UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-33135
Regional Health Properties, Inc.
(Exact name of registrant as specified in its charter)
Georgia | 81-5166048 | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer |
454 Satellite Boulevard NW, Suite 100, Suwanee, GA 30024
(Address of principal executive offices)
(678) 869-5116
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ý No ☐o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ý No ☐o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large“large accelerated filer"filer”, "accelerated filer"“accelerated filer”, "smaller“smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||||
(Do not check if a smaller reporting company) | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐o No ☐o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 31, 2017: 19,762,036May 17, 2018: 20,303,733 shares of common stock, no par value, were outstanding.
Form 10-Q
Table of Contents
Page | ||||
3 | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
8 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 | |||
36 | ||||
36 | ||||
38 | ||||
39 | ||||
40 | ||||
40 | ||||
40 | ||||
41 | ||||
41 | ||||
45 |
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
(Amounts in 000’s)
(Unaudited)
|
| March 31, 2018 |
|
| December 31, 2017 |
| ||
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
| $ | 3,524 |
|
| $ | 1,818 |
|
Restricted cash |
|
| 833 |
|
|
| 960 |
|
Accounts receivable, net of allowance of $1,992 and $2,570 |
|
| 599 |
|
|
| 945 |
|
Prepaid expenses and other |
|
| 521 |
|
|
| 304 |
|
Notes receivable |
|
| 727 |
|
|
| 677 |
|
Total current assets |
|
| 6,204 |
|
|
| 4,704 |
|
Restricted cash |
|
| 2,640 |
|
|
| 2,581 |
|
Property and equipment, net |
|
| 80,397 |
|
|
| 81,213 |
|
Intangible assets - bed licenses |
|
| 2,471 |
|
|
| 2,471 |
|
Intangible assets - lease rights, net |
|
| 1,945 |
|
|
| 2,187 |
|
Goodwill |
|
| 2,105 |
|
|
| 2,105 |
|
Lease deposits |
|
| 808 |
|
|
| 808 |
|
Straight-line rent receivable |
|
| 6,383 |
|
|
| 6,400 |
|
Notes receivable |
|
| 2,990 |
|
|
| 3,540 |
|
Other assets |
|
| 55 |
|
|
| 542 |
|
Total assets |
| $ | 105,998 |
|
| $ | 106,551 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of notes payable and other debt |
| $ | 17,714 |
|
| $ | 6,621 |
|
Current portion of convertible debt, net |
|
| — |
|
|
| 1,469 |
|
Accounts payable |
|
| 3,996 |
|
|
| 4,386 |
|
Accrued expenses and other |
|
| 4,523 |
|
|
| 7,022 |
|
Total current liabilities |
|
| 26,233 |
|
|
| 19,498 |
|
Notes payable and other debt, net of current portion: |
|
|
|
|
|
|
|
|
Senior debt, net |
|
| 53,297 |
|
|
| 57,801 |
|
Bonds, net |
|
| 6,586 |
|
|
| 6,567 |
|
Other debt, net |
|
| 572 |
|
|
| 644 |
|
Other liabilities |
|
| 3,899 |
|
|
| 4,133 |
|
Deferred tax liabilities |
|
| 38 |
|
|
| 38 |
|
Total liabilities |
|
| 90,625 |
|
|
| 88,681 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 19,697 and 19,697 issued and outstanding at March 31, 2018 and December 31, 2017, respectively |
|
| 61,755 |
|
|
| 61,724 |
|
Preferred stock, no par value; 5,000 shares authorized; 2,812 and 2,812 shares issued and outstanding, redemption amount $70,288 and $70,288 at March 31, 2018 and December 31, 2017, respectively |
|
| 62,423 |
|
|
| 62,423 |
|
Accumulated deficit |
|
| (108,805 | ) |
|
| (106,277 | ) |
Total stockholders’ equity |
|
| 15,373 |
|
|
| 17,870 |
|
Total liabilities and stockholders’ equity |
| $ | 105,998 |
|
| $ | 106,551 |
|
September 30, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,115 | $ | 14,045 | ||||
Restricted cash | 960 | 1,600 | ||||||
Accounts receivable, net of allowance of $2,946 and $7,529, respectively | 1,086 | 2,429 | ||||||
Prepaid expenses and other | 1,384 | 2,395 | ||||||
Total current assets | 4,545 | 20,469 | ||||||
Restricted cash and investments | 2,580 | 3,864 | ||||||
Property and equipment, net | 82,441 | 79,168 | ||||||
Intangible assets - bed licenses | 2,471 | 2,471 | ||||||
Intangible assets - lease rights, net | 2,253 | 2,754 | ||||||
Goodwill | 2,105 | 2,105 | ||||||
Lease deposits | 808 | 1,411 | ||||||
Notes receivable | 3,589 | 3,000 | ||||||
Other assets | 6,407 | 4,244 | ||||||
Total assets | $ | 107,199 | $ | 119,486 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Current portion of notes payable and other debt | $ | 6,828 | $ | 4,018 | ||||
Current portion of convertible debt, net | 1,499 | 9,136 | ||||||
Accounts payable | 3,617 | 3,037 | ||||||
Accrued expenses and other | 8,582 | 9,077 | ||||||
Total current liabilities | 20,526 | 25,268 | ||||||
Notes payable and other debt, net of current portion: | ||||||||
Senior debt, net | 58,212 | 60,189 | ||||||
Bonds, net | 6,548 | 6,586 | ||||||
Other debt, net | 731 | 41 | ||||||
Other liabilities | 3,785 | 3,677 | ||||||
Deferred tax liabilities | 226 | 226 | ||||||
Total liabilities | 90,028 | 95,987 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 and 2,762 shares issued and outstanding, redemption amount $70,288 and $69,038 at September 30, 2017 and December 31, 2016, respectively | — | 61,446 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 19,762 and 19,927 issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 61,738 | 61,643 | ||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 and 2,762 shares issued and outstanding, redemption amount $70,288 and $69,038 at September 30, 2017 and December 31, 2016, respectively | 62,423 | — | ||||||
Accumulated deficit | (106,990 | ) | (99,590 | ) | ||||
Total stockholders’ equity (deficit) | 17,171 | (37,947 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 107,199 | $ | 119,486 |
See accompanying notes to unaudited consolidated financial statements
(Amounts in 000’s, except per share data)
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Revenues: |
|
|
|
|
|
|
|
|
Rental revenues |
| $ | 5,705 |
|
| $ | 5,775 |
|
Management fees |
|
| 234 |
|
|
| 229 |
|
Other revenues |
|
| 48 |
|
|
| 131 |
|
Total revenues |
|
| 5,987 |
|
|
| 6,135 |
|
Expenses: |
|
|
|
|
|
|
|
|
Facility rent expense |
|
| 2,171 |
|
|
| 2,171 |
|
Cost of management fees |
|
| 157 |
|
|
| 176 |
|
Depreciation and amortization |
|
| 1,221 |
|
|
| 1,135 |
|
General and administrative expense |
|
| 879 |
|
|
| 1,446 |
|
Provision for doubtful accounts |
|
| 1,938 |
|
|
| 466 |
|
Other operating expenses |
|
| 343 |
|
|
| 89 |
|
Total expenses |
|
| 6,709 |
|
|
| 5,483 |
|
(Loss) income from operations |
|
| (722 | ) |
|
| 652 |
|
Other expense: |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 1,275 |
|
|
| 1,032 |
|
Loss on extinguishment of debt |
|
| 441 |
|
|
| 63 |
|
Other expense |
|
| 9 |
|
|
| 95 |
|
Total other expense, net |
|
| 1,725 |
|
|
| 1,190 |
|
Loss from continuing operations before income taxes |
|
| (2,447 | ) |
|
| (538 | ) |
Income tax expense |
|
| 26 |
|
|
| 1 |
|
Loss from continuing operations |
|
| (2,473 | ) |
|
| (539 | ) |
Loss from discontinued operations, net of tax |
|
| (55 | ) |
|
| (413 | ) |
Net loss |
|
| (2,528 | ) |
|
| (952 | ) |
Preferred stock dividends - declared |
|
| — |
|
|
| (1,878 | ) |
Preferred stock dividends - undeclared |
|
| (1,912 | ) |
|
| — |
|
Net loss attributable to Regional Health Properties, Inc. common stockholders |
| $ | (4,440 | ) |
| $ | (2,830 | ) |
Net loss per share of common stock attributable to Regional Health Properties, Inc. |
|
|
|
|
|
|
|
|
Basic and diluted: |
|
|
|
|
|
|
|
|
Continuing operations |
| $ | (0.23 | ) |
| $ | (0.12 | ) |
Discontinued operations |
|
| 0.00 |
|
|
| (0.02 | ) |
|
| $ | (0.23 | ) |
| $ | (0.14 | ) |
Weighted average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 19,697 |
|
|
| 19,825 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenues | $ | 5,983 | $ | 6,912 | $ | 17,703 | $ | 20,651 | ||||||||
Management fee and other revenues | 362 | 253 | 1,081 | 760 | ||||||||||||
Total revenues | 6,345 | 7,165 | 18,784 | 21,411 | ||||||||||||
Expenses: | ||||||||||||||||
Facility rent expense | 2,171 | 2,176 | 6,512 | 6,523 | ||||||||||||
Depreciation and amortization | 1,193 | 1,124 | 3,499 | 4,176 | ||||||||||||
General and administrative expense | 1,063 | 1,598 | 3,507 | 6,275 | ||||||||||||
Other operating expenses | 517 | 241 | 1,395 | 1,413 | ||||||||||||
Total expenses | 4,944 | 5,139 | 14,913 | 18,387 | ||||||||||||
Income from operations | 1,401 | 2,026 | 3,871 | 3,024 | ||||||||||||
Other expense: | ||||||||||||||||
Interest expense, net | 1,011 | 1,801 | 3,049 | 5,377 | ||||||||||||
Loss on extinguishment of debt | — | — | 63 | — | ||||||||||||
Other expense | 105 | — | 388 | 51 | ||||||||||||
Total other expense, net | 1,116 | 1,801 | 3,500 | 5,428 | ||||||||||||
Income (loss) from continuing operations before income taxes | 285 | 225 | 371 | (2,404 | ) | |||||||||||
Income tax expense | 19 | 3 | 20 | 3 | ||||||||||||
Income (loss) from continuing operations | 266 | 222 | 351 | (2,407 | ) | |||||||||||
Loss from discontinued operations, net of tax | (1,032 | ) | (2,210 | ) | (2,049 | ) | (6,513 | ) | ||||||||
Net loss | (766 | ) | (1,988 | ) | (1,698 | ) | (8,920 | ) | ||||||||
Preferred stock dividends | 1,912 | 1,879 | 5,702 | 5,457 | ||||||||||||
Net loss attributable to Regional Health Properties, Inc. common stockholders | $ | (2,678 | ) | $ | (3,867 | ) | $ | (7,400 | ) | $ | (14,377 | ) | ||||
Net loss per share of common stock attributable to Regional Health Properties, Inc. | ||||||||||||||||
Basic and diluted: | ||||||||||||||||
Continuing operations | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.27 | ) | $ | (0.39 | ) | ||||
Discontinued operations | (0.05 | ) | (0.11 | ) | (0.10 | ) | (0.33 | ) | ||||||||
$ | (0.13 | ) | $ | (0.19 | ) | $ | (0.37 | ) | $ | (0.72 | ) | |||||
Weighted average shares of common stock outstanding: | ||||||||||||||||
Basic and diluted | 19,762 | 19,917 | 19,784 | 19,909 |
See accompanying notes to unaudited consolidated financial statements
(Amounts in 000’s)
(Unaudited)
|
| Shares of Common Stock |
|
| Shares of Preferred Stock |
|
| Common Stock and Additional Paid-in Capital |
|
| Preferred Stock |
|
| Accumulated Deficit |
|
| Total |
| ||||||
Balances, December 31, 2017 |
|
| 19,697 |
|
|
| 2,812 |
|
| $ | 61,724 |
|
| $ | 62,423 |
|
| $ | (106,277 | ) |
| $ | 17,870 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 31 |
|
|
| — |
|
|
| — |
|
|
| 31 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,528 | ) |
|
| (2,528 | ) |
Balances, March 31, 2018 |
|
| 19,697 |
|
|
| 2,812 |
|
| $ | 61,755 |
|
| $ | 62,423 |
|
| $ | (108,805 | ) |
| $ | 15,373 |
|
Shares of Common Stock | Shares of Preferred Stock | Common Stock and Additional Paid-in Capital | Preferred Stock (a) | Accumulated Deficit | Total | |||||||||||||||||
Balances, December 31, 2016 | 19,927 | — | $ | 61,643 | $ | — | $ | (99,590 | ) | $ | (37,947 | ) | ||||||||||
Reclassification of preferred stock | — | 2,812 | — | 62,423 | — | 62,423 | ||||||||||||||||
Stock-based compensation | — | — | 281 | — | — | 281 | ||||||||||||||||
Common stock repurchase program | (118 | ) | — | (186 | ) | — | — | (186 | ) | |||||||||||||
Issuance of restricted stock, net of forfeitures | (47 | ) | — | — | — | — | — | |||||||||||||||
Preferred stock dividends | — | — | — | — | (5,702 | ) | (5,702 | ) | ||||||||||||||
Net loss | — | — | — | — | (1,698 | ) | (1,698 | ) | ||||||||||||||
Balances, September 30, 2017 | 19,762 | 2,812 | $ | 61,738 | $ | 62,423 | $ | (106,990 | ) | $ | 17,171 |
See accompanying notes to unaudited consolidated financial statements
(Amounts in 000’s)
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (2,528 | ) |
| $ | (952 | ) |
Loss from discontinued operations, net of tax |
|
| 55 |
|
|
| 413 |
|
Loss from continuing operations |
|
| (2,473 | ) |
|
| (539 | ) |
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 1,221 |
|
|
| 1,135 |
|
Stock-based compensation expense |
|
| 31 |
|
|
| 234 |
|
Rent expense in excess of cash paid |
|
| 113 |
|
|
| 158 |
|
Rent revenue in excess of cash received |
|
| (683 | ) |
|
| (768 | ) |
Amortization of deferred financing costs, debt discounts and premiums |
|
| 195 |
|
|
| 99 |
|
Loss on debt extinguishment |
|
| 441 |
|
|
| — |
|
Bad debt expense |
|
| 1,938 |
|
|
| 466 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (271 | ) |
|
| 163 |
|
Prepaid expenses and other |
|
| (22 | ) |
|
| (201 | ) |
Other assets |
|
| 33 |
|
|
| (294 | ) |
Accounts payable, and accrued expenses and other |
|
| 209 |
|
|
| 236 |
|
Other liabilities |
|
| — |
|
|
| 60 |
|
Net cash provided by operating activities - continuing operations |
|
| 732 |
|
|
| 749 |
|
Net cash used in operating activities - discontinued operations |
|
| (735 | ) |
|
| (1,051 | ) |
Net cash used in operating activities |
|
| (3 | ) |
|
| (302 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (163 | ) |
|
| (329 | ) |
Net cash used in investing activities - continuing operations |
|
| (163 | ) |
|
| (329 | ) |
Net cash used in investing activities |
|
| (163 | ) |
|
| (329 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from debt issuance |
|
| 2,397 |
|
|
| — |
|
Repayment on notes payable |
|
| (503 | ) |
|
| (1,974 | ) |
Repayment of convertible debt |
|
| — |
|
|
| (6,700 | ) |
Repurchase of common stock |
|
| — |
|
|
| (187 | ) |
Dividends paid on preferred stock |
|
| — |
|
|
| (1,878 | ) |
Net cash provided by (used in) financing activities - continuing operations |
|
| 1,894 |
|
|
| (10,739 | ) |
Net cash used in financing activities - discontinued operations |
|
| (90 | ) |
|
| (140 | ) |
Net cash provided by (used in) financing activities |
|
| 1,804 |
|
|
| (10,879 | ) |
Net change in cash and restricted cash |
|
| 1,638 |
|
|
| (11,510 | ) |
Cash and restricted cash, beginning |
|
| 5,359 |
|
|
| 19,509 |
|
Cash and restricted cash, ending |
| $ | 6,997 |
|
| $ | 7,999 |
|
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,698 | ) | $ | (8,920 | ) | ||
Loss from discontinued operations, net of tax | 2,049 | 6,513 | ||||||
Income (loss) from continuing operations | 351 | (2,407 | ) | |||||
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,499 | 4,176 | ||||||
Settlement agreements in excess of cash paid | 300 | — | ||||||
Stock-based compensation expense | 281 | 890 | ||||||
Rent expense in excess of cash paid | 440 | 721 | ||||||
Rent revenue in excess of cash received | (2,138 | ) | (1,941 | ) | ||||
Amortization of deferred financing costs | 230 | 614 | ||||||
Amortization of debt discounts and premiums | 11 | 11 | ||||||
Bad debt expense | 455 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 409 | (657 | ) | |||||
Prepaid expenses and other | 202 | 929 | ||||||
Other assets | (16 | ) | 39 | |||||
Accounts payable and accrued expenses | 324 | (199 | ) | |||||
Other liabilities | 167 | 630 | ||||||
Net cash provided by operating activities - continuing operations | 4,515 | 2,806 | ||||||
Net cash used in operating activities - discontinued operations | (961 | ) | (3,470 | ) | ||||
Net cash provided by (used in) operating activities | 3,554 | (664 | ) | |||||
Cash flows from investing activities: | ||||||||
Change in restricted cash | 1,889 | 3,625 | ||||||
Purchase of real estate, net | (1,375 | ) | — | |||||
Purchase of property and equipment | (774 | ) | (704 | ) | ||||
Proceeds from the sale of property and equipment | — | 1,546 | ||||||
Earnest money deposit | — | 1,750 | ||||||
Net cash (used in) provided by investing activities - continuing operations | (260 | ) | 6,217 | |||||
Net cash used in investing activities - discontinued operations | — | — | ||||||
Net cash (used in) provided by investing activities | (260 | ) | 6,217 | |||||
Cash flows from financing activities: | ||||||||
Proceeds from debt | — | 3,940 | ||||||
Repayment on notes payable | (3,038 | ) | (10,496 | ) | ||||
Repayment on bonds payable | (90 | ) | (85 | ) | ||||
Repayment of convertible debt | (7,700 | ) | — | |||||
Debt issuance costs | — | (116 | ) | |||||
Proceeds from preferred stock issuances, net | 977 | 6,790 | ||||||
Repurchase of common stock | (186 | ) | (312 | ) | ||||
Dividends paid on preferred stock | (5,702 | ) | (5,457 | ) | ||||
Net cash used in financing activities - continuing operations | (15,739 | ) | (5,736 | ) | ||||
Net cash used in financing activities - discontinued operations | (485 | ) | (1,080 | ) | ||||
Net cash used in financing activities | (16,224 | ) | (6,816 | ) | ||||
Net change in cash and cash equivalents | (12,930 | ) | (1,263 | ) | ||||
Cash and cash equivalents, beginning | 14,045 | 2,720 | ||||||
Cash and cash equivalents, ending | $ | 1,115 | $ | 1,457 | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in 000’s)
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 755 |
|
| $ | 682 |
|
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
|
|
|
Non-cash payments of long-term debt |
| $ | (8,744 | ) |
| $ | — |
|
Non-cash payments of convertible debt |
|
| (1,500 | ) |
|
| — |
|
Non-cash payments of professional liability settlements from financing |
|
| (2,371 | ) |
|
| — |
|
Non-cash debt issuance costs and prepayment penalties |
|
| (1,238 | ) |
|
| — |
|
Non-cash payments of professional liability settlements from prior insurer |
|
| (2,850 | ) |
|
| — |
|
Net payments through escrow |
| $ | (16,703 | ) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
Non-cash proceeds from financing |
| $ | 13,853 |
|
| $ | — |
|
Non-cash proceeds from prior insurer for professional liability settlements |
|
| 2,850 |
|
|
| — |
|
Net proceeds through escrow |
| $ | 16,703 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
Non-cash deferred financing |
| $ | 488 |
|
| $ | — |
|
Surrender of security deposit |
| $ | 245 |
|
| $ | 500 |
|
Non-cash proceeds from vendor-financed insurance |
| $ | 194 |
|
| $ | 193 |
|
Non-cash proceeds from financing of South Carolina Medicaid audit repayment |
| $ | — |
|
| $ | 385 |
|
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 2,840 | $ | 4,846 | ||||
Income taxes paid | $ | 13 | $ | 3 | ||||
Supplemental disclosure of non-cash activities: | ||||||||
Non-cash proceeds from debt to purchase real estate | $ | 4,125 | $ | — | ||||
Surrender of security deposit | $ | 500 | $ | — | ||||
Settlement agreements in excess of cash paid | $ | 300 | $ | — | ||||
Non-cash proceeds from vendor-financed insurance | $ | 198 | $ | — | ||||
Non-cash proceeds from financing of South Carolina Medicaid audit repayment | $ | 385 | $ | — |
See accompanying notes to unaudited consolidated financial statements
March 31, 2018
NOTE 1. | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES |
Description of Business
AdCare Health Systems, Inc. (“AdCare”) is the former parent of, and the predecessor issuer to, Regional Health Properties, Inc. (“Regional Health”), through and, together with its subsidiaries, (together, the “Company” or “we”), is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. The Company’s business primarily consists of leasing and subleasing healthcare facilities to third-party tenants, which operate such facilities. The operators of the Company’s facilities provide a range of healthcare services, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.
