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AdCare Health Systems, Inc. (ADK) Management Discusses Record Financial Results

|Includes: Adcare Health Systems Inc (ADK)

In addition to the exceptional financial numbers AdCare management was able to provide in the company's recent release of 2011 Q4 and full-year results, they also discussed their continued M&A based strategy and plans for the future. The numbers, however, plainly served to back up the management team's choice of direction:

• Record annual revenues of $151.4 million, up 198% from 2010
• Record annual income from operations of $2.7 million
• 176% year-over-year gain in Q4 adjusted EBITDAR from continuing operations

AdCare, a rapidly growing owner and operator of care facilities covering 7 states, has had its best year ever. The company's strategy of acquiring underperforming skilled nursing properties, and then assisting the local facilities leadership team in improving care, increasing acute care census, and evaluating payment rate structures has clearly done much to drive this performance, although AdCare experienced revenue growth on a "same-store" basis as well.

The company's pace of acquisitions has been impressive, closing on 5 facilities in the 4th quarter and announcing additional acquisitions in Arkansas, with 5 properties under contract which are expected to close in late Q1 or early Q2. They've also signed a deal in Oklahoma for a 456-bed set of properties that they will manage, with a contract to purchase at an attractive price. And, beyond that, they simply say they have a robust pipeline, with a number of other opportunities coming up throughout the South. AdCare now boasts over 44 facilities, with 3,000+ patients in residence, and over 4,000 employees.

However, management made it clear that they have no intention of letting the volume of acquisitions get ahead of them. They've invested heavily over the past year in infrastructure to support their growing network, including establishing a scalable administrative service center in Roswell, Georgia, north of Atlanta. They've also adopted and integrated the industry leading clinical billing platform, PointClickCare, and have transitioned to Microsoft Dynamics, a robust general ledger and financial reporting system.

In answer to questions about "cash burn," they pointed out that, although a lot of cash is understandably going to support acquisitions, the company continues to be effective at balancing A/R and A/P, and there were no cash surprises in Q4.

In short, AdCare feels that it has found a business model that works exceedingly well, and the company intends to continue its aggressive M&A approach.

To listen to a replay of the earnings conference call, visit the Investors section of AdCare's website at www.AdCareHealth.com

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