Georgia | 001-33135 | 31-1332119 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1145 Hembree Road Roswell, Georgia 30076 | ||||
(Address of Principal Executive Offices) | ||||
¨ | 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)) |
Date: November 13, 2014 | ADCARE HEALTH SYSTEMS, INC. | ||
/s/ William McBride III | |||
William McBride III | |||
Chief Executive Officer |
Exhibit No. | Exhibit Description | |
99.1 | Press Release dated November 13, 2014. | |
• | Since the Board approved the strategic plan to transition the Company’s business from an owner and operator of healthcare facilities to a healthcare facilities holding and leasing company, the Company has entered into agreements to lease or sublease 14 of its healthcare facilities. |
◦ | Of these 14 health care facilities, six of them are closed transactions. |
◦ | The Company expects to close on another three healthcare facilities that are pending regulatory approval by December 2014. |
◦ | The remaining five healthcare facilities are expected to close sometime in the first quarter of 2015 when financing approval is obtained from the U.S. Department of Housing and Urban Development (“HUD”). |
• | Management currently expects the remaining 23 facilities to be leased or subleased, subject to approval from landlord, lenders, regulators, and/or HUD, by the end of the first quarter of 2015. |
• | Revenues reflecting the historical business model as an owner and operator of skilled nursing facilities were $57.1 million, up 6.4% compared with $53.6 million in the third quarter of 2013. |
• | Adjusted EBITDAR from continuing operations was $6.5 million, up 20.2% compared with $5.4 million in the third quarter of 2013 (see “Use of Non-GAAP Financial Information” below for the definition of Adjusted EBITDAR from continuing operations and its reconciliation to GAAP net loss). |
• | Inclusive of a $1.5 million non-recurring charge, net loss attributable to AdCare common shareholders was $4.0 million compared with net loss of $0.5 million in the third quarter of 2013. |
• | On October 10, 2014, William “Bill” McBride III, a veteran of the REIT industry, was named as Chief Executive Officer and President and as a member of the Board of Directors. |
• | They are 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; |
• | They provide 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 |
• | They provide data that assists management to determine whether or not adjustments to current spending decisions are needed. |
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Amounts in 000’s) | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,867 | $ | 19,374 | ||||
Restricted cash and investments | 921 | 3,801 | ||||||
Accounts receivable, net of allowance of $6,202 and $4,989 | 25,771 | 23,598 | ||||||
Prepaid expenses and other | 2,198 | 483 | ||||||
Assets of disposal group held for use | — | 5,135 | ||||||
Assets of disposal group held for sale | 7,045 | 400 | ||||||
Assets of variable interest entity held for sale | 5,894 | 5,945 | ||||||
Total current assets | 54,696 | 58,736 | ||||||
Restricted cash and investments | 7,773 | 11,606 | ||||||
Property and equipment, net | 136,572 | 138,233 | ||||||
Intangible assets - bed licenses | 2,471 | 2,471 | ||||||
Intangible assets - lease rights, net | 4,254 | 4,889 | ||||||
Goodwill | 4,224 | 4,224 | ||||||
Lease deposits | 1,832 | 1,715 | ||||||
Deferred loan costs, net | 3,948 | 4,542 | ||||||
Other assets | 93 | 12 | ||||||
