-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M9r3nuyAj/ykwCV2gGcYnQXtWWQHvO/vuJSPgwAg9C91z7dPLSpQqL0izBOv5pQm Nn+WlahfjTxYwZLoHYLqjA== 0001157523-05-002151.txt : 20050303 0001157523-05-002151.hdr.sgml : 20050303 20050303100137 ACCESSION NUMBER: 0001157523-05-002151 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050303 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050303 DATE AS OF CHANGE: 20050303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT CORP CENTRAL INDEX KEY: 0000787784 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 621674303 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13031 FILM NUMBER: 05656323 BUSINESS ADDRESS: STREET 1: 111 WESTWOOD PLACE STREET 2: SUITE 202 CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6152212250 8-K 1 a4834888.txt AMERICAN RETIREMENT 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): March 3, 2005 (March 3, 2005) AMERICAN RETIREMENT CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Tennessee 01-13031 62-1674303 - -------------------------------- -------------- --------------------- (State or Other (Commission (I.R.S. Employer of Jurisdiction File Number) Identification No.) Incorporation) 111 Westwood Place, Suite 200 Brentwood, Tennessee 37027 - ------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (615) 221-2250 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition On March 3, 2005, American Retirement Corporation issued a press release announcing its fourth quarter and full year 2004 earnings results. A copy of the press release is furnished herewith as Exhibit 99.1. Supplemental information relating to American Retirement Corporation's fourth quarter and full year 2004 results is furnished herewith as Exhibit 99.2. Item 7.01. Regulation FD Disclosure On March 3, 2005, American Retirement Corporation issued a press release announcing its fourth quarter and full year 2004 earnings results. A copy of the press release is furnished herewith as Exhibit 99.1. Supplemental information relating to American Retirement Corporation's fourth quarter and full year 2004 results is furnished herewith as Exhibit 99.2. Item 9.01. Financial Statements and Exhibits (c) Exhibits. 99.1 Press Release dated March 3, 2005 99.2 Supplemental Information 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. AMERICAN RETIREMENT CORPORATION By:/s/ Bryan D. Richardson ------------------------------------- Bryan D. Richardson Executive Vice President and Chief Financial Officer Date: March 3, 2005 3 EXHIBIT INDEX Exhibit Number Description ------- ----------- 99.1 Press Release dated March 3, 2005 99.2 Supplemental Information 4 EX-99.1 2 a4834888ex991.txt AMERICAN RETIREMENT EXHIBIT 99.1 Exhibit 99.1 American Retirement Reports Fourth Quarter Profit and Full Year 2004 Results NASHVILLE, Tenn.--(BUSINESS WIRE)--March 3, 2005--American Retirement Corporation (NYSE: ACR), a leading national provider of senior living housing and care, today reported its financial results for the quarter ended December 31, 2004. Highlights of the quarter were: -- The Company produced $116 million of revenue for the fourth quarter of 2004, a 12% increase over the prior year's quarter and $448 million of revenue for the full 2004 year, a 12% increase over 2003. -- The Company produced a profit of $1.8 million ($.07 per share) for the fourth quarter of 2004 versus a loss of $6.7 million for the prior year's fourth quarter. -- Free cash flow for the fourth quarter, positive for the fifth consecutive quarter, was $2.6 million after principal payments on long-term debt of $4.9 million. For the full year, free cash flow was $9.7 million. -- The operating contribution from the Company's three business segments increased 22% over the fourth quarter of 2003 to $39 million. For the full year, the total segment operating contribution increased by 24% to $145 million. -- Average overall occupancy rose to 94% from 90% for last year's fourth quarter, with the Company's large retirement communities' ("Retirement Centers") ending the quarter at 96%. -- Retirement Centers' fourth quarter results were driven by a 10% increase in average monthly revenue per occupied unit and a 1% average occupancy growth. -- The Free-standing assisted living communities' ("Free-standing AL's") results were driven by a 7% occupancy growth and a 10% increase in average monthly revenue per occupied unit. Bill Sheriff, Chairman, President and CEO of