AdCare Health Systems (ADK) Acquires Two Skilled Nursing Facilities in Oklahoma

SPRINGFIELD, OH — (Marketwire) — 03/15/12 — AdCare Health Systems, Inc. (NYSE Amex: ADK), a leading long-term care provider, has signed definitive purchase agreements for two skilled nursing facilities in Oklahoma for a total consideration of $11.6 million.

The facilities have an aggregate of 239 beds in service and generate an estimated $10.3 million in gross annualized revenues according to their most recent financial statements. The transaction is expected to be completed in the next 90 days. AdCare plans to finance the acquisition of the facilities with traditional bank loans.

“Including the two new acquisitions announced today, we have a total of 12 skilled nursing facilities we expect to close in established markets over the next 120 days,” said Boyd Gentry, AdCare’s president and chief executive officer. “Together, these facilities have existing estimated gross annualized revenues of $49.0 million, which is prior to our optimization process that we believe will increase sub-acute census and revenues.

“We are especially excited about the significant upside of our Arkansas expansion, which includes three Little Rock facilities. One of these is a recently fully renovated 157 bed facility that we will open exclusively as a sub-acute facility. Once fully optimized, this facility’s revenues are anticipated to exceed $15 million. This transaction is scheduled to close at the end of this month.”

AdCare’s M&A program is driven by management’s commitment to acquire, develop and manage facilities where it can leverage operational efficiencies and improve profitability — even in a more conservative Medicare environment. In line with this strategy, the company recently terminated an agreement to acquire or lease 15 skilled nursing facilities in South Carolina, North Carolina, Virginia, and Tennessee that was announced in June of last year, following further due-diligence and renegotiation efforts.

“AdCare will no longer pursue this acquisition as it has become significantly more expensive as consent negotiations with third-party landlords progressed,” continued Gentry. “Although we tried to negotiate suitable terms, we eventually decided it was in our best interest to focus on the other numerous acquisitions we have identified which could quickly take its place.”

The company plans to continue pursuing an aggressive M&A program throughout 2012, focused on acquiring facilities that fit within its optimization strategy and have the ability to increase the company’s overall Medicare census and patient acuity.

“Our pipeline of potential acquisitions is as robust as ever, and we are working on several opportunities for owned facilities that we expect to announce soon,” added Gentry. “All of these facilities are within our existing seven state footprints, where we can leverage our existing regional operations teams.”

Combining the company’s current annualized run-rate with transactions in the process of closing, AdCare’s estimated annualized revenue run-rate is expected to exceed $246 million. This would represent an increase of more than 62% over the company’s revenues in 2011, and an increase of more than 8 times revenues since initiating its M&A campaign in the fall of 2009.

“As our portfolio of skilled nursing facilities expands, we continue to focus on cost reduction strategies that improve margins going forward,” continued Gentry. “We recently lowered our contract therapy costs, are currently leveraging a GPO program for our medical supplies and food purchases, negotiating with pharmacy providers and are in the final stages of outsourcing a large part of our IT infrastructure. We estimate that when fully implemented these cost reduction initiatives will save $4 million annually.”

Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer, commented: “Today’s new signing brings the total number of facilities we’ve put under contract to 47 since we began our current M&A program. This transaction also increases the total number of facilities we’ve put under contract to 12 in Oklahoma. With our M&A program and the integration of new facilities remaining our major focus in 2012, we continue to evaluate a number of opportunities that fit our acquisition strategy. And we demonstrated today that we are willing to walk away from those transactions that we discover are not aligned with this strategy.”

About AdCare Health Systems
AdCare Health Systems, Inc. (NYSE Amex: ADK) is a recognized innovator in senior living and health care facility management. AdCare develops, owns and manages long-term care facilities and retirement communities, and since the company’s inception in 1988, its mission has been to provide the highest quality of healthcare services to the elderly, including a broad range of skilled nursing and sub-acute care services. For more information about AdCare, visit www.adcarehealth.com.

Important Cautions Regarding Forward-Looking Statements
Statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of federal law. Such statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “plans,” “intends,” “anticipates” and variations of such words or similar expressions, but their absence does not mean that the statement is not forward-looking. Statements in this announcement that are forward-looking include, but are not limited to, statements made by Mr. Gentry that the company expects better results, and statements by Mr. Brogdon that the company continues to expect its new facilities and those pending acquisitions to improve the company’s overall EBITDAR margin, as well as other statements regarding the signing and closing of expected acquisitions, and the company’s expected annualized run-rate. Such forward-looking statements reflect management’s beliefs and assumptions and are based upon information currently available to management and involve known and unknown risks, results, performance or achievements of AdCare, which may differ materially from those expressed or implied in such statements. Such factors are identified in the public filings made by AdCare with the Securities and Exchange Commission and include, among others, AdCare’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 health care 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. Except where required by law, AdCare undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.

In addition, facilities mentioned in this press release are operated by a separate, wholly owned, independent operating subsidiary that has its own management, employees and assets.

References to the consolidated company and its assets and activities, as well as the use of terms such as “we,” “us,” “our,” and similar verbiage, is not meant to imply that AdCare Health Systems, Inc. has direct operating assets, employees or revenue or that any of the facilities, the home health business or other related businesses are operated by the same entity.

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Company Contacts
Boyd Gentry, CEO
Chris Brogdon, Vice Chairman & CAO
David A. Tenwick, Chairman of Board
AdCare Health Systems, Inc.
Tel (937) 964-8974

Investor Relations
Ron Both or Geoffrey Plank
Liolios Group, Inc.
Tel (949) 574-3860