ATLANTA, Nov. 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 third quarter ended
September 30, 2015.
Business Highlights
- The company signed a non-binding letter of intent to purchase a
skilled nursing facility with 55 operational beds in Florida for approximately $4.8 million, net of reserves. The purchase is
expected to close in the first quarter of 2016. The purchase of the
facility is subject to, among other things, satisfactory due
diligence, HUD approval and the negotiation and execution of a
definitive purchase agreement containing customary representations,
warranties, covenants and closing conditions.
- On September 29, 2015, the Board
of Directors declared a cash dividend of $0.06 per share of common stock. This quarterly
dividend, if annualized, represents an annual dividend of
$0.24 per share, or a dividend yield
of 7.5% (based on the closing stock price on November 11, 2015 of $3.19 per share). The company expects that 2015
dividends will be considered a return of capital for federal income
tax purposes.
- The company appointed Thomas W.
Knaup and Allan J. Rimland to
the Board of Directors.
- Of the 38 properties the company owns, operates or manages, 36
facilities have been transferred to third-party operators, or are
under management agreements with indefinite terms. The transfer of
operations of two Oklahoma
facilities is expected to be completed during the fourth
quarter.
"Expanding our portfolio of properties is a key aspect of our
plan for growth," stated Bill
McBride, AdCare's Chairman and Chief Executive Officer. "We
recently executed a non-binding letter of intent to acquire our
first property post-transition. We believe that the pending
acquisition, if completed, will increase our geographic
diversification with the addition of a skilled nursing facility in
the highly-attractive Florida
market. By simultaneously leasing this Tampa-Bay area property to one of our
existing, high-quality operators, we will deploy capital in a
relatively low-risk manner to immediately increase cash flow. We
continue to expect this transaction to close in the first quarter
of 2016, while our efforts to identify additional acquisition
opportunities also continue. We have developed and are carefully
evaluating a strong and growing pipeline of attractive
opportunities. Our goal is to pursue the acquisition of additional
facilities that would be a strategic fit to our business and
accretive to cash flow to enhance returns to our shareholders. We
believe the opportunities are plentiful and afford us the luxury of
being disciplined in our approach and selective in the properties
we consider."
"At the same time, we remain on schedule to transition the two
remaining Oklahoma facilities
before year-end," continued McBride. "Our commitment to returning
capital to our shareholders also continues with the Board declaring
the third consecutive cash dividend on our common stock of
$0.06 per share, which represents a
9.1% increase over the $0.055 per
share amount declared at the end of the second quarter."
2015 Dividends
- On March 31, 2015, the Board of
Directors declared a cash dividend of $0.05 per share of common stock.
- On June 30, 2015, the Board of
Directors declared a cash dividend of $0.055 per share of common stock.
- On September 29, 2015, the Board
of Directors again increased the dividend, declaring a cash
dividend of $0.06 per share of common
stock.
The most recent quarterly dividend, if annualized, would
represent an annual dividend of $0.24
per share, or a dividend yield of 7.5% (based on the closing stock
price on November 11, 2015 of
$3.19 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 and preferred 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. Investors should consult their tax
advisors.
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-six facilities have transferred operations to
third-party operators or are under management contracts with an
indefinite term.
- 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.
- One facility in Arkansas and
one facility in Oklahoma have been
sold.
The company's variable interest entity ("VIE") is subject to an
asset purchase agreement that provides for the sale of an
Alabama facility held by the VIE
to a third party. The agreement provides for a closing on or before
November 30, 2015. The sale is
subject to the completion of satisfactory due diligence, the
receipt of required licenses and other state regulatory approvals,
and the satisfaction of other customary closing conditions.
Post-transition Financial Guidance
Once operations for the remaining two properties have been
transitioned to third-party operators, the company expects:
- Annual revenue between $31.0 and $31.8
million;
- Annual rent expense of approximately $8.6 million;
- Annual general and administrative expense between $5.0 and $5.3 million, includes $1.3 of stock-based compensation;
- Annual net interest expense between $7.1
and $7.2 million;
- Annual preferred dividends of approximately $6.3 million; and
- Annual Adjusted FFO per share between $0.25 and $0.30.