American Retirement, commented, "The results for the fourth quarter show the continued improvement in our operating results and the benefit from our refinancing activities. We continue to produce revenue growth in excess of 10% and we were profitable in this quarter. Strong growth in revenue per unit, driven by our ancillary services, strength in assisted living pricing and the ability to pass on expense increases, as well as pushing occupancies to higher levels, continue the trend of increasing revenue performance. At the same time, we are controlling operating expenses and producing record levels of operating contribution per unit - well above the industry average. The significant reduction in debt service costs that have resulted from our refinancing activities in 2004 also helped achieve solid profitability. " "We are excited about the future growth plans of the Company, which the equity offering that we successfully completed in January will help support. This Company has a base of experience, talent, systems and market position to capitalize on the opportunities the future will present," Mr. Sheriff continued. OPERATIONAL HIGHLIGHTS The Company operates in three business segments: Retirement Centers, Free-standing AL's and Management Services. The Retirement Centers include CCRCs (continuing care retirement centers), Entrance-Fee Communities ("EF Communities") and congregate living residences. The Retirement Centers are established communities with strong reputations within their respective markets. Free-standing AL's are smaller than Retirement Centers and provide assisted living and specialized care such as Alzheimer's and memory enhancement programs. The Management Services segment includes fees from management agreements for communities owned by others and reimbursed expenses. The Company's three operating segments produced the following results in total: Three months ended December 31, ------------------- $ % 2004 2003 Change Change -------- ---------------------- Resident & Healthcare revenue $115,293 $103,087 12,206 11.8% Community operating expense 77,055 71,661 5,394 7.5% -------- -------- ------------- Community operating contribution $ 38,238 $ 31,426 6,812 21.7% Community operating margin 33.2% 30.5% Management Services op. contribution $ 443 $ 351 92 26.2% Consolidated Communities: # Locations 59 59 Avg. Occupancy 93.6% 89.9% Avg. Occupied Units 10,959 10,529 430 4.1% Avg. Mo. Revenue/unit $ 3,507 $ 3,264 $ 243 7.5% Avg. Mo. Op Contribution/unit $ 1,163 $ 995 $ 168 16.9% Retirement Centers The Company's 28 Retirement Centers produced strong increases in revenue and operating contribution for the fourth quarter of 2004 as follows: Retirement Centers ($ in 000's): Three months ended December 31, ----------------- $ % 2004 2003 Change Change -------------------------------- Community Revenue 89,787 81,390 8,397 10.3% Community Operating Contribution(1) 30,702 26,294 4,408 16.8% Operating contribution margin 34.2% 32.3% 1.9pts 5.9% (1) The Company evaluates the performance of its business segments, primarily, based upon their operating contributions, which the Company defines as revenue from the segment less operating expenses associated with that segment. The Retirement Centers continued to produce strong revenue per unit gains while increasing occupancy from the solid levels at which they ended the third quarter. Average monthly revenue per occupied unit increased 10% during the quarter to $3,547 versus prior year due to increases in monthly service fees and per diem rates in skilled nursing, turnover of residents (the "mark to market" effect of reselling or reletting units at higher current rates) and increased ancillary services, such as therapy. The number of occupied units increased 1%, with ending occupancy increasing from 95% to 96% versus the fourth quarter of 2003. The Retirement Centers ended the quarter with 97% occupancy in independent living, 96% in assisted living and 90% in skilled nursing. In the fourth quarter of 2004, the operating contribution for Retirement Centers exceeded $30 million for the first time, producing a 34% margin. This represented a $4.4 million increase or 17% increase over the prior year's fourth quarter. The incremental operating margin on the fourth quarter's revenue increase was 52%. The Retirement Centers continue to increase the monthly operating contribution per occupied unit hitting $1,213 per unit in the