REGIONAL HEALTH PROPERTIES, INC - FORM 8-K - EX-99.4 - EXHIBIT 99.4 - October 11, 2016

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8-K - 8-K - REGIONAL HEALTH PROPERTIES, INCa100616-form8xkxadkskyq416.htm
EX-2.4 - EXHIBIT 2.4 - REGIONAL HEALTH PROPERTIES, INCa24letteragreement092816.htm
EX-99.1 - EXHIBIT 99.1 - REGIONAL HEALTH PROPERTIES, INCa991promissorynote.htm
EX-99.3 - EXHIBIT 99.3 - REGIONAL HEALTH PROPERTIES, INCa993subordination.htm
EX-99.2 - EXHIBIT 99.2 - REGIONAL HEALTH PROPERTIES, INCa992guarantyagreement.htm
EX-2.3 - EXHIBIT 2.3 - REGIONAL HEALTH PROPERTIES, INCa23letteragreement082216.htm
Exhibit 99.4

adk2q2016er_image1a01.jpg

UNAUDITED PRO FORMA FINANCIAL INFORMATION

On October 6, 2016, nine wholly-owned subsidiaries (the “Sellers”) of AdCare Health Systems, Inc. (the “Company”) completed the sale of nine facilities located in Arkansas, together with substantially all of the fixtures, equipment, furniture and other assets relating to such facilities (the “Arkansas Facilities”), to Little Ark Realty Holdings, LLC (the “Purchaser”), an affiliate of Skyline Healthcare LLC (“Skyline”). Prior to the closing of the sale of the Arkansas Facilities (the “Closing”), the Sellers leased the Arkansas Facilities to Skyline.
The aggregate purchase price paid to the Sellers for the Arkansas Facilities was $55.0 million, which purchase price consisted of: (i) a non-refundable deposit of $1.75 million; (ii) cash consideration of $50.25 million paid to the Sellers at the Closing; and (iii) a promissory note (the “Note”) from JS Highland Holdings LLC, an affiliate of Skyline (the “Borrower”), in favor of the Company with a principal amount of $3.0 million.
The principal amount of the Note, together with all accrued and unpaid interest, is due and payable on March 31, 2022 (the “Maturity Date”). The Borrower is required to make payments of interest only commencing on October 30, 2016 and on the last day of each month thereafter until the Maturity Date. The Note provides that simple interest shall accrue on the unpaid balance of the Note at rate of ten percent (10%) per annum. Such interest rate will increase by two percent (2%) on each anniversary date of the Note beginning in year three if the Note is still outstanding at that time. The Note is guaranteed by Joseph Schwartz, the manager of Skyline, and Roselyn Schwartz (collectively, the “Guarantors”). The Guarantors have agreed to pay the outstanding principal amount of the Note, together with all accrued and unpaid interest, upon, among other events, written notice from the Company to the Guarantors any time on or after the two year anniversary of the Note. In connection with the Closing, the Company agreed to subordinate its right to receive payment under the Note to the rights of lenders under certain revolving and term loans made to affiliates of Skyline.

1
Exhibit 99.4

The following unaudited pro forma financial information are based on the Company's historical consolidated financial statements after giving effect to the sale of the Arkansas Facilities.
The unaudited pro forma consolidated balance sheet as of June 30, 2016, has been prepared to give effect to the sale of the the Arkansas Facilities as if it had occurred June 30, 2016. The unaudited pro forma consolidated statement of operations for the six months ended June 30, 2016 and the twelve months ended December 31, 2015, have been prepared to give effect to the sale of the Arkansas Facilities as if it had occurred on January 1, 2016 and January 1, 2015, respectively.
The unaudited pro forma financial information was prepared utilizing the Company's historical financial data derived from the interim consolidated financial statements included in the Company's Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016 and from the audited consolidated financial statements for the year ended December 31, 2015, included in the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2016. The pro forma adjustments are described in the notes to the unaudited pro forma information and are based upon the available information and assumptions that management believes are reasonable.
The unaudited pro forma financial information are for informational purposes only and are not necessarily indicative of what the Company's financial performance and financial position would have been had the transactions completed on the dates assumed nor is such unaudited pro forma financial information necessarily indicative of the results to be expected in any future period.
    