This guidance assumes an outstanding diluted share count of
approximately 19.9 million shares and excludes effects of any
acquisitions, including the healthcare facility in Florida currently under a non-binding letter
of intent.
(See "Use of Non-GAAP Financial Information" below for the
definition of FFO and Adjusted FFO, both non-GAAP financial
measures, as well as an important discussion about the use of these
measures and their reconciliation to GAAP net loss, the most
directly comparable GAAP financial measure).
Summary Financial Results for the Three and Nine Months Ended
September 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. AdCare reports 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.
Rental revenues were $5.8 million
in the third quarter of 2015 represented 56% of total revenues.
Rental revenues of $11.3 million
represented 46% of total revenues in the first nine months of
2015.
Adjusted EBITDA from continuing operations in the third quarter
of 2015 totaled $2.4 million.
Adjusted EBITDA from continuing operations for the first nine
months of 2015 totaled $1.1
million.
The net loss attributable to common stockholders-continuing
operations totaled $1.9 million, or
$0.17 per basic and diluted share, in
the third quarter of 2015. For the first nine months of 2015, the
net loss attributable to common stockholders-continuing operations
totaled $13.0 million, or
$0.84 per basic and diluted share.
Cash and cash equivalents at September
30, 2015, totaled $4.3 million
compared with $10.7 million at
December 31, 2014. Restricted cash
and investments at September 30,
2015, totaled $12.2 million,
as compared with $8.8 million at
December 31, 2014. Total debt
outstanding at September 30, 2015
totaled $134.5 million (which
includes $4.0 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 third quarter
financial results today, Thursday, November
12, 2015 at 10 a.m. ET.
- Dial-in number: 1-888-401-4668 (domestic) or 1-719-457-2689
(international)
- Replay number: Dial 1-877-870-5176 (domestic) or 1-858-384-5517
(international). Please use passcode 4536308 to access the replay.
The replay will be available until November
19, 2015.
- Webcast link: http://public.viavid.com/index.php?id=117043
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 38 facilities. 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 the
acquisition of the skilled nursing facility in the Tampa Bay area, statements regarding the
acquisition pipeline, statements regarding dividends 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.
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 U.S. generally accepted
accounting principles ("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
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 FFO and
Adjusted FFO provide enhanced measures 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)
|
|
|
Sept 30,
|
December
31,
|
ASSETS
|
2015
|
2014
|
|
(Unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$ 4,275
|
$ 10,735
|
Restricted
cash
|
8,265
|
3,321
|
Accounts
receivable, net of allowance of $13,048 and $6,708
|
10,991
|
24,294
|
Prepaid
expenses and other
|
5,318
|
1,766
|
Deferred tax
assets
|
569
|
569
|
Assets of
disposal group held for use
|
-
|
4,592
|
Assets of
disposal group held for sale
|
4,989
|
5,813
|
Assets of
variable interest entity held for sale
|
5,918
|
5,924
|
Total current assets
|
40,325
|
57,014
|
|
|
|
Restricted
cash
|
3,953
|
5,456
|
Property and
equipment, net
|
127,758
|
130,993
|
Intangible assets -
bed licenses
|
2,471
|
2,471
|
Intangible assets -
lease rights, net