fourth quarter of 2004, a 16% improvement from the prior year's fourth quarter. The fourth quarter was in line with the full year results with Retirement Center revenue increasing by $34 million or 11% and operating contribution increasing by $18 million or 18% versus 2003. The full year results for the segment were driven by a 7% increase in average monthly revenue per occupied unit and a 3% average occupancy growth. Free-standing AL's Revenue from the Free-standing AL segment increased 18% to $25.5 million in 2004's fourth quarter compared with last year's fourth quarter revenue of $21.7 million. Occupancy for the Free-standing AL portfolio reached 89% at the end of the 2004 fourth quarter, up from 83% a year ago. Free-standing AL ($ in 000's): Three Months Ended - ------------------------------ December 31, -------------- $ % 2004 2003 Change Change -------------------------------- Revenues 25,506 21,697 3,809 17.6% Community Operating Contribution(1) 7,536 5,132 2,404 46.8% Operating contribution margin 29.5% 23.7% 5.8pts 24.5% % Occupancy 89% 83% 6.0pts 7.2% Note: Includes results of 31 Free-standing AL's and excludes two non-consolidated Free-standing AL's held in joint ventures The Free-standing AL portfolio produced a solid year-over-year increase in average monthly revenue per occupied unit of 10%, while continuing to make progress on occupancy levels. The quarter over quarter average occupied units grew by 7%, while the average monthly revenue per unit increased to $3,372. The monthly revenue per occupied unit in December 2004 was $3,417 per month, a 10% increase from $3,101 per month in December 2003. The revenue per occupied unit increase was due to rate increases, reduced discounts and promotional allowances, increased care services and turnover of residents (the "mark to market" effect of reletting units at higher current rates). The increased use of ancillary services, particularly therapy services, also contributed significantly to the revenue and operating contribution increase for this segment. The operating contribution from the Free-standing AL segment increased 47%, or $2.4 million, in the fourth quarter of 2004 from the fourth quarter of 2003. As in prior periods, the Free-standing AL's added revenue without proportionally increasing expenses and resulting in an incremental operating margin of 63% on incremental revenue. As such, the Free-standing AL segment continues to demonstrate the high incremental margin that results from increasing revenue in a portfolio that is currently 89% occupied. The fourth quarter performance for the segment was in line with the full year results, with revenue increasing by $13 million or 15% and operating contribution increasing by $9 million or 56% versus 2003. The full year results were driven by a 9% increase in average monthly revenue per occupied unit and a 6% average occupancy growth. Management Services The Company's management services business segment included management contracts on five Retirement Centers and two Free-standing AL's, with an aggregate capacity of 1,351 units. Management Services segment had an operating contribution of $.4 million in fourth-quarter 2004, a 26% increase versus the same prior-year period. Conference Call Information American Retirement Corporation will hold a conference call with Bill Sheriff, Chairman, President and Chief Executive Officer, and Bryan Richardson, Chief Financial Officer, to discuss the Company's 2004 fourth-quarter financial results. The call will be held on Thursday, March 3, 2005 at 11:00 a.m. ET and parties may participate by either calling (877) 252-6354 or through the Company's website at - -www.arclp.com. Click on the broadcast icon to listen to the earnings call - Windows Media Player(TM) is required to listen to this webcast. In addition, the call will be archived on the Company's website until the next regularly scheduled earnings conference call. If any material information is disclosed on the conference call that has not been previously disclosed publicly, that information will also be available at the Investor Relations portion of the Company's web site. Additional Filings The Company's results are to be described in greater detail in the Company's Form 10-K, which will be filed with the Securities and Exchange Commission. The Company also will file on or about March 3rd a Form 8-K with the Securities and Exchange Commission, which includes