The Company is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. The Company’s business primarily consists of leasing and subleasing healthcare facilities to third-party tenants, which operate the RHE Charter contains ownershipfacilities. The operators of the Company’s facilities provide a range of healthcare services, including skilled nursing and transfer restrictions with respect to the common stock. These ownershipassisted living services, social services, various therapy services, and transfer restrictions will better positionother rehabilitative and healthcare services for both long-term and short-stay patients and residents.
As of March 31, 2018, the Company to comply with certain U.S. federal income tax rules applicable to REITs under the Internal Revenue Code of 1986, as amended (the “Code”) to the extent such rules relate to the common stock. The Board continues to analyze and consider: (i) whether and, if so, when, the Company could satisfy the requirements to qualify as a REIT under the Code; (ii) the structural and operational complexities which would need to be addressed before the Company could qualify as a REIT, including the disposition of certain assetsowned, leased, or the termination of certain operations which may not be REIT compliant; and (iii) if the Company were to qualify as a REIT, whether electing REIT status would be in the best interests of the Company and its shareholders in light of various factors, including our significant consolidated federal net operating loss carryforwards. There is no assurance that the Company will qualify as a REIT in future taxable years or, if it were to so qualify, that the Board would determine that electing REIT status would be in the best interests of the Company and its shareholders.
The Company leases its currently-owned healthcare properties, and subleases its currently-leased healthcare properties, on a triple-net basis, meaning that the lessee (i.e., the third-party operator of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable. These leases are generally long-term in nature with renewal options and annual rent escalation clauses.
When used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise specifically stated or the context otherwise requires, the terms:
• | “Board” refers to the Board of Directors of AdCare with respect to the period prior to the Merger and to the Board of Directors of Regional Health with respect to the period after the Merger; |
• | “common stock” refers to AdCare’s common stock with respect to the period prior to the Merger and to Regional Health’s common stock with respect to the period after the Merger; and |
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principlesU.S. generally accepted in the United States of Americaaccounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included. Operating results for the three and nine months ended September 30,March 31, 2018 and 2017 and 2016 are not necessarily indicative of the results that may be expected for the fiscal year. The balance sheet at December 31, 20162017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
You should read the unaudited consolidated financial statements in this Quarterly Report together with the historical audited consolidated financial statements of the Company for the year ended December 31, 2016,2017, included in the Annual Report.
Part II, Item 8, Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies included in the Company’s Annual Report, for a description of all significant accounting policies. During the three months ended March 31, 2018, there were no material changes to the Company’s policies, except as noted below in RecentlyAdopted Standards.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atin the date of theunaudited consolidated financial statements and the reported results of operations during the reporting period. Examples of significant estimates include allowance for doubtful accounts, self-insurance reserves, deferred tax valuation allowance, fair value of employee and nonemployee stock based awards, valuation of goodwill and other long-lived assets, and cash flow projections.accompanying notes. Actual results could differ materially from those estimates.
Allowances
Allowances.
The Company assesses theAs of September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company allowed for approximately $2.9$2.0 million and $7.5$2.6 million, respectively, of gross patient care related receivables arising from ourits legacy operations. AllowanceAllowances for patient care receivables are estimated based on an aged bucket method as well as additional analyses of remaining balances incorporating different payor types. Any changes in patient care receivable allowances are recognized as a component of discontinued operations. All uncollected patient care receivables were fully allowed at September 30, 2017March 31, 2018 and December 31, 2016.2017. Accounts receivable, net, totaled $1.1$0.6 million at September 30, 2017March 31, 2018 and $2.4$0.9 million at December 31, 2016,2017.
Pre-paid expenses and other
As of which $0.2March 31, 2018 and December 31, 2017, the Company had $0.5 million and $0.9$0.3 million, respectively, related to patient care receivables from our legacy operations.
Self-Insurance
The Company has self-insured against professional and general liability claims since it discontinued its healthcare operations during 2014 and 2015 in connection with its transition from an owner and operator of healthcare properties to a healthcare property holding and leasing company (see Part II, Item 8, Notes to Consolidated Financial Statements
, Note 15Reclassifications
Certain reclassifications have been made to the valuation of an asset or liability as of the measurement date. The categorization of a measurement within the valuation hierarchy is based upon the lowest level of input that is significant2017 financial information to conform to the fair value measurement. The2018 presentation with no effect on the Company's consolidated financial position or results of operations. These reclassifications did not affect total assets, total liabilities, or stockholders' equity. Reclassifications were made to the consolidated statements of operations for the three levels are definedmonths ended March 31, 2017 to conform the presentation of management fee revenues and its related expense, previously reported as follows:general and administrative expense. Reclassifications were made to the consolidated statements of cash flows for
the three months ended March 31, 2017 to include restricted cash in active markets for identical assets or liabilities
Recently Adopted Standards
On January 1, 2018 the Company approximates their fair value. These instruments include cash and cash equivalents, restricted cash and investments, accounts receivable, notes receivable, and accounts payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values, they are receivable or payable on demand, or the interest rates earned and/or paid approximate current market rates.
The Company does not expect adoptionhas one contract to manage (the “Management Contract”) two skilled nursing facilities and one independent living facility for a third-party, with payment for each month of thisservice received in full on a monthly basis.
Companies are permitted to adopt the standard using a retrospective transition method (i.e., restate all prior periods presented) or a cumulative effect method (i.e., recognize the cumulative effect of initially applying the guidance to have a material impact onat the Company’s consolidated financial condition, resultsdate of operations or cash flows.
In August 2016, the FASB issued
ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, guidance which clarifies the treatment of several cash flow categories. In addition, the guidance clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscalIn November 2016, the FASB issued
ASU 2016-18,Recent Significant Accounting Pronouncements
In January 2017,February 2016, the FASB issued
See Part II, Item 8, Notes to Consolidated Financial Statements,
Basic earnings per share is computed by dividing net income or loss attributable to common stockholders by the weighted averageweighted-average number of shares of common stock outstanding during the respective period. Diluted earnings per share is similar to basic earnings per share except: (i) net income or loss is adjusted by the impact of the assumed conversion of convertible debt into shares of common stock; and (ii) the weighted averageweighted-average number of shares of common stock outstanding includes potentially dilutive securities (such as options, warrants, non-vested common stock and additional shares of common stock issuable under convertible debt outstanding during the period) when such securities are not anti-dilutive. Potentially dilutive securities from options, warrants and warrantsunvested restricted shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities. Potentially dilutive securities from convertible debt are calculated based on the assumed issuance at the beginning of the period, as well as any adjustment to income that would result from their assumed issuance. For the three and nine months ended September 30,March 31, 2018 and 2017, and 2016, approximately 2.41.2 million and 4.52.8 million shares, respectively, of potentially dilutive securities were excluded from the diluted income (loss)loss per share calculation because including them would have been anti-dilutive for such periods.
The following tables provide a reconciliation of net loss for continuing and discontinued operations and the number of shares of common stock used in the computation of both basic and diluted earnings per share:
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s, except per share data) |
| 2018 |
|
| 2017 |
| ||
Numerator: |
|
|
|
|
|
|
|
|
Loss from continuing operations |
| $ | (2,473 | ) |
| $ | (539 | ) |
Preferred stock dividends - declared |
|
| — |
|
|
| (1,878 | ) |
Preferred stock dividends - undeclared (1) |
|
| (1,912 | ) |
|
| — |
|
Basic and diluted loss from continuing operations |
|
| (4,385 | ) |
|
| (2,417 | ) |
Loss from discontinued operations, net of tax |
|
| (55 | ) |
|
| (413 | ) |
Net loss attributable to Regional Health Properties, Inc. common stockholders |
| $ | (4,440 | ) |
| $ | (2,830 | ) |
Denominator: |
|
|
|
|
|
|
|
|
Basic - weighted average shares |
|
| 19,697 |
|
|
| 19,825 |
|
Diluted - adjusted weighted average shares (2) |
|
| 19,697 |
|
|
| 19,825 |
|
Basic and diluted loss per share: |
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Regional Health |
| $ | (0.23 | ) |
| $ | (0.12 | ) |
Loss from discontinued operations |
|
| 0.00 |
|
|
| (0.02 | ) |
Loss attributable to Regional Health Properties, Inc. common stockholders |
| $ | (0.23 | ) |
| $ | (0.14 | ) |
(1) | The Board suspended dividend payments with respect to the Series A Preferred Stock for the fourth quarter 2017 and first quarter 2018. |
(2) | Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows: |
|
| March 31, |
| |||||
(Share amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Stock options |
|
| 181 |
|
|
| 333 |
|
Warrants - employee |
|
| 582 |
|
|
| 1,450 |
|
Warrants - non employee |
|
| 437 |
|
|
| 437 |
|
Shares issuable upon conversion of convertible debt |
|
| — |
|
|
| 588 |
|
Total anti-dilutive securities |
|
| 1,200 |
|
|
| 2,808 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Amounts in 000’s, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | ||||||||||||||||
Income (loss) from continuing operations | $ | 266 | $ | 222 | $ | 351 | $ | (2,407 | ) | |||||||
Preferred stock dividends | 1,912 | 1,879 | 5,702 | 5,457 | ||||||||||||
Basic and diluted loss from continuing operations | (1,646 | ) | (1,657 | ) | (5,351 | ) | (7,864 | ) | ||||||||
Loss from discontinued operations, net of tax | (1,032 | ) | (2,210 | ) | (2,049 | ) | (6,513 | ) | ||||||||
Net loss attributable to Regional Health Properties, Inc. common stockholders | $ | (2,678 | ) | $ | (3,867 | ) | $ | (7,400 | ) | $ | (14,377 | ) | ||||
Denominator: | ||||||||||||||||
Basic - weighted average shares | 19,762 | 19,917 | 19,784 | 19,909 | ||||||||||||
Diluted - adjusted weighted average shares (a) | 19,762 | 19,917 | 19,784 | 19,909 | ||||||||||||
Basic and diluted loss per share: | ||||||||||||||||
Loss from continuing operations attributable to Regional Health | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.27 | ) | $ | (0.39 | ) | ||||
Loss from discontinued operations | (0.05 | ) | (0.11 | ) | (0.10 | ) | (0.33 | ) | ||||||||
Loss attributable to Regional Health Properties, Inc. common stockholders | $ | (0.13 | ) | $ | (0.19 | ) | $ | (0.37 | ) | $ | (0.72 | ) | ||||
September 30, | ||||||
(Share amounts in 000’s) | 2017 | 2016 | ||||
Stock options | 245 | 355 | ||||
Warrants - employee | 1,350 | 1,559 | ||||
Warrants - non employee | 437 | 437 | ||||
Shares issuable upon conversion of convertible debt | 353 | 2,165 | ||||
Total anti-dilutive securities | 2,385 | 4,516 |
NOTE 3. | LIQUIDITY |
The Company continuesplans to undertake measures to grow its operations and to reducestreamline its expensescost infrastructure by: (i) increasing future lease revenue through acquisitions and investments in its existing properties; (ii) modifying the terms of existing leases; (iii) refinancing or repaying debt to reduce interest costs and mandatory principal repayments; and (iv) reducing general and administrative expenses.
Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and cash on hand. Management holds routine ongoing discussions with existing lenders and potential new lenders to refinance current debt on a longer term basis and, in recent years, has refinanced shorter term acquisition debt with traditional longer term mortgage notes, many of which have been executed under government guaranteed lending programs. Historically,refinancing. At March 31, 2018, the Company has raised capital through other sources, including issuances of preferred stock and convertible debt.
As of March 31, 2018, the Company had total current liabilities of $26.2 million and total current assets of $6.2 million, resulting in a working capital deficit of approximately $20.0 million. Included in current liabilities at March 31, 2018 is the $17.7 million current portion of its $78.2 million in indebtedness. The current portion of such indebtedness is comprised of: (i) $15.4 million of long term debt classified as current due to concerns regarding the Company’s ability to comply with the terms of a forbearance agreement detailed below in this note, which may cause acceleration of the maturity of such debt, (ii) $1.3 million mortgage indebtedness under the Company’s senior guaranteed debt; and (iii) other debt of approximately $1.0 million, (see Note 12 -
On February 15, 2018, the Company had $73.8entered into a debt refinancing (“Pinecone Credit Facility”) with Pinecone Realty Partners II, LLC (“Pinecone”), with an aggregate principal amount of $16.25 million, which refinanced existing mortgage debt in indebtednessan aggregate amount of which the current portion is $8.3 million. The current portion is comprised of the following components: (i) convertible debt of $1.5$8.7 million (ii) senior debt of $4.3 million attributable to the Company’son three skilled nursing facility known as the Quail Creek Nursing & Rehabilitation Center located in Oklahoma City, Oklahoma (the “Quail Creek Facility”);properties, and (iii) other debtprovided additional surplus cash flow of approximately $2.5$6.3 million which includes senior debt - bond and mortgage indebtedness (for a detailed listing of our debt, seeis available to fund general corporate needs (see Note 9 -
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the entity’s current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the entity to meet its obligations as they come due arising within one year of the date of the issuance of the Company’s consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern. The Company’s consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
On May 10, 2018, management was notified by Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility. Management also informed Pinecone that the Company had failed to meet one of its financial covenant obligations, the minimum fixed charge coverage ratio, as outlined in the loan agreement to the Pinecone Credit Facility for the period ended March 31, 2018.
In order to alleviate such defaults, on May 18, 2018, the Company entered into a forbearance agreement with Pinecone (the “Forbearance Agreement”), in which, Pinecone provides a timeline and a number of remedies available to cure all default items and to regain compliance under the Pinecone Credit Facility. The forbearance period is from May 18, 2018, the date of the
execution of the Forbearance Agreement, to July 20, 2018, during which time, the Company must comply with all benchmarks as outlined in the Forbearance Agreement.
Management believes that the overall plan of correction as outlined in the Forbearance Agreement is achievable, however many of the most recently filed actions, are defensiblebenchmarks, as articulated in the Forbearance Agreement, fall outside of the control of management, and intendsif the Company is unable to defend them through final judgment. Accordingly,satisfy the self-insurance reserve primarily reflectsrequirements as outlined, then one of the Company's estimated legal costsremedies available to Pinecone is that the entire principal balance of litigating the pending actions, which are expectedPinecone Credit Facility, plus interest and fees, will become immediately due and payable, indicating that substantial doubt exists about whether or not the Company will be able to be paid over timecontinue as litigation continues. The duration of such legal proceedings could be greater thana going concern within one year subsequentafter the date that the consolidated financial statements are issued.
In applying the accounting guidance, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company’s obligations due over the next twelve months in addition to also considering the period ended September 30, 2017; however, management cannot reliably estimatelikelihood that the exact timing of payments. The Company expects to fund litigationwill comply with the requisites as outlined in the Forbearance Agreement and potential indemnity costs through cash on handthe implications thereof, as well as other sources as described above.
There can be no assurance that the Company generated positive cash flow from operations and anticipates positive cash flow from operations through the remainderwill be able to cure all of the current year. In orderdeficiencies as listed in the Forbearance Agreement or that the Company will be able to continue to comply with all of the various covenants as required by the loan agreement of the Pinecone Credit Facility. The Company’s ability to cure its non-compliance with the Pinecone Credit Facility depends, in part, on its ability to work with outside parties, which is not within the Company’s exclusive control. If Pinecone were to call the balance of the Pinecone Credit Facility for any reason, and the Company were unable to cure such deficiency, it could have a material adverse consequence on the Company’s ability to meet its obligations arising within one year of the date of issuance of these financial statements.
The Company plans to continue to undertake measures to refinance certain loans and to streamline its cost infrastructure. But due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and the Company’s ability to satisfy its financial obligations that may arise over the Company’s capital needs,applicable one-year period, the Company seeks to: (i) refinance debt where possibleis unable to obtain more favorable terms; (ii) raise capital throughconclude that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of debt or equity securities; and (iii) increase operating cash flows through acquisitions. The Company anticipates that these actions, if successful, will provideconsolidated financial statements within the opportunity to maintain its liquidity, thereby permittingparameters set forth in the Company to better meet its operating and financing obligations for the next twelve months. However, there is no guarantee that such actions will be successful. Management’s ability to raise additional capital through the issuance of equity securities and the terms upon which we are able to raise such capital may be adversely affected if we are unable to maintain the listing of the common stock and the Series A Preferred Stock on the NYSE American, formerly known as the NYSE MKT.accounting guidance.
