AdCare (ADK) Sees Further Delay to 10-K Filing; Issues Prelim. FY12 Numbers

AdCare Health Systems, Inc. (AMEX: ADK) announced that the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2012, and the previously announced restatements of the Company's financial statements for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, will be delayed beyond April 16, 2013 (the extended filing deadline for the Form 10-K). The Company is also furnishing in this release preliminary unaudited: (a) consolidated balance sheet as of December 31, 2012; and (b) consolidated statement of operations for the quarters ended March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012 and the year ended December 31, 2012. As previously disclosed, the Audit Committee of the Company's Board of Directors, in consultation with management, concluded that the Company's previously issued financial statements for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 should no longer be relied upon due to errors in the financial statements which have been identified in connection with the audit of the Company's financial statements for the year ended December 31, 2012. The Audit Committee initiated a further review of, and inquiry with respect to, the accounting and financial issues related to these and other potential errors and engaged counsel to assist the Audit Committee with such matters. The Audit Committee has completed its inquiry, has assisted in the correction of certain errors relating to accounting and financial matters and has identified certain material weaknesses in the Company's internal control over financial reporting. These material weaknesses include, among other things, weakness in the Company's ability to appropriately account for complex or non-routine transactions and in the quality and sufficiency of the Company's finance and accounting resources. The Audit Committee intends to make recommendations to the Board of Directors to address such material weaknesses and its other findings. In light of the foregoing, Martin D. Brew resigned as the Company's Chief Financial Officer on April 15, 2013, and the Company has commenced a search for a new Chief Financial Officer. Mr. Brew will continue to serve the Company in an accounting and financial support role during the transition period. In addition, the Company has enhanced its engagement with GBQ Partners, LLC, a Columbus, Ohio based accounting and consulting firm, to assist the Company with accounting matters while it completes its search for a new Chief Financial Officer. The restatement process for the 2012 quarterly periods, and the audit of the Company's financial statements for the year end 2012, is ongoing. The most significant accounting matter which remains unresolved in connection with the restatement and the consolidated financial statements for the year ended December 31, 2012 is whether the Company should consolidate the results of the five entities which own the five skilled nursing facilities located in Oklahoma which are managed by the Company (known as the "Oklahoma Entities"). During the first three quarters of 2012, the Company recognized the Oklahoma Entities as "variable interest entities" and, accordingly, consolidated their results with the results of the Company. The Company's unaudited financial information accompanying this release includes the results of the Oklahoma Entities on a consolidated basis. If, in connection with finalizing the restatements and the consolidated financial statements for the year end December 31, 2012, the Company determines that the Oklahoma Entities should be not be recognized as variable interest entities and that their results should not be consolidated with the results of the Company, then certain financial information would change as follows: * Total revenues for the year ended December 31, 2012 would decline from $214.0 million to $201.7 million; * Net loss for the year ended December 31, 2012 would improve from a net loss of $7.1 million to a net loss of $5.7 million; * Total assets at December 31, 2012 would decrease from $248.5 million to $235.7 million; and * Total liabilities at December 31, 2012, which includes $13.0 million of funded debt related to the Oklahoma Entities, would decrease from $224.8 million to $209.9 million. *** The Street is currently looking for FY12 revs of $230.6 million and a loss of $0.06 per share. As part of the Company's strategy to focus on the growth of skilled nursing facilities, the Company decided in the fourth quarter of 2011 to exit the home health business. In furtherance of this strategy, in the fourth quarter of 2012, the Company entered into an agreement to sell six assisted living facilities located in Ohio and entered into a sublease arrangement to exit the operations of a leased skilled nursing facility in Jeffersonville, Georgia. The results of operations for the home health business, the six Ohio assisted living facilities and the Jeffersonville, Georgia leased skilled nursing facility are reported as discontinued operations in the accompanying consolidated statement of operations. Because the arrangements to sell the six Ohio assisted living facilities and exit the Jeffersonville facility were fourth quarter 2012 events, the Company's previously reported 2012 quarterly results reflected these facilities as continuing operations. Because the restatement process for the 2012 quarterly periods, the audit of the Company's financial statements for the year end 2012 and the Company's search for a new Chief Financial Officer are ongoing, the Company is not in a position to file its Form 10-K by April 16, 2013. The Company expects to restate its financial statements for the 2012 quarters, to file its Form 10-K and to file its Form 10-Q for the quarter ended March 31, 2013, by June 30, 2013. In connection with the restatement process and the Audit Committee review and inquiry, the Company has incurred and will continue to incur significant professional services costs which will be recognized in the first and second quarters of 2013.

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