supplemental information relating to the Company's fourth quarter 2004 results. These filings will also be available through the Investor Relations section of the Company's website - www.arclp.com. COMPANY PROFILE American Retirement Corporation is a national senior living and health care services provider offering a broad range of care and services to seniors, including independent living, assisted living, skilled nursing and Alzheimer's care. Established in 1978, the Company believes that it is a leader in the operations and management of senior living communities, including independent living communities, continuing care retirement communities, Free-standing AL's, and the development of specialized care programs for residents with Alzheimer's and other forms of dementia. The Company's operating philosophy is to enhance the lives of seniors by striving to provide the highest quality of care and services in well-operated communities designed to improve and protect the quality of life, independence, personal freedom, privacy, spirit, and dignity of its residents. The Company currently operates 67 senior living communities in 14 states, with an aggregate unit capacity of approximately 13,200 units and resident capacity of approximately 14,900. The Company owns 17 communities, leases 44 communities, and manages six communities pursuant to management agreements. Approximately 85% of the Company's revenues come from private pay sources. SAFE HARBOR STATEMENT Statements contained in this press release and statements made by or on behalf of American Retirement Corporation relating hereto may be deemed to constitute forward-looking information made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company or its management, including, without limitation, all statements regarding the Company's future operating and financial expectations and its strategy to improve financial and operating results. These forward-looking statements may be affected by certain risks and uncertainties, including without limitation the following: (i) the risk associated with the Company's significant leverage, (ii) the Company's ability to sell its entry-fee units and to increase occupancy at the Company's communities (especially its Free-standing AL's), (iii) the risk that the Company will be unable to improve the Company's results of operations, increase cash flow and reduce expenses, (iv) the risks associated with adverse market conditions of the senior housing industry and the United States economy in general, (v) the risk that the Company is unable to obtain liability insurance in the future or that the costs thereof (including deductibles) will be prohibitive, (vi) the Company's ability to obtain new financing or extend and/or modify existing debt and (vii) the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 under the caption "Risk Factors" and in the Company's other filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, the Company's actual results could differ materially from such forward-looking statements. The Company does not undertake any obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three months ended December 31, 2004 Increase(Decrease) ------------------- ---------------- 2004 2003 $ % --------- --------- -------- ------- Revenues: Resident and health care $115,293 $103,087 $12,206 11.8% Management services 443 351 92 26.2% Reimbursed expenses 532 318 214 67.3% --------- --------- -------- ------- Total revenues 116,268 103,756 12,512 12.1% Operating expenses: Community operating expenses 77,055 71,661 5,394 7.5% General and administrative 7,569 6,241 1,328 21.3% Lease expense 15,590 15,106 484 3.2% Depreciation and amortization 9,200 6,149 3,051 49.6% Amortization of leasehold acquisition costs 736 776 (40) -5.2% Reimbursed expenses 532 318 214 67.3% --------- --------- -------- ------- Total operating expenses 110,682 100,251 10,431 10.4% --------- --------- -------- ------- Operating income 5,586 3,505 2,081 59.4% Other income (expense): Interest expense (4,444) (9,685) (5,241) -54.1% Interest income 794 537 257 47.9% Gain (loss) on sale of assets (22) (17) 5 29.4% Other 442 112 330 294.6% --------- --------- -------- ------- Other expense, net (3,230) (9,053) (5,823) -64.3% --------- --------- -------- ------- Earnings (loss) from continuing operations before income taxes, and minority interest 2,356 (5,548) 7,904 142.5% Income tax expense (300) 1,106 (1,406) -127.1% --------- --------- -------- ------- Earnings (loss) from continuing operations before minority interest 2,656 (6,654) 9,310 139.9% Minority interest in earnings of consolidated subsidiaries, net of tax (851) (85) 766 901.2% --------- --------- -------- ------- Net income (loss) $1,805 $(6,739) $8,544 126.8% ========= ========= ======== ======= Basic earnings (loss) per share $0.07 $(0.36) ========= ========= Diluted earnings (loss) per share $0.07 $(0.36) ========= ========= Weighted average shares used for basic earnings (loss) per share data 24,977 18,962 Weighted average shares used for diluted earnings (loss) per share data 26,606 18,962 - ---------------------------------------------------------------------- December 31, December 31, 2004 2003 ------------ ------------ Selected Balance Sheet Data: Cash and cash equivalents $28,454 $17,192 Restricted cash, including current portion 50,134 43,601 Working capital 14,864 8,603 Land, buildings and equipment, net 496,297 533,145 Total assets 745,991 774,283 Long-term debt, capital and lease financing obligation, including current portion 335,082 371,535 Refundable portion of entrance fees 79,148 72,980 Shareholders' equity 3,355 807 AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Twelve months ended December 31, Increase(Decrease) ---------------- ------------------ 2004 2003 $ % --------- --------- -------- ------ Revenues: Resident and health care $443,443 $396,307 $47,136 11.9% Management services 1,882 1,522 360 23.7% Reimbursed expenses 2,284 2,148 136 6.3% --------- --------- -------- ------ Total revenues 447,609 399,977 47,632 11.9% Operating expenses: Community operating expenses 300,797 280,808 19,989 7.1% General and administrative 28,671 25,410 3,261 12.8% Lease expense 61,244 47,664 13,580 28.5% Depreciation and amortization 31,148 26,867 4,281 15.9% Amortization of leasehold acquisition costs 2,917 2,421 496 20.5% Reimbursed expenses 2,284 2,148 136 6.3% --------- --------- -------- ------ Total operating expenses 427,061 385,318 41,743 10.8% --------- --------- -------- ------ Operating income 20,548 14,659 5,889 40.2% Other income (expense): Interest expense (31,477) (53,570) (22,093) -41.2% Interest income 2,783 2,762 21 0.8% Gain (loss) on sale of assets 41 23,153 (23,112) -99.8% Other 447 132 315 238.6% --------- --------- -------- ------ Other expense, net (28,206) (27,523) 683 2.5% --------- --------- -------- ------ Loss from continuing operations before income taxes and minority interest (7,658) (12,864) 5,206 40.5% Income tax expense 2,421 2,661 (240) -9.0% --------- --------- -------- ------ Loss from continuing operations before minority interest (10,079) (15,525) 5,446 35.1% Minority interest in earnings of consolidated subsidiaries, net of tax (2,406) (1,789) 617 34.5% --------- --------- -------- ------ Net loss $(12,485) $(17,314) $4,829 27.9% ========= ========= ======== ====== Basic and diluted loss per share $(0.52) $(0.95) ========= ========= Weighted average shares used for basic and diluted loss per share data 23,798 18,278 ========= ========= CONTACT: American Retirement Corporation Ross C. Roadman, 615-376-2412 EX-99.2 3 a4834888ex992.txt AMERICAN RETIREMENT EXHIBIT 99.2 Exhibit 99.2
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RETIREMENT CENTER COMMUNITIES - FOURTH QUARTER 2004 ($'s in thousands) RETIREMENT CENTER COMMUNITIES: TOTAL ------------------------------------- Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 -------- -------- -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $75,355 $76,673 $79,307 $81,390 $85,288 $85,578 $86,526 $89,787 Community operating expense 51,297 52,079 55,414 55,096 56,791 56,546 58,168 59,085 -------- -------- -------- -------- -------- -------- -------- -------- Community operating contribution 24,058 24,594 23,893 26,294 28,497 29,032 28,358 30,702 Community operating margin 31.9% 32.1% 30.1% 32.3% 33.4% 33.9% 32.8% 34.2% Ending Occupancy 7,969 8,009 8,328 8,397 8,374 8,424 8,436 8,482 Ending Occupancy % 93.3% 93.4% 93.8% 94.6% 94.4% 95.0% 95.1% 95.7% Average Monthly Occupancy 7,994 7,980 8,090 8,396 8,376 8,382 8,408 8,438 Monthly Revenue per unit $3,142 $3,203 $3,268 $3,231 $3,394 $3,403 $3,430 $3,547 Year to Year % Change 8.0% 6.3% 5.0% 9.8% Monthly Operating Contribution per unit 1,003 1,027 984 1,044 1,134 1,155 1,124 1,213 Year to Year % Change 13.0% 12.4% 14.2% 16.2% RETIREMENT CENTER COMMUNITIES: RENTAL