SEC Comment Letter for REGIONAL HEALTH PROPERTIES, INC (RHEP, RHEPA, RHEPB, RHEPZ) (CIK 0001004724) (RHEP) — Sep 15, 2015
REGIONAL HEALTH PROPERTIES, INC (RHEP, RHEPA, RHEPB, RHEPZ) (CIK 0001004724)
Date: Sept. 15, 2015 · CIK: 0001004724 · Accession: 0000000000-15-045714
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-33135
Letter
Mail Stop 3720 September 15, 2015 Mr. Allan Rimland President and Chief Financial Officer Adcare Health Systems, Inc. Two Buckhead Plaza 3050 Peachtree Road NW Suite 355 Atlanta, GA 30305
Re: Adcare Health Systems, Inc. Form 10 -K for Fiscal Year Ended December 31, 2014 Filed March 31, 2015 Form 10 -Q for Fiscal Quarter Ended June 30, 2015 Filed August 13, 2015 File No. 001-33135
Dear Mr. Rimland :
We have limited our review of your filing to the financial statements and related disclosures and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to these comments with in ten business days by providing the requested information or advise us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.
After reviewing your resp onse to these comments, we may have additional comments.
Description of Business, page 80 Intangible Assets and Goodwill, page 84 Note 6. Intangible Assets and Goodwill, page 92
1. We note that separable bed licenses (indefinite lived intangibl e assets) and goodwill balances were $2.5 million and $4.2 million, respectively, for 2014 and 2013. Per your strategic plan, you will transition from an owner/ manager/ operator of skilled nursing and assisted living facilities to a healthcare property h olding and leasing company.
Mr. Allan Rimland Adcare Health Systems, Inc. September 15, 2015 Page 2
Please tell us the following:
How you considered the impact of such business restructuring on the recoverability of separable bed licenses (indefinite lived intangible assets) and goodwill when you performed your annual impairment test during the fourth quarter of 2014. We note that y ou had acquired such assets and goodwill under your prior business model;
Why you have not allocated goodwill to discontinued operations; and
Whether you expect to continue operating health care facilities in states where the bed licenses are non -transfe rable (not separable from the facilities) or what your continuing involvement will be with the third party operator/ subles see. Include in your response, the nature of your involvement in maintaining the bed licenses that are required to operate the relate d facilities that you have sublet . We note that the change in carrying amount ($33 million at 2014) arose primarily from amortization and that there was no significant allocation to discontinued operations.
Form 10 -Q for Fiscal Quarter Ended June 30 2015
Cash Requirements, page 13 Liquidity and Capital Resources, page 44
2. We note that you have approximately $55 million of debt maturities due between 2015 and 2016 as presented on pages 20 and 21. You disclose that you "routinely have ongoing discussions with existing and potential new lenders to refinance current debt on a longer term basis.” Considering your limited borrowing capacity in your line of credit facilities and your non -compliance with debt covenants related to other credit instruments, plea se explain in greater detail how you expect to refinance your debt under favorable terms or expand borrowing arrangements with certain lenders. If, based on your recent actions, you are more likely to rely on private placements of preferred stock in the f uture, please address your ability to continue paying dividends on both common and preferred shares in addition to your debt obligations as they come due.
Leased and Subleased Facilities to Third -Party Operators, page 48
3. We note the significant differen ce between your future minimum lease receivables under your subleases and your future minimum lease payments under your Master Lease as presented hereunder. Please tell us whether your future minimum lease receivables include any consideration other than sublease of the facilities (i.e., profit -sharing or shared services). If so, tell us the nature of the consideration. Additionally, disclose any rents assigned to certain of your lenders if included in such receivables. We note your disclosure on page 2 3.
Mr. Allan Rimland Adcare Health Systems, Inc. September 15, 2015 Page 3
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In responding to our comments, please provide a written statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with re spect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
You may contact Kathryn Jacobson, Senior Staff Accountant at (202) 551 -3365 or Dean Suehiro, Senior Staff Accountant at (202) 551 -3384 or me at (202) 551 -3810 with any questions.
