|
|
|
June 30,
|
December
31,
|
ASSETS
|
2015
|
2014
|
|
(Unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$ 15,340
|
$ 10,735
|
Restricted cash and
investments
|
8,354
|
3,321
|
Accounts receivable,
net of allowance of $10,903 and $6,708
|
16,654
|
24,294
|
Prepaid expenses and
other
|
3,327
|
1,766
|
Deferred tax
assets
|
569
|
569
|
Assets of disposal
group held for use
|
-
|
4,592
|
Assets of disposal
group held for sale
|
10,242
|
5,813
|
Assets of variable
interest entity held for sale
|
5,894
|
5,924
|
Total current
assets
|
60,380
|
57,014
|
|
|
|
Restricted cash and
investments
|
6,009
|
5,456
|
Property and
equipment, net
|
128,693
|
130,993
|
Intangible assets -
bed licenses
|
2,471
|
2,471
|
Intangible assets -
lease rights, net
|
3,754
|
4,087
|
Goodwill
|
4,224
|
4,224
|
Lease
deposits
|
1,816
|
1,683
|
Deferred loan costs,
net
|
3,491
|
3,464
|
Other
assets
|
2,286
|
569
|
Total
assets
|
$ 213,124
|
$ 209,961
|
|
|
|
LIABILITIES AND
EQUITY / (DEFICIT)
|
|
|
|
|
|
Current
liabilities:
|
|
|
Current portion of
notes payable and other debt
|
$ 6,259
|
$
2,436
|
Current portion of
convertible debt, net of discounts
|
4,482
|
14,000
|
Revolving credit
facilities and lines of credit
|
1,542
|
5,576
|
Accounts
payable
|
13,915
|
16,434
|
Accrued
expenses
|
10,583
|
15,653
|
Liabilities of
disposal group held for use
|
-
|
4,035
|
Liabilities of
disposal group held for sale
|
9,398
|
5,197
|
Liabilities of
variable interest entity held for sale
|
5,870
|
5,956
|
Total current
liabilities
|
52,049
|
69,287
|
|
|
|
Notes payable and
other debt, net of current portion:
|
|
|
Senior debt, net of
discounts
|
102,621
|
106,089
|
Bonds, net of
discounts
|
6,918
|
7,011
|
Convertible debt, net
of discounts
|
9,200
|
-
|
Revolving credit
facilities
|
-
|
1,059
|
Other
liabilities
|
2,947
|
2,129
|
Deferred tax
liability
|
605
|
605
|
Total
liabilities
|
174,340
|
186,180
|
|
|
|
Preferred stock, no par value; 5,000 shares
authorized; 2,113 and 950 shares issued and outstanding, redemption
amount $52,831 and $23,750 at June 30, 2015 and December 31, 2014,
respectively
|
47,950
|
20,392
|
|
|
|
Stockholders'
equity:
|
|
|
Common stock and
additional paid-in capital, no par value; 55,000 shares authorized;
19,838 and 19,151 issued and outstanding at June 30, 2015 and
December 31, 2014, respectively
|
62,036
|
61,896
|
Accumulated
deficit
|
(68,262)
|
(56,067)
|
Total stockholders'
equity / (deficit)
|
(6,226)
|
5,829
|
Noncontrolling
interest in subsidiary
|
(2,940)
|
(2,440)
|
Total equity /
(Deficit)
|
(9,166)
|
3,389
|
Total
liabilities and equity / (deficit)
|
$ 213,124
|
$ 209,961
|
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)
|
2015
|
2014
|
2015
|
2014
|
Revenues:
|
|
|
|
|
Patient care
revenues
|
$
18,865
|
$
19,467
|
$
38,088
|
$
38,944
|
Management
revenues
|
256
|
304
|
474
|
786
|
Rental
revenues
|
4,205
|
296
|
5,545
|
593
|
Total
revenues
|
23,326
|
20,067
|
44,107
|
40,323
|
Expenses:
|
|
|
|
|
Cost of services
(exclusive of facility rent,
|
|
|
|
|
depreciation and
amortization)
|
16,862
|
16,013
|
33,822
|
31,907
|
General and
administrative expense
|
2,513
|
4,179
|
5,683
|
8,740
|
Facility rent
expense
|
1,932
|
923
|
3,021
|
1,855
|
Depreciation and
amortization
|
1,797
|
1,856
|
3,473
|
3,614
|
Salary retirement and
continuation costs
|
(39)
|
1,282
|
(47)
|
1,282
|
Total
expenses
|
23,065
|
24,253
|
45,952
|
47,398
|
Income (loss) from
operations
|
261
|
(4,186)
|
(1,845)
|
(7,075)
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
Interest expense,
net
|
(2,279)
|
(2,601)
|
(4,769)
|
(5,174)
|
Loss on
extinguishment of debt
|
-
|
-
|
(680)
|
(583)
|
Other
expense
|
(194)
|
(83)
|
(480)
|
(191)
|
Total other
expense, net
|
(2,473)
|
(2,684)
|
(5,929)
|
(5,948)
|
Loss from continuing
operations
|
|
|
|
|
before income
taxes
|
(2,212)
|
(6,870)
|
(7,774)
|
(13,023)
|
Income tax
expense
|
-
|
-
|
(20)
|
(8)
|
Loss from continuing
operations
|
(2,212)
|
(6,870)
|
(7,794)
|
(13,031)
|
Income (loss) from
discontinued operations, net of tax
|
(3,151)
|
4,075
|
(2,818)
|
7,713
|
Net loss
|
(5,363)
|
(2,795)
|
(10,612)
|
(5,318)
|
Net loss attributable
to noncontrolling interests
|
270
|
157
|
500
|
330
|
Net loss attributable
to AdCare Health Systems, Inc.
