-----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, DeTKZWG1pcpeGnWgL9HqYYQtK5AtdnE3Tffm/ougUNxDvN0XCqPMVyowolS+n9lG 3dhuDBp4jYb73gigukevqg== 0001157523-05-007013.txt : 20050804 0001157523-05-007013.hdr.sgml : 20050804 20050804091659 ACCESSION NUMBER: 0001157523-05-007013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050804 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050804 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: 05997783 BUSINESS ADDRESS: STREET 1: 111 WESTWOOD PLACE STREET 2: SUITE 202 CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6152212250 8-K 1 a4946031.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): August 4, 2005 (August 4, 2005) AMERICAN RETIREMENT CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Tennessee 01-13031 62-1674303 - ---------------------------- ----------- ------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 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 August 4, 2005, American Retirement Corporation issued a press release announcing its second quarter 2005 earnings results. A copy of the press release is furnished herewith as Exhibit 99.1. Supplemental information relating to American Retirement Corporation's second quarter 2005 results is furnished herewith as Exhibit 99.2. Item 7.01. Regulation FD Disclosure On August 4, 2005, American Retirement Corporation issued a press release announcing its second quarter 2005 earnings results. A copy of the press release is furnished herewith as Exhibit 99.1. Supplemental information relating to American Retirement Corporation's second quarter 2005 results is furnished herewith as Exhibit 99.2. Item 9.01. Financial Statements and Exhibits (c) Exhibits. 99.1 Press Release dated August 4, 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, Finance and Chief Financial Officer Date: August 4, 2005 3 EXHIBIT INDEX Exhibit Number Description ------- ----------- 99.1 Press Release dated August 4, 2005 99.2 Supplemental Information EX-99.1 2 a4946031ex991.txt AMERICAN RETIREMENT EXHIBIT 99.1 Exhibit 99.1 American Retirement Corporation Reports Second Quarter and Year-to-Date 2005 Results NASHVILLE, Tenn.--(BUSINESS WIRE)--Aug. 4, 2005--American Retirement Corporation (NYSE:ACR): -- Reported diluted earnings per share of $1.82 for the second quarter and $1.96 year-to-date. -- Items impacting comparability provided a net benefit of $1.69 per share in the second quarter, yielding $.13 per share without the items. -- Free cash flow was $6 million for the second quarter. -- Occupancy averaged 94%, up from 92% for last year's second quarter. American Retirement Corporation (NYSE:ACR) today reported second quarter 2005 diluted earnings of $1.82 per share, compared with a $.09 per share loss for the prior year second quarter. Second quarter 2005 results included a benefit of $1.71 per share due to the recognition of certain tax benefits and a debt extinguishment cost of $.02 per share related to the early repayment of a note. Bill Sheriff, Chairman, President and CEO of the company, commented, "During the second quarter, we had solid operating results and completed transactions consistent with our strategic initiatives of freeing restricted cash, expanding our unit capacity, increasing the mix of owned units versus leased, and improving our balance sheet. Again, our operations showed strong increases in revenue and operating contribution per unit. With occupancies holding strong, and by expanding ancillary services and maintaining good cost control, revenues increased by 10% over the second quarter of 2004 and the operating contribution increased 16%." "We completed three transactions during the quarter that released $13 million of restricted cash and created the opportunity for additional releases in the future. We used those funds plus the company's positive cash flow to pay down debt, to buyout a lessor's and a joint venture partner's interest in two communities, and to fund development. The buyouts were both accretive and facilitated the planned expansion of those communities. We also announced the start of construction of a number of community expansions and we made good progress