COMMUNITIES -------------------------------------------------- Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 -------- -------- -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $48,297 $48,920 $51,439 $52,853 $55,007 $55,249 $56,306 $57,387 Community operating expense 30,743 30,998 33,371 32,793 34,326 33,983 35,422 35,932 -------- -------- -------- -------- -------- -------- -------- -------- Community operating contribution 17,554 17,922 18,068 20,060 20,681 21,266 20,884 21,455 Community operating margin 36.3% 36.6% 35.1% 38.0% 37.6% 38.5% 37.1% 37.4% Ending Occupancy 5,223 5,275 5,548 5,588 5,576 5,595 5,581 5,623 Ending Occupancy % 94.5% 94.7% 90.9% 95.3% 95.2% 95.5% 95.2% 96.0% Average Monthly Occupancy 5,266 5,256 5,327 5,615 5,582 5,576 5,580 5,594 Monthly Revenue per unit $3,057 $3,102 $3,219 $3,138 $3,285 $3,303 $3,364 $3,420 Year to Year % Change 7.5% 6.5% 4.5% 9.0% Monthly Operating Contribution per unit 1,111 1,137 1,131 1,191 1,235 1,271 1,248 1,278 Year to Year % Change 11.2% 11.8% 10.3% 7.4% RETIREMENT CENTER COMMUNITIES: ENTRANCE FEE CCRCs -------------------------------------------------- Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 -------- -------- -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $27,058 $27,753 $27,868 $28,537 $30,281 $30,329 $30,220 $32,400 Community operating expense 20,554 21,081 22,043 22,303 22,465 22,563 22,746 23,153 -------- -------- -------- -------- -------- -------- -------- -------- Community operating contribution 6,504 6,672 5,825 6,234 7,816 7,766 7,474 9,247 Community operating margin 24.0% 24.0% 20.9% 21.8% 25.8% 25.6% 24.7% 28.5% Ending Occupancy 2,746 2,734 2,780 2,809 2,798 2,829 2,855 2,859 Ending Occupancy % 91.2% 90.8% 92.4% 93.3% 93.0% 94.0% 94.8% 95.0% Average Monthly Occupancy 2,728 2,724 2,763 2,781 2,795 2,806 2,828 2,844 Monthly Revenue per unit $3,306 $3,396 $3,362 $3,420 $3,612 $3,603 $3,562 $3,797 Year to Year % Change 9.2% 6.1% 5.9% 11.0% Monthly Operating Contribution per unit 795 816 703 747 932 923 881 1,084 Year to Year % Change 17.3% 13.0% 25.4% 45.0% Net Cash Flow per unit (includes Net Resale Cash Flow) 739 1,233 1,179 1,175 1,326 1,503 1,442 1,323 Entrance Fee Sales: Total Entrance Fee (Independent Living) Units 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,064 Ending Occupancy % 92.5% 92.7% 94.2% 94.9% 95.4% 96.3% 97.1% 97.2% Entrance Fee Sales (in units) 48 73 90 78 69 84 79 68 Entrance Fee Sales $6,055 $10,261 $11,482 $10,693 $10,257 $11,976 $11,931 $9,224 Refunds paid on Entrance Fee Terminations 2,836 3,685 3,851 3,267 2,433 2,868 3,181 3,192 Net Resale Cash Flow 3,219 6,576 7,631 7,426 7,824 9,108 8,750 6,032
NOTE: Includes Freedom Square for all periods presented. The sales proceeds at entrance fee CCRCs provide a source of financing to the community, thereby reducing the financing costs (interest or lease expense) that it would otherwise incur. As a result of the residents paying an up- front entrance fee, they pay a lower monthly service fee than they would pay at a similar rental community without entrance fees. As a result, entrance fee communities have lower operating margins (but lower non-operating financing costs) than similar rental communities.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION FREE-STANDING ASSISTED LIVING COMMUNITIES - FOURTH QUARTER 2004 ($'s in thousands) FREE-STANDING ASSISTED LIVING COMMUNITIES ----------------------------------------- Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 -------- -------- -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $19,953 $20,705 $21,227 $21,697 $22,663 $23,532 $24,563 $25,506 Community operating expense 16,949 16,819 16,589 16,565 17,061 17,519 17,657 17,970 -------- -------- -------- -------- -------- -------- -------- -------- Community operating contribution 3,004 3,886 4,638 5,132 5,602 6,013 6,906 7,536 Community operating margin 15.1% 18.8% 21.8% 23.7% 24.7% 25.6% 28.1% 29.5% Ending Occupancy 2,291 2,311 2,340 2,368 2,394 2,456 2,504 2,533 Ending Occupancy % 80.9% 81.5% 82.6% 83.4% 84.3% 86.5% 88.3% 89.3% Average Monthly Occupancy 2,282 2,298 2,316 2,357 2,384 2,430 2,478 2,521 Monthly Revenue per unit $2,915 $3,003 $3,055 $3,068 $3,169 $3,228 $3,304 $3,372 Year to Year % Change 8.7% 7.5% 8.2% 9.9% Monthly Operating Contribution per unit 439 564 668 726 783 825 929 996 Year to Year % Change 78.5% 46.3% 39.2% 37.3% NOTE: Excludes two non-consolidated joint ventures.