SEC Comment Letter for REGIONAL HEALTH PROPERTIES, INC (RHEP, RHEPA, RHEPB, RHEPZ) (CIK 0001004724) (RHEP) — Oct 9, 2015
REGIONAL HEALTH PROPERTIES, INC (RHEP, RHEPA, RHEPB, RHEPZ) (CIK 0001004724)
Date: Oct. 9, 2015 · CIK: 0001004724 · Accession: 0000000000-15-049198
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-33135
Letter
Mail Stop 3720 October 9 , 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 Response Dated September 28, 2015 File No. 001-33135
Dear Mr. Rimland :
We have reviewed your September 28, 2015 response to our comment letter and have the following comments. Please comply with the following comments in future filings. Confirm in writing that you will do so and explain to us how you intend to comply. 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 within ten business days by providing the requested information or advise us as soon as possible when you wil l respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.
After reviewing your response to these comments, we may have additional comments.
Note 1. Intangible Assets an Goodwill, page 8 4 Note 6. Intangible Assets and Goodwill, page 92
1. We note your response to comment 1. Since the recorded goodwill is based on your previous business model, tell us if you would have recognized goodwill impairment under that model after you approved your strategic plan in July but prior to entering into leases or subleases thereafter. In addition, tell us why you continue to retain ownership of the goodwill related to the facilities you no longer operate and why such goodwill is
Mr. Allan Rimland Adcare Health Systems, Inc. October 9 , 2015 Page 2
not allocated to the relat ed discontinued facilities in determining your gain or loss from discontinued operations. Please refer to your basis in the accounting literature.
2. Additionally, in testing goodwill for impairment after entering into leases or subleases, you stated tha t the Company used the same analysis as the long -lived asset (LLA) testing to determine the recoverability of goodwill an d intangible lease rights, which entailed a projection of your “undiscounted future cash flows” as a holding entity after entering into leases or subleases. Tell us how your impairment testing complied with the guidance in ASC 350 -20-35-22 to 24.
Form 10 -Q for the Quarter Ended June 30, 2015 Cash Requirements, page s 13 and 45
3. In the last paragraph, you state, in part, that you seek to improve your operating results through a series of leasing and subleasing transactions with favorable terms and consistent and predictable cash flow. However, it appears that proceeds from your future minimum lease receivables as reported on page 17 , whic h could be further reduced by amounts assigned to your lenders, do not appear to be sufficient to cover your annual cost of operations nor the scheduled maturities of your long -term debt. Please discuss in more detail the measures you have undertaken to s treamline your operations and cost infrastructure in connection with your transition to a healthcare property holding and leasing and how such measures will allow you to realize consistent and predictable cash flows as compared to your prior skilled nursin g and assisted living facilities business. In addition, discuss whether or not you are on track with regards to your planned operating results and cash flows. If not, discuss the actions you are taking to meet your plans.
You may contact Kathryn Jacobs on, 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. Littlepage, for
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Mail Stop 3720 October 9 , 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 Response Dated September 28, 2015 File No. 001-33135 Dear Mr. Rimland : We have reviewed your September 28, 2015 response to our comment letter and have the following comments. Please comply with the following comments in future filings. Confirm in writing that you will do so and explain to us how you intend to comply. 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 within ten business days by providing the requested information or advise us as soon as possible when you wil l respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response. After reviewing your response to these comments, we may have additional comments. Note 1. Intangible Assets an Goodwill, page 8 4 Note 6. Intangible Assets and Goodwill, page 92 1. We note your response to comment 1. Since the recorded goodwill is based on your previous business model, tell us if you would have recognized goodwill impairment under that model after you approved your strategic plan in July but prior to entering into leases or subleases thereafter. In addition, tell us why you continue to retain ownership of the goodwill related to the facilities you no longer operate and why such goodwill is Mr. Allan Rimland Adcare Health Systems, Inc. October 9 , 2015 Page 2 not allocated to the relat ed discontinued facilities in determining your gain or loss from discontinued operations. Please refer to your basis in the accounting literature. 2. Additionally, in testing goodwill for impairment after entering into leases or subleases, you stated tha t the Company used the same analysis as the long -lived asset (LLA) testing to determine the recoverability of goodwill an d intangible lease rights, which entailed a projection of your “undiscounted future cash flows” as a holding entity after entering into leases or subleases. Tell us how your impairment testing complied with the guidance in ASC 350 -20-35-22 to 24. Form 10 -Q for the Quarter Ended June 30, 2015 Cash Requirements, page s 13 and 45 3. In the last paragraph, you state, in part, that you seek to improve your operating results through a series of leasing and subleasing transactions with favorable terms and consistent and predictable cash flow. However, it appears that proceeds from your future minimum lease receivables as reported on page 17 , whic h could be further reduced by amounts assigned to your lenders, do not appear to be sufficient to cover your annual cost of operations nor the scheduled maturities of your long -term debt. Please discuss in more detail the measures you have undertaken to s treamline your operations and cost infrastructure in connection with your transition to a healthcare property holding and leasing and how such measures will allow you to realize consistent and predictable cash flows as compared to your prior skilled nursin g and assisted living facilities business. In addition, discuss whether or not you are on track with regards to your planned operating results and cash flows. If not, discuss the actions you are taking to meet your plans. You may contact Kathryn Jacobs on, 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. Littlepage, for Carlos Pacho Senior Assistant Chief Accountant AD Office 11 – Telecommunications