In 2010, 13 percent, or about 40.1 million, of the 308.7 million people in the United States were 65 years of age or older, according to the U.S. Census Bureau. That’s about 15 percent higher than the 35 million people in the same age bracket in 2000, which grew by 12 percent from the number in 1990. As baby boomers (people born between 1946 and 1964) continue to age, it is estimated that there should be a leveling point of about 20 percent of the total U.S. population being over age 65 by 2030, by the account of AgingStats.gov. As a result of better health management and treatments allowing people to live longer in general, the Census Bureau projects that the population age 85 and over could grow from 5.7 million in 2008 to 19 million by 2050.
What this means to investors is exponential growth potential in many arenas, including healthcare for seniors. Many companies specializing in senior living management are making prescient moves to bolster their portfolio of properties during a depressed economic and real estate climate in expectations of greater demand over the coming decades. Early this year, privately-held Mid-Atlantic Health Care, LLC, a firm which owns and operates senior care facilities throughout Maryland and Delaware, acquired five skilled nursing centers in Philadelphia from The NewCourtland Network; giving Mid-Atlantic a 25 percent control of the market in Philadelphia.
AdCare Health Systems, Inc. (AMEX: ADK) has been on a similar path with a bevy of acquisitions throughout 2011. The Springfield, Ohio-based company has been a developer, owner and manager of nursing homes, assisted living facilities and providing home health care services for nearly a quarter of a century. AdCare’s employs over 3,200 employees throughout the 31 facilities that they manage (twenty-three of skilled nursing centers, seven assisted living facilities and one Independent senior living community). AdCare outright owns seven of the skilled nursing centers and six of the assisted living facilities.
Showcasing their aggressive merger and acquisition model, some highlights from 2011 for AdCare included:
• Closed Acquisition of Skilled Nursing and Assisted Living Center in Arkansas (December 2, 2011)
• Signed Definitive Agreement to Acquire Five Skilled Nursing Facilities in Oklahoma (October 17, 2011)
• Closed Acquisition of Four Skilled Nursing Facilities in Arkansas (September 8, 2011)
• Signed Definitive Agreement to Acquire Skilled Nursing and Assisted Living Center in Ohio (September 19, 2011)
• Signed Definitive Agreement for 15 Skilled Nursing Centers Across South Carolina, North Carolina, Virginia, and Tennessee (June 28, 2011)
• Closed Acquisition of Skilled Nursing Center in Georgia (June 1, 2011)
• Closed Acquisition of Two Skilled Nursing Centers in Georgia (May 2, 2011)
• Signed Agreement for Five Skilled Nursing Facilities in Arkansas and Missouri (March 15, 2011)
The acquisition activity is showing an immediate benefit to the financial statements for AdCare. In their latest SEC filings, unaudited financial results for the third quarter ended September 30, 2011 showed that revenue for the quarter surged 208 percent to a record $40.9 million from $13.3 million in the same quarter of 2010. Income from operations in the third quarter of 2011 was $1.7 million, a $2.5 million turnaround from a $0.8 million loss for the year prior quarter. Adjusted EBITDA was a record $4.7 million compared to $579,000 in Q3 2010.
AdCare may not be in the flashiest of industries, but it is well-positioned in an essential part of our economy that appears positioned to continue to experience non-linear growth for the foreseeable future. Because of its diversification within the industry and expanding geographical footprint, AdCare could easily be aligned to garner far greater investor attention as it continues to execute its business model.
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