Total assets | $ | 215,863 | $ | 226,428 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of notes payable and other debt | $ | 24,249 | $ | 12,027 | ||||
Current portion of convertible debt, net of discounts | 14,000 | 11,389 | ||||||
Revolving credit facilities and lines of credit | 6,894 | 2,738 | ||||||
Accounts payable | 17,729 | 23,783 | ||||||
Accrued expenses | 15,644 | 13,264 | ||||||
Liabilities of disposal group held for sale | 5,197 | — | ||||||
Liabilities of variable interest entity held for sale | 5,954 | 6,034 | ||||||
Total current liabilities | 89,667 | 69,235 | ||||||
Notes payable and other debt, net of current portion: | ||||||||
Senior debt, net of discounts | 86,832 | 107,858 | ||||||
Bonds, net of discounts | 7,007 | 6,996 | ||||||
Revolving credit facilities | 1,121 | 5,765 | ||||||
Convertible debt | — | 7,500 | ||||||
Other liabilities | 1,916 | 1,589 | ||||||
Deferred tax liability | — | 191 | ||||||
Total liabilities | 186,543 | 199,134 | ||||||
Commitments and contingencies | ||||||||
Preferred stock, no par value; 5,000 shares authorized; 950 shares issued and outstanding, redemption amount 23,750 at both September 30, 2014 and December 31, 2013, respectively | 20,392 | 20,442 | ||||||
Stockholders’ equity: | ||||||||
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 18,811 and 16,016 issued and outstanding at September 30, 2014 and December 31, 2013, respectively | 61,251 | 48,370 | ||||||
Accumulated deficit | (50,141 | ) | (39,884 | ) | ||||
Total stockholders’ equity | 11,110 | 8,486 | ||||||
Noncontrolling interest in subsidiary | (2,182 | ) | (1,634 | ) | ||||
Total equity | 8,928 | 6,852 | ||||||
Total liabilities and equity | $ | 215,863 | $ | 226,428 |
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, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues: | ||||||||||||||||
Patient care revenues | $ | 56,637 | $ | 53,126 | $ | 165,196 | $ | 160,471 | ||||||||
Management revenues | 354 | 521 | 1,140 | 1,529 | ||||||||||||
Rental revenues | 88 | — | 88 | — | ||||||||||||
Total revenues | 57,079 | 53,647 | 166,424 | 162,000 | ||||||||||||
Expenses: | ||||||||||||||||
Cost of services (exclusive of facility rent, depreciation and amortization) | 47,198 | 43,802 | 137,743 | 134,392 | ||||||||||||
General and administrative expense | 3,578 | 4,583 | 12,318 | 14,016 | ||||||||||||
Audit committee investigation expense | — | 302 | — | 2,284 | ||||||||||||
Facility rent expense | 1,695 | 1,702 | 5,085 | 5,077 | ||||||||||||
Depreciation and amortization | 1,906 | 1,779 | 5,716 | 5,245 | ||||||||||||
Salary retirement and continuation costs | 1,489 | 5 | 2,771 | 154 | ||||||||||||
Total expenses | 55,866 | 52,173 | 163,633 | 161,168 | ||||||||||||
Income from Operations | 1,213 | 1,474 | 2,791 | 832 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Interest expense, net | (2,644 | ) | (3,204 | ) | (7,916 | ) | (9,459 | ) | ||||||||
Acquisition costs, net of gains | (8 | ) | (33 | ) | (8 | ) | (610 | ) | ||||||||
Derivative gain | — | 1,989 | — | 2,178 | ||||||||||||
Loss on extinguishment of debt | (1,220 | ) | (6 | ) | (1,803 | ) | (33 | ) | ||||||||
Loss on disposal of assets | — | (6 | ) | — | (10 | ) | ||||||||||
Other (expense) income | (444 | ) | 15 | (636 | ) | 15 | ||||||||||
Total other expense, net | (4,316 | ) | (1,245 | ) | (10,363 | ) | (7,919 | ) | ||||||||
(Loss) Income from Continuing Operations Before Income Taxes | (3,103 | ) | 229 | (7,572 | ) | (7,087 | ) | |||||||||
Income tax benefit (expense) | 244 | 54 | 236 | (24 | ) | |||||||||||
