AdCare Expects Revenue to Jump 436%, Continues M&A Binge With New Closings

AdCare Health Systems, Inc. (NYSE Amex:ADK) recently closed on a previously announced asset purchase of four skilled nursing facilities in Arkansas. Additionally, within the next 90 days, the company will close on a 10-year lease for a Missouri skilled nursing facility from the same seller.

The five facilities, with an aggregate purchase price of $20 million, have a total of 506 beds that generated revenues of more than $25 million in 2010. Their addition to AdCare’s portfolio is expected to be accretive to the company’s earnings.

Taking into account AdCare’s most recent as well as previously announced transactions, its estimated annualized revenue run-rate is expected to exceed $285 million, representing an increase of more than 436% from the company’s 2010 revenues, and a more than 969% increase from 2009 when it began its current M&A campaign.


“These four facilities bring the total to 26—representing more than 2,700 beds—that we’ve purchased or leased since we began our M&A program in the fall of 2009,” said Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer, in a statement. “They also mark our first entrance into Arkansas and are in line with our expansion throughout the South.”

“Our M&A strategy is to acquire underperforming skilled nursing facilities, and then assist the facility leadership to improve care, increase post-acute census and optimize payment rate structure,” said Boyd Gentry, AdCare’s CEO. “When we entered into the definitive purchase agreement for these facilities, they had relatively low Medicare utilization of 11.3% and an average daily Medicare rate of $427 a day. This optimization opportunity is right in our strategic ‘sweet spot.'”

The purchase was financed through a combination of traditional bank financing and loan guarantees by the United States Department of Agriculture.


Written by Alyssa Gerace