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION FREE CASH FLOW Three Six Nine Twelve months months months months ($'s in thousands) ended ended ended ended March June Sept. Dec. 31, 30, 30, 31, 2004 2004 2004 2004 -------- -------- --------- --------- Loss from continuing operations $(4,800) $(7,346) $(14,290) $(12,485) Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: Depreciation and amortization 8,432 16,114 28,726 38,765 Amortization of deferred entrance fee revenue / termination gains (4,526) (8,745) (12,737) (17,502) Proceeds from entrance fee sales, net of refunds 7,553 16,748 25,305 31,190 Deferred income tax benefit - - (1,808) (484) Amortization of deferred gain on sale-leaseback transactions (2,546) (5,078) (7,954) (10,902) Amortization of deferred compensation - - 182 400 Minority interest in earnings of consolidated subsidiaries 962 1,825 1,555 2,406 Tax benefit from exercise of stock options 432 Losses from unconsolidated joint ventures 144 220 85 278 Gain on sale of assets (105) (111) (63) (41) -------- -------- --------- --------- Net cash provided by continuing operations (before changes in assets and liabilities, exclusive of acquisitions and sale leaseback transactions) 5,114 13,627 19,001 32,057 Accrued but unpaid HCPI interest due at mezzanine loan maturity 1,988 4,074 4,074 4,074 Interest accretion on bond conversions 196 209 209 209 Adjustments for lease escalators and other accruals 1,689 3,362 5,012 6,537 Additions to land, building and equipment (4,665) (9,572) (14,288) (19,262) Plus: Development expenditures (funded separately) 706 1,043 1,296 1,771 Distributions to minority interest holders (1,068) (2,225) (3,243) (4,215) Principal reductions in master trust liability (322) (634) (940) (1,234) Other adjustments for refinancing activities (see Note A) 5,509 4,185 -------- -------- --------- --------- Free cash flow before principal payments 3,638 9,884 16,630 24,122 Principal payments on long-term debt, net of amounts paid as part of a refinancing transaction (2,506) (5,033) (9,577) (14,452) -------- -------- --------- --------- Free cash flow $1,132 $4,851 $7,053 $9,670 ======== ======== ========= ========= Quarter Ended ------------------------------------- March June Sept. Dec. 31, 30, 30, 31, 2004 2004 2004 2004 Income (loss) from continuing operations $(4,800) $(2,546) $(6,944) $1,805 Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: Depreciation and amortization 8,432 7,682 12,612 10,039 Amortization of deferred entrance fee revenue / termination gains (4,526) (4,219) (3,992) (4,765) Proceeds from entrance fee sales, net of refunds 7,553 9,195 8,557 5,885 Deferred income tax benefit - - (1,808) 1,324 Amortization of deferred gain on sale-leaseback transactions (2,546) (2,532) (2,876) (2,948) Amortization of deferred compensation, restricted stock - - 182 218 Minority interest in earnings of consolidated subsidiaries 962 863 (270) 851 Tax benefit from exercise of stock options - - - 432 Losses from unconsolidated joint ventures 144 76 (135) 193 (Gain) loss on sale of assets (105) (6) 48 22 -------- -------- --------- --------- Net cash provided by continuing operations (before changes in assets and liabilities, exclusive of acquisitions and sale leaseback transactions) 5,114 8,513 5,374 13,056 Accrued but unpaid HCPI interest due at mezzanine loan maturity 1,988 2,086 - - Interest accretion on bond conversions 196 13 - - Adjustments for lease escalators and other accruals 1,689 1,673 1,650 1,525 Additions to land, building and equipment (4,665) (4,907) (4,716) (4,974) Plus: Development expenditures (funded separately) 706 337 253 475 Distributions to minority interest holders (1,068) (1,157) (1,018) (972) Principal reductions in master trust liability (322) (312) (306) (294) Other adjustments for refinancing activities (see Note A) - - 5,509 (1,324) -------- -------- --------- --------- Free cash flow before principal payments 3,638 6,246 6,746 7,492 Principal payments on long-term debt, net of amounts paid as part of a refinancing transaction (2,506) (2,527) (4,544) (4,875) -------- -------- --------- --------- Free cash flow $1,132 $3,719 $2,202 $2,617 ======== ======== ========= ========= Given the Company's leverage and reported operating losses, the Company believes that Free Cash Flow is a useful liquidity measurement for investors in analyzing the Company's progress. Note A: Other adjustments for refinancing activities include costs relating to the July 2004 HCPI sale-leaseback transaction and are comprised of $1.2 million of general and administrative costs, $2.5 million of current tax expense and the deferred tax impact of the transaction.