NOTE 4. | CASH AND RESTRICTED CASH |
The following presents the Company's cash and restricted cash, escrow deposits and investments: cash:
(Amounts in 000’s) |
| March 31, 2018 |
|
| December 31, 2017 |
| ||
Cash |
| $ | 3,524 |
|
| $ | 1,818 |
|
|
|
|
|
|
|
|
|
|
Restricted cash: |
|
|
|
|
|
|
|
|
Cash collateral |
|
| 87 |
|
|
| 63 |
|
Replacement reserves |
|
| 242 |
|
|
| 260 |
|
Escrow deposits |
|
| 504 |
|
| 637 |
| |
Total current portion |
|
| 833 |
|
|
| 960 |
|
Restricted cash for debt obligations |
|
| 405 |
|
|
| 405 |
|
HUD and other replacement reserves |
|
| 2,235 |
|
|
| 2,176 |
|
Total noncurrent portion |
|
| 2,640 |
|
|
| 2,581 |
|
Total restricted cash |
|
| 3,473 |
|
|
| 3,541 |
|
|
|
|
|
|
|
|
|
|
Total cash and restricted cash |
| $ | 6,997 |
|
| $ | 5,359 |
|
(Amounts in 000’s) | September 30, 2017 | December 31, 2016 | ||||||
Cash collateral | $ | 40 | $ | 260 | ||||
Replacement reserves | 278 | 811 | ||||||
Escrow deposits | 642 | 529 | ||||||
Total current portion | 960 | 1,600 | ||||||
Restricted investments for other debt obligations and certificates of deposit | 405 | 2,274 | ||||||
HUD and other replacement reserves | 2,175 | 1,590 | ||||||
Total noncurrent portion | 2,580 | 3,864 | ||||||
Total restricted cash and investments | $ | 3,540 | $ | 5,464 |
Cash collateral
—In securing mortgage financing from certain lending institutions, the Company and certain of its wholly-owned subsidiaries are required to deposit cash to be held as collateral in accordance with the terms of such loan agreements.Replacement reserves
—Cash reserves set aside for non-critical building repairs to be completed within the next 12 months, pursuant to loan agreements.Escrow deposits
—In connection with financing secured throughRestricted investmentscash for other debt obligations and certificates of deposit—In compliance with certain financing and insurance agreements, the Company and certain wholly-owned subsidiaries of the Company are required to deposit cash and/or certificates of deposit held as collateral by the lender or in escrow with certain designated financial institutions.
HUD and other replacement reserves
—The regulatory agreements entered into in connection with the financing secured through the U.S. Department of Housing and Urban Development (“HUD”) require monthly escrow deposits for replacement and improvement of the HUD project assets.NOTE 5. | PROPERTY AND EQUIPMENT |
The following table sets forth the Company’s property and equipment:
(Amounts in 000’s) |
| Estimated Useful Lives (Years) |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||
Buildings and improvements |
| 5-40 |
|
| $ | 89,684 |
|
| $ | 89,665 |
| |
Equipment and computer related |
| 2-10 |
|
|
| 10,893 |
|
|
| 10,893 |
| |
Land |
|
| — |
|
|
| 4,268 |
|
|
| 4,248 |
|
Construction in process |
|
| — |
|
|
| 173 |
|
|
| 49 |
|
|
|
|
|
|
|
| 105,018 |
|
|
| 104,855 |
|
Less: accumulated depreciation and amortization |
|
|
|
|
|
| (24,621 | ) |
|
| (23,642 | ) |
Property and equipment, net |
|
|
|
|
| $ | 80,397 |
|
| $ | 81,213 |
|
(Amounts in 000’s) | Estimated Useful Lives (Years) | September 30, 2017 | December 31, 2016 | |||||||
Buildings and improvements | 5-40 | $ | 89,954 | $ | 84,108 | |||||
Equipment and computer related* | 2-10 | 10,883 | 12,286 | |||||||
Land | — | 4,248 | 3,988 | |||||||
Construction in process | — | — | 602 | |||||||
105,085 | 100,984 | |||||||||
Less: accumulated depreciation and amortization* | (22,644 | ) | (21,816 | ) | ||||||
Property and equipment, net | $ | 82,441 | $ | 79,168 |
The following table summarizes total depreciation and amortization expense for the three and nine months ended September 30, 2017March 31, 2018 and 2016:2017:
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Depreciation |
| $ | 808 |
|
| $ | 797 |
|
Amortization |
|
| 413 |
|
|
| 338 |
|
Total depreciation and amortization expense |
| $ | 1,221 |
|
| $ | 1,135 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Amounts in 000’s) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Depreciation | $ | 857 | $ | 786 | $ | 2,486 | $ | 3,000 | ||||||||
Amortization | 336 | 338 | 1,013 | 1,176 | ||||||||||||
Total depreciation and amortization | $ | 1,193 | $ | 1,124 | $ | 3,499 | $ | 4,176 | ||||||||
NOTE 6. | INTANGIBLE ASSETS AND GOODWILL |
Intangible assets consist of the following:
(Amounts in 000’s) |
| Bed licenses (included in property and equipment)(a) |
|
| Bed Licenses - Separable |
|
| Lease Rights |
|
| Total |
| ||||
Balances, December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
| $ | 22,811 |
|
| $ | 2,471 |
|
| $ | 7,181 |
|
| $ | 32,463 |
|
Accumulated amortization |
|
| (4,166 | ) |
|
| — |
|
|
| (4,994 | ) |
|
| (9,160 | ) |
Net carrying amount |
| $ | 18,645 |
|
| $ | 2,471 |
|
| $ | 2,187 |
|
| $ | 23,303 |
|
Amortization expense |
|
| (171 | ) |
|
| — |
|
|
| (242 | ) |
|
| (413 | ) |
Balances, March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
| 22,811 |
|
|
| 2,471 |
|
|
| 7,181 |
|
|
| 32,463 |
|
Accumulated amortization |
|
| (4,337 | ) |
|
| — |
|
|
| (5,236 | ) |
|
| (9,573 | ) |
Net carrying amount |
| $ | 18,474 |
|
| $ | 2,471 |
|
| $ | 1,945 |
|
| $ | 22,890 |
|
(a) | Non-separable bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 5 – Property and Equipment). |
(Amounts in 000’s) | CON (included in property and equipment) | Bed Licenses - Separable | Lease Rights | Total | ||||||||||||
Balances, December 31, 2016 | ||||||||||||||||
Gross | $ | 22,811 | $ | 2,471 | $ | 6,881 | $ | 32,163 | ||||||||
Accumulated amortization | (3,483 | ) | — | (4,127 | ) | (7,610 | ) | |||||||||
Net carrying amount | $ | 19,328 | $ | 2,471 | $ | 2,754 | $ | 24,553 | ||||||||
Amortization expense | (512 | ) | — | (501 | ) | (1,013 | ) | |||||||||
Balances, September 30, 2017 | ||||||||||||||||
Gross | 22,811 | 2,471 | 6,881 | 32,163 | ||||||||||||
Accumulated amortization | (3,995 | ) | — | (4,628 | ) | (8,623 | ) | |||||||||
Net carrying amount | $ | 18,816 | $ | 2,471 | $ | 2,253 | $ | 23,540 |
The following table summarizes total amortization expense for the three and nine months ended September 30, 2017March 31, 2018 and 2016:2017:
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Bed licenses |
| $ | 171 |
|
| $ | 171 |
|
Lease rights |
|
| 242 |
|
|
| 167 |
|
Total amortization expense |
| $ | 413 |
|
| $ | 338 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Amounts in 000’s) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
CON | $ | 169 | $ | 171 | $ | 512 | $ | 676 | ||||||||
Lease rights | 167 | 167 | 501 | 500 | ||||||||||||
Total amortization | $ | 336 | $ | 338 | $ | 1,013 | $ | 1,176 | ||||||||
Expected amortization expense for all definite-lived intangibles for each of the years ended December 31 is as follows:
(Amounts in 000’s) |
| Bed Licenses |
|
| Lease Rights |
| ||
2018(a) |
| $ | 512 |
|
| $ | 525 |
|
2019 |
|
| 683 |
|
|
| 667 |
|
2020 |
|
| 683 |
|
|
| 482 |
|
2021 |
|
| 683 |
|
|
| 203 |
|
2022 |
|
| 683 |
|
|
| 68 |
|
Thereafter |
|
| 15,230 |
|
|
| - |
|
Total expected amortization expense |
| $ | 18,474 |
|
| $ | 1,945 |
|
(a) | Estimated amortization expense for the year ending December 31, 2018, includes only amortization to be recorded after March 31, 2018. |
(Amounts in 000’s) | Bed Licenses | Lease Rights | ||||||
2017(a) | $ | 171 | $ | 166 | ||||
2018 | 683 | 667 | ||||||
2019 | 683 | 667 | ||||||
2020 | 683 | 482 | ||||||
2021 | 683 | 203 | ||||||
Thereafter | 15,913 | 68 | ||||||
Total expected amortization expense | $ | 18,816 | $ | 2,253 |
The following table summarizes the carrying amount of goodwill:
(Amounts in 000’s) | September 30, 2017 | December 31, 2016 |
| March 31, 2018 |
|
| December 31, 2017 |
| ||||||||
Goodwill | $ | 2,945 | $ | 2,945 |
| $ | 2,945 |
|
| $ | 2,945 |
| ||||
Accumulated impairment losses | (840 | ) | (840 | ) |
|
| (840 | ) |
|
| (840 | ) | ||||
Net carrying amount | $ | 2,105 | $ | 2,105 |
| $ | 2,105 |
|
| $ | 2,105 |
|
The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses and goodwill.
Operating Leases
The Company leases a total of eleven skilled nursing facilities from unaffiliated owners under non-cancelable leases, all of which have rent escalation clauses and provisions requiring payment of real estate taxes, insurance and maintenance costs by the lessee. Each of the skilled nursing facilities that are leased by the Company are subleased to and operated by third-party tenants. The Company also leases certain office space located in Suwanee, Georgia and Atlanta, Georgia. The Atlanta office space is subleased to a third-party tenant.
As of September 30, 2017,March 31, 2018, the Company is in compliance with all operating lease financial covenants.
Future Minimum Lease Payments
Future minimum lease payments for each of the next five years ending December 31, are as follows:
|
| (Amounts in 000’s) |
| |
2018 (a) |
| $ | 6,262 |
|
2019 |
|
| 8,492 |
|
2020 |
|
| 8,671 |
|
2021 |
|
| 8,830 |
|
2022 |
|
| 9,026 |
|
Thereafter |
|
| 37,430 |
|
Total |
| $ | 78,711 |
|
(a) | Estimated minimum lease payments for the year ending December 31, 2018 include only payments to be paid after March 31, 2018. |
(Amounts in 000’s) | ||||
2017 (a) | $ | 2,069 | ||
2018 | 8,331 | |||
2019 | 8,492 | |||
2020 | 8,671 | |||
2021 | 8,830 | |||
Thereafter | 46,456 | |||
Total | $ | 82,849 |
Leased and Subleased Facilities to Third-Party Operators
The Company leases or subleases 27 facilities (16 owned by the Company and 11 leased to the Company) to third-party tenants on a triple net basis, meaning that the lessee (i.e., the third-party tenant of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable.
Arkansas Leases and Facilities
. Until February 3, 2016, the Company subleasedIn connection with the closing of the sale of the Arkansas Facilities, the Company entered into a Subordination and Standstill Agreement, dated September 26, 2016 (the “Subordination Agreement”), with CIBC (formerly the PrivateBank and Trust Company), as agent for the lenders specified therein (collectively, the “Lenders”). Pursuant to the Subordination Agreement, the Company agreed to subordinate its claims and rights to receive payment under the Skyline Note or any document which may evidence or secure the indebtedness evidenced by such note, other than the Guaranty (collectively, the “Subordinated Debt”), to the claims and rights of the Lenders to receive payment under certain revolving loans, with an initial aggregate principal amount of $6.0 million, and certain term loans, with an aggregate principal amount of $45.6 million (collectively, the “Loans”), each extended by certain of the Lenders to affiliates of Skyline (collectively, the “Skyline Borrowers”). Pursuant to the Subordination Agreement, the Company may not accept payment of the Subordinated Debt, or take any action to collect
such payment, if: (i) the Company has received notice from the Lenders that the Skyline Borrowers have failed to meet a specified financial covenant with respect to the Loans; or (ii) a default has occurred or is continuing with respect to the Loans. Pursuant to the Guaranty, the Guarantors have agreed to pay the outstanding principal amount of the Skyline Note, together with all accrued and unpaid interest: (x) on the date on which the Skyline Borrowers or an affiliate thereof repays or refinances any of the Loans; (y) on the date on which the Skyline Borrowers or its affiliates sells any of the Arkansas Facilities which the Skyline Borrowers or its affiliates purchased with proceeds from the Loans; or (z) upon written notice from the Company to the Guarantors any time on or after the two year anniversary of the Skyline Note. As of the date of filing, the Company has not received written notice from the Lenders regarding conditions prohibiting repayment of the Skyline Note.
On April 24, 2018, Skyline entered into a management contract with a third-party to manage the Arkansas Facilities. The Company is negotiating an arrangement with such third-party, pursuant to which the Company would: (i) accept a cash payment from such third-party, within the next few months, in full satisfaction of the Skyline Note at a discount from the full amount outstanding thereunder, and (ii) agree to release the Guarantors from their obligations under the Guaranty. The Company estimates the recoverable amount of the Skyline Note to be in the range of $0.5 million to $2.5 million. Consequently, during the three months ended March 31, 2018, the Company recorded an allowance of $0.5 million on the Skyline Note. On March 31, 2018, the net balance of the Skyline Note was $2.5 million. In the course of on-going negotiations, as additional facts are known, additional losses on the Skyline Note may be incurred.
Beacon. On March 8, 2017, AdCare executedAugust 1, 2015, the Company entered into a purchase and salelease inducement fee agreement with Meadowood Retirement Village,certain affiliates (collectively, the "Beacon Affiliates") of Beacon Health Management, LLC and Meadowood Properties, LLC (the “Meadowood Purchase Agreement”(“Beacon”), pursuant to which the Company paid a fee of $0.6 million as a lease inducement for certain Beacon Affiliates (collectively “Beacon Sublessee”) to acquireenter into sublease agreements and to commence such subleases and transfer operations thereunder (the “Beacon Lease Inducement”). As of March 31, 2018 the Meadowoodbalance of the Beacon Lease Inducement was approximately $0.5 million. On April 24, 2018, five Beacon affiliates (the “Ohio Beacon Affiliates”) informed the Company in writing that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio (the “Ohio Beacon Facilities”) and that they would surrender operation of such facilities to the Company on June 30, 2018. Consequently, the Company is recognizing revenue on a cash basis with respect to the Ohio Beacon Facilities and has expensed approximately $0.7 million straight-line rent asset and recorded an allowance of $0.5 million against the Beacon Lease Inducement and $0.3 million allowance for other receivables (see Note 15- Subsequent Events).
Peach Health. On June 18, 2016, the Company entered into a master sublease agreement (the “Peach Health Sublease”) with affiliates (collectively, “Peach Health Sublessee”) of Peach Health Group, LLC (“Peach Health”), providing that Peach Health Sublessee would take possession of and operate the three facilities located in Georgia (the “Peach Facilities”) as subtenant. The Peach Facilities are comprised of: (i) an 85-bed skilled nursing facility located in Tybee Island, Georgia (the “Oceanside Facility”); (ii) a 50-bed skilled nursing facility located in Tybee Island, Georgia (the “Savannah Beach Facility”); and (iii) a 131-bed skilled nursing facility located in Jeffersonville, Georgia (the “Jeffersonville Facility”). The Jeffersonville Facility and the Oceanside Facility were previously decertified by the U.S. Department of Health and Human Services Centers for $5.5 million cash. Medicare and Medicaid Services (“CMS”) in February and May 2016, respectively, for deficiencies related to the operations and maintenance of the facility while operated by the previous sublessee. The Jeffersonville Facility and the Oceanside Facility (the “Peach Recertified Facilities”) were recertified by CMS as of December 20, 2016 and February 7, 2017, respectively, which are the rent commencement dates for such facilities. The lease provided for a period of de minimis rent and base rent discounted by 50%.
On March 21,30, 2018 the Company and Peach Health Sublessee entered into an amendment to the Peach Health Sublease. The amendment provides for: (i) additional four and six month periods of base rent of $37,080 and $54,590, discounted by 50%, which rate continued through March 1, 2018, for the Oceanside Facility and the Jeffersonville Facility, respectively and (ii) beginning April 1, 2018 provides for additional rent payment amounts of $2,500 and $3,400 per month for the Oceanside Facility and the Jeffersonville Facility, respectively. The additional rent for each of the Peach Facilities will escalate at a rate of 3% each year on April 1st of each remaining year of the term, and any extension thereof.
In connection with the Peach Health Sublease, the Company extended a line of credit to Peach Health Sublessee for up to $1.0 million for operations at the Peach Facilities (the “Peach Line”), with interest accruing on the unpaid balance under the Peach Line at a starting interest rate of 13.5%, which increases by 1% per annum. The entire principal amount due under the Peach Line, together with all accrued and unpaid interest thereunder, was due one year from the date of the first disbursement. The Peach Line was secured by a first priority security interest in Peach Health Sublessee’s assets and accounts receivable. On April 6, 2017, AdCare executedthe Company modified certain terms of the Peach Line in connection with Peach Health Sublessee securing a long-term lease$2.5 million revolving working capital loan from a third party lender (the “Peach Working Capital Facility”), subsequently capped at $1.75 million, which matures April 5, 2020. The Peach Working Capital Facility is secured by the eligible accounts receivable, and all the collections on the eligible accounts receivable are remitted to a lockbox controlled by the lender. The modifications of the Peach Line include (as so amended, the “Peach Note”): (i) reducing the loan balance to $0.8 million and restricting
further borrowings; (ii) extending the maturity of the loan to October 1, 2020 and adding a six month extension option by Peach Health Sublessee, assuming certain conditions precedent are met at the time of the exercise of the option; (iii) increasing the interest rate from 13.5% per annum by 1% per annum; and (iv) establishing a four year amortization schedule. Payment of principal and interest under the Peach Note is governed by certain financial covenants limiting distributions under the Peach Working Capital Facility. Furthermore, the Company guaranteed Peach Health Sublessee’s borrowings under the Peach Working Capital Facility subject to certain burn-off provisions (i.e., the Company’s obligations under such guaranty cease after the later of 18 months or achievement of a certain financial ratio by Peach Health Sublessee). The Company is obligated to pay the outstanding balance on the Peach Working Capital Facility (after application of all eligible accounts receivable collections by the lender) if Peach Health Sublessee fails to comply with an affiliatethe Peach Working Capital Facility obligations and covenants. Fair value of C.R. Management (the “Meadowood Operator”) to lease the Meadowood Facility effectiveliability using the expected present value approach is immaterial.
