AdCare Health Systems, Inc. Reports 2009 Third Quarter Earnings Results; Third Consecutive Profitable Quarter

SPRINGFIELD, Ohio, Nov. 16 /PRNewswire-FirstCall/ -- AdCare Health Systems, Inc. (NYSE AMEX: ADK), an Ohio based long term care, home care and management company, today reported financial results for its third quarter of 2009.

Revenues for the quarter ended September 30, 2009 were $6,909,499 as compared to $6,185,760 for the same quarter in 2008, an increase of $723,739. The increase was mostly due to better occupancy at our skilled nursing centers and improved revenues at our home health care provider. Also, there was an increase in the number of patients covered by Medicare at our nursing centers as well as covered for services provided by our home health care agency.

The net income attributable to AdCare Health Systems for the quarter ended September 30, 2009 was $200,017 as compared to a loss of $664,449 for the third quarter ended September 30, 2008, an improvement of $864,466. Basic and diluted net income per share for the quarter ended September 30, 2009 was $0.05 as compared to a basic and diluted net loss per share of ($0.18) for the same quarter ended September 30, 2008, an improvement of $0.23 per share.

Revenues for the nine-months ended September 30, 2009 were $19,907,515 as compared to $18,194,838 for the same period in 2008, an increase of $1,712,677. Net income attributable to AdCare Health Systems for the nine-months ended September 30, 2009 was $442,932 as compared to a loss of $780,595 for the same period in 2008, an improvement of $1,223,527. The increase was again mostly due to better occupancy at our skilled nursing centers and improved revenues at our home health care division together with servicing more Medicare patients. The significant improvement in net income would have been higher without the $413,954 gain on the acquisition of the Lincoln Lodge in the second quarter of 2008. Basic and diluted net income per share for the nine-months ended September 30, 2009 was $0.12 as compared to a basic and diluted net loss per share of ($0.21) for the same nine-months period ended September 30, 2008, an improvement of $0.33 per share.

David A. Tenwick, Chairman of AdCare, stated that "all the hard work since becoming a public company is starting to pay off with three consecutive profitable quarters. We have been able to increase revenues and occupancy at several of our facilities, control expenses in this difficult economic environment; and at the same time, maintain our commitment to be the provider of choice in the areas we serve by providing quality care." He continued, "Our financial performance continues to improve with income from operations for the first nine months of 2009, increasing to $1,429,701 from a loss of $131,766 for the same period last year. In addition, we continued to improve our working capital position by $919,020, since the end of 2008 with current assets now $378,998 more than current liabilities." He added that "AdCare is now focusing on acquisition opportunities in the health care field that will expand our operations, and is confident that Chris Brogdon, recently appointed Chief Acquisition Officer, will be able to accelerate this expansion through his efforts to locate and assist in funding selective acquisitions of nursing homes and assisted living facilities."

On November 10, 2009, AdCare refinanced its 30-unit assisted living facility located in Van Wert, Ohio. AdCare was the developer and is the owner and manager of the property. Red Mortgage Capital, Inc., as FHA/LEAN lender, processed and funded the total $2,181,200 Section 232/223(f) refinancing at an annual interest rate of 5.1% for a period of 35 years. The Company now has long term, fixed rate HUD financing in place on all eight properties in which the Company has ownership interests.

About AdCare Health Systems, Inc.

AdCare Health Systems, Inc. (NYSE AMEX: ADK) develops, owns and manages assisted living facilities, nursing homes and retirement communities and provides home health care services. Prior to becoming a publicly traded company in November of 2006, AdCare operated as a private company for 18 years. AdCare's 900 employees provide management, development and accounting/financial services to 20 long term care facilities, nine of which are assisted living facilities, ten skilled nursing centers and one independent senior living community totaling over 1,400 beds. The Company has ownership interests in eight of those facilities. In the ever expanding marketplace of long term care, AdCare's mission is to provide quality healthcare services to the elderly.