Sincerely,
/s/ Robert S. Littlep age, for
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Mail Stop 3720 September 15, 2015 Mr. Allan Rimland President and Chief Financial Officer Adcare Health Systems, Inc. Two Buckhead Plaza 3050 Peachtree Road NW Suite 355 Atlanta, GA 30305 Re: Adcare Health Systems, Inc. Form 10 -K for Fiscal Year Ended December 31, 2014 Filed March 31, 2015 Form 10 -Q for Fiscal Quarter Ended June 30, 2015 Filed August 13, 2015 File No. 001-33135 Dear Mr. Rimland : We have limited our review of your filing to the financial statements and related disclosures and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to these comments with in ten business days by providing the requested information or advise us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response. After reviewing your resp onse to these comments, we may have additional comments. Description of Business, page 80 Intangible Assets and Goodwill, page 84 Note 6. Intangible Assets and Goodwill, page 92 1. We note that separable bed licenses (indefinite lived intangibl e assets) and goodwill balances were $2.5 million and $4.2 million, respectively, for 2014 and 2013. Per your strategic plan, you will transition from an owner/ manager/ operator of skilled nursing and assisted living facilities to a healthcare property h olding and leasing company. Mr. Allan Rimland Adcare Health Systems, Inc. September 15, 2015 Page 2 Please tell us the following: How you considered the impact of such business restructuring on the recoverability of separable bed licenses (indefinite lived intangible assets) and goodwill when you performed your annual impairment test during the fourth quarter of 2014. We note that y ou had acquired such assets and goodwill under your prior business model; Why you have not allocated goodwill to discontinued operations; and Whether you expect to continue operating health care facilities in states where the bed licenses are non -transfe rable (not separable from the facilities) or what your continuing involvement will be with the third party operator/ subles see. Include in your response, the nature of your involvement in maintaining the bed licenses that are required to operate the relate d facilities that you have sublet . We note that the change in carrying amount ($33 million at 2014) arose primarily from amortization and that there was no significant allocation to discontinued operations. Form 10 -Q for Fiscal Quarter Ended June 30 2015 Cash Requirements, page 13 Liquidity and Capital Resources, page 44 2. We note that you have approximately $55 million of debt maturities due between 2015 and 2016 as presented on pages 20 and 21. You disclose that you "routinely have ongoing discussions with existing and potential new lenders to refinance current debt on a longer term basis.” Considering your limited borrowing capacity in your line of credit facilities and your non -compliance with debt covenants related to other credit instruments, plea se explain in greater detail how you expect to refinance your debt under favorable terms or expand borrowing arrangements with certain lenders. If, based on your recent actions, you are more likely to rely on private placements of preferred stock in the f uture, please address your ability to continue paying dividends on both common and preferred shares in addition to your debt obligations as they come due. Leased and Subleased Facilities to Third -Party Operators, page 48 3. We note the significant differen ce between your future minimum lease receivables under your subleases and your future minimum lease payments under your Master Lease as presented hereunder. Please tell us whether your future minimum lease receivables include any consideration other than sublease of the facilities (i.e., profit -sharing or shared services). If so, tell us the nature of the consideration. Additionally, disclose any rents assigned to certain of your lenders if included in such receivables. We note your disclosure on page 2 3. Mr. Allan Rimland Adcare Health Systems, Inc. September 15, 2015 Page 3 We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In responding to our comments, please provide a written statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with re spect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. You may contact Kathryn Jacobson, Senior Staff Accountant at (202) 551 -3365 or Dean Suehiro, Senior Staff Accountant at (202) 551 -3384 or me at (202) 551 -3810 with any questions. Sincerely, /s/ Robert S. Littlep age, for Carlos Pacho Senior Assistant Chief Accountant AD Office 11 – Telecommunications