At March 31, 2018, there was approximately $1.0 million outstanding on May 1, 2017. For further information, see Note 10 - Acquisitions.
Future minimum lease receivables from the Company’s facilities leased and subleased to third party tenants for each of the next five years ending December 31 are as follows:
|
| (Amounts in 000's) (a) |
| |
2018 (a) |
| $ | 15,248 |
|
2019 |
|
| 19,651 |
|
2020 |
|
| 20,112 |
|
2021 |
|
| 20,619 |
|
2022 |
|
| 21,140 |
|
Thereafter |
|
| 103,721 |
|
Total |
| $ | 200,491 |
|
(a) | Estimated minimum lease receivables for the year ending December 31, 2018, include only payments to be received after March 31, 2018. |
(Amounts in 000's) | ||||
2017 (a) | $ | 5,460 | ||
2018 | 22,281 | |||
2019 | 22,764 | |||
2020 | 23,299 | |||
2021 | 23,886 | |||
Thereafter | 136,813 | |||
Total | $ | 234,503 |
For further details regarding the Company’s leased and subleased facilities to third-party operators, see Note 10 -15 – Subsequent Events Acquisitions below and Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 - Leases and Note 10 – Acquisitions and Dispositions included in the Annual Report.
NOTE 8. | ACCRUED EXPENSES AND OTHER |
Accrued expenses and other consist of the following:
(Amounts in 000’s) |
| March 31, 2018 |
|
| December 31, 2017 |
| ||
Accrued employee benefits and payroll-related |
| $ | 281 |
|
| $ | 290 |
|
Real estate and other taxes |
|
| 676 |
|
|
| 423 |
|
Self-insured reserve (1) |
|
| 2,436 |
|
|
| 5,077 |
|
Accrued interest |
|
| 333 |
|
|
| 260 |
|
Other accrued expenses |
|
| 797 |
|
|
| 972 |
|
Total accrued expenses and other |
| $ | 4,523 |
|
| $ | 7,022 |
|
(Amounts in 000’s) | September 30, 2017 | December 31, 2016 | ||||||
Accrued employee benefits and payroll-related | $ | 387 | $ | 442 | ||||
Real estate and other taxes | 435 | 557 | ||||||
Self-insured reserve (1) | 6,683 | 6,924 | ||||||
Accrued interest | 248 | 251 | ||||||
Other accrued expenses | 829 | 903 | ||||||
Total accrued expenses and other | $ | 8,582 | $ | 9,077 |
(1) | The Company self-insures against professional and general liability |
See Part II, Item 8, Notes to Consolidated Financial Statements,
Note 9Notes payable and other debt consists of the following:
(Amounts in 000’s) |
| March 31, 2018 |
|
| December 31, 2017 |
| ||
Senior debt—guaranteed by HUD |
| $ | 33,479 |
|
| $ | 33,685 |
|
Senior debt—guaranteed by USDA (a) |
|
| 14,040 |
|
|
| 20,320 |
|
Senior debt—guaranteed by SBA (b) |
|
| 683 |
|
|
| 2,210 |
|
Senior debt—bonds |
|
| 7,055 |
|
|
| 7,055 |
|
Senior debt—other mortgage indebtedness |
|
| 25,044 |
|
|
| 9,486 |
|
Other debt |
|
| 1,098 |
|
|
| 1,050 |
|
Convertible debt |
|
| — |
|
|
| 1,500 |
|
Subtotal |
|
| 81,399 |
|
|
| 75,306 |
|
Deferred financing costs |
|
| (3,056 | ) |
|
| (2,027 | ) |
Unamortized discount on bonds |
|
| (174 | ) |
|
| (177 | ) |
Total debt |
|
| 78,169 |
|
|
| 73,102 |
|
Less: current portion of debt |
|
| 17,714 |
|
|
| 8,090 |
|
Notes payable and other debt, net of current portion |
| $ | 60,455 |
|
| $ | 65,012 |
|
(Amounts in 000’s) | September 30, 2017 | December 31, 2016 | ||||||
Senior debt—guaranteed by HUD | $ | 33,887 | $ | 34,473 | ||||
Senior debt—guaranteed by USDA (a) | 20,477 | 22,518 | ||||||
Senior debt—guaranteed by SBA (b) | 2,236 | 2,319 | ||||||
Senior debt—bonds | 7,055 | 7,145 | ||||||
Senior debt—other mortgage indebtedness | 9,572 | 5,639 | ||||||
Other debt | 1,322 | 1,063 | ||||||
Convertible debt | 1,500 | 9,200 | ||||||
Subtotal | 76,049 | 82,357 | ||||||
Deferred financing costs, net | (2,050 | ) | (2,196 | ) | ||||
Unamortized discount on bonds | (181 | ) | (191 | ) | ||||
Total debt | 73,818 | 79,970 | ||||||
Less: current portion of debt | 8,327 | 13,154 | ||||||
Notes payable and other debt, net of current portion | $ | 65,491 | $ | 66,816 |
(a) | U.S. Department of Agriculture (“USDA”) |
(b) | U.S. Small Business Administration (“SBA”) |
The following is a detailed listing of the debt facilities that comprise each of the above categories:
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility |
| Lender |
| Maturity |
| Interest Rate (a) |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
Senior debt - guaranteed by HUD (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Pavilion Care Center |
| Red Mortgage |
| 12/01/2027 |
| Fixed |
|
| 4.16 | % |
| $ | 1,302 |
|
| $ | 1,329 |
|
Hearth and Care of Greenfield |
| Red Mortgage |
| 08/01/2038 |
| Fixed |
|
| 4.20 | % |
|
| 2,111 |
|
|
| 2,127 |
|
Woodland Manor |
| Midland State Bank |
| 10/01/2044 |
| Fixed |
|
| 3.75 | % |
|
| 5,305 |
|
|
| 5,334 |
|
Glenvue |
| Midland State Bank |
| 10/01/2044 |
| Fixed |
|
| 3.75 | % |
|
| 8,235 |
|
|
| 8,283 |
|
Autumn Breeze |
| KeyBank |
| 01/01/2045 |
| Fixed |
|
| 3.65 | % |
|
| 7,160 |
|
|
| 7,199 |
|
Georgetown |
| Midland State Bank |
| 10/01/2046 |
| Fixed |
|
| 2.98 | % |
|
| 3,624 |
|
|
| 3,644 |
|
Sumter Valley |
| KeyBank |
| 01/01/2047 |
| Fixed |
|
| 3.70 | % |
|
| 5,742 |
|
|
| 5,769 |
|
Total |
|
|
|
|
|
|
|
|
|
|
| $ | 33,479 |
|
| $ | 33,685 |
|
Senior debt - guaranteed by USDA (c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attalla (e) |
| Metro City |
| 09/30/2035 |
| Prime + 1.50% |
|
| 5.50 | % |
| $ | — |
|
| $ | 6,169 |
|
Coosa |
| Metro City |
| 09/30/2035 |
| Prime + 1.50% |
|
| 5.50 | % |
|
| 5,517 |
|
|
| 5,562 |
|
Mountain Trace |
| Community B&T |
| 01/24/2036 |
| Prime + 1.75% |
|
| 5.75 | % |
|
| 4,227 |
|
|
| 4,260 |
|
Southland |
| Bank of Atlanta |
| 07/27/2036 |
| Prime + 1.50% |
|
| 6.00 | % |
|
| 4,296 |
|
|
| 4,329 |
|
Total |
|
|
|
|
|
|
|
|
|
|
| $ | 14,040 |
|
| $ | 20,320 |
|
Senior debt - guaranteed by SBA (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
College Park (e) |
| CDC |
| 10/01/2031 |
| Fixed |
|
| 2.81 | % |
| $ | — |
|
| $ | 1,523 |
|
Southland |
| Bank of Atlanta |
| 07/27/2036 |
| Prime + 2.25% |
|
| 5.75 | % |
|
| 683 |
|
|
| 687 |
|
Total |
|
|
|
|
|
|
|
|
|
|
| $ | 683 |
|
| $ | 2,210 |
|
(Amounts in 000’s) | |||||||||||||||||
Facility | Lender | Maturity | Interest Rate (a) | September 30, 2017 | December 31, 2016 | ||||||||||||
Senior debt - guaranteed by HUD | |||||||||||||||||
The Pavilion Care Center | Red Mortgage | 12/01/2027 | Fixed | 4.16% | $ | 1,355 | $ | 1,434 | |||||||||
Hearth and Care of Greenfield | Red Mortgage | 08/01/2038 | Fixed | 4.20% | 2,143 | 2,191 | |||||||||||
Woodland Manor | Midland State Bank | 10/01/2044 | Fixed | 3.75% | 5,363 | 5,447 | |||||||||||
Glenvue | Midland State Bank | 10/01/2044 | Fixed | 3.75% | 8,327 | 8,457 | |||||||||||
Autumn Breeze | KeyBank | 01/01/2045 | Fixed | 3.65% | 7,238 | 7,352 | |||||||||||
Georgetown | Midland State Bank | 10/01/2046 | Fixed | 2.98% | 3,664 | 3,723 | |||||||||||
Sumter Valley | KeyBank | 01/01/2047 | Fixed | 3.70% | 5,797 | 5,869 | |||||||||||
Total | $ | 33,887 | $ | 34,473 | |||||||||||||
Senior debt - guaranteed by USDA (b) | |||||||||||||||||
Attalla | Metro City | 09/30/2035 | Prime + 1.50% | 5.50% | $ | 6,218 | $ | 7,189 | |||||||||
Coosa | Metro City | 09/30/2035 | Prime + 1.50% | 5.50% | 5,607 | 6,483 | |||||||||||
Mountain Trace | Community B&T | 01/24/2036 | Prime + 1.75% | 5.75% | 4,292 | 4,384 | |||||||||||
Southland | Bank of Atlanta | 07/27/2036 | Prime + 1.50% | 6.00% | 4,360 | 4,462 | |||||||||||
Total | $ | 20,477 | $ | 22,518 | |||||||||||||
Senior debt - guaranteed by SBA | |||||||||||||||||
College Park | CDC | 10/01/2031 | Fixed | 2.81% | $ | 1,545 | $ | 1,611 | |||||||||
Southland | Bank of Atlanta | 07/27/2036 | Prime + 2.25% | 5.75% | 691 | 708 | |||||||||||
Total | $ | 2,236 | $ | 2,319 |
(a) | Represents cash interest rates as of |
or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into each loan, the Company entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions. |
| For the four skilled nursing facilities, the Company has term loans insured 70% to 80% by the USDA with financial institutions. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 3% to 4% through |
(Amounts in 000’s) | |||||||||||||||||
Facility | Lender | Maturity | Interest Rate (a) | September 30, 2017 | December 31, 2016 | ||||||||||||
Senior debt - bonds | |||||||||||||||||
Eaglewood Bonds Series A | City of Springfield, Ohio | 05/01/2042 | Fixed | 7.65% | $ | 6,610 | $ | 6,610 | |||||||||
Eaglewood Bonds Series B | City of Springfield, Ohio | 05/01/2021 | Fixed | 8.50% | 445 | 535 | |||||||||||
Total | $ | 7,055 | $ | 7,145 |
(d) | For each of the two facilities, the Company has a term loan with a financial institution, which is insured 75% by the SBA. |
(e) | On February 15, 2018, the Company repaid these loans with proceeds from the Pinecone Credit Facility (described below, see “Senior debt - other mortgage indebtedness” in this Note below). |
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility |
| Lender |
| Maturity |
| Interest Rate (a) |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
Senior debt - bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eaglewood Bonds Series A |
| City of Springfield, Ohio |
| 05/01/2042 |
| Fixed |
|
| 7.65 | % |
| $ | 6,610 |
|
| $ | 6,610 |
|
Eaglewood Bonds Series B |
| City of Springfield, Ohio |
| 05/01/2021 |
| Fixed |
|
| 8.50 | % |
|
| 445 |
|
|
| 445 |
|
Total |
|
|
|
|
|
|
|
|
|
|
| $ | 7,055 |
|
| $ | 7,055 |
|
(a) | Represents cash interest rates as of |
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility |
| Lender |
| Maturity |
| Interest Rate (a) |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
Senior debt - other mortgage indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Quail Creek (c) |
| Congressional Bank |
| 04/30/2019 |
| LIBOR + 4.75% |
|
| 5.75 | % |
| $ | 4,290 |
|
| $ | 4,314 |
|
Northwest (d) |
| First Commercial |
| 07/31/2020 |
| Prime |
|
| 5.00 | % |
|
| — |
|
|
| 1,122 |
|
Meadowood |
| Exchange Bank of Alabama |
| 05/01/2022 |
| Fixed |
|
| 4.50 | % |
|
| 4,016 |
|
|
| 4,050 |
|
College Park |
| Pinecone (b) |
| 08/15/2020 |
| Fixed |
|
| 12.50 | % |
|
| 2,573 |
|
|
| — |
|
Northwest |
| Pinecone (b) |
| 08/15/2020 |
| Fixed |
|
| 12.50 | % |
|
| 2,059 |
|
|
| — |
|
Attalla |
| Pinecone (b) |
| 08/15/2020 |
| Fixed |
|
| 12.50 | % |
|
| 8,499 |
|
|
| — |
|
Adcare Property Holdings |
| Pinecone (b) |
| 08/15/2020 |
| Fixed |
|
| 12.50 | % |
|
| 3,607 |
|
|
| — |
|
Total |
|
|
|
|
|
|
|
|
|
|
| $ | 25,044 |
|
| $ | 9,486 |
|
(Amounts in 000’s) | |||||||||||||||
Facility | Lender | Maturity | Interest Rate (a) | September 30, 2017 | December 31, 2016 | ||||||||||
Senior debt - other mortgage indebtedness | |||||||||||||||
Quail Creek (b) | Congressional Bank | 12/31/2017 | LIBOR + 4.75% | 5.75% | $ | 4,346 | $ | 4,432 | |||||||
Northwest (c) | First Commercial | 07/31/2020 | Prime | 5.00% | 1,143 | 1,207 | |||||||||
Meadowood (d) | Exchange Bank of Alabama | 05/01/2022 | Fixed | 4.50% | 4,083 | — | |||||||||
Total | $ | 9,572 | $ | 5,639 |
(a) | Represents cash interest rates as of |
(b) | On |
(c) | On April 30, 2018, |
(d) | |
| On |
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lender |
| Maturity |
| Interest Rate |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Insurance Funding |
| 03/01/2019 |
| Fixed |
|
| 4.24 | % |
| $ | 194 |
|
| $ | 20 |
|
Key Bank |
| 08/02/2019 |
| Fixed |
|
| 0.00 | % |
|
| 495 |
|
|
| 495 |
|
McBride Note (a) |
| 09/30/2019 |
| Fixed |
|
| 4.00 | % |
|
| 227 |
|
|
| 264 |
|
Pharmacy Care of Arkansas |
| 02/08/2018 |
| Fixed |
|
| 2.00 | % |
|
| — |
|
|
| 42 |
|
South Carolina Department of Health & Human Services (b) |
| 02/24/2019 |
| Fixed |
|
| 5.75 | % |
|
| 182 |
|
|
| 229 |
|
Total |
|
|
|
|
|
|
|
|
| $ | 1,098 |
|
| $ | 1,050 |
|
(Amounts in 000’s) | ||||||||||||||
Lender | Maturity | Interest Rate | September 30, 2017 | December 31, 2016 | ||||||||||
Other debt | ||||||||||||||
First Insurance Funding | 02/28/2018 | Fixed | 4.24% | $ | 81 | $ | 20 | |||||||
Key Bank (a) | 08/02/2019 | Fixed | 0.00% | 495 | 496 | |||||||||
McBride Note (b) | 09/30/2019 | Fixed | 4.00% | 300 | — | |||||||||
Pharmacy Care of Arkansas | 02/08/2018 | Fixed | 2.00% | 169 | 547 | |||||||||
South Carolina Department of Health & Human Services (c) | 02/24/2019 | Fixed | 5.75% | 277 | — | |||||||||
Total | $ | 1,322 | $ | 1,063 |
(a) |
| The Company executed an unsecured promissory note in favor of William McBride III, the Company’s former Chairman and Chief Executive Officer, pursuant to a settlement agreement dated September 26, 2017, between Mr. McBride and the Company. |
(b) | |
| On February 21, 2017, the South Carolina Department of Health and Human Services (“SCHHS”) issued fiscal year 2013 Medicaid audit reports for two facilities operated by the Company during 2013. In its fiscal year 2013 Medicaid audit reports, SCHHS determined that the Company owed an aggregate $0.4 million related to patient-care related payments made by SCHHS during 2013. Repayment of the $0.4 million began on March 24, 2017 in the form of a two-year note bearing interest of 5.75% per annum. |
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility |
| Maturity |
| Interest Rate |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
Convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued July 2012 (a) |
| 04/30/2018 |
| Fixed |
|
| 14.00 | % |
| $ | — |
|
| $ | 1,500 |
|
Total |
|
|
|
|
|
|
|
|
| $ | — |
|
| $ | 1,500 |
|
(Amounts in 000’s) | |||||||||||||||
Facility | Maturity | Interest Rate (a) | September 30, 2017 | December 31, 2016 | |||||||||||
Convertible debt | |||||||||||||||
Issued July 2012 (C) | 04/30/2018 | Fixed | 14.00% | $ | 1,500 | $ | 1,500 | ||||||||
Issued March 2015 (b) | 04/30/2017 | Fixed | 10.00% | — | 7,700 | ||||||||||
Total | $ | 1,500 | $ | 9,200 |
(a) | |
On |
New Financing
On February 15, 2018 (the “Closing Date”), the Company entered into the Pinecone Credit Facility with Pinecone. The Company borrowed an aggregate principal amount of $16.25 million. The Pinecone Credit Facility refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties, as shown in the table below (the “Facilities”).
