-----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, JByiHlmKjrPri60a8BB12EbR3MatCyZlpfXvi6XC8Vbo/wcdyKT/PrECIeViM39H BJ7jUPcVWn0xSR8FUiAzmg== /in/edgar/work/0001095811-00-004775/0001095811-00-004775.txt : 20001115 0001095811-00-004775.hdr.sgml : 20001115 ACCESSION NUMBER: 0001095811-00-004775 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: 766260 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 a67232e10-q.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED SEPT.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 SEPTEMBER 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
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Properties, at cost: Land $ 11,453 $ 11,453 Buildings and improvements, less accumulated depreciation of $7,901 and $7,248 at September 30, 2000 and December 31, 1999, respectively 20,292 20,662 Leasehold property and improvements, less accumulated depreciation of $1,266 and $1,244 at September 30, 2000 and December 31, 1999, respectively 225 209 Furniture, fixtures and equipment, less accumulated depreciation of $1,404 and $1,145 at September 30, 2000 and December 31, 1999, respectively 1,243 1,373 -------- -------- Net properties 33,213 33,697 Cash 2,039 2,002 Other assets 2,851 2,844 -------- -------- $ 38,103 $ 38,543 ======== ======== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Notes payable $ 39,196 $ 39,545 Accounts payable 101 155 Accrued expenses 1,669 1,426 Amounts payable to affiliate 216 304 Distributions payable to Partners 22 8 -------- -------- Total liabilities 41,204 41,438 -------- -------- Commitments and contingencies Partners' capital (deficit) General partners' capital 117 119 Limited partners' capital, 35,020 units outstanding (3,218) (3,014) -------- -------- Total partners' capital (deficit) (3,101) (2,895) -------- -------- $ 38,103 $ 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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ----------------------- 2000 1999 2000 1999 ------- ------ -------- ------- REVENUE: Rent $ 4,483 $4,178 $ 12,869 $12,259 Assisted living 924 1,025 2,801 3,032 Interest and other 99 121 306 363 ------- ------ -------- ------- Total revenue 5,506 5,324 15,976 15,654 ------- ------ -------- ------- COSTS AND EXPENSES: Rental property operations 2,844 2,800 8,409 8,098 Assisted living 659 507 1,981 1,387 General and administrative 222 200 475 784 Communities rent 87 86 262 472 Depreciation and amortization 584 535 1,740 1,292 Property taxes 177 155 494 480 Advertising 104 66 296 151 Interest 899 901 2,475 1,560 Other (income) (31) -- (31) -- ------- ------ -------- ------- Total costs and expenses 5,545 5,250 16,101 14,224 ------- ------ -------- ------- Income (loss) before income tax expense (39) 74 (125) 1,430 Income tax expense 2 -- 7 -- ------- ------ -------- ------- Net income (loss) $ (41) $ 74 $ (132) $ 1,430 ======= ====== ======== ======= Net income (loss) per limited partner unit $ (1.17) $ 2.09 $ (3.73) $ 40.44 ======= ====== ======== =======
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 NINE MONTHS ENDED SEPTEMBER 30, ----------------------- 2000 1999 ------- -------- Cash flows from operating activities: Net income (loss) $ (132) $ 1,430 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,740 1,292 Change in assets and liabilities: Increase in other assets (635) (1,665) Increase in accounts payable & accrued expenses .. 189 439 Increase (decrease) in amounts payable to affiliate (88) 179 ------- -------- Net cash provided by operating activities 1,074 1,675 ------- -------- Cash flows used in investing activities: Capital expenditures (624) (1,258) Purchase of previously leased communities -- (14,692) (Increase) decrease in deposits (4) 199 ------- -------- Net cash used in investing activities (628) (15,751) ------- -------- Cash flows from financing activities: Principal repayments on notes payable (348) (20,889) Proceeds from notes payable -- 54,380 Distributions paid (61) (18,027) ------- -------- Net cash provided by (used in) financing activities (409) 15,464 ------- -------- Net increase in cash 37 1,388 Cash at beginning of period 2,002 953 ------- -------- Cash at end of period $ 2,039 $ 2,341 ======= ======== Supplemental disclosure of cash flow information - Cash paid during the period for interest $ 2,703 $ 1,301 ======= ========
