8-K 1 f8kitem5anditem94209.htm ADCARE ITEM 2.02 AND ITEM 5.02 SECURITIES AND EXCHANGE COMMISSION

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


FORM 8-K


CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


Date of Report:  April 2, 2009

Date of Earliest Event Reported:  March 30, 2009


AdCare Health Systems, Inc.

(Exact Name of Registrant as specified in its Charter)


Ohio

31-1332119

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)


5057 Troy Rd, Springfield, OH

45502-9032

(Address of principal executive offices)

(Zip Code)


Registrant’s Telephone Number, Including Area Code

(937) 964-8974


Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A2. below):

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).




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Item 2.02.  Financial Statements and Exhibits.

On Tuesday, March 31, 2009, AdCare Health Systems, Inc. (the “Company”) issued a press release announcing its financial results for the year ended December 31, 2008.  A copy of this press release is furnished as Exhibit 99.1 hereto.  Pursuant to the rules and regulations of the Securities and Exchange Commission, the information in this Current Report on Form 8-K, including the attached exhibit and the information set forth therein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.

Item 5.02  Departure of Directors or Certain Officers;  Election of Directors;  Appointment of Certain Officers;  Compensatory Arrangements of Certain Officers

On Monday, March 30, 2009, we received notice of resignation from our Director, Merle Grace Kearns.  Mrs. Kearns’ resignation was for personal reasons.

Item 9.01.  Financial Statements and Exhibits.

Exhibits

Exhibit Number

Description of Exhibit

99.1

Press Release dated March 31, 2009





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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

Date:  April 2, 2009

ADCARE HEALTH SYSTEMS, INC.

By:  /s/ Scott Cunningham

Name: Scott Cunningham

Title:  Chief Financial Officer




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EXHIBIT INDEX

Exhibit No.

 

Description

 

 

 

 

 

99.1

 

AdCare Health Systems, Inc. Press Release, dated March 31, 2009.

 




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Exhibit 99.1


News Release


AdCare Health Systems, Inc. Reports Financial Results for 2008



SPRINGFIELD, OHIO,  March 31, 2009 /PRNewswire-FirstCall/ -- AdCare Health Systems, Inc. (NYSE AMEX: ADK), an Ohio based long term care, home care and management company today reported financial results for its year ending December 31, 2008.


Revenues for the year ended December 31, 2008 were $24,793,294 as compared to $23,667,756 in 2007, an increase of $1,125,538 or 4.8%.  The improvement was primarily due to increased rental charges at the Company’s assisted living and skilled nursing facilities, maintaining occupancy levels and the acquisition of the New Lincoln Lodge, a long term care facility located in Columbus, Ohio which also resulted in a gain of approximately of $414,000.


The loss from continuing operations for the year ended December 31, 2008 was $1,076,178 as compared to the loss from continuing operations of $627,552 for 2007, which resulted in an increase in the loss of $448,626.  However, a majority of the loss in 2008 is attributable to non-cash charges for warrant and option expenses of $791,835.  Approximately $210,000 was expensed as unamortized financing costs associated with the HUD refinancing of four long term care properties and $170,007 was accounted for as a deferred tax expense in connection with the Assured Home Health acquisition in 2005.  Also, the Company accrued $162,000 in payroll expenses related to the retirement of the COO in September of last year.  We anticipate that in 2009, non-cash charges should be significantly lower than in 2008.  


The net loss for the year ended December 31, 2008 was $1,076,178 as compared to a loss of $218,928 for 2007. However, the 2007 loss was reduced by recognizing a gain of $619,605 on the sale of assets in discontinued operations.  Basic and diluted net loss per share for 2008 was $0.28 as compared to a basic and diluted net loss per share of $0.05 for 2007.  AdCare’s net cash flow from operations for 2008 was $439,442, compared with a net cash use of $107,337 in 2007.  


David A. Tenwick, Chairman of AdCare, stated, “AdCare’s loss for 2008 was greatly affected by non-cash charges, unamortized financing and deferred tax expenses.  The Company also took significant steps to position itself for a positive year in 2009.  Despite the tightening credit market and deterioration of the economy in general, we were able to successfully refinance three of our assisted living facilities and one of our nursing homes with long term, non-recourse HUD financings, completing the expansion and rehabilitation of our 50-bed nursing home located in Greenfield, Ohio, acquiring the remaining ownership interests in our 30-unit assisted living facility located in Van Wert, Ohio and the acquisition of the New Lincoln Lodge.  We believe this demonstrates that AdCare’s balance sheet is stronger than many of our larger competitors.”  Mr. Tenwick further stated, “The home health division changed and implemented its business strategy in 2008 to concentrate its operations in programs with stronger profit margins while reducing participation in home health programs that generate little marginal profit.”






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About AdCare Health Systems, Inc.


