-----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, IBgOGmcPEPW6DdFtgT6p7pDTVOYZLBIfrxqxiodoqRY6VQCX5ZFsIKMjFO4f42po B3lkCk97/TflQRQr9vDU4g== /in/edgar/work/20000811/0001095811-00-002669/0001095811-00-002669.txt : 20000921 0001095811-00-002669.hdr.sgml : 20000921 ACCESSION NUMBER: 0001095811-00-002669 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES II CENTRAL INDEX KEY: 0000830156 STANDARD INDUSTRIAL CLASSIFICATION: [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: 694068 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 e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED JUNE 30,2000 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 JUNE 30, 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
JUNE 30, DECEMBER 31, 2000 1999 -------- ------------ Properties, at cost: Land $ 11,453 $ 11,453 Buildings and improvements, less accumulated depreciation of $7,682 and $7,248 at June 30, 2000 and December 31, 1999, respectively 20,405 20,662 Leasehold property and improvements, less accumulated depreciation of $1,258 and $1,244 at June 30, 2000 and December 31, 1999, respectively 269 209 Furniture, fixtures and equipment, less accumulated depreciation of $1,298 and $1,145 at June 30, 2000 and December 31, 1999, respectively 1,306 1,373 -------- -------- Net properties 33,433 33,697 Cash 2,112 2,002 Other assets 2,642 2,844 -------- -------- $ 38,187 $ 38,543 ======== ======== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Notes payable $ 39,312 $ 39,545 Accounts payable 170 155 Accrued expenses 1,500 1,426 Amounts payable to affiliate 234 304 Distributions payable to Partners 31 8 -------- -------- Total liabilities 41,247 41,438 -------- -------- Commitments and contingencies Partners' capital (deficit) General partners' capital 117 119 Limited partners' capital, 35,020 units outstanding (3,177) (3,014) -------- -------- Total partners' capital (deficit) (3,060) (2,895) -------- -------- $ 38,187 $ 38,543 ======== ========
See accompanying notes to the unaudited financial statements. 2 3 American Retirement Villas Properties II (a California limited partnership) Statements of Operations (Unaudited) (In thousands, except unit data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- ------------------------ 2000 1999 2000 1999 ------ ------ -------- ------- REVENUE: Rent $4,230 $4,093 $ 8,387 $ 8,080 Assisted living 965 1,014 1,877 2,007 Interest and other 101 113 207 243 ------ ------ -------- ------- Total revenue 5,296 5,220 10,471 10,330 ------ ------ -------- ------- COSTS AND EXPENSES: Rental property operations 2,775 2,666 5,565 5,263 Assisted living 623 456 1,323 880 General and administrative 132 283 252 584 Communities rent 87 86 175 386 Depreciation and amortization 578 419 1,156 756 Property taxes 152 177 316 325 Advertising 102 66 192 120 Interest 673 443 1,577 660 ------ ------ -------- ------- Total costs and expenses 5,122 4,596 10,556 8,974 ------ ------ -------- ------- Income (loss) before income tax expense 174 624 (85) 1,356 Income tax expense 2 -- 5 -- ------ ------ -------- ------- Net income (loss) $ 172 $ 624 $ (90) $ 1,356 ====== ====== ======== ======= Net income (loss) per limited partner unit $ 4.86 $16.26 $ (2.56) $ 36.96 ====== ====== ======== =======
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 SIX MONTHS ENDED JUNE 30, ------------------------ 2000 1999 -------- -------- Cash flows from operating activities: Net income (loss) $ (90) $ 1,356 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,156 756 Change in assets and liabilities: Increase in other assets (218) (1,599) Increase (decrease) in accounts payable & accrued expenses 88 (423) Increase in amounts payable to affiliate (70) (21) ------- -------- Net cash provided by operating activities 866 69 ------- -------- Cash flows used in investing activities: Capital expenditures (470) (913) Purchase of previously leased communities -- (14,636) (Increase) decrease in deposits (1) 200 ------- -------- Net cash used in investing activities (471) (15,349) ------- -------- Cash flows from financing activities: Principal repayments on notes payable (233) (20,791) Proceeds from notes payable -- 54,380 Distributions paid (52) (9,755) ------- -------- Net cash provided by (used in) financing activities (285) 23,834 ------- -------- Net increase in cash 110 8,554 Cash at beginning of period 2,002 953 ------- -------- Cash at end of period $ 2,112 $ 9,507 ======= ======== Supplemental disclosure of cash flow information - Cash paid during the period for interest $ 1,805 $ 443 ======= ========
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) June 30, 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 $518,000 and $514,000 for the six-month periods and $261,000 and $259,000 for the three-month periods ended June 30, 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 $109,000 and $252,000 for the six-month periods and $67,000 and $128,000 for the three-month periods ended June 30, 2000 and 1999 respectively. (3) NOTES PAYABLE On June 28, 1999, we obtained financing on eight owned communities. As part of the loan requirements, we created a wholly owned subsidiary Retirement Inns II, LLC. The loan is for 24 months and is secured by the various properties; in addition, ARV Assisted Living, our managing general partner, is a guarantor on the loan for fraud, material misrepresentation and certain covenants. The $39.3 million of mortgage loans are due June 2001 and are in the process of being refinanced with 30-year loans. However, we have not received the approvals necessary to ensure the loans will be available. 5 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS) For the Six Months Ended June 30, ------------------------ Increase/ 2000 1999 (decrease) --------- ---------- ---------- Revenue: Assisted living community revenue $10.3 $10.1 1.8% Interest and other revenue 0.2 0.2 (14.8)% ----- ----- ----- Total revenue 10.5 10.3 1.3% ----- ----- ----- Costs and expenses: Assisted living operating expenses 6.9 6.1 12.1% General and administrative 0.2 0.6 (56.8)% Communities rent 0.2 0.4 (54.8)% Depreciation and amortization 1.2 0.8 52.8% Property taxes 0.3 0.3 (2.6)% Advertising 0.2 0.1 59.5% Interest 1.6 0.6 139.2% ----- ----- ----- Total costs and expenses 10.6 8.9 17.6% ----- ----- ----- Net income (loss) $(0.1) $ 1.4 (106.7)% ===== ===== =====