on a number of development projects. Finally, with our improved financial results and our future prospects, we were able to recognize certain tax benefits through the income statement into shareholders' equity and end the quarter with shareholders' equity of $120 million." (All references to growth rate percentage compare the results of the current period to the prior year comparable period.) Financial Highlights -- $122 million of total revenue for the second quarter of 2005, a 10% increase. -- Net income of $59 million ($1.82 per diluted share) versus a loss of $2.3 million. -- Free cash flow for the second quarter of $6 million. -- An operating contribution from the company's three business segments of $41 million, an increase of 16%. Operational Highlights -- Occupancy was 94% with the company's large retirement communities ending the quarter at 95% and the free-standing assisted living communities ending at 90%. -- Retirement Centers produced a 7% increase in average monthly revenue per occupied unit, and a 7% increase in operating contribution per occupied unit. -- Free-standing assisted living communities produced an 8% increase in average monthly revenue per occupied unit, and a 39% increase in operating contribution per occupied unit. Operating Review The company operates in three business segments: -- The Retirement Centers ("Retirement Centers") include CCRCs (continuing care retirement centers), Entrance-Fee Communities ("EF Communities") and congregate living residences. -- Free-standing assisted living communities ("Free-standing AL's") are smaller than Retirement Centers and provide assisted living and specialized care such as Alzheimer's and memory enhancement programs. -- The Management Services segment includes fees from management agreements for communities owned by others and reimbursed expenses. The results for the company's three operating segments for the second quarter of 2005 were as follows: Three months ended ($ in 000's) June 30, - ---------------------------------- ------------------- $ % 2005 2004 Change Change - ---------------------------------- ---------- -------- ------- ------- Resident & Healthcare revenue $120,641 $109,110 11,531 10.6% - ---------------------------------- ---------- -------- ------- ------- Community operating expense $ 79,896 $ 74,065 5,831 7.9% - ---------------------------------- ---------- -------- ------- ------- Community operating contribution $ 40,745 $ 35,045 5,700 16.3% - ---------------------------------- ---------- -------- ------- ------- Community operating margin 33.8% 32.1% - ---------------------------------- ---------- -------- ------- ------- Management Services op. contribution $ 516 $ 515 1 0.2% - ---------------------------------- ---------- -------- ------- ------- Retirement Centers Segment The company's 29 Retirement Centers exhibited strong increases in revenue and operating contribution for the second quarter of 2005 as follows: Retirement Centers ($ in 000's): Three Months Ended: June 30, - ------------------------------------------------------- $ % 2005 2004 Change Change - --------------------------------------- ------- ------- ------ ------- Revenues $93,794 $85,578 8,216 9.6% - --------------------------------------- ------- ------- ------ ------- Community Operating Contribution(1) $31,925 $29,032 2,893 10.0% - --------------------------------------- ------- ------- ------ ------- Operating contribution margin 34.0% 33.9% - --------------------------------------- ------- ------- ------ ------- % Ending Occupancy 95% 95% - --------------------------------------- ------- ------- ------ ------- (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 Center segment continued to produce strong revenue gains. -- Ending occupancy was 95%, level with the second quarter of 2004, though the number of occupied units increased 2% due to the acquisition of Galleria Woods in the first quarter. -- The Retirement Centers ended the quarter with 97% occupancy in independent living, 93% in assisted living and 87% in skilled nursing. -- Average monthly revenue per occupied unit increased 7% during the quarter to $3,647 