Facility |
| Prior Lender |
| Prior Balance |
|
| Refinanced Balance* |
| ||
Attalla |
| Metro City |
| $ | 6,137 |
|
| $ | 8,250 |
|
College Park |
| CDC |
|
| 1,492 |
|
|
| 2,500 |
|
Northwest |
| First Commercial |
|
| 1,115 |
|
|
| 2,000 |
|
|
| Sub Total |
| $ | 8,744 |
|
| $ | 12,750 |
|
AdCare Property Holdings |
|
|
|
| — |
|
|
| 3,500 |
|
|
| Total |
| $ | 8,744 |
|
| $ | 16,250 |
|
*Excludes 3% finance fee due upon maturity
The maturity date of the Pinecone Credit Facility is August 15, 2020 and bears interest at a fixed rate equal to 10% per annum for the first three months after the Closing Date and at a fixed rate equal to 12.5% per annum thereafter, subject to adjustment upon an event of default and specified regulatory events. The Pinecone Credit Facility is secured by, among other things, first priority liens on the Facilities and all tangible and intangible assets of the borrowers owning the Facilities, including all rent payments received from the operators thereof. Beginning March 1, 2018, the first payment date, accrued and unpaid interest on the outstanding principal amount of the Pinecone Credit Facility is payable in consecutive monthly installments. The entire unpaid principal amount of the Pinecone Credit Facility is due on the maturity date, together with all accrued and unpaid interest and a finance fee equal to 3% of the original principal amount.
The Pinecone Credit Facility is subject to customary operating and financial covenants and regulatory conditions for each of the Facilities, which could result in additional monthly interest charges during any non-compliance and cure period. The Pinecone Credit Facility is prepayable in full beginning on the date that is thirteen months after the Closing Date, subject to the payment of a specified finance fee and, with respect to any prepayment made between March 15, 2019 and September 15, 2019, a prepayment premium equal to 1% of the principal amount being repaid. A specified early termination fee is payable in the event any amount is prepaid (in whole or in part) or is accelerated on or before the first anniversary of the Closing Date.
The Pinecone Credit Facility and the related documentation provide for customary events of default. Upon the occurrence of certain events of default, Pinecone may declare the entire unpaid principal balance under the Pinecone Credit Facility, together with all accrued interest and other amounts payable, immediately due and payable.
On May 10, 2018, management was notified by Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility, consequently the fixed interest rate will be equal to 13.5% commencing May 18, 2018. For further information, see Note – 3 Liquidity and Note 15 – Subsequent Events.
Debt Covenant Compliance
As of September 30, 2017,March 31, 2018, the Company had approximately 2823 credit related instruments outstanding that include various financial and administrative covenant requirements. Covenant requirements include, but are not limited to, fixed charge coverage ratios, debt service coverage ratios, minimum EBITDA or EBITDAR, and current ratios. Certain financial covenant requirements are based on consolidated financial measurements whereas others are based on measurements at the subsidiary level (i.e., facility, multiple facilities or a combination of subsidiaries). The subsidiary level requirements are as follows: (i) financial covenants measured against subsidiaries of the Company; and (ii) financial covenants measured against third-party operator performance. Some covenants are based on annual financial metric measurements whereas others are based on monthly and quarterly financial metric measurements. The Company routinely tracks and monitors its compliance with its covenant requirements.
The Company’s credit-related instruments were allCompany was not in compliance with various non-financial covenants and the combined fixed charge coverage ratio required under the Pinecone Credit Facility as of September 30, 2017.
Scheduled Maturities
The schedule below summarizes the scheduled gross maturities for the twelve months ended September 30March 31 of the respective year (not adjusted for commitments to refinance or extend the maturities of debt as noted above):year:
For the twelve months ended March 31, |
| (Amounts in 000’s) |
| |
2019 |
| $ | 2,330 |
|
2020 |
|
| 6,178 |
|
2021 (1) |
|
| 18,425 |
|
2022 |
|
| 1,768 |
|
2023 |
|
| 5,135 |
|
Thereafter |
|
| 47,563 |
|
Subtotal |
| $ | 81,399 |
|
Less: unamortized discounts |
|
| (174 | ) |
Less: deferred financing costs, net |
|
| (3,056 | ) |
Total notes and other debt |
| $ | 78,169 |
|
(1) | The Pinecone Credit Facility matures on August 15, 2020. |
For the twelve months ended September 30, | (Amounts in 000’s) | ||
2018 | $ | 8,328 | |
2019 | 2,719 | ||
2020 | 2,955 | ||
2021 | 2,088 | ||
2022 | 5,552 | ||
Thereafter | 54,407 | ||
Subtotal | $ | 76,049 | |
Less: unamortized discounts | (181 | ) | |
Less: deferred financing costs, net | (2,050 | ) | |
Total notes and other debt | $ | 73,818 |
(Amounts in 000’s) | Estimated Useful Lives (Years) | May 1, 2017 | ||||
Buildings and improvements | 15-32 | $ | 4,700 | |||
Equipment and computer related | 10 | 400 | ||||
Land | — | 100 | ||||
Property and equipment | 5,200 | |||||
In place occupancy (a) | 32 | 300 | ||||
Purchase Price | $ | 5,500 |
For the discontinued operations, the patient care revenue and related cost of services, prior to the commencement of subleasingprimarily accruals for professional and general liability claims and bad debt expense are classified in the activities below. For a historical listing and description of the Company’s discontinued entities, see Part II, Item 8, Notes to Consolidated Financial Statements,
The following table summarizes certainthe activity of discontinued operations for the
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Cost of services |
| $ | 52 |
|
| $ | 409 |
|
Interest expense, net |
|
| 3 |
|
|
| 4 |
|
Net loss |
| $ | (55 | ) |
| $ | (413 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(Amounts in 000’s) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Total revenues | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of services | 1,026 | 2,200 | 2,032 | 6,478 | |||||||||||||
Interest expense, net | 6 | 10 | 17 | 35 | |||||||||||||
Net loss | $ | (1,032 | ) | $ | (2,210 | ) | $ | (2,049 | ) | $ | (6,513 | ) |
NOTE 11. | COMMON AND PREFERRED STOCK |
Common and Preferred Stock Repurchase Activity
In November 2016, the Board approved two share repurchase programs (collectively, the "November 2016 Repurchase Program"), pursuant to which AdCaremanagement was authorized to repurchase up to 1.0 million shares of the common stock and 100,000 shares of the Series A Preferred Stock during a twelve-month period. The November 2016 Repurchase Program succeeded the repurchase program announced on November 12, 2015 (the “November 2015 Repurchase Program”), which terminated in accordance with its terms. Share repurchases under the November 2016 Repurchase Program could be made from time to time through open market transactions, block trades or privately negotiated transactions and were subject to market conditions, as well as corporate, regulatory and other considerations. The Company could suspend or continue the November 2016 Repurchase Program at any time and had no obligation to repurchase any amount of the common stock or the Series A Preferred Stock under such program. The November 2016 Repurchase Program was suspended in February 2017.
During the nine months ended September 30, 2016, the Company repurchased 150,000 shares of common stock pursuant to the November 2015 Repurchase Program for $0.3 million at an average purchase price of approximately $2.05 per share, exclusive of commissions and related fees and made no repurchases during the three months ended September 30, 2016. Pursuant to the November 2015 Repurchase Program, the Company was authorized to repurchase up to 500,000 shares of its outstanding common stock during a twelve-month period. During the three and nine months ended September 30, 2016, the Company made no repurchases of the Series A Preferred Stock.
Preferred Stock Offerings and Dividends
No dividends were declared or paid on the Series A Preferred Stock for the three months ended March 31, 2018. Dividends declared and paid on shares of the Series A Preferred Stock were $0.68 per share per quarter, or $1.9 million, and $5.7 million for the three and nine months ended September 30, 2017, respectively, and $1.9 million and $5.5 million forMarch 31, 2017.
As of March 31, 2018, as a result of the three and nine months ended September 30, 2016, respectively.
As of September 30, 2017,March 31, 2018, the Company had 2,811,535 shares of the Series A Preferred Stock issued and outstanding. On August 2, 2017, the Company terminated the 2017 Sales Agreement and discontinued sales under the ATM.
Holders of the Series A Preferred Stock generally have no voting rights but have limited voting rights under certain circumstances. The Company may not redeem the Series A Preferred Stock before December 1, 2017, except the Company is required to redeem the Series A Preferred Stock following a "Change of Control," as defined in the Charter. On and after December 1, 2017, the Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid dividends to the redemption date.
For historical information regarding the Series A Preferred Stock, the ATMCompany’s former “at-the-market” offering program and prior share repurchase programs, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 12 - –Common and Preferred Stock included in the Annual Report.
NOTE 12. | STOCK BASED COMPENSATION |
For the three and nine months ended March 31, 2018 and September 30, 2017 and 2016, the Company recognized stock-based compensation expense as follows:
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Employee compensation: |
|
|
|
|
|
|
|
|
Restricted stock |
| $ | 3 |
|
| $ | 118 |
|
Warrants |
|
| — |
|
|
| 60 |
|
Total employee stock-based compensation expense |
| $ | 3 |
|
| $ | 178 |
|
Non-employee compensation: |
|
|
|
|
|
|
|
|
Board restricted stock |
| $ | 28 |
|
| $ | 44 |
|
Board stock options |
|
| — |
|
|
| 12 |
|
Total non-employee stock-based compensation expense |
| $ | 28 |
|
| $ | 56 |
|
Total stock-based compensation expense |
| $ | 31 |
|
| $ | 234 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Amounts in 000’s) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Employee compensation: | ||||||||||||||||
Restricted stock | $ | 47 | $ | 118 | $ | 81 | $ | 494 | ||||||||
Stock options | — | — | — | 112 | ||||||||||||
Warrants | 19 | 62 | 23 | 213 | ||||||||||||
Total employee stock-based compensation expense | $ | 66 | $ | 180 | $ | 104 | $ | 819 | ||||||||
Non-employee compensation: | ||||||||||||||||
Board restricted stock | $ | 48 | $ | (23 | ) | $ | 140 | $ | 34 | |||||||
Board stock options | 13 | 13 | 37 | 37 | ||||||||||||
Total non-employee stock-based compensation expense | $ | 61 | $ | (10 | ) | $ | 177 | $ | 71 | |||||||
Total stock-based compensation expense | $ | 127 | $ | 170 | $ | 281 | $ | 890 |
Stock Incentive Plan
The AdCare Health Systems, Inc. 2011 Stock Incentive Plan, as amended (the “2011 Stock Incentive Plan”), was assumed by Regional Health pursuant to the Merger. As a result of the Merger, all rights to acquire shares of AdCare common stock under
In addition to the 2011 Stock Incentive Plan, the Company grants stock warrants to officers, directors, employees and certain consultants to the Company from time to time as determined by the Board and, when appropriate, the Compensation Committee.
For the fair value of employee common stock options and warrants granted during the ninethree months ended September 30, 2017March 31, 2018 and September 30, 2016, using the Black-Scholes-Merton option-pricing model, are set forth in the following table:
Nine Months Ended September 30, | |||||
2017 | * | 2016 | |||
Dividend yield | — | % | — | % | |
Expected volatility | — | % | 41 | % | |
Risk-free interest rate | — | % | 1.43 | % | |
Expected term (in years) | n/a | 5.0 |
Common Stock Options
The following table summarizes the Company’s common stock option activity for the ninethree months ended September 30, 2017:March 31, 2018:
|
| Number of Shares (000's) |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value (in 000's) |
| ||||
Outstanding, December 31, 2017 |
|
| 181 |
|
| $ | 3.98 |
|
|
| 6.4 |
|
| $ | — |
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Expired |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2018 |
|
| 181 |
|
| $ | 3.98 |
|
|
| 6.1 |
|
| $ | — |
|
Vested, March 31, 2018 |
|
| 181 |
|
| $ | 3.98 |
|
|
| 6.1 |
|
| $ | — |
|
Number of Shares (000's) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in 000's) | ||||||||||
Outstanding, December 31, 2016 | 355 | $ | 3.21 | 5.6 | $ | — | |||||||
Granted | — | $ | — | ||||||||||
Forfeited | — | $ | — | ||||||||||
Expired | (110 | ) | $ | 2.62 | |||||||||
Outstanding, September 30, 2017 | 245 | $ | 3.48 | 5.8 | $ | — | |||||||
Vested, September 30, 2017 | 210 | $ | 3.41 | 5.5 | $ | — |
The following table summarizes the common stock options outstanding and exercisable as of September 30, 2017:March 31, 2018:
|
| Stock Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||
Exercise Price |
| Number of Shares (000's) |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Weighted Average Exercise Price |
|
| Vested, March 31, 2018 |
|
| Weighted Average Exercise Price |
| |||||
$1.31 - $3.99 |
|
| 115 |
|
|
| 6.5 |
|
| $ | 3.90 |
|
|
| 115 |
|
| $ | 3.90 |
|
$4.00 - $4.30 |
|
| 66 |
|
|
| 5.5 |
|
| $ | 4.12 |
|
|
| 66 |
|
| $ | 4.12 |
|
Total |
|
| 181 |
|
|
| 6.1 |
|
| $ | 3.98 |
|
|
| 181 |
|
| $ | 3.98 |
|
Stock Options Outstanding | Options Exercisable | ||||||||||||||
Exercise Price | Number of Shares | Weighted Average Remaining Contractual Term (in years) | Weighted Average Exercise Price | Vested, September 30, 2017 | Weighted Average Exercise Price | ||||||||||
$1.31 - $3.99 | 180 | 5.7 | $ | 3.25 | 145 | $ | 3.09 | ||||||||
$4.00 - $4.30 | 65 | 6.0 | $ | 4.12 | 65 | $ | 4.12 | ||||||||
Total | 245 | 5.8 | $ | 3.48 | 210 | $ | 3.41 |
Common Stock Warrants
The following table summarizes the Company’s common stock warrant activity for the ninethree months ended September 30, 2017:March 31, 2018:
|
| Number of Warrants (000's) |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value (in 000's) |
| ||||
Outstanding, December 31, 2017 |
|
| 1,019 |
|
| $ | 3.79 |
|
|
| 4.7 |
|
| $ | — |
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Expired |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2018 |
|
| 1,019 |
|
| $ | 3.79 |
|
|
| 4.4 |
|
| $ | — |
|
Vested, March 31, 2018 |
|
| 1,019 |
|
| $ | 3.79 |
|
|
| 4.4 |
|
| $ | — |
|
Number of Warrants (000's) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in 000's) | ||||||||||
Outstanding, December 31, 2016 | 1,887 | $ | 3.58 | 4.1 | $ | 11 | |||||||
Granted | — | $ | — | ||||||||||
Forfeited | (100 | ) | $ | 4.49 | |||||||||
Expired | — | $ | — | ||||||||||
Outstanding, September 30, 2017 | 1,787 | $ | 3.53 | 3.1 | $ | — | |||||||
Vested, September 30, 2017 | 1,695 | $ | 3.49 | 2.9 | $ | — |
The following table summarizes the common stock warrants outstanding and exercisable as of September 30, 2017:March 31, 2018:
|
| Warrants Outstanding |
|
| Warrants Exercisable |
| ||||||||||||||
Exercise Price |
| Number of Shares (000's) |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Weighted Average Exercise Price |
|
| Vested at March 31, 2018 |
|
| Weighted Average Exercise Price |
| |||||
$0 - $1.99 |
|
| 110 |
|
|
| 1.6 |
|
| $ | 1.93 |
|
|
| 110 |
|
| $ | 1.93 |
|
$2.00 - $2.99 |
|
| 110 |
|
|
| 1.6 |
|
| $ | 2.57 |
|
|
| 110 |
|
| $ | 2.57 |
|
$3.00 - $3.99 |
|
| 274 |
|
|
| 3.2 |
|
| $ | 3.71 |
|
|
| 274 |
|
| $ | 3.71 |
|
$4.00 - $4.99 |
|
| 502 |
|
|
| 6.3 |
|
| $ | 4.42 |
|
|
| 502 |
|
| $ | 4.42 |
|
$5.00 - $5.90 |
|
| 23 |
|
|
| 5.1 |
|
| $ | 5.90 |
|
|
| 23 |
|
| $ | 5.90 |
|
Total |
|
| 1,019 |
|
|
| 4.4 |
|
| $ | 3.79 |
|
|
| 1,019 |
|
| $ | 3.79 |
|
Warrants Outstanding | Warrants Exercisable | ||||||||||||||
Exercise Price | Number of Shares (000's) | Weighted Average Remaining Contractual Term (in years) | Weighted Average Exercise Price | Vested at September 30, 2017 | Weighted Average Exercise Price | ||||||||||
$0 - $1.99 | 218 | 0.1 | $ | 1.82 | 218 | $ | 1.82 | ||||||||
$2.00 - $2.99 | 335 | 0.8 | $ | 2.58 | 335 | $ | 2.58 | ||||||||
$3.00 - $3.99 | 500 | 2.1 | $ | 3.59 | 500 | $ | 3.59 | ||||||||
$4.00 - $4.99 | 711 | 5.8 | $ | 4.38 | 619 | $ | 4.40 | ||||||||
$5.00 - $5.90 | 23 | 5.6 | $ | 5.90 | 23 | $ | 5.90 | ||||||||
Total | 1,787 | 3.1 | $ | 3.53 | 1,695 | $ | 3.49 |
Restricted Stock
The following table summarizes the Company’s restricted stock activity for the ninethree months ended September 30, 2017:March 31, 2018:
|
| Number of Shares (000's) |
|
| Weighted Avg. Grant Date Fair Value |
| ||
Unvested, December 31, 2017 |
|
| 152 |
|
| $ | 1.83 |
|
Granted |
|
| — |
|
| $ | — |
|
Vested |
|
| (61 | ) |
| $ | 1.85 |
|
Forfeited |
|
| — |
|
| $ | — |
|
Unvested, March 31, 2018 |
|
| 91 |
|
| $ | 1.81 |
|
Number of Shares (000's) | Weighted Avg. Grant Date Fair Value | ||||||
Unvested, December 31, 2016 | 404 | $ | 2.84 | ||||
Granted | 23 | $ | 1.07 | ||||
Vested | (78 | ) | $ | 3.21 | |||
Forfeited | (70 | ) | $ | 4.29 | |||
Unvested, September 30, 2017 | 279 | $ | 2.22 |
For restricted stock unvested at September 30, 2017, $0.4March 31, 2018, $0.1 million in compensation expense will be recognized over the next 1.51.3 years.
NOTE 13. | COMMITMENTS AND CONTINGENCIES |
Regulatory Matters
Laws and regulations governing federal Medicare and state Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from certain governmental programs. As of September 30, 2017,March 31, 2018, all of the Company’s facilities leased and subleased to third-party operators and managed for third-parties are certified by CMS and operational (see Note 7
Legal Matters
The Company is party to various legal actions and administrative proceedings and is subject to various claims arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to the patients of the Company’s facilities and claims related to professional and general negligence, employment, staffing requirements and commercial matters. Although the Company intends to vigorously defend itself in these matters, there is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company previously operated, and the Company’s tenants now operate, in an industry that is extremely regulated. As such, in the ordinary course of business, the Company’s tenants are continuously subject to state and federal regulatory scrutiny, supervision and control. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine. In addition, we believe that there has been, and will continue to be, an increase in governmental investigations of long-term care providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Adverse determinations in legal proceedings or governmental investigations against or involving the Company, for the Company’s prior operations, or the Company’s tenants, whether currently asserted or arising in the future, could have a material adverse effect on the Company’s business, results of operations and financial condition.