The increase in assisted living community revenue is attributable to: o an increase in average rental rate per occupied unit to $1,723 for the six-month period ended June 30, 2000 as compared with $1,643 for the six-month period ended June 30, 1999; offset o by a decrease in average occupancy to 88% for the six-month period ended June 30, 2000 compared with 89% for the six-month period ended June 30, 1999; and o a decrease in assisted living penetration to 55% for the six-month period ended June 30, 2000 compared with 56% for the six-month period ended June 30, 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 expenses are 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 G&A due to cost-cutting efforts. The decrease in community rent is a result of the purchase of four previously leased communities, in March of 1999. The increase in depreciation and amortization is due to the amortization of loan fees related to the refinancing in June 1999 of the eight owned properties and the purchase of four previously leased communities, in March of 1999. The increase in advertising expenses is due to increased use of professionals to prepare collateral used in advertising in 2000. The increase in interest expense is related to the refinancing in June 1999 of the eight owned properties. 6 7 (DOLLARS IN MILLIONS) For the Three Months Ended June 30, -------------------------- Increase/ 2000 1999 (decrease) ------------ ------------ ---------- Revenue: Assisted living community revenue $5.2 $5.1 1.7% Interest and other revenue 0.1 0.1 (10.6)% ---- ---- ---- Total revenue 5.3 5.2 1.5% ---- ---- ---- Costs and expenses: Assisted living operating expenses 3.4 3.1 8.8% General and administrative 0.1 0.3 (53.3)% Communities rent 0.1 0.1 0.4% Depreciation and amortization 0.6 0.4 37.8% Property taxes 0.1 0.2 (14.2)% Advertising 0.1 0.1 54.5% Interest 0.7 0.4 52.0% ---- ---- ---- Total costs and expenses 5.1 4.6 11.4% ---- ---- ---- Net income $0.2 $0.6 (72.4)% ==== ==== ==== The increase in assisted living community revenue is attributable to: o an increase in average rental rate per occupied unit to $1,723 for the three-month period ended June 30, 2000 as compared with $1,649 for the three-month period ended June 30, 1999; offset o by a decrease in average occupancy to 88% for the three-month period ended June 30, 2000 compared with 90% for the three-month period ended June 30, 1999; and o a decrease in assisted living penetration to 54% for the three-month period ended June 30, 2000 compared with 58% for the three-month period ended June 30, 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 expenses are 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 G&A due to cost-cutting efforts. The increase in depreciation and amortization is due to the ongoing amortization of loan fees related to the refinancing in June 1999 of the eight owned properties. The increase in advertising expenses is due to increased use of professionals to prepare collateral used in advertising in 2000. The increase in interest expense is related to the refinancing in June 1999 of the eight owned properties. 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, and meet required principal reductions of debt. On a long-term basis, our liquidity is sustained primarily from cash flow provided by operating activities. During the six-month period ended June 30, 2000, cash provided by operating activities increased to $0.9 million compared to $0.1 million for the corresponding period in 1999. The primary components of cash used by operating activities for the quarter ended June 30, 2000 were operating losses offset by depreciation of $1.1 million and a decrease in other assets of $0.2 million. 7 8 During the six-month period ended June 30, 2000, our net cash used in investing activities decreased to $0.5 million compared to $15.3 million for the corresponding period in 1999. The decrease was a result of a purchase our landlords' interests in four previously leased assisted living communities in March 1999 and capital expenditures required to qualify for the refinancing in June 1999. The 2000 cash used in investing activities was primarily a result of capital expenditures. During the six-month period ended June 30, 2000, our net cash used in financing activities was $0.3 million compared to cash provided by financing activities of $23.8 million for the corresponding period in 1999. The 1999 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 and the refinancing of the eight owned properties. As part of the $39.2 million Banc One refinancing we were able to pay down the bridge loan of $14.7 million. The 2000 cash used in financing activities was a result of principal repayments on notes payable of $0.2 million and distributions paid of $0.1 million. The mortgage loans are due June 2001 and, are in the process of being refinanced with 30-year loans. However, the company has not received the approvals necessary to ensure the loans will be available. Our debt agreements contain restrictive covenants requiring us to maintain a certain level of debt service coverage. At June 30, 2000, we were not in compliance with the debt service coverage ratio. We have obtained waivers for those covenants with which we were not in compliance. Had we not obtained waivers we would have been in default on certain debt agreements. At June 30, 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. QUANATITATIVE 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 8 9 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: August 11, 2000 By: /s/ Abdo H. Khoury ----------------------------------------- Abdo H. Khoury Senior Vice President, and Chief Financial Officer of ARVAL, Managing General Partner Date: August 11, 2000 9 10 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- 27 Financial Data Schedule EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 2,112 0 0 0 0 0 43,451 10,238 38,187 0 39,312 0 0 0 (3,060) 38,187 0 10,471 0 10,556 0 0 1,577 (85) 5 (90) 0 0 0 (90) 2.56 2.56 Net income per listed partner unit.
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