AdCare Health Systems, Inc. (NYSE Alternext US: ADK) develops, owns and manages assisted living facilities, nursing homes and retirement communities and provides home health care services.  Prior to becoming a publicly traded company in November of 2006, AdCare operated as a private company for 18 years.  AdCare’s 920 employees provide high-quality care for patients and residents residing in the 16 facilities that they manage, seven of which are assisted living facilities, six skilled nursing centers and three independent senior living communities.  The Company has ownership interests in eight of those facilities.  In the ever expanding marketplace of long term care, AdCare’s mission is to provide quality healthcare services to the elderly.


Safe Harbor Statement


Statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of federal law.  Such forward-looking statements reflect management’s beliefs and assumptions and are based on information currently available to management.  The forward-looking statements involve known and unknown  risks, results, performance or achievements of the Company to differ materially from those expressed or implied in such statements.  Such factors are identified in the public filings made by the Company with the Securities and Exchange Commission and include the Company’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.


Contact:


April Spittle

Manager of Corporate Communications

1-703-893-0021 ext. 108

aspittle@galencc.com

www.adcarehealth.com






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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

December 31,

 

 

 

ASSETS

2008

 

2007

Current Assets:

 

 

 

Cash and cash equivalents

 $ 1,266,315 

 

 $    926,625 

Certificate of deposit, restricted

- 

 

209,637 

Accounts receivable:

 

 

 

 

Long-term care resident receivables, net

2,008,847 

 

2,115,364 

 

Management, consulting and development receivables, net

258,811 

 

259,778 

 

Advances and receivables from affiliates

17,635 

 

27,558 

Prepaid expenses and other

478,534 

 

453,219 

 

 

 

Total current assets

4,030,142 

 

3,992,181 

 

 

 

 

 

 

 

Restricted cash

1,155,596 

 

973,975 

Property and equipment, net

16,772,660 

 

14,425,868 

Note receivable, net

- 

 

221,413 

License, net

1,189,307 

 

1,189,307 

Goodwill

2,679,482 

 

2,638,193 

Other assets

1,012,340 

 

1,050,506 

 

 

 

Total Assets

$26,839,527 

 

$24,491,443 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities:

 

 

 

 

Current portion of notes payable and other debt

 $    713,323 

 

$     773,279 

 

Current portion of note payable to stockholder

9,432 

 

9,026 

 

Accounts payable

1,009,002 

 

1,416,313 

 

Accrued expenses

2,838,407 

 

2,060,222 

 

Forward purchase contract

- 

 

900,000 

 

 

 

Total current liabilities

4,570,164 

 

5,158,840 

 

 

 

 

 

 

 

Notes payable and other debt, net of current portion

16,974,788 

 

12,813,338 

Note payable to stockholder, net of current portion

34,626 

 

810,084 

Other liabilities

299,314 

 

559,509 

Income tax payable

170,007 

 

- 

Minority Interest in Equity of Consolidated Entities

269,193 

 

255,070 

 

 

Total Liabilities

22,318,092 

 

19,296,841 

Stockholders' equity:

 

 

 

 

Preferred stock, no par value; 500,000 shares authorized;

 

 

 

 

 

no shares issued or outstanding

- 

 

- 

 

Common stock and additional paid-in capital, no par value;

 

 

 

 

14,500,000 shares authorized; 3,786,129 shares issued and outstanding

14,766,967 

 

14,063,956 

 

Accumulated deficit

(10,245,532)

 

(9,169,354)

 

 

Total stockholders' equity

4,521,435 

 

4,894,602 

 

 

Total liabilities and stockholders' equity

$26,839,527 

 

$24,491,443 

See notes to consolidated financial statements





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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2008

 

2007

Revenues:

 

 

 

 

Patient care revenues

$23,008,754 

 

$21,928,808

 

Management, consulting and development fee revenue

1,784,540 

 

1,738,948 

 

 

Total revenue

24,793,294 

 

23,667,756 

 

 

 

 

 

 

Expenses:

 

 

 

 

Payroll and related payroll costs

15,649,862 

 

14,762,090 

 

Other operating expenses

8,248,157 

 

7,746,505 

 

Depreciation and amortization

882,900 

 

847,440 

 

 

Total expenses

24,780,919 

 

23,356,035 

 

 

 

 

 

 

Income from Operations

12,375 

 

311,721 

Other Income (Expense):

 

 

 

 

Interest income

23,287 

 

59,300 

 

Interest expense, others

(1,265,622)

 

(978,731)

 

Interest expense, related parties

(36,446)

 

(66,432)

 

Minority interest in earnings of consolidated entities

(57,919)

 

(94,811)

 

Other income (expense)

4,200 

 

(37,014)

 

 

Total other (expenses)

(1,332,500)

 

(1,117,688)

 

 

 

 

 

 

Gain on Acquisition

413,954 

 

- 

 

 

 

 

 

 

Loss from continuing operations before income taxes

(906,171)

 

(805,967)

 

 

 

 

Income Tax Benefit (Expense)