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION SAME COMMUNITY RESULTS - FOURTH QUARTER 2004 ($'s in thousands) INCLUDING ENTRANCE FEE COMMUNITIES: ----------------------------------- Three months ended December 31, -------------------------------- $ % 2004 2003 Change Change -------------- ---------------- --------- ----------- Resident & Healthcare revenue $115,293 $103,086 $12,207 11.8% Community operating expense 77,055 71,661 5,394 7.5% -------------- ---------------- --------- ----------- Community operating contribution $38,238 $31,425 6,813 21.7% Community operating margin 33.2% 30.5% # Locations 59 59 Avg. Occupancy 93.6% 89.9% Avg. Occupied Units 10,959 10,529 430 4.1% Avg. Mo. Revenue/unit $3,507 $3,264 $243 7.5% Avg. Mo. Operating Contribution/unit 1,163 995 168 16.9% EXCLUDING ENTRANCE FEE COMMUNITIES: - ------------------------------------ Three months ended December 31, -------------------------------- $ % 2004 2003 Change Change -------------- ---------------- --------- ----------- Resident & Healthcare revenue $82,893 74,550 $8,343 11.2% Community operating expense 53,903 49,358 4,545 9.2% -------------- ---------------- --------- ----------- Community operating contribution $28,990 $25,192 3,798 15.1% Community operating margin 35.0% 33.8% # Locations 53 53 Avg. Occupancy 93.3% 89.1% Avg. Occupied Units 8,115 7,748 367 4.7% Avg. Mo. Revenue/unit $3,405 $3,207 $198 6.2% Avg. Mo. Operating Contribution/unit 1,191 1,084 107 9.9% * This table sets forth certain selected financial and operating data on a Same Community basis. "Same Community basis" refers to communities that were owned and/or leased by the company throughout each of the periods being compared.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION REVENUE - FOURTH QUARTER 2004 ($'s in thousands) Three months Three months ended December ended December 31, 31, ---------------- ---------------- 2004 % 2003 % --------- ------ --------- ------ COMPOSITION - ----------- Revenues: Retirement Centers Independent living $37,160 32.0% $34,800 33.5% Assisted living 14,703 12.6% 13,840 13.3% Skilled Nursing 19,760 17.0% 19,188 18.5% Ancillary services, including Innovative Senior Care (therapy and wellness programs) 15,015 12.9% 11,400 11.0% Amortization of Deferred Entrance Fee Revenue 3,149 2.8% 2,161 2.1% --------- ------ --------- ------ 89,787 77.3% 81,389 78.4% Free-Standing Assisted Living Assisted living 22,766 19.6% 19,927 19.2% Ancillary services, including Innovative Senior Care (therapy and wellness programs) 2,740 2.3% 1,770 1.7% --------- ------ --------- ------ 25,506 21.9% 21,697 20.9% Total Resident and Healthcare Revenue 115,293 99.2% 103,086 99.4% Management and Contract Services 443 0.4% 352 0.3% Reimbursed Expenses 532 0.4% 318 0.3% --------- ------ --------- ------ 975 0.8% 670 0.6% --------- ------ --------- ------ Total Revenues $116,268 100.0% $103,756 100.0% BY PAYOR - -------- Private Pay $98,189 84.5% $89,892 86.7% Medicare 15,244 13.1% 11,254 10.8% Medicaid 2,835 2.4% 2,610 2.5% --------- ------ --------- ------ Total $116,268 100.0% $103,756 100.0%
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION OTHER STATISTICS - FOURTH QUARTER 2004 UNIT CAPACITY BY COMMUNITY TYPE - ------------------------------- At December 31, 2004 --------------------- Locations Capacity ---------- ---------- Rental Retirement Centers: Owned-100% 2 272 Leased 20 5,585 Managed - other 3 713 ---------- ---------- 25 6,570 Entrance Fee Retirement Centers: Owned-90% 2 712 Leased 3 1,562 Managed-Freedom Square 1 735 Managed-other 2 474 ---------- ---------- 8 3,483 Free-Standing AL's: Owned-100% 9 868 Owned-Joint Venture 2 164 Leased 21 1,878 Leased-Joint Venture 1 92 ---------- ---------- 33 3,002 All Communities: Owned-100% 13 1,852 Owned-Joint Venture 2 164 Leased 44 9,025 Leased-Joint Venture 1 92 Managed-Freedom Square 1 735 Managed-other 5 1,187 ---------- ---------- 66 13,055 Note: Leased communities include both operating and capital leases. Two of the three Owned-Joint Ventures are managed and are not consolidated. Freedom Square is consolidated due to the variable interest entity rules set forth in FIN 46. -----END PRIVACY-ENHANCED MESSAGE-----