SOURCE: AdCare Health Systems, Inc.

AdCare Health Systems, Inc.

May 10, 2011 16:05 ET

AdCare Health Systems Reports First Quarter 2011 Results

SPRINGFIELD, OH--(Marketwire - May 10, 2011) - AdCare Health Systems, Inc. (NYSE Amex: ADK), a leading skilled nursing and assisted living provider, reported unaudited financial results for the first quarter ended March 31, 2011.

Financial Highlights: Q1 2011 vs. Q1 2010

  • Record quarter revenues, up 394% to $31.5 million
  • Income from operations totaled $357,000 versus loss from operations
  • Adjusted EBITDAR up 689% to a record $3.9 million

Q1 2011 Summary of Financial Results
Revenue in the first quarter of 2011 increased 394% to a record $31.5 million from $6.4 million in the same quarter a year ago. The increase in revenue was primarily due to acquisitions completed since August 2010 as part of the company's M&A program. An increase in revenue from company's skilled nursing and assisted living facilities that existed before August 2010 also contributed to the improvement in revenue. A more detailed discussion and analysis of the company's performance will be available in AdCare's Form 10-Q to be filed with the Security and Exchange Commission.

Income from operations in the first quarter of 2011 was $357,000, which compares to a loss from operations of $114,000 in the same year-ago period. The increase in income from operations was primarily due to acquisitions that substantially increased patient care revenue.

For earnings attributable to the company and its shareholders, the company recorded a net loss in the first quarter of 2011 of $765,000 or $(0.09) per share, versus net income of $410,000 or $0.05 per diluted share in the same year-ago period. The first quarter 2011 net loss included acquisition expense of approximately $148,000 and a derivative loss of $1.3 million, compared to neither occurring in the same year-ago quarter. This was offset by a gain on acquisition, net of acquisition cost of $979,000 in the first quarter of 2011. The company also experienced an increase in cash-based corporate payroll overhead costs of approximately $354,000 in Q1 2011 versus Q1 2010, as the company ramps up operations and facility integration activity related to its acquisition strategy. Total stock-based compensation in the first quarter of 2011 was $390,000, as compared to $216,000 in the same year-ago quarter.

Adjusted EBITDAR in the first quarter of 2011 totaled $3.9 million, up 689% from an adjusted EBITDAR of $496,000 in the first quarter of 2010 (see the definition and an important discussion about the presentation of adjusted EBITDAR, a non-GAAP term, below.)

Cash at March 31, 2011 totaled $9.7 million, with deposits on pending acquisitions of $1.2 million. This compares to cash of $3.9 million at December 31, 2010, with the increase of cash in the first quarter primarily due to financings and the collection of certain receivables purchased as part of an acquisition completed in 2010.

Q1 2011 Operational Highlights

  • AdCare assumed control effective January 1, 2011 of Mountain Trace Nursing Center, a 106-bed nursing facility in North Carolina. Mountain Trace was generating an estimated $7.8 million in annualized revenues when AdCare closed the acquisition at the end of December 2010. (See table "Summary of Closed and Pending Transactions Since Start of M&A Program," below).


  • In January, AdCare appointed Boyd P. Gentry as Co-CEO. Gentry is sharing the new co-CEO position with Gary Wade, AdCares's co-founder, president and chief executive officer, who is planning to retire from his management roles in June 2011. Upon Wade's retirement, Gentry will become president and chief executive officer, and Wade will continue as a member of the company's board of directors.


  • In March, AdCare signed a definitive agreement for the asset purchase of four skilled nursing facilities in Arkansas and the acquisition of a 10-year lease for one skilled nursing facility in Missouri. The five facilities have 506 beds in total, which generated revenues of more than $25 million in 2010. The transaction is anticipated to be immediately accretive to AdCare's earnings when it closes, as expected, early in the third quarter.


  • In May, AdCare acquired two new skilled nursing centers in Georgia. The facilities have a total of 235 beds that were generating at the time of the acquisition approximately $16 million in annualized revenue.


  • By the end of the first quarter, the company owned or leased 16 skilled nursing facilities with 1,790 beds and six assisted living facilities with 196 units. Facilities managed by the company for third parties totaled five skilled nursing homes with 403 beds, two assisted living facilities with 139 units, and an 83-unit independent living campus.