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, primarily driven by the company's Innovative Senior Care education and wellness programs. The operating contribution for Retirement Centers for the second quarter of 2005 was almost $32 million, a 34% margin. This represented a $2.9 million increase or 10% increase over the prior year's second quarter. The Retirement Centers continue to increase the monthly operating contribution per occupied unit, hitting $1,241 per unit in the second quarter of 2005, a 7% improvement from the prior year's second quarter. Free-standing AL's Segment The company's 31 Free-standing AL's exhibited strong increases in revenue and operating contribution for the second quarter of 2005 as follows: Free-standing AL ($ in 000's): Three Months Ended: June 30, - ------------------------------------------------------ $ % 2005 2004 Change Change - -------------------------------------- ------- ------- ------- ------- Revenues $26,847 $23,532 3,315 14.1% - -------------------------------------- ------- ------- ------- ------- Community Operating Contribution(1) $ 8,820 $ 6,013 2,807 46.7% - -------------------------------------- ------- ------- ------- ------- Operating contribution margin 32.9% 25.6% - -------------------------------------- ------- ------- ------- ------- % Ending Occupancy 90% 86% - -------------------------------------- ------- ------- ------- ------- Note (1): Includes results of 31 Free-standing AL's and excludes two non-consolidated Free-standing AL's held in joint ventures Revenue from the Free-standing AL segment increased 14% to $27 million. -- Average occupancy for the Free-standing AL portfolio was 90% for the second quarter, up from 86% a year ago and up from 89% in the first quarter of 2005. -- The average monthly revenue per occupied unit increased 8% to $3,500, up from $3,228 per month in June 2004. 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 Innovative Senior Care education and wellness services, also contributed significantly to the revenue increase for this segment. The operating contribution for Free-standing AL's for the second quarter of 2005 was almost $9 million, a 33% margin. This represented a $2.8 million or 47% increase over the prior year's second quarter. The Free-standing AL's continue to increase the monthly operating contribution per occupied unit, hitting $1,150 per unit in the second quarter of 2005, a 39% improvement from the prior year's second quarter. For six months year-to-date, over 72% of the incremental revenue from the Free-standing AL segment fell to operating contribution. Management Services Segment The company's Management Services business segment includes management contracts on five Retirement Centers and two Free-standing AL's, with an aggregate capacity of 1,351 units. The Management Services segment had an operating contribution of $.5 million in the second quarter of 2005, level with the same prior-year period. Financial Review Revenues for the quarter increased 10% to $122 million versus the prior year quarter, reflecting the increased average occupied units, the incremental rate increase from new residents, rate increases to existing residents and increased ancillary services. Ancillary services revenue was almost $20 million for the quarter, up from $16 million a year ago. Ancillary services revenue currently comprises 16% of total revenue. Community operating expenses increased 8% for the quarter versus the prior year period, while revenue increased 10%, evidencing good cost control and the low incremental cost of additional occupancy. General and administrative expenses increased 11%, reflecting the growth of the Company's business as well as almost $300,000 of unexpected costs related to accounting restatement activities. Net income for the second quarter of 2005 was $59 million or $1.82 per diluted share, compared with a loss of $2 million for the prior year's second quarter. The second quarter included a benefit of $56 million, $1.71 per share, due to certain tax benefits that had not previously been recognized as a result of the Company's losses during the relevant time periods. As a result of the Company's