|
3,587
|
4,087
|
Goodwill
|
4,183
|
4,224
|
Lease
deposits
|
1,812
|
1,683
|
Deferred loan costs,
net
|
3,389
|
3,464
|
Other
assets
|
2,690
|
569
|
Total
assets
|
$ 190,168
|
$ 209,961
|
|
|
|
LIABILITIES AND
EQUITY / (DEFICIT)
|
|
|
|
|
|
Current
liabilities:
|
|
|
Current
portion of notes payable and other debt
|
$ 39,150
|
$
2,436
|
Current
portion of convertible debt, net of discounts
|
-
|
14,000
|
Revolving
credit facilities and lines of credit
|
842
|
5,576
|
Accounts
payable
|
11,247
|
16,434
|
Accrued
expenses
|
7,768
|
15,653
|
Liabilities of
disposal group held for use
|
-
|
4,035
|
Liabilities of
disposal group held for sale
|
4,008
|
5,197
|
Liabilities of
variable interest entity held for sale
|
5,871
|
5,956
|
Total current liabilities
|
68,886
|
69,287
|
|
|
|
Notes payable and
other debt, net of current portion:
|
|
|
Senior debt,
net of discounts
|
68,491
|
106,089
|
Bonds, net of
discounts
|
6,899
|
7,011
|
Convertible
debt
|
9,200
|
-
|
Revolving
credit facilities
|
-
|
1,059
|
Other
liabilities
|
2,996
|
2,129
|
Deferred tax
liability
|
605
|
605
|
Total
liabilities
|
157,077
|
186,180
|
|
|
|
Preferred stock, no
par value; 5,000 shares authorized; 2,203
and 950 shares issued and
outstanding, redemption amount $55,084 and $23,750 at September 30, 2015 and December 31,
2014, respectively
|
50,119
|
20,392
|
|
|
|
Stockholders'
equity:
|
|
|
Common stock
and additional paid-in capital, no par value; 55,000
shares authorized; 19,879 and 19,151
issued and outstanding at September 30, 2015 and December 31, 2014,
respectively
|
60,768
|
61,896
|
Accumulated
deficit
|
(74,572)
|
(56,067)
|
Total
stockholders' equity / (deficit)
|
(13,804)
|
5,829
|
Noncontrolling
interest in subsidiary
|
(3,224)
|
(2,440)
|
Total equity /
(deficit)
|
(17,028)
|
3,389
|
Total
liabilities and equity / (deficit)
|
$ 190,168
|
$ 209,961
|
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)
|
2015
|
2014
|
2015
|
2014
|
Revenues:
|
|
|
|
|
Rental
revenues
|
$ 5,826
|
$ 388
|
$ 11,322
|
$ 980
|
Patient care
revenues
|
4,290
|
4,359
|
12,532
|
12,621
|
Management
revenues
|
218
|
354
|
692
|
1,140
|
Other
revenues
|
86
|
-
|
135
|
-
|
Total revenues
|
10,420
|
5,101
|
24,681
|
14,741
|
Expenses:
|
|
|
|
|
Cost of
services (exclusive of facility rent, depreciation and amortization)
|
|
|
|
|
4,354
|
4,168
|
12,887
|
10,964
|
General and
administrative expense
|
2,101
|
3,575
|
7,782
|
12,313
|
Facility rent
expense
|
1,802
|
385
|
3,618
|
1,044
|
Depreciation
and amortization
|
1,912
|
1,861
|
5,385
|
5,570
|
Salary
retirement and continuation costs
|
21
|
1,488
|
(27)
|
2,770
|
Total
expenses
|
10,190
|
11,477
|
29,645
|
32,661
|
Income (loss) from
operations
|
230
|
(6,376)
|
(4,964)
|
(17,920)
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
Interest
expense, net
|
(1,830)
|
(2,594)
|
(6,600)
|
(7,770)
|
Acquisition
costs
|
-
|
(8)
|
-
|
(8)
|
Loss on
extinguishment of debt
|
-
|
(1,220)
|
(680)
|
(1,803)
|
Other
expense
|
(269)
|
(444)
|
(749)
|
(635)
|
Total other expense, net
|
(2,099)
|
(4,266)
|
(8,029)
|
(10,216)
|
Loss from continuing
operations before income
taxes
|
|
|
|
|
(1,869)
|
(10,642)
|
(12,993)
|
(28,136)
|
Income tax benefit
(expense)
|
-
|
244
|
(20)
|
236
|
Loss from continuing
operations
|
(1,869)
|
(10,398)
|
(13,013)
|
(27,900)
|
Income (loss) from
discontinued operations, net of tax
|
(3,228)
|
6,850
|
(2,694)
|
19,034
|
Net loss
|
(5,097)
|
(3,548)
|
(15,707)
|
(8,866)
|
Net loss attributable
to noncontrolling interests
|
285
|
218
|
784
|
548
|
Net loss attributable
to AdCare Health Systems, Inc.
