Health & Fitness
Health and Fitness
Health and Fitness
Tue, May 18, 2010
Mon, May 17, 2010 AdCare Health Systems Reports First Quarter 2010 Results
SPRINGFIELD, OH--(Marketwire - May 17, 2010) - AdCare Health Systems, Inc. (
Q1 2010 Financial Results
Revenue in the first quarter of 2010 was $6.4 million, unchanged from the same year-ago quarter. The company's results were unchanged in the first quarter of 2010 primarily due to a decrease in the number of residents covered by Medicare to 11.3% compared to 16.6% in the same year-ago period, resulting in a decrease in revenue of $120,000, offset by a $65,000 increase in revenue in the company's assisted living centers and a $40,000 increase in management fees.
Loss from operations in the first quarter of 2010 was $114,000, as compared to income from operations of $404,000 in the same year-ago quarter. The loss in the first quarter of 2010 was partially the result of a $202,000 increase in amortized non-cash compensation expense over the year-ago quarter related to warrants and restricted stock issued to management in December 2009.
Net income in the first quarter of 2010 totaled $414,000 or $0.05 per diluted share as compared to net income of $104,000 or $0.03 per diluted share in the same year-ago period. Net income in the first quarter of 2010 included a gain of approximately $826,000 as a result of acquiring the remaining 50% interest in three assisted living facilities during the quarter, partially offset by the loss from operations.
EBITDA in the first quarter of 2010 increased 51% to $955,000 from EBITDA of $633,000 in the same year-ago period. The company defines EBITDA as net income before interest income, interest expense, income tax expense and depreciation and amortization (see the important discussion about the presentation of EBITDA, a non-GAAP term, below).
Cash at March 31, 2010 totaled $3.6 million, as compared to $4.5 million at the end of fiscal 2009. The decrease in cash is primarily attributed to approximately $118,000 in net cash used in operating activities, and approximately $800,000 used for completed and pending acquisitions.
Q1 2010 Operational Highlights
- AdCare signed a definitive purchase agreement for two privately-held nursing homes in Alabama for $18.5 million. The facilities have a total of 312 beds and generate an estimated $18 million in annualized revenue. The acquisitions, which represent the company's first expansion outside of Ohio, are expected to increase AdCare's annualized revenue by 60% and be immediately accretive to earnings. The company expects to close the transaction in the third quarter of 2010.
- Completed the acquisition of Community's Hearth & Home (H&H) in which AdCare acquired its partners' 50% interest in one assisted living facility located in Urbana, Ohio, and two located in Springfield, Ohio. AdCare will now be able to recognize 100% of the income generated by these facilities, with no portion being attributed to the non-controlling interest. Additionally, 100% of the cash flow generated by these operations will now be available for other company initiatives.
- Entered into a multiyear management contract to manage 80 nursing home beds located in two single story buildings in Northeastern Ohio. Third party management contracts provide an outlet for higher margin services that support AdCare's core, long-term care business without requiring large capital outlays.
Management Commentary
"During the first quarter, we continued to focus on initiatives to grow both organically and through acquisition," said David A. Tenwick, AdCare's chairman. "To compensate for the mix of Medicare-funded residents, and increase occupancy and usage of our facilities, we continued to market cross-selling opportunities between our home healthcare services and our centers for assisted and independent living. We also signed a new multi-year facilities management contract. Soon after the end of the quarter, we received the long-anticipated approval to provide Medicare and Medicaid funded home healthcare services in two additional Ohio counties, which includes the city of Columbus, and thereby opening up new opportunities for this growing area of our business.
"In addition, by repositioning AdCare to grow more aggressively through acquisitions during the second half of last year, we set the stage for significant acquisition activity in 2010. These actions in 2009 included strengthening our balance sheet by raising new equity, expanding our board of directors, and appointing Christopher Brogdon, a highly experienced M&A specialist in our industry, as vice chairman and chief acquisition officer.
"In the first quarter of 2010, we realized the first outcomes from our acquisition plans. We acquired the remaining 50% of our three assisted living facilities in Ohio and signed an agreement to purchase two nursing facilities in Alabama. The agreement to purchase a 105-unit assisted living facility also in Alabama soon followed after the end of the quarter. When these Alabama acquisitions are closed as expected -- the assisted living facility at the end of the second quarter and the nursing homes at the beginning of the third -- we expect these facilities to substantially expand our bottom line while adding, on aggregate, 65 to 80% to our top line. They will also represent our first expansion outside of Ohio."
Chris Brogdon commented: "As the year advances, we continue to see very attractive opportunities in our highly fragmented market segments. We are working on several potential acquisitions in our pipeline, with our efforts now assisted by C.K. Cooper & Company, a leading investment banking firm which we recently engaged to advise us in these transactions."
Concluded Tenwick: "As we set out to accomplish our goals for the remainder of 2010, our overriding mission will continue to be on maintaining the best quality of care and services for our residents, and sustaining our position as the provider of choice in the areas we serve."