improved financial results and its expectations for continued financial improvement, the Company believes that it is more likely than not that it will recognize the benefits of its deferred tax assets. As such, the Company recognized the income tax benefit on its second quarter income statement. The benefit is a non-cash GAAP accounting item that increased the Company's shareholders' equity to $120 million as of June 30, 2005. The tax benefit was partially offset by a $794,000 non-cash charge related to the second quarter repayment of a debt. Free cash flow was $6 million for the second quarter, versus $4 million for the second quarter of 2004. For the six months ended June 30, free cash flow was $9 million versus $5 million for the same prior year period. The primary drivers of the increased cash flow were increased operating income and entrance fee sale proceeds, net of refunds. 2005 Earnings Outlook The company expects to report net earnings per diluted share of $0.46 to $0.49 for 2005, excluding the effect of the second quarter tax benefit. 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 2005 second-quarter financial results and the other matters described above. The call will be held on Thursday, August 4, 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 Investors Welcome portion of the company's website. Additional Filings The company will file on or about August 4, 2005 a Form 8-K with the SEC which includes supplemental information relating to the company's second quarter 2005 results. These filings will also be available through the Investors Welcome 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 operation 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 18 communities, leases 43 communities, and manages six communities pursuant to management agreements. Approximately 84% of the company's revenues come from private pay sources. Risks of Forward Looking Statements 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 statements 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. 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 entrance 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/A for the year ended December 31, 2004 under the caption "Risk Factors" and in the company's other filings with the SEC. 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 Increase June 30, (Decrease) -------------------- ----------------- 2005 2004 $ % -------- -------- ------- -------- Revenues: (restated) Resident and health care $120,641 $109,110 $11,531 10.6% Management services 516 515 1 0.2% Reimbursed expenses 542 524 18 3.4% -------- -------- ------- -------- Total revenues 121,699 110,149 11,550 10.5% Operating expenses: Community operating expenses 79,896 74,065 5,831 7.9% General and administrative 6,765 6,114 651 10.6% Lease expense 15,445 14,872 573 3.9% Depreciation and amortization 8,773 6,547 2,226 34.0% Amortization of leasehold acquisition costs 689 728 (39) -5.4% Loss (gain) on sale of assets 344 (6) 350 5833.3% Reimbursed expenses 542 524 18 3.4% -------- -------- ------- -------- Total operating expenses 112,454 102,844 9,610 9.3% -------- -------- ------- -------- Operating income 9,245 7,305 1,940 26.6% Other income (expense): Interest expense (3,916) (8,932) 5,016 56.2% Interest income 874 669 205 30.6% Other 5 (364) 369 101.4% -------- -------- ------- -------- Other expense, net (3,037) (8,627) 5,590 64.8% -------- -------- ------- -------- Income (loss) before income taxes and minority interest 6,208 (1,322) 7,530 569.6% Income tax (benefit) expense (53,392) 75 53,467 71289.3% -------- -------- ------- -------- Income (loss) from continuing operations before minority interest 59,600 (1,397) 60,997 4366.3% Minority interest in earnings of consolidated subsidiaries, net of tax (600) (863) 263 30.5% -------- -------- ------- -------- Net income (loss) $ 59,000 $ (2,260) $61,260 2710.6% ======== ======== ======= ======== Basic income (loss) per share $ 1.90 $ (0.09) ======== ======== Diluted income (loss) per share $ 1.82 $ (0.09) ======== ======== Weighted average shares used for basic earnings (loss) per share data 31,053 24,290 Effect of dilutive common