2
Exhibit 99.4

ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
JUNE 30, 2016
(Amounts in 000’s)
 
(Unaudited)
 
 
 
Pro Forma
ASSETS
June 30, 2016
 
Adjustments
 
June 30, 2016
Current assets:
 
 
 
 
 
Cash and cash equivalents 1
$
3,249

 
$
19,652

 
$
22,901

Restricted cash
1,443

 
—

 
1,443

Accounts receivable, net
3,994

 
—

 
3,994

Prepaid expenses and other
1,817

 
—

 
1,817

Assets of disposal group held for sale 2
49,353

 
(49,175
)
 
178

Total current assets
59,856

 
(29,523
)
 
30,333

 
 
 
 
 
 
Restricted cash and investments
3,535

 
—

 
3,535

Property and equipment, net
79,617

 
—

 
79,617

Intangible assets - bed licenses
2,471

 
—

 
2,471

Intangible assets - lease rights, net
3,087

 
—

 
3,087

Goodwill
2,105

 
—

 
2,105

Lease deposits
1,411

 
—

 
1,411

Other assets 3
3,352

 
2,964

 
6,316

Total assets
$
155,434

 
$
(26,559
)
 
$
128,875

LIABILITIES AND DEFICIT
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current portion of notes payable and other debt
$
19,306

 
$
—

 
$
19,306

Current portion of convertible debt
7,700

 
—

 
7,700

Accounts payable
4,340

 
—

 
4,340

Accrued expenses and other 4
5,329

 
(1,674
)
 
3,655

Liabilities of disposal group held for sale 5
32,160

 
(32,160
)
 
—

Total current liabilities
68,835

 
(33,834
)
 
35,001

 
 
 
 
 
 
Notes payable and other debt, net of current portion:
 
 
 
 
 
Senior debt, net
48,614

 
—

 
48,614

Bonds, net
6,547

 
—

 
6,547

Convertible debt, net
1,352

 
—

 
1,352

Other debt, net
295

 
—

 
295

Other liabilities 6
4,078

 
(900
)
 
3,178

Deferred tax liability
389

 
—

 
389

Total liabilities
130,110

 
(34,734
)
 
95,376

 
 
 
 
 
 
Preferred stock
59,261

 
—

 
59,261

 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
Common stock and additional paid-in capital
61,366

 
—

 
61,366

Accumulated deficit 7
(95,303
)
 
8,175

 
(87,128
)
Total stockholders' deficit
(33,937
)
 
8,175

 
(25,762
)
Total liabilities and stockholders' deficit
$
155,434

 
$
(26,559
)
 
$
128,875

Notes:
1.Cash impact from the sale of the Arkansas Facilities, net of liabilities held for sale.
2.Removal of Arkansas Facilities held for sale.
3.Addition of Skyline Note of $3.0 million, net of other adjustments of $36.
4.Application of earnest deposit of $1.0 million toward purchase consideration of Arkansas Facilities, and payment of outstanding accrued property taxes and accrued interest expense.
5.Repayment of associated mortgage debt and write-off of deferred financing costs.
6.Application of lease security deposit toward purchase consideration of Arkansas Facilities.
7.Equity impact on sale of Arkansas Facilities.




3
Exhibit 99.4


ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016
(Amounts in 000’s, except per share data)
 
Unaudited
 
 
 
Pro Forma
 
Six Months Ended
 
 
 
Six Months Ended
 
June 30, 2016
 
Adjustments
 
June 30, 2016
Revenues:
 
 
 
 
 
Rental revenues 1
$
13,739

 
$
(2,545
)
 
$
11,194

Management fee and other revenues
507

 
—

 
507

Total revenues
14,246

 
(2,545
)
 
11,701

Expenses:
 
 
 
 
 
Facility rent expense
4,347

 
—

 
4,347

Depreciation and amortization 2
3,052

 
(756
)
 
2,296

General and administrative expense
4,677

 
—

 
4,677

Other operating expense 3
1,172

 
(394
)
 
778

Total expenses
13,248

 
(1,150
)
 
12,098

 
 
 
 
 
 
Income (loss) from operations
998

 
(1,395
)
 
(397
)
 
 
 
 
 
 
Other (income) / expense:
 
 
 
 
 
Interest expense, net 4
3,576

 
(1,254
)
 
2,322

Loss on extinguishment of debt 5
—

 
763

 
763

Gain on disposal of assets 6
—

 
(8,008
)
 
(8,008
)
Other expense 7
51

 
290

 
341

Total other (income) / expense, net
3,627

 
(8,209
)
 
(4,582
)
 
 
 
 
 
 
(Loss) / income from continuing operations before income taxes
(2,629
)
 
6,814

 
4,185

Income tax expense
—

 
—

 
—

(Loss) / income from continuing operations
(2,629
)
 
6,814

 
4,185

 
 
 
 
 
 
Preferred stock dividends
(3,578
)
 
—

 
(3,578
)
 
 
 
 
 
 
Net (loss) / income attributable to AdCare Health Systems, Inc. Common Stockholders 8
$
(6,207
)
 
$
6,814

 
$
607

 
 
 
 
 
 
Net loss (income) per share of common stock attributable to
 
 
 
 
 
AdCare Health Systems, Inc.
 
