XML 66 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2012
SUBSEQUENT EVENTS  
SUBSEQUENT EVENTS

NOTE 16. SUBSEQUENT EVENTS

 

Self-Insurance

 

Effective October 1, 2012, the Company began providing self-insured medical healthcare benefits to employees.  To protect itself against loss exposure with this policy, the Company has purchased individual stop-loss insurance coverage that insures individual claims that exceed $0.2 million for each covered person per year with an aggregate annual stop-loss level of approximately $7.5 million. In addition, the Company entered into a large deductible worker’s compensation plan for the majority of its employees with a $0.3 million deductible limit for each occurrence with an aggregate limit of approximately $6.5 million.

 

Oklahoma (Harty) PSA Amendment

 

On October 8, 2012, a wholly owned subsidiary of AdCare amended the Purchase and Sale Agreement, dated May 5, 2011, and as subsequently amended and assigned pursuant to which the Company would acquire five skilled nursing facilities located in Oklahoma.  The amendment extends the closing date to 60 days after AdCare receives all required licenses and permits necessary to complete the purchase but by no later than November 30, 2012.  In consideration for extending the closing date, the Company agrees to pay certain real estate taxes and assessments relating to the facilities in Oklahoma for fiscal year 2011 (which the seller represents to total approximately $0.2 million)  and fiscal year 2012.

 

On October 12, 2012, the Company executed an Assignment of Purchase and Sale Agreement in favor of the Edwards Assignees, pursuant to which AdCare assigns all of its right to purchase the Edwards Redeemer Nursing Center located in Oklahoma under that certain Purchase and Sale Agreement, dated May 5, 2011 and as subsequently amended and assigned. The Edwards Assignees have agreed to assume all obligations of AdCare under the Purchase and Sale Agreement with respect to the Edwards Redeemer Nursing Center facility, including reimbursement for out-of-pocket costs.  AdCare Holdings, the owner of all of the issued and outstanding membership interests of Edward Redeemer (a wholly owned subsidiary of the Company) also has executed a Membership Interest Power pursuant to which it assigns all such interests to Chris Brogdon, the Company’s Vice Chairman.

 

The Company also executed an Assignment of Purchase and Sale Agreement in favor of WP Oklahoma Nursing, LLC, an entity owned and controlled by Mr. Brogdon, pursuant to which the Company assigns all of its right to purchase the Whispering Pines Nursing Center located in Oklahoma under the Purchase and Sale Agreement, dated May 5, 2011 and as subsequently amended and assigned.  WP Oklahoma Nursing, LLC has agreed to assume all obligations of the Company under the Oklahoma Facilities Purchase Agreement with respect to the WP Facility.

 

Ohio ALFs Sale

 

On October 11, 2012, the Company and certain subsidiaries entered into an Agreement of Sale with CHP Acquisition Company, LLC (“CHP”) pursuant to which the Company may sell certain land, buildings, improvements, furniture, fixtures, operating agreements and equipment comprising the following six assisted living facilities: Community’s Hearth & Home located in Springfield, Ohio; Community’s Hearth & Home also located in Springfield, Ohio; Hearth & Home of Van Wert located in Van Wert, Ohio; Community’s Hearth & Home located in Urbana, Ohio; Hearth & Home of Vandalia located in Vandalia, Ohio; and Lincoln Lodge Retirement Residence located in Columbus, Ohio (collectively, the “Ohio ALFs”), for an aggregate purchase price of approximately $22.3 million, subject to the terms and conditions of the Agreement of Sale.

 

The purchase price consists of: (i) $0.2 million to be deposited by CHP into escrow to be held as earnest money (the “Deposit”); (ii) CHP’s satisfaction of the principal balance of United States Department of Housing and Urban Development (“HUD”) loans for certain of the Ohio ALFs (the “HUD Loan Payoff”); (iii) CHP’s assumption of a HUD loan secured by one of the Ohio ALFs (the “HUD Loan Assumption”); (iv) a promissory note issued by CHP to the Company in the amount of $3.6 million (the “CHP Promissory Note”); and (v) cash consideration in an amount equal to the purchase price minus the amount of the Deposit, the HUD Loan Payoff, the HUD Loan Assumption and the CHP Promissory Note.  The Company estimates that the cash consideration to be received at closing would be approximately $6.7 million.

 

The closing of the Ohio ALFs Sale may take place at any such time as mutually agreed upon by the Company and CHP, but in no event later than December 31, 2012, unless such closing date has been extended by mutual agreement of the Company and CHP.  The closing of the Ohio ALFs Sale is subject to customary closing conditions, indemnification provisions and termination provisions.

 

At September 30, 2012, the Company did not meet the criteria to classify the Ohio ALFs as held for sale or to present the related operations as discontinued operations because management, although having the authority to approve the action had not yet committed to sell the assets, there was no active plan to locate a buyer was and the disposal of the Ohio ALFs probable.  Therefore, the related assets and liabilities of the Ohio ALFs were classified as held and used at September 30, 2012.  The major assets that will be held as part of the disposal group include the property and equipment with a carrying value of approximately $12.0 million and the liabilities that are expected to be extinguished consisting of debt was approximately $11.5 million at September 30, 2012. There are no indications of potential impairment of assets.

 

PrivateBank Credit Facility Amendment

 

On October 26, 2012, the Company and certain of its wholly owned subsidiaries, on the one hand, and PrivateBank entered into a Modification Agreement which amends that certain Loan and Security Agreement, dated as of September 20, 2012, between certain of the Company’s wholly owned subsidiaries and PrivateBank.  The modification agreement amends the loan agreement to: (i) allow PrivateBank to issue additional letters of credit for the account of the borrowers under the loan agreement; and (ii) change the total amount that may be issued under any letters of credit to $2.5 million.  The modification agreement did not change the maximum amount that may be borrowed under the loan agreement by the borrowers, which remains at $10.6 million.

 

Georgetown PSA Amendment

 

On November 5, 2012, the Company amended its Purchase and Sale Agreement with Winyah Nursing Home, LLC relating to the acquisition of the Georgetown Healthcare & Rehabilitation Center, an 84-bed skilled nursing facility in Georgetown, South Carolina.  The amendment extends the closing date to December 27, 2012 and required the Company to deliver an additional $50,000 extension fee to the seller.

 

Preferred Stock

 

On November 7, 2012, the Company announced a “best efforts” public offering of 450,000 shares of its newly designated series of its preferred stock, designated as its 10.875% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”).  The Series A Preferred Stock is offered at $23 per share.  Subject to the closing of the offering and sale of the 450,000 shares of Series A Preferred Stock, the Company expects to receive net proceeds of approximately $9.3 million after deducting underwriting discounts and other offering-related expenses of approximately $1.1 million.