Professional and General Liability Claims
. As ofOn March 12, 2018, the Company entered into a separate mediation settlement agreement with respect to each of the original 25 actions (22 such actions remaining subject to settlement in principle, at March 31, 2018), filed in the State of Arkansas relating to the settlement in principle of such actions, subject to the satisfaction of certain specified conditions. Each mediation settlement agreement provides for payment by the Company of a specified settlement amount, which settlement amount with respect to each action was deposited into the mediator’s trust account. The aggregate settlement amount, for all such 25 actions arebefore related insurance proceeds is $5.2 million. The settlement of each such action must be individually approved by the probate court, and the settlement of one action is not conditioned upon receipt of the probate court’s approval with respect the settlement of any other action. Upon the probate court approving, with respect to a particular action, the settlement and an executed settlement and release agreement, the settlement amount with respect to such action will be disbursed to the plaintiff’s counsel. Under the settlement and release agreement with respect to a particular action, the Company will be released from any and all claims arising out of the applicable plaintiff’s care while the plaintiff was a resident of one of the Company’s facilities.
In connection with a dispute between the Company and the Company’s former commercial liability insurance provider regarding, among other things, the Company’s insurance coverage with respect to the 25 actions filed in various stagesthe State of discovery,Arkansas, the former insurer filed a complaint in May 2016 against the Company seeking, among other things, a determination that the former insurer had properly exhausted the limits of liability of certain of the Company’s insurance policies issued by the former insurer, and the Company intendssubsequently filed a counterclaim against the former insurer regarding such matters (collectively, the “Coverage Litigation”). On March 12, 2018, the former insurer and the Company entered into a settlement agreement (the
“Coverage Settlement Agreement”), providing for, among other things, a settlement payment by the former insurer in the amount of approximately $2.8 million, (the “Insurance Settlement Amount”), the dismissal with prejudice of the Coverage Litigation, a customary release of claims by the former insurer and the Company, and agreement that that the former insurer has exhausted the policies’ respective limits of liability and has no further obligations under the policies. Pursuant to vigorously defend the claims.Coverage Settlement Agreement: (i) on March 16, 2018, the former insurer deposited the Insurance Settlement Amount into the trust account of the mediator with respect to the 25 actions; and (ii) on March
Assuming, and subject to, the approval by the probate court of the settlement of each of the original 25 actions filed in the State of Arkansas and related matters, and the satisfaction of the other conditions with respect thereto, the Company will pay, net of the Insurance Settlement Amount, an aggregate of approximately $2.4 million in settlement of such actions. The probate court approved settlements with respect to three of the 25 Arkansas actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of the 25 actions subsequent to March 31, 2018, and approximately $0.5 million and $3.3 million, respectively, was paid from the mediator’s trust account in such settlements. The Company gives no assurance that the probate court will approve the settlement of the remaining 7 Arkansas actions pending approval or that the other conditions to such settlements will be satisfied, or that such actions will be settled on the terms described herein or at all.
In the first quarter of 2018, the Company settled four professional and general liability actions (other than those subject to mediation settlement agreements as discussed above) for the total of $670,000. A majority of the settlements include payment terms greater than one year.
The Company established a self-insurance reserve for these professional and general liability claims, included within “Accrued expenses and other” in the Company’s unaudited consolidated balance sheets of $6.7$2.4 million and $6.9$5.1 million at September 30, 2017,March 31, 2018, and December 31, 2016,2017, respectively. The decreaseAdditionally as of March 31, 2018, and December 31, 2017, $0.1 and $0.2 million respectively, was reserved for settlement amounts in “Other liabilities”, and $0.6 million and $0.5 million in “Accounts payable” in the reserve at September 30, 2017, primarily reflects the legal and associated settlement amounts paid.Company’s consolidated balance sheets, respectively. For additional information regarding the Company’s self-insurance reserve, please see Part II, Item 8, Notes to Consolidated Financial Statements,Note 15 -– Commitments and Contingencies included in the Annual Report.
Aria Bankruptcy Proceeding
. On May 31, 2016,On July 17, 2015, the Company made a short-term loan to HAH, for working capital purposes, and, in connection therewith, HAH executed a promissory note (the “HAH Note”) in favor of the Company. Since July 17, 2015, the HAH Note has been amended from time to time and currently has an outstanding principal balance of $1.0 million that matured on December 31, 2015. On October 6, 2015, HAH and the Company entered into a security agreement, whereby HAH granted the Company a security interest in all accounts arising from the business of HAH and the Aria Sublessees, and all rights to payment from patients, residents, private insurers and others arising from the business of HAH and the Aria Sublessees (including any proceeds thereof), as security for payment of the HAH Note, as amended, and certain rent and security deposit obligations of the Aria Sublessees under Aria Subleases.
On April 21, 2017, the Company moved for relief from the automatic stay seeking release of its collateral, the Debtors’ accounts and their proceeds, the value of which the trustee has represented as a total of approximately $800,000.$0.8 million. The Company’s motion was opposed by the Chapter 7 trustee and another creditor in May 2017. In its objection, the Chapter 7 trustee asserts that the Company is not entitled to any of the $800,000$0.8 million with respect to the HAH Note. Discovery with respect to the motion is ongoing and the matter is currently not on the calendar. In addition to opposing the Company’s claim to the $800,000,$0.8 million, the Chapter 7 trustee has also taken the position thatindicated he iswas investigating avoidance claims against the Company with respect to funds itthe Company received from the Debtors prior to the bankruptcy filings. On March 28, 2018, such avoidance case was filed, requesting relief in an amount of $4.7 million, which the Company believes to be without merit and intends to vigorously defend against. For the year ended December 31, 2017 the Company has charged approximately $0.6 million to bad debt expense on the HAH Note. The trustee’s statute of limitation for filing avoidance actions runsCompany believes it acted in good faith and as it is the only secured creditor believes that the remaining balance on May 31, 2018.the HAH Note is collectible. There is no guarantee that the bankruptcy court will approve repayment of the HAH Note to the Company or that the Company will prevail in anythe avoidance action that may behas been filed against it.
McBride Matters
During the three months ended March 31, 2018 the Company paid $36,600 to NOTE 16.Mr. McBride, the Company’s former Chief Executive Officer and a former director, pursuant a Settlement Agreement and Mutual Release the Company entered into with Mr. McBride on September 26, 2017.RELATED PARTY TRANSACTIONS
For additional information regarding the Company’s related party transactions, see Part II, Item 8, Notes to Consolidated Financial Statements,
Note 18NOTE 15. | SUBSEQUENT EVENTS |
The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and filed with the SEC. The following is a summary of the material subsequent events.
Forbearance Agreement
On November 8, 2017,May 18, 2018, (“the Forbearance Date”), the Company entered into a Forbearance Agreement in association with the Pinecone Credit Facility, whereby the Company was notified of certain events of default under the loan agreements of the Pinecone Credit Facility. Such Forbearance Agreement outlines a plan of correction whereby the Company may regain compliance under its obligations pertaining to the loan documents of the Pinecone Credit Facility, through a forbearance period ending July 20, 2018. Some requirements outlined in the Forbearance Agreement include, among other items, the hiring of a special consultant to advise Management on operational improvements and to assist in coordinating overall company strategy. Pursuant to the Forbearance Agreement, the Company and Pinecone agreed to amend certain provisions of the Pinecone Credit Facility. Such amendments, among other things: (i) eliminate the Company’s obligation to complete the Lease Assignments; (ii) require the payment of a specified “break-up fee” upon certain events, including prepayment of the Pinecone Credit Facility or a change of control; (iii) increase the ongoing interest rate from 12.5% per annum to 13.5% effective May 18, 2018, and (iii) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%, as of the Forbearance Date.
Notification of Potential Employer Shared Responsibility Payment
On April 2, 2018, the Company received notification from the Internal Revenue Service (“IRS”), on Letter 226-J, that the Company may be liable for an Amendment No. 2Employer Shared Responsibility Payment (“ESRP”) in the amount of $2.9 million for the year ended December 31, 2015. The ESRP is applicable to Subordinated Convertible Note, with Cantone Asset Management LLCemployers that had 50 or more full-time equivalent employees, did not offer minimum essential coverage (“CAM”MEC”) to at least 70% of full-time employees (and their dependents) or did offer MEC to at least 70% of full time-employees (and their dependents), which amended, effective October 31, 2017,did not meet the $1.5 million convertible promissory note originally issued byaffordable or minimum value criteria and had one or more employees who claimed the Employee Premium Tax Credit (“PTC”) pursuant to the Affordable Care Act (the “ACA”). The IRS determines which employers receive Letter 226-J and the amount of the proposed ESRP from information that the employers complete on their information returns (IRS Forms 1094-C and 1095-C) and from the income tax returns of their employees. The letter indicated that none of the Company’s employees claimed the PTC. The Company engaged third party providers to assist the Company with complying with the provisions of the ACA for the year ended December 31, 2015 to CAMensure the Company offered plans that would not require ESRP. On April 10, 2018 the Company responded to the IRS with appropriate documentation to prove the Company has no ESRP liability, and on May 8, 2018 the Company received written confirmation from the IRS that is in July 2012, as subsequently amended, to: (i)agreement with the Company’s findings.
Extension of Quail Creek Credit Facility
On April 30, 2018, the Company extended the maturity date of the Quail Creek Credit Facility to April 30, 2019. There is no assurance that the Company will be able to refinance or further extend the maturity date from October 31, 2017of the Quail Creek Credit Facility on terms that are favorable to April 30, 2018; (ii) increase the annual interest rate from 10.00% to 14.00%; and (iii) increase the default annual interest rate from 14.00% to 18.00%. In addition, the Company agreed to grant to CAM a second security interest inor at all.
Notice of Facility Surrender by Tenants
On April 24, 2018, the Company received notice from five of its Ohio facility tenants, affiliated with Beacon, that they will be vacating the Company’s College Park Facility no later than December 22, 2017.properties on June 30, 2018. The security may be convertedCompany intends to 352,941 shares at a conversion price of $4.25 at the option of the holder. Failure to grant the security interest by December 22, 2017, will constitute an event of defaultenforce its rights under the promissory note.
The annualized cash rent for 2018 per the Company’s outstanding indebtedness. Dividends on the Series A Preferred Stock will continue to accrue regardless of whether declared by the Board. A “dividend default” is deemed to occur if we fail to pay the accrued cash dividends on the outstanding Series A Preferred Stock in full for any four consecutive or non-consecutive quarterly periods. If we have committed a dividend default, then until we have paid all accrued dividends on the shares of the Series A Preferred Stock for all dividend periods up to, and including, the dividend payment date on which the accumulated and unpaid dividends are paid in full: (i) the annual dividend rate on the Series A Preferred Stock will be increased to 12.875% per annum, which we refer to as the “penalty rate,” commencing on the first day after the missed fourth quarterly payment; and (ii) the holders of the Series A Preferred Stock will have limited voting rights, namely to elect two additional directors, at a special meeting called upon the request of the holders of record of at least 25.00% of the outstanding shares of Series A Preferred Stock. Once we have paid all accumulated and unpaid dividends in full and have paid cash dividends at the penalty rate in full for an additional two consecutive quarters (or declared such dividends provided that a sum sufficientlease agreements for the payment thereofOhio Beacon Affiliates is set aside for such payment), the dividend rate will be restored to the stated rate and the foregoing provisions will not be applicable, unless we again fail to pay any quarterly dividend for any future quarter, at which time the term of any directors elected by holders of the Series A Preferred Stock shall immediately terminate and the number of directors constituting our board of directors shall be reduced accordingly.shown below:
|
|
|
|
|
|
|
| Initial Lease Term |
|
|
|
| ||
|
| Operating |
|
|
|
| Commencement |
| Expiration |
| 2018 Cash |
| ||
Facility Name |
| Beds/Units |
|
| Structure |
| Date |
| Date |
| Annual Rent |
| ||
Ohio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covington Care |
|
| 94 |
|
| Leased |
| 8/1/2015 |
| 4/30/2025 |
| $ | 818 |
|
Eaglewood ALF |
|
| 80 |
|
| Owned |
| 8/1/2015 |
| 7/31/2025 |
|
| 764 |
|
Eaglewood Care Center |
|
| 99 |
|
| Owned |
| 8/1/2015 |
| 7/31/2025 |
|
| 764 |
|
H&C of Greenfield |
|
| 50 |
|
| Owned |
| 8/1/2015 |
| 7/31/2025 |
|
| 382 |
|
The Pavilion Care Center |
|
| 50 |
|
| Owned |
| 8/1/2015 |
| 7/31/2025 |
|
| 382 |
|
Total |
|
| 373 |
|
|
|
|
|
|
|
| $ | 3,110 |
|
Forward Looking Statements
This Quarterly Report and certain information incorporated herein by reference contain forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, and management’s plans and objectives. In addition, certain statements included in this Quarterly Report, in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “seek,” “plan,” “project,” “continue,” “predict,” “will,” and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on the Company’s current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.
All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. The Company’s actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including the Company’s critical accounting policies and risks and uncertainties related to, but not limited to, the operating results of the Company’s tenants, the overall industry environment and the Company’s financial condition. These and other risks and uncertainties are described in more detail in the Company’s most recent Annual Report, as well as other reports that the Company files with the SEC.
Forward-looking statements speak only as of the date they are made and should not be relied upon as representing the Company’s views as of any subsequent date. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that the Company makes in this Quarterly Report and other reports that the Company files with the SEC that discuss factors germane to the Company’s business.
Regional Health, through its subsidiaries (together, the “Company” or “we”), is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. Our business primarily consists of leasing and subleasing healthcare facilities to third-party tenants. As of September 30, 2017,March 31, 2018, the Company owned, leased, or managed for third parties 30 facilities primarily in the Southeast.
The operators of the Company’s facilities provide a range of health care and related services to patients and residents, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.
The following table provides summary information regarding the number of facilities and related operational beds/units as of September 30, 2017:March 31, 2018:
|
| Owned |
|
| Leased |
|
| Managed for Third Parties |
|
| Total |
| ||||||||||||||||||||
|
| Facilities |
|
| Beds/Units |
|
| Facilities |
|
| Beds/Units |
|
| Facilities |
|
| Beds/Units |
|
| Facilities |
|
| Beds/Units |
| ||||||||
State |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alabama |
|
| 3 |
|
|
| 410 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 410 |
|
Georgia |
|
| 4 |
|
|
| 463 |
|
|
| 10 |
|
|
| 1,168 |
|
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 1,631 |
|
North Carolina |
|
| 1 |
|
|
| 106 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 106 |
|
Ohio |
|
| 4 |
|
|
| 279 |
|
|
| 1 |
|
|
| 94 |
|
|
| 3 |
|
|
| 332 |
|
|
| 8 |
|
|
| 705 |
|
Oklahoma |
|
| 2 |
|
|
| 197 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 197 |
|
South Carolina |
|
| 2 |
|
|
| 180 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 180 |
|
Total |
|
| 16 |
|
|
| 1,635 |
|
|
| 11 |
|
|
| 1,262 |
|
|
| 3 |
|
|
| 332 |
|
|
| 30 |
|
|
| 3,229 |
|
Facility Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skilled Nursing |
|
| 14 |
|
|
| 1,449 |
|
|
| 11 |
|
|
| 1,262 |
|
|
| 2 |
|
|
| 249 |
|
|
| 27 |
|
|
| 2,960 |
|
Assisted Living |
|
| 2 |
|
|
| 186 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 186 |
|
Independent Living |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 83 |
|
|
| 1 |
|
|
| 83 |
|
Total |
|
| 16 |
|
|
| 1,635 |
|
|
| 11 |
|
|
| 1,262 |
|
|
| 3 |
|
|
| 332 |
|
|
| 30 |
|
|
| 3,229 |
|
Owned | Leased | Managed for Third Parties | Total | |||||||||||||||||||||
Facilities | Beds/Units | Facilities | Beds/Units | Facilities | Beds/Units | Facilities | Beds/Units | |||||||||||||||||
State | ||||||||||||||||||||||||
Alabama | 3 | 410 | — | — | — | — | 3 | 410 | ||||||||||||||||
Georgia | 4 | 463 | 10 | 1,168 | — | — | 14 | 1,631 | ||||||||||||||||
North Carolina | 1 | 106 | — | — | — | — | 1 | 106 | ||||||||||||||||
Ohio | 4 | 279 | 1 | 94 | 3 | 332 | 8 | 705 | ||||||||||||||||
Oklahoma | 2 | 197 | — | — | — | — | 2 | 197 | ||||||||||||||||
South Carolina | 2 | 180 | — | — | — | — | 2 | 180 | ||||||||||||||||
Total | 16 | 1,635 | 11 | 1,262 | 3 | 332 | 30 | 3,229 | ||||||||||||||||
Facility Type | ||||||||||||||||||||||||
Skilled Nursing | 14 | 1,449 | 11 | 1,262 | 2 | 249 | 27 | 2,960 | ||||||||||||||||
Assisted Living | 2 | 186 | — | — | — | — | 2 | 186 | ||||||||||||||||
Independent Living | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||
Total | 16 | 1,635 | 11 | 1,262 | 3 | 332 | 30 | 3,229 |
The following table provides summary information regarding the number of facilities and related operational beds/units by operator affiliation as of September 30, 2017:March 31, 2018:
Operator Affiliation |
| Number of Facilities (1) |
|
| Beds / Units |
| ||
C.R. Management |
|
| 8 |
|
|
| 936 |
|
Beacon Health Management (2) |
|
| 7 |
|
|
| 585 |
|
Wellington Health Services |
|
| 4 |
|
|
| 641 |
|
Peach Health Group |
|
| 3 |
|
|
| 252 |
|
Symmetry Healthcare |
|
| 3 |
|
|
| 286 |
|
Southwest LTC |
|
| 2 |
|
|
| 197 |
|
Subtotal |
|
| 27 |
|
|
| 2,897 |
|
Regional Health Managed |
|
| 3 |
|
|
| 332 |
|
Total |
|
| 30 |
|
|
| 3,229 |
|
Operator Affiliation | Number of Facilities (1) | Beds / Units | ||||
C.R. Management | 8 | 936 | ||||
Beacon Health Management | 7 | 585 | ||||
Wellington Health Services | 4 | 641 | ||||
Peach Health Group | 3 | 252 | ||||
Symmetry Healthcare | 3 | 286 | ||||
Southwest LTC | 2 | 197 | ||||
Subtotal | 27 | 2,897 | ||||
Regional Health Managed | 3 | 332 | ||||
Total | 30 | 3,229 |
(1) | Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 7 |
(2) | On April 24, 2018, the Company received notice from the Ohio Beacon Affiliates, that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio commencing July 1, 2018. Regional is currently in negotiations with suitably qualified replacement operators to take possession of the Ohio Beacon Facilities on July 1, 2018. There is no assurance that Regional will be able to execute new leases with respect to the Ohio Beacon Facilities on substantially equivalent terms to the Sublease Agreements or at all or that, if new leases are executed, the new tenants will be able to take possession of the Ohio Beacon Facilities on July 1, 2018. |
on Form 10-Q; Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 - Leases included in the Annual Report; and “Portfolio of Healthcare Investments” included in Part I, Item 1, Business included in the Annual Report.