(Loss) Income from Continuing Operations | (2,859 | ) | 283 | (7,336 | ) | (7,111 | ) | |||||||||
Loss from Discontinued Operations, Net of Tax | (690 | ) | (696 | ) | (1,531 | ) | (2,998 | ) | ||||||||
Net Loss | (3,549 | ) | (413 | ) | (8,867 | ) | (10,109 | ) | ||||||||
Net Loss Attributable to Noncontrolling Interests | 218 | 195 | 548 | 629 | ||||||||||||
Net Loss Attributable to AdCare Health Systems, Inc. | (3,331 | ) | (218 | ) | (8,319 | ) | (9,480 | ) | ||||||||
Preferred stock dividend | (646 | ) | (306 | ) | (1,938 | ) | (918 | ) | ||||||||
Net Loss Attributable to AdCare Health Systems, Inc. Common Stockholders | $ | (3,977 | ) | $ | (524 | ) | $ | (10,257 | ) | $ | (10,398 | ) | ||||
Net loss per Common Share attributable to AdCare Health Systems, Inc. | ||||||||||||||||
Common Stockholders - | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing Operations | $ | (0.18 | ) | $ | 0.01 | $ | (0.50 | ) | $ | (0.50 | ) | |||||
Discontinued Operations | (0.04 | ) | (0.04 | ) | (0.09 | ) | (0.20 | ) | ||||||||
$ | (0.22 | ) | $ | (0.03 | ) | $ | (0.59 | ) | $ | (0.70 | ) | |||||
Diluted: | ||||||||||||||||
Continuing Operations | $ | (0.18 | ) | $ | 0.01 | $ | (0.50 | ) | $ | (0.50 | ) | |||||
Discontinued Operations | (0.04 | ) | (0.04 | ) | (0.09 | ) | (0.20 | ) | ||||||||
$ | (0.22 | ) | $ | (0.03 | ) | $ | (0.59 | ) | $ | (0.70 | ) | |||||
Weighted Average Common Shares Outstanding: | ||||||||||||||||
Basic | 18,134 | 14,962 | 17,539 | 14,805 | ||||||||||||
Diluted | 18,134 | 14,962 | 17,539 | 14,805 |
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
TRAILING FIVE QUARTERS | ||||||||||||||||||||
(Amounts in 000's) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For Three Months Ended | ||||||||||||||||||||
9/30/2013 | 12/31/2013 | 3/31/2014 | 6/30/2014 | 9/30/2014 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Patient care revenues | $ | 53,126 | $ | 53,239 | $ | 53,797 | $ | 54,762 | $ | 56,637 | ||||||||||
Management revenues | 521 | 568 | 482 | 304 | 354 | |||||||||||||||
Rental revenues | — | — | — | — | 88 | |||||||||||||||
Total revenues | 53,647 | 53,807 | 54,279 | 55,066 | 57,079 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of services (exclusive of facility rent, depreciation and amortization) | 43,802 | 43,925 | 44,821 | 45,724 | 47,198 | |||||||||||||||
General and administrative expenses | 4,583 | 5,016 | 4,561 | 4,179 | 3,578 | |||||||||||||||
Audit committee investigation expense | 302 | 102 | — | — | — | |||||||||||||||
Facility rent expense | 1,702 | 1,712 | 1,698 | 1,692 | 1,695 | |||||||||||||||
Depreciation and amortization | 1,779 | 1,946 | 1,856 | 1,954 | 1,906 | |||||||||||||||
Salary retirement and continuation costs | 5 | — | — | 1,282 | 1,489 | |||||||||||||||
Total expenses | 52,173 | 52,701 | 52,936 | 54,831 | 55,866 | |||||||||||||||
Income from Operations | 1,474 | 1,106 | 1,343 | 235 | 1,213 | |||||||||||||||
Other Income (Expense): | ||||||||||||||||||||
Interest expense, net | (3,204 | ) | (2,891 | ) | (2,622 | ) | (2,650 | ) | (2,644 | ) | ||||||||||
Acquisition costs, net of gains | (33 | ) | 45 | — | — | (8 | ) | |||||||||||||
Derivative gain | 1,989 | 829 | — | — | — | |||||||||||||||
Loss on extinguishment of debt | (6 | ) | (77 | ) | (583 | ) | — | (1,220 | ) | |||||||||||
Loss on disposal of assets | (6 | ) | — | — | — | — | ||||||||||||||
Other income (expense) | 15 | (321 | ) | (109 | ) | (83 | ) | (444 | ) | |||||||||||
Total other expense, net | (1,245 | ) | (2,415 | ) | (3,314 | ) | (2,733 | ) | (4,316 | ) | ||||||||||