|
(5,093)
|
(2,638)
|
(10,112)
|
(4,988)
|
Preferred stock
dividend
|
(1,437)
|
(646)
|
(2,083)
|
(1,292)
|
Net loss attributable
to AdCare Health
|
|
|
|
|
Systems, Inc. common
stockholders
|
(6,530)
|
(3,284)
|
(12,195)
|
(6,280)
|
|
|
|
|
|
Net loss per share of
common stock attributable to AdCare
Health Systems, Inc. common stockholders - basic:
|
|
|
|
|
Continuing
operations
|
$
(0.17)
|
$
(0.43)
|
$
(0.48)
|
$
(0.81)
|
Discontinued
operations
|
$
(0.16)
|
$
0.24
|
$
(0.15)
|
$
0.45
|
|
$
(0.33)
|
$
(0.19)
|
$
(0.63)
|
$
(0.36)
|
|
|
|
|
|
Net loss per share of
common stock attributable to AdCare
Health Systems, Inc. common stockholders -
diluted:
|
|
|
|
|
Continuing
operations
|
$
(0.17)
|
$
(0.43)
|
$
(0.48)
|
$
(0.81)
|
Discontinued
operations
|
$
(0.16)
|
$
0.24
|
$
(0.15)
|
$
0.45
|
|
$
(0.33)
|
$
(0.19)
|
$
(0.63)
|
$
(0.36)
|
|
|
|
|
|
Weighted average
shares of common stock outstanding:
|
|
|
|
|
Basic
|
19,775
|
17,221
|
19,499
|
17,220
|
Diluted
|
19,775
|
17,221
|
19,499
|
17,220
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES
|
RECONCILIATION OF NET
LOSS TO ADJUSTED EBITDA FROM CONTINUING OPERATIONS
|
(Amounts in
000's)
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
Six Months Ended June
30,
|
(Amounts in
000's)
|
2015
|
2014
|
2015
|
2014
|
Condensed
Consolidated Statements of Operations Data:
|
|
|
|
|
Net Loss
|
$
(5,363)
|
$
(2,795)
|
$
(10,612)
|
$
(5,318)
|
Discontinued
operations
|
3,151
|
(4,075)
|
2,818
|
(7,713)
|
Net loss from
continuing operations (Per GAAP)
|
(2,212)
|
(6,870)
|
(7,794)
|
(13,031)
|
Add back:
|
|
|
|
|
Interest expense,
net
|
2,279
|
2,601
|
4,769
|
5,174
|
Income tax
expense
|
-
|
-
|
20
|
8
|
Amortization of stock
based compensation
|
229
|
226
|
432
|
738
|
Depreciation and
amortization
|
1,797
|
1,856
|
3,473
|
3,614
|
Loss on
extinguishment of debt
|
-
|
-
|
680
|
583
|
Other
adjustments
|
70
|
84
|
225
|
193
|
New business model
expenses
|
123
|
-
|
255
|
-
|
Salary retirement and
continuation costs
|
(39)
|
1,282
|
(47)
|
1,282
|
Adjusted EBITDA from
continuing operations
|
$
2,247
|
$
(821)
|
$
2,013
|
$
(1,439)
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES
|
RECONCILIATION OF NET
LOSS TO FFO AND ADJUSTED FFO
|
(Amounts in
000's)
|
(Unaudited)
|
|
|
Range of Financial
Guidance Upon
Completion of Transition
|
|
Twelve Month
Period
|
Condensed
consolidated statements of operations data:
|
|
|
Net loss
|
$
(2,350)
|
$
(1,250)
|
Discontinued
operations
|
-
|
-
|
Net loss from
continuing operations (per GAAP)
|
(2,350)
|
(1,250)
|
Depreciation and
amortization
|
6,500
|
6,500
|
Funds from operations
(FFO)
|
$
4,150
|
$
5,250
|
Amortization of stock
based compensation
|
750
|
750
|
Adjusted
FFO
|
$
4,900
|
$
6,000
|
|
|
|
Assumed shares of
common stock outstanding
|
19,900
|
19,900
|
Adjusted FFO per
share
|
$
0.25
|
$
0.30
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/adcare-reports-second-quarter-results-300127298.html
SOURCE AdCare Health Systems, Inc.