AdCare Health Systems third quarter 2013 revenues up 5%

AdCare Health Systems, Inc. (NYSE MKT: ADK), (NYSE MKT: ADK.PA) a leading long-term care provider, reported results for the third quarter and nine months ended September 30, 2013.

Financial Highlights

• Revenues up 5% to $55.9 million from $53.2 million in the year-ago period
• Adjusted EBITDAR from continuing operations was $5.4 million (see "Use of Non-GAAP Financial Information," below for more information)
• AdCare's financial results included a non-cash derivative gain of $2.0 million compared to a non-cash derivative loss of $2.1 million in the third quarter last year (see, "About the Derivative Liability," below for more information)
• Board of Directors declared a quarterly cash preferred dividend payment of $0.68 per share on the Company's 10.875% Series A Cumulative Redeemable Preferred Stock which was paid on September 30, 2013 to holders of record at the close of business on September 20, 2013
• Subsequent to the quarter end, completed a public offering of 500,000 shares of its 10.875% Series A Cumulative Redeemable Preferred Stock; $11.2 million net proceeds to be used for general corporate purposes; completed offering eliminates embedded derivative from financial statements

"The third quarter is our seasonally slowest quarter and yet we delivered solid revenue growth from the year ago period for both the third quarter and the first nine months of 2013," said AdCare's president and chief executive officer, Boyd P. Gentry. "Our EBITDAR continues to demonstrate the progress we are making and this quarter we generated the highest EBITDA and EBITDAR in five quarters - since Q2 of 2012. We have more than doubled Adjusted EBITDAR since Q4 of 2012; adjusted EBITDAR from continuing operations reached $5.4 million compared to $2.5 million for the fourth quarter of 2012.  We narrowed our quarterly net loss attributable to AdCare Health stockholders significantly to $0.5 million from $4.5 million in the prior year period and sequentially from $7.0 million. We are on track to reduce our expense run-rate by nearly $1 million annually, primarily from new fixed-price contracts for certain expenses as well as eliminating some redundancy at the corporate level."  

Mr. Gentry added, "Profitability improved sequentially even though revenues decreased slightly due to the seasonality mentioned above.  Additionally, we are laying the groundwork for an enhanced sales and marketing strategy that should begin to yield higher skilled mix in 2014. These anticipated improvements in census and mix, when combined with our continued careful expense control which are gaining traction should drive solid financial improvements in the coming quarters. We believe this progress will become even more evident as the non-recurring costs related to the Audit Committee review and inquiry and the restatement process dissipate. Audit committee investigation expenses decreased by more than $0.5 million sequentially from Q2 to Q3. We are encouraged by the progress we have made and look forward to continued profitable growth."

Q3 and Nine Month 2013 Summary of Financial Results
Revenues in the third quarter of 2013 were $55.9 million, up 5% from $53.2 million in the same year-ago quarter. Revenue for the first nine months of 2013 increased by 18.5% to $168.5 million from $142.2 million in 2012.

Inclusive of a $302,000 charge related to the Audit Committee's review and the Company's restatement process, and a non-cash derivative gain of $2.0 million, net loss attributable to AdCare common stockholders in the third quarter of 2013 totaled $0.5 million or $(0.03) per basic and diluted share. This compares to a net loss of $4.5 million, or $(0.31) per basic and diluted share, in the same year-ago quarter, which included a non-cash derivative loss of $2.1 million. For the first nine months of 2013, the net loss attributable to AdCare common stockholders was $10.4 million or $(0.70) per basic and diluted share, versus a net loss of $7.0 million or $(0.50) per basic and diluted share in 2012.

"Quarterly cost of services declined to 82.5% of revenues in the third quarter of 2013 compared to 83.6% of revenues in the prior year quarter and also declined sequentially from 84.2% of revenues in the second quarter of 2013 due to successful facility optimization efforts," commented Ronald Fleming, AdCare Health's chief financial officer. "In addition, after the end of October, 2013 the non-cash derivative liability no longer impacts our financial statements so going forward we will be able to present results that no longer reflect this quarterly non-cash line item."

Adjusted EBITDAR from continuing operations in the third quarter of 2013 totaled $5.4 million, up 6.3% compared to $5.0 million in the third quarter of 2012 and up 13.9% sequentially compared to the $4.7 million in the second quarter of 2013. Adjusted EBITDAR from continuing operations for the first nine months of 2013 totaled $14.0 million compared to $14.9 million for the first nine months of 2012 (see "Use of Non-GAAP Financial Information," below for the definition of Adjusted EBITDA from continuing operations and Adjusted EBITDAR from continuing operations, each, non-GAAP financial measures, as well as an important discussion about the use of these measures and their reconciliation to GAAP net loss, the most directly comparable GAAP financial measure).

Cash and cash equivalents at September 30, 2013 totaled $12.7 million, as compared to $15.9 million at December 31, 2012.

Q3 2013 Total Facility Count
At the end of the third quarter of 2013, the Company, through its subsidiaries, operated or managed 47 facilities comprised of 43 skilled nursing centers, three assisted living residences and one independent living/senior housing facility, with a total of 4,781 beds/units in service. Of these 47 facilities, 26 are owned, nine are leased, 11 are managed for third parties and one is a consolidated variable interest entity. The facilities are located in Alabama, Arkansas, Georgia, Missouri, North Carolina, Ohio, Oklahoma and South Carolina.