(Loss) Income from Continuing Operations Before Income Taxes | 229 | (1,309 | ) | (1,971 | ) | (2,498 | ) | (3,103 | ) | |||||||||||
Income tax benefit (expense) | 54 | (118 | ) | (8 | ) | — | 244 | |||||||||||||
Income (Loss) from Continuing Operations | 283 | (1,427 | ) | (1,979 | ) | (2,498 | ) | (2,859 | ) | |||||||||||
Loss from Discontinued Operations, Net of Tax | (696 | ) | (1,828 | ) | (544 | ) | (297 | ) | (690 | ) | ||||||||||
Net Loss | (413 | ) | (3,255 | ) | (2,523 | ) | (2,795 | ) | (3,549 | ) | ||||||||||
Net Loss Attributable to Noncontrolling Interest | 195 | 168 | 173 | 157 | 218 | |||||||||||||||
Net Loss Attributable to AdCare Health Systems, Inc. | (218 | ) | (3,087 | ) | (2,350 | ) | (2,638 | ) | (3,331 | ) | ||||||||||
Preferred stock dividend | (306 | ) | (646 | ) | (646 | ) | (646 | ) | (646 | ) | ||||||||||
Net Loss Attributable to AdCare Health Systems, Inc. Common Stockholders | $ | (524 | ) | $ | (3,733 | ) | $ | (2,996 | ) | $ | (3,284 | ) | $ | (3,977 | ) |
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||||
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA FROM CONTINUING OPERATIONS AND | ||||||||||||||||||||
ADJUSTED EBITDAR FROM CONTINUING OPERATIONS | ||||||||||||||||||||
(Amounts in 000's) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For Three Months Ended | ||||||||||||||||||||
9/30/2013 | 12/31/2013 | 3/31/2014 | 6/30/2014 | 9/30/2014 | ||||||||||||||||
Net Loss | $ | (413 | ) | $ | (3,255 | ) | $ | (2,523 | ) | $ | (2,795 | ) | $ | (3,549 | ) | |||||
Impact of discontinued operations | 696 | 1,828 | 544 | 297 | 690 | |||||||||||||||
Net (loss) income from continuing operations (Per GAAP) | 283 | (1,427 | ) | (1,979 | ) | (2,498 | ) | (2,859 | ) | |||||||||||
Add back: | ||||||||||||||||||||
Interest expense, net | 3,204 | 2,891 | 2,622 | 2,650 | 2,644 | |||||||||||||||
Income tax (benefit) expense | (54 | ) | 118 | 8 | — | (244 | ) | |||||||||||||
Amortization of stock-based compensation | 186 | 360 | 513 | 226 | 244 | |||||||||||||||
Depreciation and amortization | 1,779 | 1,946 | 1,856 | 1,954 | 1,906 | |||||||||||||||
Acquisition costs, net of gain | 33 | (45 | ) | — | — | 8 | ||||||||||||||
Loss on extinguishment of debt | 6 | 77 | 583 | — | 1,220 | |||||||||||||||
Derivative gain | (1,989 | ) | (829 | ) | — | — | — | |||||||||||||
Loss on disposal of assets | 6 | — | — | — | — | |||||||||||||||
Audit committee investigation expense | 302 | 102 | — | — | — | |||||||||||||||
Reincorporation - Georgia | — | 91 | — | — | — | |||||||||||||||
Salary retirement and continuation costs | 5 | — | — | 1,282 | 1,489 | |||||||||||||||
Other (income) expenses | (15 | ) | 321 | 109 | 83 | 444 | ||||||||||||||
Adjusted EBITDA from continuing operations | 3,746 | 3,605 | 3,712 | 3,697 | 4,852 | |||||||||||||||
Facility rent expense | 1,702 | 1,712 | 1,698 | 1,692 | 1,695 | |||||||||||||||
Adjusted EBITDAR from continuing operations | $ | 5,448 | $ | 5,317 | $ | 5,410 | $ | 5,389 | $ | 6,547 | ||||||||||
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||
SUPPLEMENTARY SCHEDULES | |||||||||
(Unaudited) | |||||||||
2013 | 2014 | ||||||||
End of Period Data | Q1 | Q2 | Q3 | 9 Mo. YTD | Q4 | Q1 | Q2 | Q3 | 9 Mo. YTD |
Number of Facilities | |||||||||
SNF | |||||||||
Owned | 23 | 23 | 23 | 23 | 23 | 23 | 23 | 23 | 23 |
Leased | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 8 |
Managed | 10 | 10 | 10 | 10 | 10 | 3 | 3 | 3 | 3 |
ALF | |||||||||
Owned | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
IL | |||||||||