Management Commentary
"Our record revenues in the first quarter of 2011 reflect the major contribution of our successful, ongoing M&A program," said Boyd P. Gentry, AdCare's co-CEO. "We also realized organic growth from our previously existing skilled nursing and assisted living facilities, which operate in market segments that increasingly represent our core business focus and greatest opportunity for revenue growth. These results reflect the gains we expect to realize across all of our facilities as we continue to leverage operational improvements, as well as maintain the aggressive pace of our acquisition efforts."

Chris Brogdon, AdCare's chief acquisition officer, commented: "We've now purchased or acquired under lease some 19 facilities since we introduced our M&A program at the end of 2009. Including the transactions we have announced and are in the process of closing, we expect our annualized revenue run-rate to exceed an estimated $175 million. This would represent an increase of more than 555% over annual revenues in 2009 when this all began. We continue to expect an EBITDAR margin with these facilities -- exclusive of acquisition-related costs -- to be at least 10% going forward."

"We are currently evaluating several attractive acquisition opportunities in the southern region of the U.S., as well as around our home base in the Midwest," added Brogdon. "We expect to announce signing a number of them over the next few months."

Conference Call and Webcast
The company will hold a conference call to discuss its 2011 financial results later today, May 10, 2011 at 4:30 p.m. Eastern time. Management will host the presentation, followed by a question and answer period.

Date: Tuesday, May 10, 2011
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Dial-In Number: 1-877-941-8602
International: 1-480-629-9811
Conference ID#: 4439538

The conference call will be broadcast simultaneously at http://viavid.net/dce.aspx?sid=00008600 and available for replay via the investor section of the company's Web site at www.adcarehealth.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact the Liolios Group at 949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time on the same day and until June 10, 2011:

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4439538

---------------------------------------------------------------------------
                                                                  Closing
Description   Size  Location     Type         ARR*       Terms    Status
---------------------------------------------------------------------------
                             Consolidated              1 yr       Signed
                              Variable     Currently   purchase   Option
Assisted                      Interest     $ 2 million option,    6-25.
 Living       105   Hoover,   Entity       at 59%      expiring   Currently
 Facility     Units AL        (CVIE)       occupancy   June 2011  a CVIE
---------------------------------------------------------------------------
Five Nursing  615                                      10-yr      Closed
 Homes        beds  Georgia  Lease        $ 35 million lease      7-30-10
---------------------------------------------------------------------------
                                                       10-yr
                                                       lease
                                                       (combined
Three Nursing 280                         $ 15.5       with the   Closed
 Homes        beds  Georgia  Lease          million    above)     9-2-10
---------------------------------------------------------------------------
                                                       Long-term
                                                       fixed rate
Two Nursing   306                                      loan, USDA Closed
 Homes        beds  Alabama  Purchase     $ 18 million guaranteed 10-1-10
---------------------------------------------------------------------------
                                                       12-yr
                                                       lease with
Two Nursing   300   Atlanta,                           renewal    Closed
 Homes        beds  GA       Lease        $ 21 million option     11-2-10
---------------------------------------------------------------------------
                                                       Long-term
                                                       fixed rate
Nursing       106   Sylva,                $ 7.8        loan, USDA Closed
 Facility     beds  NC       Purchase       million    guaranteed 12-31-10
---------------------------------------------------------------------------
                                                       Long-term  Closed
                                                       fixed rate Two
                    Atlanta,                           loan (USDA 5-2-2011;
                    GA &                               guaranteed Other
Three Nursing 335   Dublin,               $ 16.4       and bank   Expected
 Homes        beds  GA       Purchase       million    loans)     in Q2-11
---------------------------------------------------------------------------
                                                       Long-term
                                                       fixed rate
                                                       loan (USDA
                                                       guaranteed
                                                       and bank
                                                       loans),    Closing
                    Arkansas  Purchase                 one        Expected
Five Nursing  506   &         (four) and  $ 25.0       10-year    in Early
 Homes        beds  Missouri  Lease (one)   million    lease      Q3-11
---------------------------------------------------------------------------
                                          $ 140.7
Total         2,553                         million
---------------------------------------------------------------------------


*ARR= Annualized Revenue Run-rate at the time of purchase/lease or signing, estimated