Safe Harbor Statement

Statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of federal law. Such forward-looking statements reflect management's beliefs and assumptions and are based on information currently available to management. The forward-looking statements involve known and unknown risks, results, performance or achievements of the Company to differ materially from those expressed or implied in such statements. Such factors are identified in the public filings made by the Company with the Securities and Exchange Commission and include the Company's ability to secure lines of credit and/or an acquisition credit facility, find suitable acquisition properties at favorable terms, changes in the health care industry because of political and economic influences, changes in regulations governing the industry, changes in reimbursement levels including those under the Medicare and Medicaid programs and changes in the competitive marketplace. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.

www.adcarehealth.com

                           ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEET

                                               September 30,  December 31,
                                                       2009          2008
                                                       ----          ----
                             ASSETS                (Unaudited)
                             ------
    Current Assets:
      Cash                                          $2,031,370    $1,266,315
      Accounts receivable:
         Long-term care resident receivables, net    2,019,183     2,008,847
         Management, consulting and
          development receivables, net                 114,433       258,811
         Advances and receivables from affiliates       37,638        17,635
      Prepaid expenses and other                       434,965       478,534
                                                     ---------     ---------
               Total current assets                  4,637,589     4,030,142
                                                     ---------     ---------

      Restricted cash                                1,107,646     1,155,596
      Property and equipment, net                   16,447,215    16,772,660
      License, net                                   1,189,307     1,189,307
      Goodwill                                       2,679,482     2,679,482
      Other assets                                     916,687     1,012,340
                                                    ----------    ----------
               Total assets                        $26,977,926   $26,839,527
                                                   ===========   ===========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
                         ------------------------------------
      Current Liabilities:
         Current portion of notes payable
          and other debt                              $663,078      $713,323
         Current portion of notes
          payable to stockholder                         9,432         9,432
         Accounts payable                              722,606     1,009,002
         Accrued expenses                            2,863,475     2,838,407
                                                     ---------     ---------
               Total current liabilities             4,258,591     4,570,164
                                                     ---------     ---------

      Notes payable and other debt,
       net of current portion                       16,498,924    16,974,788
      Notes payable to stockholder,
       net of current portion                           28,748        34,626
      Other liabilities                                570,690       299,314
      Income tax payable                               201,932       170,007
                                                    ----------    ----------
            Total liabilities                       21,558,885    22,048,899

      Stockholders' equity:
         Preferred stock, no par value; 500,000
          shares authorized; no shares
          issued or outstanding                              -             -
         Common stock and additional paid-in capital,
          no par value; 14,500,000 shares authorized;
          3,786,129 shares issued and outstanding   14,933,652    14,766,967
         Accumulated deficit                        (9,802,600)  (10,245,532)
                                                    ----------  ------------
            Total stockholders' equity               5,131,052     4,521,435
         Noncontrolling interest in subsidiaries       287,989       269,193
                                                     ---------     ---------
            Total equity                             5,419,041     4,790,628
                                                    ----------    ----------
            Total liabilities and stockholders'
             equity                                $26,977,926   $26,839,527
                                                   ===========   ===========

                    See notes to consolidated financial statements

                           ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (Unaudited)

                             Three-Months Ended           Nine-Months Ended
                                September 30,              September 30,
                                -------------              -------------
                             2009          2008         2009          2008
                             ----          ----         ----          ----
     Revenues:
      Patient care
       revenues           $6,434,186   $5,731,938   $18,513,767   $16,874,113
      Management,
       consulting and
       development
       fee revenue           475,313      453,822     1,393,748     1,320,725
                           ---------    ---------     ---------     ---------
       Total revenue       6,909,499    6,185,760    19,907,515    18,194,838
                           ---------    ---------    ----------    ----------

     Expenses:
      Payroll and related
       payroll costs       3,929,280    4,162,908    11,376,737    11,447,782
      Other operating
       expenses            2,250,032    2,086,919     6,418,118     6,223,303
      Depreciation and
       amortization          231,773      222,500       682,959       655,519
                           ---------    ---------    ----------    ----------
       Total expenses      6,411,085    6,472,327    18,477,814    18,326,604
                           ---------    ---------    ----------    ----------

     Income (Loss) from
      Operations             498,414     (286,567)    1,429,701      (131,766)
                             -------     --------     ---------       --------
     Other Income (Expense):
       Interest income           520        6,381         2,926        20,609
       Interest expense,
        others              (292,364)    (352,931)     (886,311)     (972,641)
       Interest expense,
        related parties         (489)     (14,598)       (1,717)      (43,044)
       Other expense          (1,622)           -       (50,946)            -
                              ------      -------       -------        -------
                            (293,955)    (361,148)     (936,048)     (995,076)
                            --------     --------      --------      --------