 
 
 
 
Basic and diluted:
 
 
 
 
 
     Continuing operations
$
(0.31
)
 
 
 
$
0.03

 
 
 
 
 
 
Weighted average shares of common stock outstanding:
 
 
 
 
 
     Basic and diluted
19,896

 
 
 
19,896

Notes:
1.Eliminates the results of rent revenues for the Arkansas Facilities.
2.Adjusts depreciation for the Arkansas Facilities.
3.Eliminates other operating expenses, such as private mortgage insurance associated with the Arkansas Facilities.
4.Interest expense eliminated on sale of Arkansas Facilities, net of $150 interest income on the Skyline Note.
5.Costs associated with write-off of deferred financing costs and the incurrence of prepayment penalties on early retirement of debt.
6.Gain on sale of the Arkansas Facilities.
7.Expenses associated with payment of property taxes on the Arkansas Facilities.
8.Amount excludes net loss from discontinued operations of $4,303.



4
Exhibit 99.4


ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2015
(Amounts in 000’s, except per share data)
 
Audited
 
 
 
Pro Forma
 
Twelve Months Ended
 
 
 
Twelve Months Ended
 
December 31, 2015
 
Adjustments
 
December 31, 2015
Revenues:
 
 
 
 
 
Rental revenues 1
$
17,254

 
$
(3,147
)
 
$
14,107

Management fee and other revenues
910

 
—

 
910

Other revenues
236

 
—

 
236

Total revenues
18,400

 
(3,147
)
 
15,253

Expenses:
 
 
 
 
 
Facility rent expense
5,758

 
—

 
5,758

Depreciation and amortization 2
7,345

 
(2,085
)
 
5,260

General and administrative expense
10,544

 
—

 
10,544

Other operating expense 3
2,394

 
(103
)
 
2,291

Total expenses
26,041

 
(2,188
)
 
23,853

 
 
 
 
 
 
Loss from operations
(7,641
)
 
(959
)
 
(8,600
)
 
 
 
 
 
 
Other (income) / expense:
 
 
 
 
 
Interest expense, net 4
8,462

 
(2,598
)
 
5,864

Loss on extinguishment of debt 5
680

 
1,076

 
1,756

Gain on disposal of assets 6
—

 
(6,679
)
 
(6,679
)
Other expense 7
918

 
(228
)
 
690

Total other (income) / expense, net
10,060

 
(8,429
)
 
1,631

 
 
 
 
 
 
Loss from continuing operations before income taxes
(17,701
)
 
7,470

 
(10,231
)
Income tax expense
110

 
—

 
110

Loss from continuing operations
(17,811
)
 
7,470

 
(10,341
)
 
 
 
 
 
 
Preferred stock dividends
(5,208
)
 
—

 
(5,208
)
 
 
 
 
 
 
Net loss attributable to AdCare Health Systems, Inc. Common Stockholders 8
$
(23,019
)
 
$
7,470

 
$
(15,549
)
 
 
 
 
 
 
Net loss (income) per share of common stock attributable to

 
 
 

AdCare Health Systems, Inc.

 
 
 
 
Basic and diluted:
 
 
 
 
 
     Continuing operations
$
(1.17
)
 
 
 
$
(0.79
)
 
 
 
 
 
 
Weighted average shares of common stock outstanding:
 
 
 
 
 
     Basic and diluted
19,680

 
 
 
19,680

Notes:
1.Eliminates the results of rent revenues for the Arkansas Facilities.
2.Adjusts depreciation for the Arkansas Facilities.
3.Eliminates other operating expenses, such as private mortgage insurance associated with the Arkansas Facilities.
4.Interest expense eliminated on sale of Arkansas Facilities, net of $300 interest income on the Skyline Note.
5.Costs associated with write-off of deferred financing costs and prepayment penalties on early retirement of debt.
6.Gain on sale of Arkansas Facilities.
7.Expenses saved associated with payment of property taxes on sold Arkansas Facilities.
8. Amount excludes net loss from discontinued operations of $4,892 and loss attributable to non controlling interests of $815.

5

REGIONAL HEALTH PROPERTIES, INC Reports