stock options 1,278 - -------- -------- Weighted average shares used for diluted earnings (loss) per share data 32,331 24,290 ======== ======== - ------------------------------- ------------------- June 30, December 31, 2005 2004 --------- ---------- Selected Balance Sheet Data: Cash and cash equivalents $ 46,472 $ 28,454 Restricted cash 39,054 50,134 Working capital deficit (87,180) (98,995) Land, buildings and equipment, net 516,786 496,297 Total assets 829,437 749,250 Long-term debt and lease financing obligations, including current portion 296,658 335,082 Refundable portion of entrance fees 83,556 79,148 Current portion of deferred entrance fee income 35,732 33,800 Long-term deferred entrance fee income 121,258 111,386 Deferred gain on sale lease- back transactions 92,965 98,876 Shareholders' equity 120,278 5,701 AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Six months ended Increase June 30, (Decrease) -------------------- ----------------- 2005 2004 $ % -------- -------- ------- -------- Revenues: (restated) Resident and health care $238,330 $217,061 $21,269 9.8% Management services 1,016 939 77 8.2% Reimbursed expenses 1,344 1,292 52 4.0% -------- -------- ------- -------- Total revenues 240,690 219,292 21,398 9.8% Operating expenses: Community operating expenses 159,233 147,917 11,316 7.7% General and administrative 13,356 12,702 654 5.1% Lease expense 30,955 29,693 1,262 4.3% Depreciation and amortization 18,044 13,460 4,584 34.1% Amortization of leasehold acquisition costs 1,388 1,446 (58) -4.0% Loss (gain) on sale of assets 356 (111) 467 420.7% Reimbursed expenses 1,344 1,292 52 4.0% -------- -------- ------- -------- Total operating expenses 224,676 206,399 18,277 8.9% -------- -------- ------- -------- Operating income 16,014 12,893 3,121 24.2% Other income (expense): Interest expense (7,473) (18,633) 11,160 59.9% Interest income 1,594 1,271 323 25.4% Other 144 (253) 397 156.9% -------- -------- ------- -------- Other expense, net (5,735) (17,615) 11,880 67.4% -------- -------- ------- -------- Income (loss) before income taxes and minority interest 10,279 (4,722) 15,001 317.7% Income tax expense (52,357) 220 52,577 23898.6% -------- -------- ------- -------- Income (loss) from continuing operations before minority interest 62,636 (4,942) 67,578 1367.4% Minority interest in earnings of consolidated subsidiaries, net of tax (1,011) (1,825) 814 44.6% -------- -------- ------- -------- Net income (loss) $ 61,625 $ (6,767) $68,392 1010.7% ======== ======== ======= ======== Basic income (loss) per share $ 2.06 $ (0.30) ======== ======== Diluted income (loss) per share$ 1.96 $ (0.30) ======== ======== Weighted average shares used for basic earnings (loss) per share data 29,976 22,770 Effect of dilutive common stock options 1,540 - -------- -------- Weighted average shares used for dilutive earnings (loss) per share data 31,516 22,770 ======== ======== AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES GAAP RECONCILIATION FREE CASH FLOW ($'s in thousands) Free cash flow is presented to provide additional information concerning cash flow available to meet future debt service obligations and working capital requirements. Free cash flow should not be considered as a measure of financial performance or liquidity under U.S. generally accepted accounting principles. Free cash flow should not be considered in isolation or as alternative to financial statement data presented in the company's consolidated financial statements as an indicator of financial performance or liquidity. Free cash flow, as presented, may not be comparable to similarly titled measures of other companies. The following table reconciles Free cash flow, as described above, to net income (loss) as reflected in the company's consolidated statements of earnings. Three Six months months ended ended March 31, June 30, 2005 2005 Net income $ 2,625 $ 61,625 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: Tax benefit from release of tax valuation allowance - (55,697) Depreciation and amortization 10,066 19,685 Loss on extinguishment of debt - 794 Amortization of deferred entrance fee revenue (4,064) (8,894) Proceeds from