|
(4,812)
|
(3,330)
|
(14,923)
|
(8,318)
|
Preferred stock
dividends
|
(1,498)
|
(646)
|
(3,582)
|
(1,938)
|
Net loss attributable
to AdCare Health
|
|
|
|
|
Systems, Inc. Common
Stockholders
|
$(6,310)
|
$(3,976)
|
$(18,505)
|
$(10,256)
|
|
|
|
|
|
Net income (loss) per
share of common stock attributable to
|
|
|
|
|
AdCare Health
Systems, Inc. - basic:
|
|
|
|
|
Continuing
operations
|
$ (0.17)
|
$ (0.61)
|
$ (0.84)
|
$ (1.70)
|
Discontinued
operations
|
$ (0.15)
|
$ 0.39
|
$ (0.10)
|
$ 1.12
|
|
$ (0.32)
|
$ (0.22)
|
$ (0.94)
|
$ (0.58)
|
|
|
|
|
|
Net income (loss) per
share of common stock attributable to
|
|
|
|
|
AdCare Health
Systems, Inc. - diluted:
|
|
|
|
|
Continuing
operations
|
$ (0.17)
|
$ (0.61)
|
$ (0.84)
|
$ (1.70)
|
Discontinued
operations
|
$ (0.15)
|
$ 0.39
|
$ (0.10)
|
$ 1.12
|
|
$ (0.32)
|
$ (0.22)
|
$ (0.94)
|
$ (0.58)
|
|
|
|
|
|
Weighted average
shares of common stock outstanding:
|
|
|
|
|
Basic
|
19,838
|
18,134
|
19,617
|
17,539
|
Diluted
|
19,838
|
18,134
|
19,617
|
17,539
|
ADCARE HEALTH
SYSTEMS, INC. AND SUBSIDIARIES
|
RECONCILIATION OF NET
LOSS TO ADJUSTED EBITDA FROM CONTINUING OPERATIONS
|
(Amounts in
000's)
|
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
Nine Months Ended
September 30,
|
(Amounts in
000's)
|
2015
|
2014
|
2015
|
2014
|
Condensed
Consolidated Statements of Operations Data:
|
|
|
|
|
Net Loss
|
$(5,097)
|
$(3,548)
|
$(15,707)
|
$(8,866)
|
Discontinued
operations
|
3,228
|
(6,850)
|
2,694
|
(19,034)
|
Net loss from
continuing operations (Per GAAP)
|
(1,869)
|
(10,398)
|
(13,013)
|
(27,900)
|
Add back:
|
|
|
|
|
Interest expense, net
|
1,830
|
2,594
|
6,600
|
7,770
|
Income
tax (benefit) expense
|
-
|
(244)
|
20
|
(236)
|
Amortization of stock based compensation
|
245
|
244
|
677
|
983
|
Depreciation and amortization
|
1,912
|
1,861
|
5,385
|
5,570
|
Loss on
extinguishment of debt
|
-
|
1,220
|
680
|
1,803
|
Other
adjustments
|
71
|
201
|
296
|
393
|
New
business model expenses
|
198
|
251
|
453
|
251
|
Salary
retirement and continuation costs
|
21
|
1,488
|
(27)
|
2,770
|
Adjusted EBITDA from
continuing operations
|
$ 2,408
|
$(2,783)
|
$ 1,071
|
$(8,596)
|
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
|
(Amounts in 000's)
|
|
Twelve Month
Period
|
Condensed
consolidated statements of operations data:
|
|
|
|
|
Net loss
|
|
$(2,800)
|
|
$(1,700)
|
Discontinued
operations
|
|
-
|
|
-
|
Net loss from
continuing operations (Per GAAP)
|
|
(2,800)
|
|
(1,700)
|
Depreciation and
amortization
|
|
6,500
|
|
6,500
|
Funds from operations
(FFO)
|
|
$ 3,700
|
|
$ 4,800
|
Amortization
of stock based compensation
|
|
1,250
|
|
1,250
|
Adjusted
FFO
|
|
$ 4,950
|
|
$ 6,050
|
|
|
|
|
|
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-third-quarter-results-300177348.html
SOURCE AdCare Health Systems, Inc.