About AdCare Health Systems
AdCare Health Systems, Inc. (
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, which can be identified by the use of forward-looking terminology such as "believes," "expects," "plans" or similar expressions. Statements in this announcement that are forward-looking include, but are not limited to statements made by Mr. Tenwick that recent contracts to acquire one assisted living facility and two nursing facilities are expected to close in the second and third quarter, respectively, and are expected to expand the company's bottom line while adding more than 65 to 80% to the company's top line. 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 also 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 healthcare 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.
Use of Non-GAAP Financial Information
EBITDA is a measure of operating performance that is not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). EBITDA 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. EBITDA is a key measure 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. The company defines EBITDA as net income (loss) before interest income, interest expense, income tax expense and depreciation and amortization.
The company believes EBITDA is useful to investors in evaluating their performance, results of operations and financial position for the following reasons:
- It's 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's an indication to determine if adjustments to current spending decisions are needed.
AdCare believes that the use of EBITDA provides a meaningful and consistent comparison of their underlying business between periods by eliminating certain items required by GAAP which have little or no significance in the day-to-day operations.
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES Reconciliation of Net Income to EBITDA (Unaudited) Mar 31, Mar 31, 2010 2009 --------- --------- Net Income $ 414,205 $ 103,932 Interest income (5,725) (1,308) Interest expense, others 292,551 294,142 Interest expense, related parties 394 718 Income tax expense 10,642 10,642 Depreciation and amortization 242,564 225,308 --------- --------- EBITDA $ 954,631 $ 633,434 ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2010 2009 ------------ ------------ ASSETS (Unaudited) Current Assets: Cash $ 3,579,299 $ 4,481,100 Accounts receivable: Long-term care resident receivables, net 1,775,764 1,838,560 Management, consulting and development receivables, net 155,301 124,761 Advances and receivables from affiliates 16,407 16,407 Prepaid expenses and other 555,322 541,958 ------------ ------------ Total current assets 6,082,093 7,002,786 ------------ ------------ Restricted cash 1,232,897 1,430,674 Property and equipment, net 17,598,315 16,445,028 Licenses 1,189,307 1,189,307 Goodwill 2,679,482 2,679,482 Other assets 1,775,685 1,357,160 ------------ ------------ Total assets $ 30,557,779 $ 30,104,437 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of notes payable and other debt $ 695,620 $ 698,504 Current portion of notes payable to stockholder 28,270 9,432 Accounts payable 650,551 1,039,422 Accrued expenses 2,677,076 2,597,151 ------------ ------------ Total current liabilities 4,051,517 4,344,509 ------------ ------------ Notes payable and other debt, net of current portion 16,569,333 16,701,028 Notes payable to stockholder, net of current portion - 24,444 Other liabilities 1,222,435 746,074 Deferred tax liability 223,216 212,574 ------------ ------------ Total liabilities 22,066,501 22,028,629 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; 5,400,007 and 5,360,007 shares issued and outstanding 17,884,402 17,571,801 Accumulated deficit (9,395,748) (9,805,249) ------------ ------------ Total stockholders' equity 8,488,654 7,766,552 Noncontrolling interest in subsidiaries 2,624 309,256 ------------ ------------ Total equity 8,491,278 8,075,808 ------------ ------------ Total liabilities and stockholders' equity $ 30,557,779 $ 30,104,437 ============ ============ ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, ---------------------------- 2010 2009 ------------- ------------- Revenues: Patient care revenues $ 5,866,787 $ 5,916,835 Management, consulting and development fee revenue 507,731 468,054 ------------- ------------- Total revenue 6,374,518 6,384,889 ------------- ------------- Expenses: Payroll and related payroll costs 4,060,964 3,737,729 Other operating expenses 2,184,876 2,017,926 Depreciation and amortization 242,564 225,308 ------------- ------------- Total expenses 6,488,404 5,980,963 ------------- ------------- (Loss) Income from Operations (113,886) 403,926 ------------- ------------- Other Income (Expense): Interest income 5,725 1,308 Interest expense, others (292,551) (294,142) Interest expense, related parties (394) (718) Other expense (36) 4,200 ------------- ------------- (287,256) (289,352) ------------- ------------- Gain on Acquisition 825,989 - ------------- ------------- Income Before Income Taxes 424,847 114,574 Income Tax Expense (10,642) (10,642) ------------- ------------- Net Income 414,205 103,932 Net Income Attributable to Noncontrolling Interests (4,704) (8,118) ------------- ------------- Net Income Attributable to AdCare Health Systems $ 409,501 $ 95,814 ============= ============= Net Income Per Share, Basic: $ 0.08 $ 0.03 ============= ============= Net Income Per Share, Diluted: $ 0.05 $ 0.03 ============= ============= Weighted Average Common Shares Outstanding, Basic 5,400,007 3,786,129 ============= ============= Diluted 7,805,910 3,815,820 ============= =============