entrance fee sales, net of refunds 7,805 18,211 Deferred income tax benefit (765) - Amortization of deferred gain on sale- leaseback transactions (2,956) (5,911) Amortization of deferred compensation 218 412 Minority interest in earnings of consolidated subsidiaries 71 671 Tax benefit from exercise of stock options 395 558 (Gains) losses from unconsolidated joint ventures (66) (160) Loss (gain) on sale of assets 12 356 -------- -------- Net cash and cash equivalents provided by operating activities (before changes in assets and liabilities, exclusive of acquisitions and sale leaseback transactions) 13,341 31,650 Proceeds from refundable entrance fee sales, net of refunds (1,521) (2,737) Adjustments for lease escalators and other accruals 1,004 2,220 Additions to land, building and equipment (19,629) (27,533) Plus: Development expenditures (funded separately) 693 2,266 Distributions to minority interest holders (984) (2,378) Principal reductions in master trust liability (285) (553) Other adjustments for transactions / refinancings 15,015 15,764 -------- -------- Free cash flow before principal payments 7,634 18,699 Principal payments on long-term debt (4,897) (9,869) -------- -------- Free cash flow $ 2,737 $ 8,830 ======== ======== Quarter Ended ------------------ March 31, June 30, 2005 2005 Net income $ 2,625 $ 59,000 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: Tax benefit from release of tax valuation allowance (55,697) Depreciation and amortization 10,066 9,619 Loss on extinguishment of debt 794 Amortization of deferred entrance fee revenue (4,064) (4,830) Proceeds from entrance fee sales, net of refunds 7,805 10,406 Deferred income tax benefit (765) 765 Amortization of deferred gain on sale- leaseback transactions (2,956) (2,955) Amortization of deferred compensation 218 194 Minority interest in earnings of consolidated subsidiaries 71 600 Tax benefit from exercise of stock options 395 163 (Gains) losses from unconsolidated joint ventures (66) (94) Loss (gain) on sale of assets 12 344 -------- -------- Net cash and cash equivalents provided by operating activities (before changes in assets and liabilities, exclusive of acquisitions and sale leaseback transactions) 13,341 18,309 Proceeds from refundable entrance fee sales, net of refunds (1,521) (1,216) Adjustments for lease escalators and other accruals 1,004 1,216 Additions to land, building and equipment (19,629) (7,904) Plus: Development expenditures (funded separately) 693 1,573 Distributions to minority interest holders (984) (1,394) Principal reductions in master trust liability (285) (268) Other adjustments for transactions / refinancings 15,015 749 -------- -------- Free cash flow before principal payments 7,634 11,065 Principal payments on long-term debt (4,897) (4,972) -------- -------- Free cash flow $ 2,737 $ 6,093 ======== ======== CONTACT: American Retirement Corporation Ross C. Roadman, 615-376-2412 www.arclp.com EX-99.2 3 a4946031ex992.txt AMERICAN RETIREMENT EXHIBIT 99.2 Exhibit 99.2
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RETIREMENT CENTER COMMUNITIES - SECOND QUARTER 2005 ($'s in thousands) RETIREMENT CENTER COMMUNITIES: TOTAL ------------------------------------- Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $85,288 $85,578 $86,526 $89,787 $91,482 $93,794 Community operating expense 56,791 56,546 58,168 59,085 60,890 61,869 ------- ------- ------- ------- ------- ------- Community operating contribution 28,497 29,032 28,358 30,702 30,592 31,925 Community operating margin 33.4% 33.9% 32.8% 34.2% 33.4% 34.0% Community operating contribution excluding Amortization of Deferred Entrance Fee Revenue 25,832 26,592 26,249 27,553 28,357 29,226 Ending Occupancy 8,374 8,424 8,436 8,482 8,585 8,567 Ending Occupancy % 94.4% 95.0% 95.1% 95.7% 94.6% 94.8% Average Monthly Occupancy 8,376 8,382 8,408 8,438 8,532 8,572 Monthly Revenue per unit $ 3,394 $ 3,403 $ 3,430 $ 3,547 $ 3,574 $ 3,647 Year to Year % Change 8.0% 6.3% 5.0% 9.8% 5.3% 7.2% Monthly Operating Contribution per unit 1,134 1,155 1,124 1,213 1,195 1,241 Year to Year % Change 13.0% 12.4% 14.2% 16.2% 5.4% 7.5% RETIREMENT CENTER COMMUNITIES: RENTAL COMMUNITIES -------------------------------------------------- Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $55,007 $55,249 $56,306 $57,387 $58,493 $59,919 Community operating expense 34,326 33,983 35,422 35,932 36,739 37,259 ------- ------- ------- ------- ------- ------- Community operating contribution 20,681 21,266 20,884 21,455 21,754 22,660 Community operating margin 37.6% 38.5% 37.1% 37.4% 37.2% 37.8% Ending Occupancy 5,576 5,595 5,581 5,623 5,586 5,597 Ending Occupancy % 95.2% 95.5% 95.2% 96.0% 95.4% 95.7% Average Monthly Occupancy 5,582 5,576 5,580 5,594 5,602 5,596 Monthly Revenue per unit $ 3,285 $ 3,303 $ 3,364 $ 3,420 $ 3,480 $ 3,569 Year to Year % Change 7.5% 6.5% 4.5% 9.0% 5.9% 8.1% Monthly Operating Contribution per unit 1,235 1,271 1,248 1,278 1,294 1,350 Year to Year % Change 11.2% 11.8% 10.3% 7.4% 4.8% 6.2% RETIREMENT CENTER COMMUNITIES: ENTRANCE FEE CCRCs -------------------------------------------------- Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 -------- -------- -------- -------- -------- -------- Resident and healthcare revenue $30,281 $30,329 $30,220 $32,400 $32,989 $33,875 Community operating expense 22,465 22,563 22,746 23,153 24,151 24,610 ------- ------- ------- ------- ------- ------- Community operating contribution 7,816 7,766 7,474 9,247 8,838 9,265 Community operating margin 25.8% 25.6% 24.7% 28.5% 26.8% 27.4% Ending Occupancy 2,798 2,829 2,855 2,859 2,999 2,970 Ending Occupancy % 93.0% 94.0% 94.8% 95.0% 93.3% 93.2% Average Monthly Occupancy 2,795 2,806 2,828 2,844 2,930 2,976 Monthly Revenue per unit $ 3,612 $ 3,603 $ 3,562 $ 3,797 $ 3,753 $ 3,794 Year to Year % Change 9.2% 6.1% 5.9% 11.0% 3.9% 5.3% Monthly Operating Contribution per unit 932 923 881 1,084 1,005 1,038 Year to Year % Change 17.3% 13.0% 25.4% 45.0% 7.9% 12.5% Net Cash Flow per unit (includes Net Resale Cash Flow) 1,326 1,503 1,442 1,217 1,397 1,551 Entrance Fee Sales: Total Entrance Fee (Independent Living) Units 2,066 2,066 2,066 2,064 2,217 2,213 Ending Occupancy % 95.4% 96.3% 97.1% 97.2% 95.8% 95.6% Entrance Fee Sales (in units) 69 84 79 68 70 81 Entrance Fee Sales $10,257 $11,976 $11,931 $ 9,224 $11,589 $14,271 Refunds paid on Entrance Fee Terminations 2,433 2,868 3,181 3,192 4,137 5,293 Net Resale Cash Flow 7,824 9,108 8,750 6,032 7,452 8,978
NOTE: The sales proceeds at entrance fee CCRCs provide a source of financing to the community, thereby reducing the financing costs (interest or lease expense) that it would otherwise incur. As a result of the residents paying an up-front entrance fee, they pay a lower monthly service fee than they would pay at a similar rental community without entrance fees. As a result, entrance fee communities have lower operating margins (but lower non-operating financing costs) than similar rental communities.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION FREE-STANDING ASSISTED LIVING COMMUNITIES - SECOND QUARTER 2005 ($'s in thousands) FREE-STANDING ASSISTED LIVING COMMUNITIES ----------------------------------------- Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 --------- ---------- ---------- --------- ---------- ----------- Resident and healthcare revenue $22,663 $ 23,532 $ 24,563 $25,506 $ 26,207 $ 26,847 Community operating expense 17,061 17,519 17,657 17,970 18,447 18,027 ------- -------- -------- ------- -------- --------- Community operating contribution 5,602 6,013 6,906 7,536 7,760 8,820 Community operating margin 24.7% 25.6% 28.1% 29.5% 29.6% 32.9% Ending Occupancy 2,394 2,456 2,504 2,533 2,562 2,561 Ending Occupancy % 84.3% 86.5% 88.3% 89.3% 90.1% 89.9% Average Monthly Occupancy 2,384 2,430 2,478 2,521 2,537 2,557 Monthly Revenue per unit $ 3,169 $ 3,228 $ 3,304 $ 3,372 $ 3,443 $ 3,500 Year to Year % Change 8.7% 7.5% 8.2% 9.9% 8.7% 8.4% Monthly Operating Contribution per unit 783 825 929 996 1,020 1,150 Year to Year % Change 78.5% 46.3% 39.2% 37.3% 30.2% 39.4%
NOTE: Excludes two non-consolidated joint ventures.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION INNOVATIVE SENIOR CARE / THERAPY SECOND QUARTER 2006 ($'s in thousands) Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 ---------- ---------- -------- -------- ---------- ---------- Revenues $8,781 $9,207 $9,970 $10,902 $11,745 $12,504 Therapy clinics 81 87 93 96 107 115 Outside clinics (included in above totals) 12 17 23 25 34 41 Therapy staff Full time 248 280 338 354 369 418 Part time 201 205 232 225 208 209