Managed | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Total | 44 | 44 | 44 | 44 | 44 | 37 | 37 | 37 | 37 |
Number of Operational Beds | |||||||||
SNF | |||||||||
Owned | 2,458 | 2,458 | 2,458 | 2,458 | 2,458 | 2,458 | 2,458 | 2,458 | 2,458 |
Leased | 1,038 | 1,038 | 1,038 | 1,038 | 1,038 | 1,038 | 1,038 | 1,038 | 1,038 |
Managed | 813 | 813 | 813 | 813 | 813 | 510 | 510 | 510 | 510 |
ALF | |||||||||
Owned | 112 | 112 | 112 | 112 | 112 | 112 | 112 | 112 | 112 |
IL | |||||||||
Managed | 83 | 83 | 83 | 83 | 83 | 83 | 83 | 83 | 83 |
Total at Period End | 4,504 | 4,504 | 4,504 | 4,504 | 4,504 | 4,201 | 4,201 | 4,201 | 4,201 |
Total Weighted Average (d) | 3,608 | 3,608 | 3,608 | 3,608 | 3,608 | 3,608 | 3,608 | 3,608 | 3,608 |
SNF + ALF % Owned | 71.2% | 71.2% | 71.2% | 71.2% | 71.2% | 71.2% | 71.2% | 71.2% | 71.2% |
SNF + ALF % Leased | 28.8% | 28.8% | 28.8% | 28.8% | 28.8% | 28.8% | 28.8% | 28.8% | 28.8% |
Revenue Mix % (b) | |||||||||
Skilled (c) | 32.8% | 32.0% | 29.4% | 31.4% | 29.1% | 31.8% | 32.8% | 31.7% | 32.1% |
Medicaid | 51.9% | 52.8% | 53.4% | 52.7% | 53.1% | 52.1% | 51.6% | 51.8% | 51.8% |
Private + Other | 15.3% | 15.2% | 17.2% | 15.9% | 17.8% | 16.1% | 15.6% | 16.5% | 16.1% |
Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
Patient Days (b) | |||||||||
Skilled (c) | 39,717 | 39,400 | 35,119 | 114,236 | 34,416 | 37,632 | 39,375 | 39,387 | 116,394 |
Medicaid | 171,584 | 177,100 | 179,990 | 528,674 | 177,154 | 174,512 | 176,155 | 181,017 | 531,684 |
Private + Other | 39,697 | 39,279 | 42,203 | 121,179 | 45,625 | 40,535 | 41,849 | 44,312 | 126,696 |
Total | 250,998 | 255,779 | 257,312 | 764,089 | 257,195 | 252,679 | 257,379 | 264,716 | 774,774 |
Patient Day Mix % (a) | |||||||||
Skilled (c) | 16.4% | 16.0% | 14.1% | 15.5% | 13.9% | 15.5% | 15.9% | 15.4% | 15.6% |
Medicaid | 70.1% | 71.0% | 71.6% | 70.9% | 70.8% | 70.9% | 70.4% | 70.2% | 70.5% |
Private + Other | 13.5% | 13.0% | 14.3% | 13.6% | 15.3% | 13.6% | 13.7% | 14.4% | 13.9% |
Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
Revenue Rates Per Patient Day (a) | |||||||||
Skilled (c) | $441.73 | $436.66 | $444.47 | $440.82 | $449.55 | $454.85 | $456.80 | $455.22 | $455.64 |
Medicaid | $162.53 | $161.22 | $158.14 | $160.60 | $160.28 | $161.34 | $161.26 | $162.84 | $161.83 |
Private + Other | $177.58 | $176.28 | $177.01 | $176.96 | $178.01 | $181.43 | $178.10 | $177.96 | $179.12 |
Weighted Average Total | $217.89 | $215.11 | $210.86 | $214.59 | $211.81 | $218.02 | $218.25 | $219.15 | $218.49 |
Average Daily Census (b) | |||||||||
Skilled (c) | 441 | 433 | 382 | 418 | 374 | 418 | 433 | 428 | 426 |
Medicaid | 1,906 | 1,946 | 1,956 | 1,937 | 1,926 | 1,939 | 1,936 | 1,968 | 1,948 |
Private + Other | 442 | 432 | 459 | 444 | 496 | 451 | 459 | 481 | 464 |
Total Average Daily Census | 2,789 | 2,811 | 2,797 | 2,799 | 2,796 | 2,808 | 2,828 | 2,877 | 2,838 |
Occupancy (b) | 77.3% | 77.9% | 77.5% | 77.6% | 77.5% | 77.8% | 78.4% | 79.7% | 78.7% |
(in thousands) | |||||||||
Total Revenue (b) | $54,030 | $54,323 | $53,647 | $162,000 | $53,807 | $54,279 | $55,066 | $57,079 | $166,424 |
Adjusted EBITDAR (b) | $3,993 | $4,888 | $5,448 | $14,329 | $5,317 | $5,410 | $5,389 | $6,547 | $17,346 |
Adjusted EBITDA (b) | $2,316 | $3,190 | $3,746 | $9,252 | $3,605 | $3,712 | $3,697 | $4,852 | $12,261 |
(a) Skilled nursing only - excludes managed facilities | |||||||||
(b) AdCare consolidated incorporating discontinued operations | |||||||||
(c) Skilled is defined as Medicare A + Managed Care RUGS | |||||||||
(d) Consists of weighted average beds of SNF + ALF owned and leased facilities |