-----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, SkOds8+bu72rmUep8jgaK1m9GmOV8VMRFI5F08SUfRDK1MTMBpaGpFQxqp11wzmp YkCuttqFfC/YbesaVJjfjg== 0001095811-00-001403.txt : 20000515 0001095811-00-001403.hdr.sgml : 20000515 ACCESSION NUMBER: 0001095811-00-001403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES II CENTRAL INDEX KEY: 0000830156 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330278155 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-20413 FILM NUMBER: 628193 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7147517400 MAIL ADDRESS: STREET 2: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 10-Q 1 FORM 10-Q QUARTER ENDED MARCH 31, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------------- -------------------- COMMISSION FILE NUMBER: 0-26468 AMERICAN RETIREMENT VILLAS PROPERTIES II, L.P. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-0278155 - ------------------------------- ------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 245 FISCHER AVENUE, D-1 COSTA MESA, CA 92626 - --------------------------------------- ------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS American Retirement Villas Properties II (a California limited partnership) Condensed Balance Sheets (Unaudited) (In thousands) ASSETS
MARCH 31, DECEMBER 31, 2000 1999 -------- ------------ Properties, at cost: Land $ 11,453 $ 11,453 Buildings and improvements, less accumulated depreciation of $7,464 and $7,248 at March 31, 2000 and December 31, 1999, respectively 20,480 20,662 Leasehold property and improvements, less accumulated depreciation of $1,250 and $1,244 at March 31, 2000 and December 31, 1999, respectively 203 209 Furniture, fixtures and equipment, less accumulated depreciation of $1,254 and $1,145 at March 31, 2000 and December 31, 1999, respectively 1,329 1,373 -------- -------- Net properties 33,465 33,697 Cash 2,228 2,002 Other assets 2,451 2,844 -------- -------- $ 38,144 $ 38,543 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable $ 39,425 $ 39,545 Accounts payable 128 155 Accrued expenses 1,595 1,426 Amounts payable to affiliate 194 304 Distributions payable to Partners 33 8 -------- -------- Total liabilities 41,375 41,438 -------- -------- Commitments and contingencies Partners' capital (deficit): General partners' capital 283 119 Limited partners' capital, 35,020 units outstanding (3,514) (3,014) -------- -------- Total partners' capital (3,231) (2,895) -------- -------- $ 38,144 $ 38,543 ======== ========
See accompanying notes to the unaudited financial statements. 2 3 American Retirement Villas Properties II (a California limited partnership) Condensed Statements of Operations (Unaudited) (In thousands, except unit data)
FOR THE THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ------- ------- Revenues: Rent $ 4,157 $ 3,987 Assisted living 912 993 Interest and other 106 130 ------- ------- Total revenues 5,175 5,110 ------- ------- Costs and expenses: Rental property operations 2,771 2,498 Assisted living 699 545 General and administrative 121 300 Communities rent 88 299 Depreciation and amortization 578 337 Property taxes 164 148 Advertising 110 34 Interest 904 217 ------- ------- Total costs and expenses 5,435 4,378 ------- ------- Income (loss) before income tax expense (260) 732 Income tax expense 2 -- ------- ------- Net income (loss) $ (262) $ 732 ======= ======= Net income (loss) per limited partnership unit $ (7.42) $ 20.69 ======= =======
See accompanying notes to the unaudited financial statements. 3 4 American Retirement Villas Properties II (a California limited partnership) Condensed Statements of Cash Flows (Unaudited) (In thousands)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------ 2000 1999 ------- -------- Cash flows from operating activities: Net income (loss) $ (262) $ 732 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 578 337 Change in assets and liabilities: (Increase) decrease in other assets 394 (82) Increase (decrease) in accounts payable & accrued expenses 142 (175) Increase (decrease) in amounts payable to affiliates (110) 405 ------- -------- Net cash provided by operating activities 742 1,217 ------- -------- Cash flows used in investing activities: Capital expenditures (346) (332) Purchase of previously leased communities -- (14,636) Refund of purchase deposit, net (1) 200 ------- -------- Net cash used in investing activities (347) (14,768) ------- -------- Cash flows provided by (used in) financing activities: Principal repayments on notes payable (120) (60) Proceeds from notes payable -- 14,677 Distributions paid (49) (348) ------- -------- Net cash provided by (used in) financing activities (169) 14,269 ------- -------- Net increase in cash 226 718 Cash at beginning of period 2,002 953 ------- -------- Cash at end of period $ 2,228 $ 1,671 ======= ======== Supplemental disclosure of cash flow information - Cash paid during the period for interest $ 904 $ 122 ======= ========
See accompanying notes to the unaudited financial statements. 4 5 American Retirement Villas Properties II, L.P. (a California limited partnership) Notes to Condensed Financial Statements (Unaudited) March 31, 2000 (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION We prepared the accompanying condensed financial statements of American Retirement Villas Properties II, L.P. following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by generally accepted accounting principles ("GAAP") can be condensed or omitted. The financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results. These are condensed financial statements. To obtain a more detailed understanding of our results, one should also read the financial statements and notes in our Form 10-K for 1999, which is on file with the SEC. The results of operations can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. USE OF ESTIMATES In preparing the financial statements conforming with GAAP, we have made estimates and assumptions that affect the following: o reported amounts of assets and liabilities at the date of the financial statements; o disclosure of contingent assets and liabilities at the date of the financial statements; and o reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) TRANSACTIONS WITH AFFILIATES We have an agreement with ARV Assisted Living, Inc. ("ARV"), our Managing General Partner, providing for a property management fee of five percent of gross revenues amounting to $257,000 and $255,000 for the three-month periods ended March 31, 2000 and 1999, respectively. Additionally, we pay to ARV a partnership management fee of 10 percent of cash flow before distributions, as defined in the Partnership Agreement, which amounted to $42,000 and $124,000 for the three-month periods ended March 31, 2000 and 1999, respectively. 