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION SAME COMMUNITY RESULTS - SECOND QUARTER 2005 ($'s in thousands) INCLUDING ENTRANCE FEE COMMUNITIES: - ------------------------------------ Three months ended June 30 $ % ------------------------------- 2005 2004 Change Change ------------ ------------ ----------- ------------ Resident & Healthcare revenue $ 119,442 $ 109,110 $ 10,332 9.5% Community operating expense 78,666 74,065 4,601 6.2% ------------ ------------ -------- ------------ Community operating contribution $ 40,776 $ 35,045 5,731 16.4% Community operating margin 34.1% 32.1% # Locations 59 59 Avg. Occupancy 93.8% 92.3% Avg. Occupied Units 10,974 10,812 162 1.5% Avg. Mo. Revenue/unit $ 3,628 $ 3,364 $ 264 7.9% Avg. Mo. Operating Contribution/unit 1,239 1,080 158 14.6% EXCLUDING ENTRANCE FEE COMMUNITIES: - ------------------------------------ Three months ended June 30 $ % ------------------------------- 2005 2004 Change Change ------------ ------------ ----------- ------------ Resident & Healthcare revenue $ 86,766 78,781 $ 7,985 10.1% Community operating expense 55,286 51,502 3,784 7.3% ------------ ------------ -------- ------------ Community operating contribution $ 31,480 $ 27,279 4,201 15.4% Community operating margin 36.3% 34.6% # Locations 53 53 Avg. Occupancy 93.7% 92.0% Avg. Occupied Units 8,153 8,006 147 1.8% Avg. Mo. Revenue/unit $ 3,547 $ 3,280 $ 267 8.1% Avg. Mo. Operating Contribution/unit 1,287 1,136 151 13.3%
* 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 - SECOND QUARTER 2005 ($'s in thousands) Three months ended June 30, Three months ended June 30, -------------------------------------------------------------- 2005 % 2004 % ---------- ---------- ---------- ---------- COMPOSITION - ----------- Revenues: Retirement Centers Independent living $ 39,029 32.0% $ 36,171 32.8% Assisted living 15,150 12.4% 14,337 13.0% Skilled Nursing 20,392 16.8% 19,071 17.3% Ancillary services, including Innovative Senior Care (therapy and wellness programs) 16,524 13.6% 13,559 12.3% Amortization of Deferred Entrance Fee Revenue 2,699 2.2% 2,440 2.3% ---------- ---------- ---------- ---------- 93,794 77.0% 85,578 77.7% Free-Standing Assisted Living Assisted living 23,658 19.4% 21,152 19.2% Ancillary services, including Innovative Senior Care (therapy and wellness programs) 3,189 2.7% 2,380 2.2% ---------- ---------- ---------- ---------- 26,847 22.1% 23,532 21.4% Total Resident and Healthcare Revenue 120,641 99.1% 109,110 99.1% Management and Contract Services 516 0.5% 515 0.5% Reimbursed Expenses 542 0.4% 524 0.4% ---------- ---------- ---------- ---------- 1,058 0.9% 1,039 0.9% ---------- ---------- ---------- ---------- Total Revenues $ 121,699 100.0% $ 110,149 100.0% BY PAYOR - -------- Private Pay $ 101,852 83.7% $ 93,907 85.3% Medicare 17,532 14.4% 13,487 12.2% Medicaid 2,315 1.9% 2,755 2.5% ---------- ---------- ---------- ---------- Total $ 121,699 100.0% $ 110,149 100.0%
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION OTHER STATISTICS - SECOND QUARTER 2005 UNIT CAPACITY BY COMMUNITY TYPE - ------------------------------- At June 30, 2005 --------------------- Locations Capacity --------- ---------- Rental Retirement Centers: Owned-100% 2 272 Leased 20 5,579 Managed - other 3 682 --------- ---------- 25 6,533 Entrance Fee Retirement Centers: Owned-100% 3 918 Owned- 90% - - Leased 3 1,529 Managed-Freedom Square 1 739 Managed-other 2 506 --------- ---------- 9 3,692 Free-Standing AL's: Owned-100% 10 898 Owned-Joint Venture 2 163 Leased 20 1,859 Leased-Joint Venture 1 92 --------- ---------- 33 3,012 All Communities: Owned-100% 15 2,088 Owned- 90% - - Owned-Joint Venture 2 163 Leased 43 8,967 Leased-Joint Venture 1 92 Managed-Freedom Square 1 739 Managed-other 5 1,188 --------- ---------- 67 13,237 Note: Leased communities include both operating and capital leases. The two 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-----