AdCare Health Systems Reports Second Quarter 2016 Results

ATLANTA, Aug. 15, 2016 /PRNewswire/ -- AdCare Health Systems, Inc. (NYSE MKT: ADK) (NYSE MKT: ADK.PRA), a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term care, today reported results for the three months and six months ended June 30, 2016.

Business Update

• Entered into a Purchase and Sale Agreement with affiliates of Skyline Healthcare LLC for the sale of the Company's nine Arkansas facilities for $55.0 million, of which $52.0 million shall be paid in cash and $3.0 million shall be paid by promissory note. Completion of the sale is expected to occur on or before August 31, 2016, and is subject to customary termination provisions and closing conditions. If the sale is completed, net proceeds from the sale after the repayment of related mortgage indebtedness are expected to be approximately $25.0 million (including the $3.0 million promissory note).
• Entered into a master sublease for three of the Company's Georgia facilities with affiliates of Peach Health Group LLC ("Peach Health").
  • Transferred the operations of the Company's Savannah Beach facility located in Georgia from an affiliate of New Beginnings Care, LLC to Peach Health.
  • Recertification efforts for Oceanside and Jeffersonville facilities are progressing.
• Completed the sale of all non-core assets, including three office buildings and a parcel of excess land for $1.4 million in aggregate.
• Strategic review by the Board of Directors, with the assistance of its financial advisor, is ongoing.

"In the second quarter, we continued to improve the value of our real estate portfolio, reduced our general and administrative expenses and strengthened our balance sheet to increase our financial flexibility," commented Bill McBride, AdCare's Chairman and Chief Executive Officer. "We completed the sale of all assets we identified as non-core. If completed, the sale of our nine Arkansas facilities, which is expected to close during the third quarter, will enable increased management focus on our remaining core operations."

"We continue to evaluate strategic alternatives with the assistance of our financial advisor, while working to enhance our portfolio to maximize shareholder value," continued Mr. McBride. "In the context of the Board's review of strategic alternatives, the Board will consider its options for the redeployment of the net proceeds from the sale of the Arkansas properties, if completed."

Set forth below are operating metrics that management believes measure the operating performance of the Company's leased and subleased portfolio:

Summary of Financial Results for the Three Months and Six Months Ended June 30, 2016

Revenues in the second quarter of 2016 were $7.2 million, up 61% from $4.5 million in the second quarter of 2015. Revenues for the six months ended June 30, 2016, increased by 137% to $14.2 million from $6.0 million for the six months ended June 30, 2015. The increase in revenues reflects the Company's transition to a healthcare property holding and leasing company. In accordance with accounting principles generally accepted in the United States, the Company recognized all rental revenues on a straight line rent accrual basis, except rental revenues for the nine facilities leased to affiliates of Skyline Healthcare LLC, for which revenue is recognized based on cash rent owed, and rental revenues for the three facilities leased to affiliates of New Beginnings, Care LLC, for which revenue is recognized based on cash rent received.

General and administrative costs decreased by $434,000, or 17%, to $2.1 million for the three months ended June 30, 2016, compared with $2.6 million for the same period in 2015. For the three months ended June 30, 2016 and 2015, general and administrative costs include $240,000 and $229,000, respectively, of stock-based compensation expense. General and administrative costs for the six months ended June 30, 2016, decreased by approximately $1.2 million, or 21%, to $4.7 million, compared with $5.9 million for the same period in 2015. For the six months ended June 30, 2016 and 2015, general and administrative costs include $720,000 and $432,000, respectively, of stock-based compensation expense.

The loss from discontinued operations, net of tax for the quarter was $3.8 million, compared with $1.5 million for the prior‑year period.  Year-to-date, the loss from discontinued operations, net of tax was $4.3 million, compared with income from discontinued operations, net of tax of $729,000 for the prior‑year period. The losses in the three and six month periods ended June 30, 2016 were primarily due to increased reserves for professional general liability claims in connection to legacy operations as well as higher bad debt expense related to legacy patient care related receivables.

Net loss attributable to AdCare common stockholders in the second quarter of 2016 was $6.8 million, compared with $6.5 million in the second quarter of 2015, or $0.34 and $0.33 per basic and diluted share for each respective period. For the six months ended June 30, 2016, the net loss attributable to AdCare common stockholders was $10.5 million, or $0.53 per basic and diluted share, compared with a net loss of $12.2 million, or $0.63 per basic and diluted share, in the year-ago period.

Cash and cash equivalents at June 30, 2016, totaled $3.2 million, compared with $2.7 million at December 31, 2015. Restricted cash and investments at June 30, 2016, totaled $5.0 million, excluding $3.0 million of restricted cash included in assets of disposal group held for sale, compared with $12.7 million at December 31, 2015. Total debt outstanding at June 30, 2016, totaled $116.0 million, compared with $122.8 million at December 31, 2015 (including $32.2 million and $958,000 in liabilities of disposal group held for sale and net of $2.3 million and $2.7 million of deferred financing costs at June 30, 2016 and December 31, 2015, respectively).

Conference Call and Webcast

AdCare will hold a conference call to discuss its second quarter 2016 financial results on Monday, August 15, 2016, at 10 a.m. ET.

• Date and time: Monday, August 15, 2016 at 10 a.m. ET
• Dial-in number: 1-888-282-4570 (domestic) or 1-719-325-2355 (international). Reference passcode: 6794807
• Replay number: Dial 1-877-870-5176 (domestic) or 1-858-384-5517 (international). Reference passcode: 6794807. The replay will be available until August 22, 2016.
• Webcast link: http://public.viavid.com/index.php?id=120619

About AdCare Health Systems

AdCare Health Systems, Inc. (NYSE MKT: ADK) (NYSE MKT: ADK.PRA) is a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term healthcare through facility lease and sub-lease transactions. AdCare currently owns, leases or manages for third parties 38 facilities. For more information about AdCare, visit www.adcarehealth.com.

Important Cautions Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "expects," "intends," "believes," "anticipates," "plans," "likely," "will," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements in this press release regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements. Forward-looking statements in this press release include, among others, all statements regarding the sale of our Arkansas facilities, the options and use of the net proceeds from the sale of the Arkansas facilities (if completed), the recertification of our Oceanside and Jeffersonville facilities, our Board's review of strategic alternatives and our efforts to enhance shareholder value.

Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those projected or contemplated by our forward-looking statements due to various factors, including, among others: our dependence on the operating success of our operators; the significant amount of, and our ability to service, our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; the availability and cost of capital; our ability to raise capital through equity and debt financings or through the sale of assets; the impact of required regulatory approvals of transfers of healthcare properties; the effect of increasing healthcare regulation and enforcement on our operators and the dependence of our operators on reimbursement from governmental and other third-party payors; the relatively illiquid nature of real estate investments; the impact of litigation and rising insurance costs on the business of our operators; the impact on us of litigation relating to our prior operation of our healthcare properties; the effect of our operators declaring bankruptcy, becoming insolvent or failing to pay rent as due; the ability of any of our operators in bankruptcy to reject unexpired lease obligations and to impede our ability to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor's obligations; our ability to find replacement operators and the impact of unforeseen costs in acquiring new properties; and other factors discussed from time to time in our news releases, public statements and documents filed by us with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by applicable law. 

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SOURCE AdCare Health Systems, Inc.