(170,007)

 

178,415 

 

 

 

 

Loss from Continuing Operations

(1,076,178)

 

(627,552)

Discontinued Operations:

 

 

 

 

Income from discontinued operations  (including gain on disposal of $619,605 in 2007)

- 

 

587,039 

 

Provision for income taxes

- 

 

(178,415)

Income on discontinued operations

- 

 

  408,624 

Net loss

$(1,076,178)

 

$   (218,928)

 

 

 

 

Net (Loss) Income Per Share, Basic and Diluted:

 

 

 

 

Continuing operations

$         (0.28)

 

$         (0.16)

 

Discontinued operations

- 

 

0.11 

 

 

 

$         (0.28)

 

$         (0.05)

 

 

 

 

 

 

Weighted Average Common Shares Outstanding,

 

 

 

 

Basic

3,786,129 

 

3,786,129 

 

Diluted

3,786,129 

 

3,786,129 

See notes to consolidated financial statements





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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

 

 

 

 

 

2008

 

2007

Cash flows from operating activities:

 

 

 

 

Net Loss

 $  (1,076,178)

 

 $    (218,928)

 

Add back:  income from discontinued operations

-

 

(587,039)

 

Net loss from continuing operations

 $  (1,076,178)

 

 $    (805,967)

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss from continuing operations to net cash

 

 

 

provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

882,900

 

847,440

 

 

 

Warrants issued for services

150,831

 

            58,149

 

 

 

Stock option compensation expense

641,004

 

            27,326

 

 

 

Minority interest

            57,919

 

            94,811

 

 

 

Note receivable forgiveness exchanged for rent

9,000

 

36,000

 

 

 

Gain on acquisition

(413,952)

 

-

 

 

 

Changes in certain assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

       111,805

 

       (162,737)

 

 

 

 

Prepaid expenses and other

       (90,851)

 

       (171,461)

 

 

 

 

Other assets

         (24,982)

 

         (50,737)

 

 

 

 

Accounts payable and accrued expenses

       300,635

 

       (350,232)

 

 

 

 

Income tax liability

170,007

 

-

 

 

 

 

Other liabilities

        (278,696)

 

            67,991

 

Net cash provided by (used in) operating activities of continuing operations

439,442

 

       (409,417)

 

Net cash provided by operating activities of discontinued operations

          -

 

          302,080

 

Net cash provided by (used in) operating activities

439,442

 

       (107,337)

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Increase (decrease) in restricted cash

47,829

 

         (59,034)

 

 

Forward purchase contract buyout

(941,289)

 

-

 

 

Distribution to minority shareholders

(50,000)

 

-

 

 

Purchase of minority interest investment

(448)

 

         (11,382)

 

 

Purchase of property plant and equipment

    (477,092)

 

    (1,042,402)

 

Net cash used in investing activities of continuing operations

    (1,421,000)

 

    (1,112,818)

 

Net cash provided by investing activities of discontinued operations:

 

 

 

 

 

Proceeds from sale of assets, net of associated costs

         2,500

 

591,329

 

Net cash used in investing activities

    (1,418,500)

 

      (521,489)

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements





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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

 

 

 

Year Ended December 31,

 

2008

 

2007

Cash flows from financing activities:

 

 

 

 

 

Proceeds from notes payable

6,469,171 

 

            91,197

 

 

Prepaid loan financing costs

       - 

 

       (172,857)

 

 

Cash received upon exercise of warrants

            - 

 

            20,000

 

 

Prepaid Financing Costs

159,130 

 

                     -

 

 

Repayment of note payable to stockholder

        (760,000)

 

           (9,234)

 

 

Repayment on notes payable

     (4,549,553)

 

       (497,335)

 

Net cash provided by (used in) financing activities of continuing operations

    1,318,748

 

       (568,229)

 

Net cash used in financing activities of discontinued operations:

 

 

 

 

 

Repayment on notes payable of discontinued operations

         -

 

         (12,734)

 

Net cash provided (used in) by financing activities

       1, 318,748

 

       (580,963)

 

 

 

 

 

 

 

 

 

 

 

Net  Increase (Decrease) in Cash

339,690

 

    (1,209,789)

 

 

 

 

 

 

 

 

 

 

 

Cash, Beginning

       926,625

 

       2,136,414

 

 

 

 

 

 

 

 

 

 

 

Cash, Ending

 $     1,266,315

 

$       926,625

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

Interest

 $    1,012,813

 

$    1,044,755

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Activities:

 

 

 

 

Rent in exchange of note receivable repayment

 $           9,000

 

 $         36,000

 

Payoff of existing mortgage at closing of discontinued operations

-

 

 $       609,839

 

Acquisition of assets in exchange for note forgiveness

$    2,740,584

 

-

 

Purchase of business assets in exchange for debt

 $       266,300

 

 $       337,361

 

 

 

 

 

See notes to consolidated financial statements




 







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