The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:
|
| For the Three Months Ended |
| |||||||||||||
Operating Metric (1) |
| June 30, 2017 |
|
| September 30, 2017 |
|
| December 31, 2017 |
|
| March 31, 2018 |
| ||||
Occupancy (%) (2) |
|
| 83.1 | % |
|
| 81.8 | % |
|
| 80.0 | % |
|
| 79.5 | % |
For the Three Months Ended | ||||||||
Operating Metric (1) | December 31, 2016 | March 31, 2017 | June 30, 2017 | September 30, 2017 | ||||
Occupancy (%) (2) | 82.6% | 82.6% | 83.1% | 84.0% |
(1) | Excludes the three Peach Facilities, which were operated by affiliates of New Beginnings Care LLC prior to their bankruptcy and are currently operated by affiliates of Peach Health and the Meadowood Facility acquired on May 1, 2017, for all periods presented. Occupancy (%) for the Savannah Beach Facility, the one facility among the Peach Facilities which was not decertified by CMS and which has 50 operational beds, for the three months ending June 30, 2017, September 30, 2017, December 31, 2017 and March 31, 2018 was 82.0%, 84.9%, 88.5% and 85.7%, respectively. |
(2) | Occupancy percentages are based on operational beds. The number of operational beds is reported to us by our tenants and represents the number of available beds that can be occupied by patients. The number of operational beds is always less than or equal to the number of licensed beds with respect to any particular facility. |
Lease Expiration
The following table provides summary information regarding our lease expirations for the years shown:
|
|
|
|
|
| Operational Beds |
|
| Annual Lease Revenue (1) |
| ||||||||||
|
| Number of Facilities |
|
| Amount |
|
| Percent (%) |
|
| Amount ($) '000's |
|
| Percent (%) |
| |||||
2024 |
|
| 1 |
|
|
| 126 |
|
|
| 4.3 | % |
|
| 965 |
|
|
| 4.0 | % |
2025 (2) |
|
| 12 |
|
|
| 1,206 |
|
|
| 41.7 | % |
|
| 9,671 |
|
|
| 40.2 | % |
2026 |
|
| — |
|
|
| — |
|
| —% |
|
|
| — |
|
| —% |
| ||
2027 |
|
| 8 |
|
|
| 869 |
|
|
| 30.0 | % |
|
| 8,265 |
|
|
| 34.4 | % |
2028 |
|
| — |
|
|
| — |
|
| —% |
|
|
| — |
|
| —% |
| ||
Thereafter |
|
| 6 |
|
|
| 696 |
|
|
| 24.0 | % |
|
| 5,129 |
|
|
| 21.4 | % |
Total |
|
| 27 |
|
|
| 2,897 |
|
|
| 100.0 | % |
|
| 24,030 |
|
|
| 100.0 | % |
Operational Beds | Annual Lease Revenue (1) | ||||||||||||||
Number of Facilities | Amount | Percent (%) | Amount ($) '000's | Percent (%) | |||||||||||
2024 | 1 | 126 | 4.3 | % | 965 | 4.0 | % | ||||||||
2025 | 12 | 1,206 | 41.7 | % | 9,671 | 40.2 | % | ||||||||
2026 | — | — | — | % | — | — | % | ||||||||
2027 | 8 | 869 | 30.0 | % | 8,265 | 34.4 | % | ||||||||
Thereafter | 6 | 696 | 24.0 | % | 5,129 | 21.4 | % | ||||||||
Total | 27 | 2,897 | 100.0 | % | 24,030 | 100.0 | % |
(1) | Straight-line rent. |
(2) | On April 24, 2018, the Company received notice from the Ohio Beacon Affiliates, that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio commencing July 1, 2018. Straight-line annual lease revenue included in the table above relating to these five facilities is approximately $3.3 million. The Company intends to enforce its rights under the applicable sublease agreements for such Ohio Beacon Facilities and pursue all remedies available to it under such sublease agreements and applicable law. Regional is currently in negotiations with suitably qualified replacement operators to take possession of the Ohio Beacon Facilities on July 1, 2018. There is no assurance that Regional will be able to execute new leases with respect to the Ohio Beacon Facilities on substantially equivalent terms to the Sublease Agreements or at all or that, if new leases are executed, the new tenants will be able to take possession of the Ohio Beacon Facilities on July 1, 2018. Regional intends to enforce its rights under the Sublease Agreements and pursue all remedies available to it under the Sublease Agreements and applicable law. |
Acquisitions
There were no acquisitions during the ninethree months ended September 30, 2017, the Company generated positive cash flow from operations and anticipates positive cash flow from operations for the remainder of the current year. At September 30, 2017, we had: (i) $1.1 million in cash and cash equivalents; (ii) restricted cash of $3.5 million; and (iii) $73.8 million in indebtedness, of which the current portion is $8.3 million. This current portion is comprised of the following components: (i) convertible debt of $1.5 million, (ii) senior debt of $4.3 million attributable to the Company’s skilled nursing facility known as the Quail Creek Nursing & Rehabilitation Center located in Oklahoma City, Oklahoma (the “Quail Creek Facility”), and (iii) remaining debt of approximately $2.5 million which includes senior debt - bond and mortgage indebtedness.
Divestitures
There were no divestitures for the three and nine months ended September 30, 2017.March 31, 2018. For historical information regarding the Company’s divestitures, see Part II, Item 8, Notes to Consolidated Financial Statements
We prepare our financial statements in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis we review our judgments and estimates, including, but not limited to, those related to doubtful accounts, income taxes, stock compensation, intangible assets and loss contingencies. We base our estimates on historical experience, business knowledge and on various other assumptions that we believe to be reasonable under the circumstances at the time. Actual results may vary from our estimates. These estimates are evaluated by management and revised as circumstances change.
For a discussion of our critical accounting policies and recent accounting pronouncements not yet adopted by the Company see Note 1
Results of Operations
The following table sets forth, for the periods indicated, unaudited statement of operations items and the amounts and percentages of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our consolidated financial statements and the notes thereto, which are included herein.
|
| Three Months Ended March 31, |
| |||||||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
|
| Percent Change |
| |||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenues |
| $ | 5,705 |
|
| $ | 5,775 |
|
|
| (1.2 | )% |
Management fees |
|
| 234 |
|
|
| 229 |
|
|
| 2.2 | % |
Other revenues |
|
| 48 |
|
|
| 131 |
|
|
| (63.4 | )% |
Total revenues |
|
| 5,987 |
|
|
| 6,135 |
|
|
| (2.4 | )% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Facility rent expense |
|
| 2,171 |
|
|
| 2,171 |
|
|
| — |
|
Cost of management fees |
|
| 157 |
|
|
| 176 |
|
|
| (10.8 | )% |
Depreciation and amortization |
|
| 1,221 |
|
|
| 1,135 |
|
|
| 7.6 | % |
General and administrative expenses |
|
| 879 |
|
|
| 1,446 |
|
|
| (39.2 | )% |
Provision for doubtful accounts |
|
| 1,938 |
|
|
| 466 |
|
| NM |
| |
Other operating expenses |
|
| 343 |
|
|
| 89 |
|
| NM |
| |
Total expenses |
|
| 6,709 |
|
|
| 5,483 |
|
|
| 22.4 | % |
Loss (income) from operations |
|
| (722 | ) |
|
| 652 |
|
| NM |
| |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 1,275 |
|
|
| 1,032 |
|
|
| 23.5 | % |
Loss on extinguishment of debt |
|
| 441 |
|
|
| 63 |
|
| NM |
| |
Other expense |
|
| 9 |
|
|
| 95 |
|
|
| (90.5 | )% |
Total other expense, net |
|
| 1,725 |
|
|
| 1,190 |
|
|
| 45.0 | % |
Loss from continuing operations before income taxes |
|
| (2,447 | ) |
|
| (538 | ) |
|
| 354.8 | % |
Income tax expense |
|
| 26 |
|
|
| 1 |
|
| NM |
| |
Loss from continuing operations |
|
| (2,473 | ) |
|
| (539 | ) |
|
| 358.8 | % |
Loss from discontinued operations, net of tax |
|
| (55 | ) |
|
| (413 | ) |
|
| (86.7 | )% |
Net loss |
| $ | (2,528 | ) |
| $ | (952 | ) |
|
| 165.5 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
(Amounts in 000’s) | 2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | ||||||||||||||||
Revenues: | ||||||||||||||||||||||
Rental revenues | $ | 5,983 | $ | 6,912 | (13.4 | )% | $ | 17,703 | $ | 20,651 | (14.3 | )% | ||||||||||
Management fee and other revenues | 362 | 253 | 43.1 | % | 1,081 | 760 | 42.2 | % | ||||||||||||||
Total revenues | 6,345 | 7,165 | (11.4 | )% | 18,784 | 21,411 | (12.3 | )% | ||||||||||||||
Expenses: | ||||||||||||||||||||||
Facility rent expense | 2,171 | 2,176 | (0.2 | )% | 6,512 | 6,523 | (0.2 | )% | ||||||||||||||
Depreciation and amortization | 1,193 | 1,124 | 6.1 | % | 3,499 | 4,176 | (16.2 | )% | ||||||||||||||
General and administrative expenses | 1,063 | 1,598 | (33.5 | )% | 3,507 | 6,275 | (44.1 | )% | ||||||||||||||
Other operating expenses | 517 | 241 | 114.5 | % | 1,395 | 1,413 | (1.3 | )% | ||||||||||||||
Total expenses | 4,944 | 5,139 | (3.8 | )% | 14,913 | 18,387 | (18.9 | )% | ||||||||||||||
Income from operations | 1,401 | 2,026 | (30.8 | )% | 3,871 | 3,024 | 28.0 | % | ||||||||||||||
Other expense: | ||||||||||||||||||||||
Interest expense, net | 1,011 | 1,801 | (43.9 | )% | 3,049 | 5,377 | (43.3 | )% | ||||||||||||||
Loss on extinguishment of debt | — | — | NM | 63 | — | NM | ||||||||||||||||
Other expense | 105 | — | NM | 388 | 51 | NM | ||||||||||||||||
Total other expense, net | 1,116 | 1,801 | (38.0 | )% | 3,500 | 5,428 | (35.5 | )% | ||||||||||||||
Income (loss) from continuing operations before income taxes | 285 | 225 | 26.7 | % | 371 | (2,404 | ) | NM | ||||||||||||||
Income tax expense | 19 | 3 | NM | 20 | 3 | NM | ||||||||||||||||
Income (loss) from continuing operations | 266 | 222 | 19.8 | % | 351 | (2,407 | ) | NM | ||||||||||||||
Loss from discontinued operations, net of tax | (1,032 | ) | (2,210 | ) | (53.3 | )% | (2,049 | ) | (6,513 | ) | (68.5 | )% | ||||||||||
Net loss | $ | (766 | ) | $ | (1,988 | ) | (61.5 | )% | $ | (1,698 | ) | $ | (8,920 | ) | (81.0 | )% |
Three Months Ended September 30,March 31, 2018 and 2017 and 2016
Rental Revenues
—Facility Rent Expense—Facility rent expense was $2.2 million for the three months ended September 30, 2017,March 31, 2018, and $2.2 million for the same period in 2016. Rent expense year over year is comparable due to the completion of the Company's transition to a healthcare property holding and leasing company.2017. For further information, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 -– Leases, included in the Annual Report and Note 7 –Leases to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report on Form 10-Q.Report.
Depreciation and Amortization
—Depreciation and amortization increased by $0.1 million, orGeneral and Administrative—General and administrative costs decreased by $0.5 million, or 33.5%39.2%, to $1.1$0.9 million for the three months ended September 30, 2017,March 31, 2018, compared with $1.6$1.4 million for the same period in 2016.2017. The net decrease is due to a continued reduction in overhead and specifically the following: (i) a decrease in salaries, wages and employee benefits expense of approximately $0.2 million and (ii) a decrease in legal, contract services, IT, insurance and other expenses of approximately $0.3 million.
Provision for doubtful accounts—Other operatingProvision for doubtful accounts expense increased by $0.3approximately $1.4 million, or 114.5%, to $0.5$1.9 million for the three months ended September 30, 2017,March 31, 2018, compared with $0.2$0.5 million for the same period in 2016.2017. The increase is due to $0.3the Ohio Beacon Affiliates notifying the Company of their plan to cease operating our properties on June 30, 2018 and in addition the Company has also recorded an allowance of approximately $0.5 million settlement expense relatedon the $3.0 million Skyline Note.
Other operating expenses—Other operating expenses increased by $0.2 million, to the Settlement Agreement with Mr. McBride, the Company’s former Chief Executive Officer and Chairman of the Board, in the current year period.
Interest Expense, Net—Interest expense increased by approximately $0.3 million, or 23.5%, to $1.3 million for the three months ended March 31, 2018, compared with $1.0 million for the same period in 2017. The increase is mainly due tothe net increase of debt principal year over year of approximately $6.3 million and approximately $1.0 million in capitalized deferred financing. The $16.25 million Pinecone Credit Facility, increased debt by approximately $7.5 million from February 15, 2018, which was partially offset by the repayment of $36.0$6.7 million in convertible debt in the prior year and $1.5 million repayment of convertible debt during the current quarter. The increase in interest is approximately $0.1 million for amortization of deferred financing and approximately $0.1 million due to interest.
Loss from Debt Extinguishment—The loss from debt extinguishment increased by approximately $0.3 million, to $0.4 million for the three months ended March 31, 2018, compared with $0.1 million for the same period in 2017. The increase is due to pre-payment penalties of $0.2 million and $0.2 million in expensed deferred financing fees from the repayment of debt and hence cessation of interest, in connection with the Arkansas Facilities and the sale thereof in October 2016 and $6.7 million principal repayment of the 2015 Notes on January 10, 2017 pursuant to the Tender Offer and the remaining $1.0 million on April 30, 2017, partially offset by $4.1 million in new financing for the MeadowoodPinecone Credit Facility.
Loss from Discontinued Operations
—The loss from discontinued operations decreased byOther Expenses—Total rental revenueOther expense decreased by $2.9$0.1 million, or 14.3%90.5%, to $17.7$0.0 million for the ninethree months ended September 30, 2017,March 31, 2018, compared with $20.7$0.1 million for the same period in 2016.2017. The decrease reflects lower rent dueprior period charge was related to expenses for the saleMerger.
Liquidity and Capital Resources
Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing. At March 31, 2018, the Arkansas Facilities on October 6, 2016, partially off-set by lease revenueCompany had $3.5 million in unrestricted cash. During the three months ended March 31, 2018, the Company generated positive cash flow from continuing operations of $0.7 million and anticipates continued positive cash flow from operations in the Meadowood Facility (acquired on May 1, 2017) and the Peach Facilities.future. The Company recognizes all rental revenues on a straight line rent accrual basis exceptBoard suspended dividend payments with respect to the Oceanside FacilitySeries A Preferred Stock for the fourth quarter 2017 and the Jeffersonvillefirst quarter 2018 dividend periods. The Board plans to revisit the dividend payment policy with respect to the Series A Preferred Stock in the second quarter of 2018. The Board believes that the dividend suspension will provide the Company with additional funds to meet its ongoing liquidity needs.
On February 15, 2018, the Company entered into a debt refinancing with Pinecone, with an aggregate principal amount of $16.25 million, that refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties, and provided additional surplus cash flow of $6.3 million. The surplus cash flow from the Pinecone Credit Facility was used to deposit $2.4 million of cash into escrow to fund self-insurance reserves for professional and general liability claims
with respect to 25 professional and general liability actions (included within current liabilities), and to fund repayment of $1.5 million in convertible debt.
On May 18, 2018, (“the Forbearance Date”), the Company entered into a Forbearance Agreement in association with the Pinecone Credit Facility, whereby the Company was notified of certain events of default under the Peach Health Sublease prior to recertification (which were recertified by CMS, in February 2017 and December 2016, respectively), the Aria Subleases (which were terminated for non-payment of rent) and the Skyline Lease (which terminated upon saleloan agreements of the Arkansas Facilities)Pinecone Credit Facility. Such Forbearance Agreement outlines a plan of correction whereby the Company may regain compliance under its obligations pertaining to the loan documents of the Pinecone Credit Facility, through a forbearance period ending July 20, 2018. Some requirements outlined in the Forbearance Agreement include, among other items: (i) the hiring of a special consultant to advise Management on operational improvements and to assist in coordinating overall company strategy, (ii) increase the ongoing interest rate to 13.5% effective May 18, 2018, and (iii) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%, for which rental revenueas of the Forbearance Date.
If the Company is recognized based on cash amount owed, and the sublease with affiliates of New Beginnings (which terminated in connectionable comply with the bankruptcy of such entities), for which rental revenue is recognized when cash is received.
The Company expects to use cash from operations, restricted replacement reserves and borrowings to: (i) invest in the Company’s existing property holdingportfolio, (ii) resolve our 12 outstanding legal actions, and leasing company. (iii) refinance or repay debt to minimize the average weighted cost of capital.
For furtheradditional information regarding the Company’s liquidity, see Note 73 – Liquidity - Leases, to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Cash Flows
The following table presents selected data from our consolidated statement of cash flows for the periods presented:
|
| Three Months Ended March 31, |
| |||||
(Amounts in 000’s) |
| 2018 |
|
| 2017 |
| ||
Net cash provided by operating activities - continuing operations |
| $ | 732 |
|
| $ | 749 |
|
Net cash used in operating activities - discontinued operations |
|
| (735 | ) |
|
| (1,051 | ) |
Net cash used in investing activities - continuing operations |
|
| (163 | ) |
|
| (329 | ) |
Net cash provided by (used in) financing activities - continuing operations |
|
| 1,894 |
|
|
| (10,739 | ) |
Net cash used in financing activities - discontinued operations |
|
| (90 | ) |
|
| (140 | ) |
Net change in cash and restricted cash |
|
| 1,638 |
|
|
| (11,510 | ) |
Cash and restricted cash at beginning of period |
|
| 5,359 |
|
|
| 19,509 |
|
Cash and restricted cash at end of period |
| $ | 6,997 |
|
| $ | 7,999 |
|
Nine Months Ended September 30, | ||||||||
(Amounts in 000’s) | 2017 | 2016 | ||||||
Net cash provided by operating activities - continuing operations | $ | 4,515 | $ | 2,806 | ||||
Net cash used in operating activities - discontinued operations | (961 | ) | (3,470 | ) | ||||
Net cash (used in) provided by investing activities - continuing operations | (260 | ) | 6,217 | |||||
Net cash used in financing activities - continuing operations | (15,739 | ) | (5,736 | ) | ||||
Net cash used in financing activities - discontinued operations | (485 | ) | (1,080 | ) | ||||
Net change in cash and cash equivalents | (12,930 | ) | (1,263 | ) | ||||
Cash and cash equivalents at beginning of period | 14,045 | 2,720 | ||||||
Cash and cash equivalents at end of period | $ | 1,115 | $ | 1,457 |
Three Months Ended September 30, 2017
Net cash provided by operating activities—continuing operations
for theNet cash used in operating activities—discontinued operations
for theNet cash used investing activities—continuing operations
for theNet cash used inprovided by financing activities—continuing operations was approximately $15.7$1.9 million for the ninethree months ended September 30, 2017. ThisMarch 31, 2018. Excluding non-cash proceeds and payments, this is primarily the result of $2.4 million new financing from Pinecone offset by routine repayments of $7.7 million of convertible debt, $3.1$0.5 million of other existing debt obligations, $0.2 million payment to repurchase our common stock and $5.7 million payment of preferred stock dividends partially off-set by net proceeds of $1.0 million from issuances of shares of the Series A Preferred Stock.obligations.