About AdCare Health Systems
AdCare Health Systems, Inc. (NYSE Amex: ADK) is a recognized innovator in senior living and health care facility management. AdCare develops, owns and manages assisted living facilities, nursing homes and retirement communities, as well as provides home health care services. Since its inception in 1988, AdCare's mission has been to provide the highest quality of healthcare services to the elderly. 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 announcement that are forward-looking include, but are not limited to, statments made by Mr. Gentry that these results reflect the gains we expect to realize across all of our facilities, and statements by Mr. Brogdon that the company expect its annualized revenue run-rate to exceed an estimated $175 million, and that this would represent an increase of more than 555% over annual revenues in 2009 when the company's M&A program began, as well as statements regarding the signing and closing of expected acquisitions. Such forward-looking statements reflect management's beliefs and assumptions and are based on 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 SEC and include, among others, AdCare's ability to secure lines of credit and/or an acquisition credit facility, find suitable acquisition properties at favorable terms, changes in the health care industry because of political and economic influences, changes in regulations governing the industry, changes in reimbursement levels including those under the Medicare and Medicaid programs and changes in the competitive marketplace. There can be 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
Beginning with the reporting of results for this first quarter of 2011, the company has transitioned from reporting EBITDA, and EBITDAR, to also reporting adjusted EBITDAR. These are measures of operating performance that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). The company defines EBITDA as net income (loss) before interest income, interest expense, income tax expense, depreciation and amortization (including amortization of non-cash stock-based compensation). The company defines EBITDAR as net income (loss) before interest income, interest expense, income tax expense, depreciation, amortization (including amortization of non-cash stock-based compensation) and rent cost. The company defines adjusted EBITDAR as net income (loss) before interest income; interest expense; income tax expense; depreciation; amortization (including amortization of non-cash stock-based compensation); rent cost; gain on acquisitions, net of acquisition costs; and derivative loss.

EBITDA, EBITDAR, and adjusted EBITDAR 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 metrics are a key measures of AdCare Health Systems' operating performance used by management to focus on operating performance and management without mixing in items of income and expense that relate to the financing and capitalization of the business, fixed rent or lease payments of facilities, derivative loss and certain gains on acquisitions.

The company believes these measures are 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 affords management the ability to make decisions, which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance; and


  • It is an indication to determine if adjustments to current spending decisions are needed.


AdCare believes that the use of the measures provides a meaningful and consistent comparison of the company's underlying business between periods by eliminating certain items required by GAAP, which have little or no significance in the company's day-to-day operations.

                AdCare Health Systems, Inc. and Subsidiaries
Reconciliation of Net (Loss) Income to EBITDA, EBITDAR and Adjusted EBITDAR
                                (Unaudited)


                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
Net Income (Loss)                                      (941,633)   414,205
  Interest income                                       (19,159)    (5,689)
  Interest expense                                    1,459,349    292,945
  Income tax expense                                     96,372     10,642
  Amortization of stock based compensation              389,994    215,810
  Depreciation and amortization                         651,193    242,564
                                                      ---------  ---------
EBITDA                                                1,636,116  1,170,477
  Rent expense                                        1,902,724    151,151
                                                      ---------  ---------
EBITDAR                                               3,538,840  1,321,628
  Gain on acquisitions, net of acquisition costs      (979,339)  (825,989)
  Derivative loss                                     1,349,866          -
                                                      ---------  ---------
Adjusted EBITDAR                                      3,909,367    495,639
                                                      =========  =========





               ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                               (unaudited)

                                                  March 31,   December 31,
                  ASSETS                            2011          2010
                                                ------------  ------------
Current Assets:                                  (Unaudited)
Cash and cash equivalents                       $  9,703,956  $  3,911,140
Restricted cash                                      408,172     1,047,454
Accounts receivable:
  Long-term care resident receivables, net        13,394,390    10,943,963
  Management, consulting and development
   receivables, net                                  228,191       271,224
Prepaid expenses and other                         1,718,264     1,243,663
                                                ------------  ------------
      Total current assets                        25,452,973    17,417,444