     Gain on Acquisition           -            -             -       413,954
                              ------      -------       -------       -------

     Income (Loss) Before
      Income Taxes           204,459     (647,715)      493,653      (712,888)
     Income Tax Expense      (10,641)     (10,641)      (31,925)      (31,925)
                             -------      -------       -------       -------
     Net Income (Loss)       193,818     (658,356)      461,728      (744,813)
     Net (Income) Loss
      Attributable to
      Noncontrolling
      Interests                6,199       (6,093)      (18,796)      (35,782)
                               -----        ------       -------       -------
     Net Income (Loss)
      Attributable to AdCare
      Health Systems        $200,017    $(664,449)     $442,932     $(780,595)
                            ========     ========      ========      ========

     Net  Income (Loss)
      Per Share, Basic:        $0.05       $(0.18)        $0.12        $(0.21)
                               =====        ======        =====         ======
     Net  Income (Loss)
      Per Share, Diluted:      $0.05       $(0.18)        $0.12        $(0.21)
                               =====        ======        =====         ======

     Weighted Average Common
      Shares Outstanding,
        Basic              3,786,129    3,786,129     3,786,129     3,786,129
                           =========    =========     =========     =========
        Diluted            3,998,789    3,786,129     3,998,789     3,786,129
                           =========    =========     =========     =========

                    See notes to consolidated financial statements.
                           ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Unaudited)
                                                        Nine-Months Ended
                                                          September 30,
                                                        2009          2008
                                                        ----          ----
    Cash flows from operating activities:
          Net income (loss) inclusive of
           noncontrolling interest                    $461,728     $(744,813)
          Adjustments to reconcile net income (loss)
           to net cash
           provided by operating activities:
            Depreciation and amortization              682,959       655,519
            Warrants issued for services                40,486        75,462
            Stock option compensation expense          120,776       243,948
            Note receivable forgiveness exchanged for
             rent                                            -         9,000
            Gain on acquisition                              -      (413,954)
            Changes in certain assets and liabilities:
                Accounts receivable                    114,039       321,298
                Prepaid expenses and other               3,830       (24,680)
                Other assets                            95,653      (121,132)
                Accounts payable and accrued expenses (261,328)      208,151
                Income tax liability                    31,925        31,925
                Other liabilities                      271,377       (88,317)
                                                       -------       -------
          Net cash provided by operating activities  1,561,445       152,407

     Cash flows from investing activities:
            Distribution to noncontrolling interest          -       (50,000)
            Proceeds from the sale of assets, net of
             associated costs                              892         2,500
            Increase in restricted cash                 47,950        77,639
            Restricted cash received upon acquisition
             of assets                                       -        19,813
            Assets transferred to noncontrolling
             interest upon acquisition                       -        (6,651)
            Purchase of property plant and equipment  (343,245)     (286,689)
                                                       --------      --------
          Net cash used in investing activities       (294,403)     (243,388)

     Cash flows from financing activities:
            Proceeds from notes payable                      -     2,287,127
            Stock issuance                              30,000             -
            Repayment of notes payable to stockholder   (5,878)     (760,000)
            Prepaid financing costs                          -       159,130
            Repayment of notes payable                (526,109)     (560,587)
                                                      --------      --------
          Net cash (used in) provided by financing
           activities                                 (501,987)    1,125,670

     Net Increase in Cash                              765,055     1,034,689
     Cash, Beginning                                 1,266,315       926,625
                                                     ---------       -------
     Cash, Ending                                   $2,031,370    $1,961,314
                                                    ==========    ==========

     Supplemental Disclosure of Cash Flow Information:
          Cash paid during the year for interest      $876,987      $855,030
                                                      ========      ========
     Supplemental Disclosure of Non-Cash Activities:
          Rent in exchange of note receivable
           repayment                                        $-        $9,000
                                                            ==        ======
          Acquisition of assets in exchange for note
           forgiveness                                      $-    $2,740,584
                                                            ==    ==========

                    See notes to consolidated financial statements.


SOURCE AdCare Health Systems, Inc.



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