5 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS) For the Three Months Ended March 31, --------------------- Increase/ 2000 1999 (decrease) ------ ------ ---------- Revenue: Assisted living community revenues $ 5.1 $ 5.0 1.8% Interest and other revenue ....... 0.1 0.1 (18.3)% ------ ------ ------ Total revenues............ 5.2 5.1 1.3% ------ ------ ------ Costs and expenses: Assisted living operating expenses 3.5 3.0 14.1% General and administrative ....... 0.1 0.3 (59.8)% Communities rent ................. 0.1 0.3 (70.6)% Depreciation and amortization .... 0.6 0.3 71.6% Property taxes ................... 0.2 0.2 11.2% Advertising ...................... 0.1 0.1 219.7% Interest ......................... 0.9 0.2 317.1% ------ ------ ------ Total costs and expenses . 5.5 4.4 24.2% ------ ------ ------ Net income (loss) ........ $ (0.3) $ 0.7 (135.8)% ====== ====== ======
The assisted living community revenue remained relatively constant due to: o an increase in the average rate per occupied unit to $2,099 for the three-month period ended March 31, 2000 as compared with $2,045 for the three-month period ended March 31, 1999; offset by: o a decrease in average occupancy for our assisted living communities to 87.0% for the three-month period ended March 31, 2000 as compared with 88.0% for the three-month period ended March 31, 1999; and o an decrease in assisted living penetration to 55.4% for the three-month period ended March 31, 2000 compared with 55.9% for the three-month period ended March 31, 1999. Interest and other revenue remained relatively constant. The increase in assisted living operating expenses is attributable to increased payroll costs including: o increased wages of staff; o incentive programs; and o increased worker's compensation premiums. The decrease in general and administrative is attributable to: o a reduction of administration fees paid to our managing general partner; and o a reduction of expenses, that were previously allocated to general and administrative due to cost-cutting efforts. The decrease in community rent, and increases in property taxes and depreciation and amortization are a result of the purchase of four previously leased communities, in March of 1999. The increase in advertising expenses is due to additional advertising in the 2000 quarter. The increase in interest expense is related to the loans for the purchase of the four previously leased communities, in March of 1999, and to the increased debt from the refinancing on June 28, 1999 of the eight owned properties. 6 7 LIQUIDITY AND CAPITAL RESOURCES We expect that the cash to be generated from operations of all our properties will be adequate to pay operating expenses, make necessary capital improvements, make required principal reductions of debt and make quarterly distributions. On a long-term basis, our liquidity is sustained primarily from cash flow provided by operating activities. During the three-month period ended March 31, 2000, cash provided by operating activities decreased to $0.7 million compared to $1.2 million for the corresponding period in 1999. The decrease was primarily due to the operating loss in the quarter. During the three-month period ended March 31, 2000, our net cash used in investing activities decreased to $0.3 million compared to $14.8 million for the corresponding period in 1999. The decrease was a result of a purchase of our landlords' interests in four previously leased assisted living communities in March of 1999. During the three-month period ended March 31, 2000, our net cash used in financing activities was $0.2 million compared to cash provided by financing activities of $14.3 million for the corresponding period in 1999. The cash provided by financing activities was the result of a $14.7 million bridge loan, which enabled us to purchase four previously leased communities from our landlords. As of March 31, 2000, of our ten assisted living communities, 8 are owned directly, one is operated under a long-term operating lease, and one is owned subject to a ground lease. We contemplate spending approximately $725,000 for capital expenditures during 2000 for physical improvements at our communities. Funds for these improvements are expected to be available from operations. We are not aware of any trends, other than national economic conditions which have had, or which may be reasonably expected to have, a material favorable or unfavorable impact on the revenues or income from the operations or sale of properties. We believe that if the inflation rate increases we will be able to pass the subsequent increase in operating expenses onto the residents of the communities by way of higher rental and assisted living rates. The implementation of price increases is intended to lead to an increase in revenue however, those increases may result in an initial decline in occupancy and/or a delay in increasing occupancy. If this occurs, revenues may remain constant or even decline. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks related to fluctuations in interest rates on our fixed rate notes payable. Currently, we do not utilize interest rate swaps. You should be aware that many of the statements contained in this section are forward looking and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements." For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value of the debt instrument, but do affect our future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until we would be required to refinance such debt. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 7 8 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 thereunto duly authorized. AMERICAN RETIREMENT VILLAS PROPERTIES II, A CALIFORNIA LIMITED PARTNERSHIP By: /s/ Douglas M. Pasquale -------------------------------- Douglas M. Pasquale Chairman of the Board of ARVAL, Managing General Partner. Date: May 12, 2000 By: /s/ Abdo H. Khoury -------------------------------- Abdo H. Khoury Senior Vice President, and Chief Financial Officer of ARVAL, Managing General Partner Date: May 12, 2000 8 9 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 11,453 0 0 0 0 0 43,433 9,968 38,144 0 39,425 0 0 0 (3,231) 38,144 0 5,175 0 4,531 0 0 904 (260) 2 (262) 0 0 0 (262) (7.42) (7.42) Net loss per limited partner unit.
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