Net cash used in financing activities—discontinued operations
for theThree Months Ended September 30, 2016
Net cash provided inby operating activities—continuing operations
Net cash used in operating activities—discontinued operations was approximately $1.1 million. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims, in addition to settling legacy vendor liabilities.
Net cash used in investing activities—continuing operations for the ninethree months ended September 30, 2016March 31, 2017 was approximately $3.5 million as we continued to settle legacy vendor liabilities.
Net cash used in financing activities—continuing operations
was approximatelyNet cash used in financing activities—discontinued operations
was approximatelyNotes Payable and Other Debt
For information regarding the Company’s debt financings, see Note 9 -
Receivables
Our operations could be adversely affected if we experience significant delays in receipt of rental income from our tenants.
Accounts receivable, net totaled $1.1$0.6 million at September 30, 2017March 31, 2018 and $2.4$0.9 million at December 31, 2016, of which $0.2 million and $0.9 million, respectively, related to2017, with all uncollected patient care receivables from our legacy operations.
Operating Leases
For information regarding the Company’s operating leases, see Note 7
Item 3. |
Disclosure in response to Item 3. of Form 10-Q is not required to be provided by smaller reporting companies.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Interiminterim Chief Executive Officer and Interiminterim Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Interiminterim Chief Executive Officer and Interiminterim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on such evaluation, our Interiminterim Chief Executive Officer and Interiminterim Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company is a defendant in various legal actions and administrative proceedings arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to patients. Although the Company settles cases from time to time when settlement can be achieved on a reasonable basis, the Company vigorously defends any matter in which it believes the claims lack merit and the Company has a reasonable chance to prevail at trial or in arbitration. Litigation is inherently unpredictable and there is risk in the Company's strategy of aggressively defending these cases. There is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s financial condition. Although arising in the ordinary course of the Company's business, certain of these matters are described below under "Professional and General Liability Claims."
Except as set forth in this Item 1., Legal Proceedings, there have been no new material legal proceedings and no material developments in the legal proceedings reported in Part I, Item 3, Legal Proceedings, in the Annual Report. For additional information with respect to legal proceedings, also see Note 13 - Commitments and Contingencies to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.
Professional and General Liability ClaimsClaims. . As of September 30, 2017,March 31, 2018, the Company wasis a defendant in a total of 42 unsettled34 professional and general liability actions commenced on behalf of former patients, of which 28 cases were filed in the State of Arkansas by the same plaintiff attorney who represented the plaintiffs in the lawsuit captioned Amy Cleveland et. al. v. APHR&R Nursing, LLC et al. filed on March 4, 2015 with the Circuit Court of Pulaski County, Arkansas, 16th Division, 6th Circuit. During the three months ended September 30, 2017, one professional and general liability claim against the Company was settled for $0.8 million and two previously dismissed without prejudice cases were refiled.patients. These actions generally seek unspecified compensatory and punitive damages for former patients of the Company who were allegedly injured or died while patients of facilities operated by the Company due to professional negligence or understaffing. TwoTwenty-two of these actions were filed in the pendingState of Arkansas by the same plaintiff attorney who represented the plaintiffs in a purported class action lawsuit against the Company previously disclosed as the Amy Cleveland Class Action (which settled in December 2015) and such 22 actions are subject to a settlement in principle as discussed below. Of the 12 not subject to settlement in principle: (i) two of such actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage. Thecoverage; and (ii) three of such actions relate to events which occurred after the Company transitioned the operations of the facilities in question to a third-party operator and which are subject to such operators’ indemnification obligations in favor of the Company. These remaining 12 actions are in various stages of discovery, and the Company intends to vigorously defend such actions, where economically favorable to the claims.Company.
On March 12, 2018, the Company entered into a separate mediation settlement agreement with respect to each of the original 25 actions (22 such actions remaining subject to settlement in principle, at March 31, 2018), filed in the State of Arkansas, relating to the settlement in principle of each such action, subject to the satisfaction of certain specified conditions. Each mediation settlement agreement provides for payment by the Company of a specified settlement amount, which settlement amount with respect to each action has been deposited into the mediator’s trust account. The action must be individually approved by the probate court, and the settlement of one action is not conditioned upon receipt of the probate court’s approval with respect the settlement of any other action. Upon the probate court approving, with respect to a particular action, the settlement and an executed settlement and release agreement, the settlement amount with respect to such action will be disbursed to the plaintiff’s counsel. Under the settlement and release agreement with respect to a particular action, the Company will be released from any and all claims arising out of the applicable plaintiff’s care while the plaintiff was a resident of one of the Company’s facilities. Of the original 25 actions subject to the settlement in principle, the probate court approved settlements with respect to three of such actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of such subsequent to March 31, 2018.
In connection with the Coverage Litigation between the Company and the Company’s former commercial liability insurance provider regarding, among other things, the Company’s insurance coverage with respect to the 25 actions filed in the State of Arkansas, the former insurer and the Company entered into the Coverage Settlement Agreement on March 12, 2018, providing for, among other things, Insurance Settlement Amount by the former insurer in the amount of approximately $2.8 million, the dismissal with prejudice of the Coverage Litigation, a customary release of claims by the former insurer and the Company, and agreement that that the former insurer has exhausted the policies’ respective limits of liability and has no further obligations under the policies. Pursuant to the Coverage Settlement Agreement: (i) on March 16, 2018, the former insurer deposited the Insurance Settlement Amount into the trust account of the mediator with respect to the 25 actions; and (ii) on March 20, 2018, the former insurer and the Company caused the Coverage Litigation, including the counterclaim, to be dismissed with prejudice.
Assuming, and subject to, the approval by the probate court of the settlement of each of the original 25 actions filed in the State of Arkansas and related matters, and the satisfaction of the other conditions with respect thereto, the Company will pay, net of the Insurance Settlement Amount, an aggregate of approximately $2.4 million in settlement of such actions. The probate court approved settlements with respect to three of the 25 Arkansas actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of the 25 Arkansas actions after March 31, 2018, and approximately $0.5 million and $3.3 million, respectively, was paid from the mediator’s trust account in such settlements. The Company gives no assurance that the probate court will approve the settlement of the remaining 7 Arkansas actions pending approval or that the other conditions to such settlements will be satisfied, or that such actions will be settled on the terms described herein or at all.
In the first quarter of 2018, the Company settled four previously disclosed professional and general liability actions (other than those subject to mediation settlement agreements as discussed above) for the total of $670,000. A majority of the settlements include payment terms greater than one year.
The Company has self-insured against professional and general liability claims since it discontinued its healthcare operations. The Company established a self-insurance reserve for these professional and general liability claims, included within “Accrued expenses and other” in the Company’s unaudited consolidated balance sheets of $6.7$2.4 million and $6.9$5.1 million at September 30, 2017,March 31, 2018, and December 31, 2016,2017, respectively. The decreaseAdditionally, as of March 31, 2018, and December 31, 2017, $0.1 and $0.2 million respectively, was reserved for settlement amounts in “Other liabilities”, and $0.6 and $0.5 million in “Accounts payable” in the reserve at September 30, 2017 primarily reflects the legal costs and associated settlement amounts paid.Company’s consolidated balance sheets, respectively. For additional information regarding the Company’s self-insurance reserve, see Part II, Item 8, Notes to Consolidated Financial Statements,Note 15 -– Commitments and Contingencies included in the Annual Report.
The Pavilion Care Center, LLC, Hearth & Home of Greenfield, LLC (each a subsidiaryCompany believes that most of the Company),professional and certain other parties (including parties for which the Company provides or provided management services). The lawsuit alleges that defendants submitted improper Medicaid claims for independent laboratory services for glucose blood tests and capillary blood draws and further alleges that defendants (i) engaged in deception, (ii) willfully received Medicaid payments to which they were not entitled or in a greater amount than that to which they were entitled, and (iii) obtained payments under the Medicaid program to which they were not entitled pursuant to their provider agreements and applicable Medicaid rules and regulations. The OAG is seeking, among other things, triple the amount of damages proven at trial (plus interest) and not less than $5,000 and not more than $10,000 for each deceptive claim or falsification. As previously disclosed, the Company received a letter from the OAG in February 2014 demanding repayment of allegedly improper Medicaid claims related to glucose blood tests and capillary blood draws and penalties of approximately $1.0 million, and the Company responded to such letter in July 2014 denying all claims. The Company filed an answer to the complaint on January 27, 2017 in which it denied the allegations. An order granting a motion to stay this proceeding was granted in the Court of Common Pleas, Franklin County, Ohio on July 12, 2017. Although there is no assurance as to the ultimate outcome of this matter or its impact on the Company’s business or its financial condition, the Company believes it has meritorious defensesgeneral liability actions are defensible and intends to vigorously defend them through final judgement unless settlement is more advantageous to the claim.
Aria Avoidance Claims. On March 28, 2018, the Chapter 7 bankruptcy trustee in the Aria bankruptcy proceeding, see Note 15 -
We depend on affiliates of C.R Management and Beacon Health Management for a significant portion of our key management personnel, we may not be ablerevenues and any inability or unwillingness by such entities to successfully manage our business or achieve our objectives, whichsatisfy their obligations to us could have a material adverse effect on our business, financial condition, resultsus.
Our 27 properties (excluding the three facilities that are managed by us) are operated by a total of operations and prospects.
Although we are currently in negotiations with suitably qualified replacement operators to take possession of the five Ohio facilities on July 1, 2018, there is no assurance that we will be disruptiveable to execute new leases with respect to such facilities on substantially equivalent terms to the sublease agreements for such facilities which we entered into with the Ohio Beacon affiliates or cause uncertainty in,at all or that, if new leases are executed, the Company’s business,new tenants will be able to take possession of such facilities on July 1, 2018. We intend to enforce our rights under the sublease agreements for such facilities which we entered into with the Ohio Beacon affiliates and pursue all remedies available to us under such sublease agreements and applicable law.
We cannot assure you that the tenants affiliated with C.R Management and Beacon will have sufficient assets, income and access to financing to enable them to make rental payments to us or to otherwise satisfy their obligations under the applicable leases and subleases, and any additional changesinability or unwillingness by such tenants to the executive management team could have a negative impact on the Company’s ability to manage and grow its business effectively. Any such disruption or uncertainty or difficulty in efficiently and effectively filling key rolesdo so could have a material adverse effect on our business,us.
We depend on Pinecone not to call the entire principal balance, plus interest and fees of the Pinecone Credit Facility in the event the Company is unable to comply with all benchmarks as outlined in the Forbearance Agreement.
On May 10, 2018, management was notified by one of the Company’s lenders, Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility. Management also informed Pinecone that the Company had failed to meet one of its financial condition,covenant obligations, the minimum fixed charge coverage ratio, as outlined in the loan agreement to the Pinecone Credit Facility for the period ended March 31, 2018.
In order to alleviate such defaults, on May 18, 2018, the Company entered into a forbearance agreement with Pinecone (the “Forbearance Agreement”), in which, Pinecone provides a timeline and a number of remedies available to cure all default items and to regain compliance under the Pinecone Credit Facility. The forbearance period is from May 18, 2018, the date of the execution of the Forbearance Agreement, to July 20, 2018, during which time, the Company must comply with all benchmarks as outlined in the Forbearance Agreement. Management believes that the overall plan of correction as outlined in the Forbearance Agreement is achievable, however many of the benchmarks, as articulated in the Forbearance Agreement, fall outside of the control of management, and if the Company is unable to satisfy the requirements as outlined, then one of the remedies available to Pinecone is that the entire principal balance of the Pinecone Credit Facility, plus interest and fees, will become immediately due and payable, indicating that substantial doubt exists about whether or not the Company will be able to continue as a going concern within one year after the date that the financial statements are issued.
There can be no assurance that the Company will be able to cure all of the deficiencies as listed in the Forbearance Agreement or that the Company will be able to continue to comply with all of the various covenants as required by the loan agreement of the Pinecone Credit Facility. The Company’s ability to cure its non-compliance with the Pinecone Credit Facility depends, in part, on its ability to work with outside parties, which is not within the Company’s exclusive control. If Pinecone were to call the balance of the Pinecone Credit Facility for any reason, and the Company were unable to cure such deficiency, it could have a material adverse consequence on the Company’s ability to meet its obligations arising within one year of the date of issuance of these financial statements. The Company plans to continue to undertake measures to refinance certain loans and to streamline its cost infrastructure. But due to the inherent risks, unknown results and significant uncertainties associated with each of operationsthese matters and prospects.
For a detailed description of certain risk factors that could affect our business, operations and financial condition, see Part I, “ItemItem 1A., Risk Factors” of Factors, included in the Annual Report. The risk factors described in the Annual Report and this Quarterly Report. The risk factors described in the Annual Report (“Risk Factors”) do not describe all risks applicable to our business, and we intend it only as a summary of certain material factors. The Risk Factors should be considered in connection with evaluating the forward-looking statements contained in this Quarterly Report because the Risk Factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of the common stock and Series A Preferred Stock could continue to decline.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
The Board suspended dividend payments with respect to the Series A Preferred Stock for the fourth quarter 2017 and the first quarter 2018 dividend periods, and no dividends were declared or paid with respect to the Series A Preferred Stock for such dividend periods. As a result of such suspension, the Company has $3.8 million of undeclared preferred stock dividends in arrears with respect to the Series A Preferred Stock as of the date of filing of this Quarterly Report. See Note 11– Common and Preferred Stock – “Preferred Stock Offerings and Dividends”, to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 3. Defaults upon Senior Securities.
Not applicable.
Pursuant to the Forbearance Agreement, the Company and subsequently amended, without registrationPinecone agreed to amend certain provisions of the Pinecone Credit Facility. Such amendments, among other things: (i) eliminate the Company’s obligation to complete the Lease Assignments; (ii) require the payment of a specified “break-up fee” upon certain events, including prepayment of the Pinecone Credit Facility or a change of control; (iii) increase the ongoing interest rate from 12.5% per annum to 13.5% per annum; and (iv) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%.
Pursuant to the Forbearance Agreement, the New Guarantor entered into a guaranty agreement for the benefit of Pinecone, pursuant to which the New Guarantor agreed to guarantee the obligations of the borrowers under the Securities ActPinecone Credit Facility. In connection therewith, the New Guarantor executed shall execute a pledge agreement in reliance uponfavor of Pinecone, pursuant to which the private placement exemption set forthNew Guarantor pledged the equity interests in Section 4(a)(2)the New Guarantor’s subsidiaries as security for the New Guarantor’s obligations under such guaranty.
The Forbearance Agreement outlines a plan of correction whereby the Company may regain compliance under the Pinecone Credit Facility during the Forbearance Period. Among other things, the Company is required to complete certain post-closing actions required under the Pinecone Credit Facility no later than June 4, 2018 and to hire a consultant, acceptable to Pinecone and the Company, to advise management on operational improvements and to assist in coordinating overall company strategy. The Company is also required to obtain Pinecone’s prior written consent prior to paying dividends on the Series A Preferred Stock and to increase the outstanding principal balance of the Securities Act, based upon CAM’s status as an accredited investor, representations madePinecone Credit Facility by CAM,2.5%. For additional information regarding the isolated natureCompany’s liquidity, see Note 3 – Liquidity and Note15 – Subsequent Events, to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of the transaction and that the transaction did not involve a public offering. The promissory note may be converted to 352,941 shares of common stock at a conversion price of $4.25 at the option of the holder.
The agreements included as exhibits to this Quarterly Report are included to provide information regarding the terms of these agreements and are not intended to provide any other factual or disclosure information about the Company, its business or the other parties to these agreements. These agreements may contain representations and warranties by each of the parties to the
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon by investors.
Exhibit No. | Description | Method of Filing | ||
3.1 | ||||
Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017 | Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017 | |||
3.2 | Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017 | |||
3.3 | Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 | Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017 | ||
4.1 | Form of Common Stock Certificate of Regional Health Properties, Inc. | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017 | ||
4.2 | Description of Regional Health Properties, Inc. Capital Stock | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017 | ||
4.3* | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | |||
4.4* | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | |||
4.5* | Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | |||
4.6* | Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | |||
4.7 | Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3 (File No. 333-175541) | |||
4.8 | Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 | |||
4.9 | Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014 | |||
4.10 | Incorporated by reference to Exhibit 10.23.2 of the Registrant’s Annual Report on Form 10-KSB as amended March 31, 2008 | |||
Exhibit No. | Description | Method of Filing | ||
Incorporated by reference to Exhibit |
2017 | ||||
10.2 | Incorporated by reference to Exhibit | |||
10.3 | Incorporated by reference to Exhibit | |||
10.4 | Incorporated by reference to Exhibit | |||
10.5 | ||||
| ||||
Incorporated by reference to Exhibit | ||||
10.6 | Incorporated by reference to Exhibit 10.429 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017 | |||
10.7 | Incorporated by reference to Exhibit | |||
10.8 | ||||
Filed herewith | ||||
10.9 | ||||
Third Amendment to Bank. | Filed herewith | |||
10.10 | ||||
Filed herewith | ||||
10.11 | Filed herewith | |||
10.12 | Filed herewith |
Exhibit No. | Description | Method of Filing | ||
31.1 | ||||
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | |||
31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
32.1 | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
32.2 | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
101 | The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended | Filed herewith |
* | Identifies a management contract or compensatory plan or arrangement |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
REGIONAL HEALTH PROPERTIES, INC. | ||||
(Registrant) | ||||
Date: | May 21, 2018 | /s/ Brent Morrison | ||
Brent Morrison | ||||
Interim Chief Executive Officer and Director (Principal Executive Officer) | ||||
Date: | May 21, 2018 | /s/ E. Clinton Cain | ||
E. Clinton Cain | ||||
Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer |
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