Restricted cash and investments                    3,166,029     3,099,936
Property and equipment, net                       43,843,404    37,606,301
Intangibles, net                                  16,994,030    16,159,845
Goodwill                                           2,679,482     2,679,482
Escrow deposits for acquisitions                   1,150,000     1,725,086
Lease deposits                                     1,670,282     1,670,282
Other assets                                       3,279,207     2,600,530
                                                ------------  ------------
      Total assets                              $ 98,235,407  $ 82,958,906
                                                ============  ============

         LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion of notes payable and other
   debt                                         $  7,833,596  $  3,633,401
  Accounts payable                                 4,905,709     3,411,772
  Accrued expenses                                10,967,743     9,664,325
                                                ------------  ------------
      Total current liabilities                   23,707,048    16,709,498

Notes payable and other debt, net of current
 portion                                          54,217,648    47,210,995
Derivative liability                               4,255,616     2,905,750
Other liabilities                                  1,347,700     1,267,429
Deferred tax liability                               351,512       255,141
                                                ------------  ------------
    Total liabilities                             83,879,524    68,348,813
                                                ------------  ------------

Commitments and contingencies                              -             -

Stockholders' equity:
  Preferred stock, no par value;
   1,000,000 shares authorized; no shares
   issued or outstanding                                   -             -
  Common stock and additional paid-in capital,
   no par value; 29,000,000 shares authorized;
   8,349,197 shares issued and outstanding        27,299,293    26,611,870
  Accumulated deficit                            (13,314,166)  (12,548,870)
                                                ------------  ------------
    Total stockholders' equity                    13,985,127    14,063,000
  Noncontrolling interest in subsidiaries            370,756       547,093
                                                ------------  ------------
    Total equity                                  14,355,883    14,610,093
                                                ------------  ------------
    Total liabilities and stockholders'
    equity                                      $ 98,235,407  $ 82,958,906
                                                ============  ============





               ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                               (unaudited)

                                              Three Months Ended March 31,
                                              ----------------------------
                                                  2011           2010
                                              -------------  -------------
Revenues:
  Patient care revenues                       $  31,012,524  $   5,866,787
  Management, consulting and development fee
   revenue                                          497,341        507,731
                                              -------------  -------------
    Total revenue                                31,509,865      6,374,518
                                              -------------  -------------

Expenses:
  Payroll and related payroll costs              18,115,812      4,060,964
  Other operating expenses                       10,482,845      2,033,725
  Lease expense                                   1,902,724        151,151
  Depreciation and amortization                     651,193        242,564
                                              -------------  -------------
    Total expenses                               31,152,574      6,488,404
                                              -------------  -------------

Income (Loss) from Operations                       357,291       (113,886)
                                              -------------  -------------

Other (Expense) Income:
  Interest income                                    19,159          5,689
  Interest expense                               (1,459,349)      (292,945)
  Gain on acquisitions, net of acquisition
   costs                                            979,339        825,989
  Derivative loss                                (1,349,866)             -
  Other income                                      608,165              -
                                              -------------  -------------
    Total other (expense) income                 (1,202,552)       538,733
                                              -------------  -------------

(Loss) Income Before Income Taxes                  (845,261)       424,847
Income Tax Expense                                  (96,372)       (10,642)
                                              -------------  -------------
Net (Loss) Income                                  (941,633)       414,205
Net Loss (Income) Attributable to
 Noncontrolling Interests                           176,337         (4,704)
                                              -------------  -------------
Net (Loss) Income Attributable to AdCare
 Health Systems                               $    (765,296) $     409,501
                                              =============  =============

Net (Loss) Income Per Share, Basic:           $       (0.09) $        0.07
                                              =============  =============
Net (Loss) Income Per Share, Diluted:         $       (0.09) $        0.05
                                              =============  =============

Weighted Average Common Shares Outstanding,
  Basic                                           8,349,197      5,670,007
                                              =============  =============
  Diluted                                         8,349,197      8,196,206
                                              =============  =============



Contact Information


  • Company Contacts
    Boyd Gentry, Co-CEO
    Chris Brogdon, Vice Chairman & CAO
    David A. Tenwick, Chairman of Board
    AdCare Health Systems, Inc.
    Tel (937) 964-8974
    Email Contact

    Investor Relations
    Ron Both or Geoffrey Plank
    Liolios Group, Inc.
    Tel (949) 574-3860
    Email Contact