Regional Health Properties names interim CEO, CFO as legacy issues remain
Regional Health Properties named an interim CEO and interim chief financial officer after the third quarter ended and created a Strategic Finance Committee that will advise both of them as the self-managed healthcare real estate investment company addresses legacy issues and plots a course for its future.
“While we have not yet resolved the company's legacy matters, management is working diligently to come to a quick settlement while taking into consideration all costs incurred defending these matters,” Brent Morrison, a company director who was named interim CEO Oct. 18, said in a statement Thursday afternoon in advance of the company's third-quarter earnings call. “The determinations made by this select committee of the board will significantly influence future decisions, including the selection of permanent senior leadership and overall capital allocation.”
Morrison succeeds Allan Rimland, who in addition to the title of CEO held the titles of president and CFO and was a director. Rimland notified the company Oct. 15 that he was resigning for personal reasons, according to a filing with the Securities and Exchange Commission.
The former CEO previously identified the company's legacy issues as uncollected patient care accounts receivable and professional liability and general liability lawsuits. In the past two years, in addition to reorganizing and changing its name from AdCare Health Systems, the company faced its former vice chairman and chief acquisitions officer being charged with fraud, fell out of compliance with certain continued listing requirements in the New York Stock Exchange (and regained compliance Oct. 19) and fired its CEO for lying about his credentials.
Regional Health Properties has appointed E. Clinton Cain, currently the company's senior vice president, chief accounting officer and controller, to serve as interim CFO. The company has launched searches for people to fill the CEO and CFO roles permanently. Cain is being considered for the CFO position, the company said.
The company's earnings per share in the third quarter were -$0.13, and revenue of $6.3 million was down 12.5% year over year.
To relieve cash flow constraints, Regional Health Properties also announced that it will suspend quarterly dividend on Series A Preferred Stock beginning in the fourth quarter.
“The dividend suspension will allow the company to pay outstanding vendors and fund ongoing legal expenses and settlement payments,” Morrison said. “Furthermore, the dividend suspension does not trigger a default under its outstanding indebtedness.”
Morrison said the board will consider reinstating the dividend payment at its first-quarter 2018 meeting.
Occupancy and skilled mix for the company's portfolio were 84% and 28.8% for the third quarter, respectively, compared with 82.6% and 23.7% for the third quarter of 2016, respectively.
“The underlying performance metrics of our operators remains strong, with continued year-over-year improvements in key operating metrics such as occupancy and mix, providing an encouraging underpinning for the company and its portfolio,” Morrison said. “However, a modest decline in rent coverage ratios was observed for the current quarter when compared to the year-over-year quarter, caused, in part, by flat facility profitability compared to escalating rent payments.”
The company will focus on resolving existing issues so its focus can return to owning and acquiring healthcare real estate facilities, he added.