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AdCare Health Systems (ADK) Reports Record Fourth Quarter and Full Year 2010 Results

AdCare Health Systems, Inc., a leading skilled nursing and assisted living provider, reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.

Financial Highlights

  • Record annual revenues, up 99% to $53.2 million
  • Record annual EBITDAR, up 44% to $5.2 million, with 50% generated in final
  • M&A program adds nearly $100 million in annualized revenue in 2010
  • Q4 2010 EBITDAR up 183% to $2.6 million versus Q4 2009
  • Estimated annualized revenue run-rate currently exceeds $175 million

Q4 & FY2010 Summary of Financial Results

Revenue in the fourth quarter of 2010 increased 303% to a record $27.4 million from $6.8 million in the same quarter a year ago. Revenue for the full year of 2010 increased 99% to a record $53.2 million from $26.7 million in 2009. The increases in revenue were primarily due to acquisitions by the company’s new Southeast Division completed during the quarter and year. (Full year audited results, along with a more detailed discussion and analysis of the company’s performance, will be available in AdCare’s Form 10-K to be filed with the Security and Exchange Commission.)

Loss from operations in the fourth quarter of 2010 was $508,000, as compared to income from operations of $344,000 in the same year-ago period. Loss from operations for the full year in 2010 was $1.7 million, as compared to income from operations of $1.8 million in 2009. The loss from operations for both the quarter and full year was primarily due to startup expenses associated with recent acquisitions, increased depreciation, acquisition costs, and non-cash stock-based compensation.

In the fourth quarter, non-cash compensation expense comprised of warrants and restricted stock totaled $193,000, as compared to $203,000 in the fourth quarter of 2009. For the full year 2010, non-cash compensation expense comprised of warrants and restricted stock totaled $840,000, as compared to $364,000 in 2009. Approximately $456,000 of non-cash stock based compensation in 2010 was related to the replacement of unvested warrants with restricted common stock.

For earnings attributable to the company and its shareholders, net loss in the fourth quarter of 2010 totaled $1.0 million or $(0.15) per share, versus approximately breakeven in the same year-ago period. The fourth quarter of 2010 net loss included acquisition costs of approximately $420,000. For fiscal 2010, net loss was $2.7 million or $(0.40) per share, versus a net income of $440,000 or $0.09 per diluted share in 2009.

EBITDAR in the fourth quarter of 2010 totaled $2.6 million, up 183% from an EBITDAR of $930,000 in the fourth quarter of 2009. EBITDAR for the full year in 2010 totaled $5.2 million, an increase of 44% from an EBITDAR of $3.6 million in 2009. The company defines EBITDAR as net income or loss before interest income, interest expense, income tax expense, depreciation, amortization (including amortization of stock-based compensation) and rent cost (see the important discussion about the presentation of EBITDAR, a non-GAAP term, below).

Cash at December 31, 2010 totaled $3.9 million, and deposits on pending acquisitions totaled $1.7 million. This compares to cash of $4.5 million at December 31, 2009, with the decrease of cash over the previous year primarily due to cash used in operations.

Q4 2010 Operational Highlights

  • In October, AdCare acquired two nursing homes in Alabama. The facilities have a total of 306 beds that were generating at the time of the acquisition about $18 million in annualized revenue. (see table “Summary of Closed 2010 and Pending 2011 Transactions,” below).
  • In November, the company finalized a long-term lease with renewal options for two additional nursing homes in Georgia. The facilities have an aggregate of 300 beds and were generating more than $21 million in annualized revenue.
  • In December, AdCare signed a definitive agreement to acquire three skilled nursing facilities in Georgia. The facilities have an aggregate of 335 beds that were generating an estimated $16.4 million in annualized revenues at the time of signing. AdCare expects to close the transaction by the end of March and to obtain control effective April 1, 2011.
  • AdCare also completed at the end of December the acquisition 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 assumed control effective January 1, 2011.
  • The company secured a $5 million revolving line of credit from Gemino Healthcare Finance, LLC, a specialty healthcare lender that provides senior debt financing to healthcare service providers. The line will be used to support AdCare’s working capital requirements.
  • AdCare issued and sold unsecured subordinated convertible notes in a private placement transaction that raised a total of $11.8 million. Proceeds from this financing were used for general corporate purposes and acquisitions.
  • By the end of the fourth quarter, the company owned or leased 15 skilled nursing facilities with 1688 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

“2010 was a milestone year for AdCare Health Systems, as we dramatically expanded our operations and geographic footprint, resulting in a doubling of our annual revenues and strong EBITDAR growth,” said Boyd P. Gentry, AdCare’s co-CEO. “It’s important to note that a majority of our 2010 EBITDAR growth occurred in the final quarter, significantly narrowing our sequential quarterly loss, and this growth was sustained in the first quarter of 2011 as we continue to leverage operational improvements in our newly acquired facilities.”

Chris Brogdon, AdCare’s chief acquisition officer, commented: “We’ve put more than 25 facilities under contract since we began our M&A program at the end of 2009, which has established a strong record of achieving what we’ve set out to accomplish. Including the transactions we have announced and are in the process of closing, our annualized revenue run-rate exceeds $175 million. This represents an increase of more than 229% over 2010 and more than 556% over revenues in 2009 when this all began. Given the anticipated improved operations of our new facilities over time, we continue to expect an EBITDAR margin with these facilities — exclusive of acquisition-related costs — to be at least 10% going forward.”

“In terms of our M&A pipeline,” added Brogdon, “we continue to see choice opportunities emerging in the southern region of the U.S., as well as around our home base in the Midwest. Our M&A program will remain a major focus for AdCare as we continue through 2011.”

Conference Call and Webcast

The company will hold a conference call to discuss its 2010 financial results later today, March 23, 2011, at 4:30 p.m. Eastern time. Management will host the presentation, followed by a question and answer period.

Date: Wednesday, March 23, 2011
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Dial-In Number: 1-800-895-1715
International: 1-785-424-1059
Conference ID#: 7ADCARE

The conference call will be broadcast simultaneously at and available for replay via the investor section of the company’s Web site at

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 April 23, 2011:

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 12522

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