See accompanying notes to the unaudited financial statements. 4 5 American Retirement Villas Properties II, L.P. (a California limited partnership) Notes to Consolidated Condensed Financial Statements (Unaudited) September 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 to 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 $792,000 and $778,000 for the nine-month periods and $274,000 and $264,000 for the three-month periods ended September 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 $200,000 and $301,000 for the nine-month periods and $89,000 and $49,000 for the three-month periods ended September 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 $39.2 million of mortgage loans are due June 2001 and are in the process of being refinanced with 35-year loans. We have received the approvals on two communities and are waiting on the approvals necessary to ensure the loans will be available on six other communities. 5 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FACTORS AFFECTING FUTURE RESULTS AND FORWARD-LOOKING STATEMENTS This 10-Q report contains forward-looking statements, including statements regarding, among other items: o our business strategy; o our liquidity requirements and ability to obtain financing; o the level of future capital expenditures; o the impact of inflation and changing prices; and These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. These risks and uncertainties include, but are not limited to: o access to capital necessary for acquisitions and development; o our ability to manage growth; o governmental regulations; o competition; and o other risks associated with the assisted living industry. Although we believe we have the resources required to achieve our objectives, actual results could differ materially from those anticipated by these forward-looking statements. There can be no assurances that events anticipated by these forward-looking statements will in fact transpire as expected. RESULTS OF OPERATIONS
For the Nine Months Ended September 30, ------------------- Increase/ 2000 1999 (decrease) ------ ------ ---------- (DOLLARS IN MILLIONS) Revenue: Assisted living community revenue $15.67 $15.29 2.5% Interest and other revenue 0.31 0.36 (15.2)% ------ ------ ------ Total revenue 15.98 15.65 2.1% ------ ------ ------ Costs and expenses: Assisted living operating expenses 10.39 9.49 9.6% General and administrative 0.47 0.78 (39.4)% Communities rent 0.26 0.47 (44.5)% Depreciation and amortization 1.73 1.29 34.7% Property taxes 0.49 0.48 3.0% Advertising 0.29 0.15 95.8% Interest 2.47 1.56 58.6% ------ ------ ------ Total costs and expenses 16.10 14.22 13.2% ------ ------ ------ Net income (loss) $(0.12) $ 1.43 (108.7)% ====== ====== ======
The increase in assisted living community revenue is attributable to: o an increase in average rental rate per occupied unit to $1,748 for the nine-month period ended September 30, 2000 as compared with $1,658 for the nine-month period ended September 30, 1999; offset by o a decrease in average occupancy to 88% for the nine-month period ended September 30, 2000 compared with 89% for the nine-month period ended September 30, 1999; and o a decrease in assisted living penetration to 54% for the nine-month period ended September 30, 2000 compared with 57% for the nine-month period ended September 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. 6 7 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 competition in the Assisted Living market. The increase in interest expense attributable to: o the refinancing in June 1999 of the eight owned properties; partially offset by o a recovery of $228,000 of the interest rate lock and commitment fees incurred in connection with the failed refinancing of certain notes payable in 1998.
For the Three Months Ended September 30, ------------------- Increase/ 2000 1999 (decrease) ------ ------ ---------- (DOLLARS IN MILLIONS) Revenue: Assisted living community revenue $ 5.41 $5.20 3.9% Interest and other revenue 0.10 0.12 (18.2)% ------ ----- ------ Total revenue 5.51 5.32 3.4% ------ ----- ------ Costs and expenses: Assisted living operating expenses 3.50 3.31 5.9% General and administrative 0.22 0.20 11.2% Communities rent 0.09 0.09 1.1% Depreciation and amortization 0.58 0.53 9.1% Property taxes 0.17 0.15 14.8% Advertising 0.10 0.07 58.0% Interest 0.89 0.90 (0.3)% ------ ----- ------ Total costs and expenses 5.55 5.25 5.6% ------ ----- ------ Net income $(0.04) $0.07 (156.9)% ====== ===== ======
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 September 30, 2000 as compared with $1,649 for the three-month period ended September 30, 1999; offset o by a decrease in assisted living penetration to 53% for the three-month period ended September 30, 2000 compared with 58% for the three-month period ended September 30, 1999. o occupancy levels remained constant at 89% 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 increase in general and administrative expenses are attributable to: o increased legal fees as the successful collection efforts of loan fees due the company, and o an increase of administration fees paid to our managing general partner as a result of increased cash flow; offset by o a reduction of expenses, that were previously allocated to G&A due to cost-cutting efforts. Community rent expense remained relatively constant between the three-month periods ending September 30, 2000 and September 30, 1999. The increase in depreciation and amortization is due to an increase in property improvements. The increase in advertising expenses is due to increased competition in the Assisted Living market. Interest expense remained relatively constant between the three-month periods ending September 30 2000 and September 30, 1999. 7 8 LIQUIDITY AND CAPITAL RESOURCES We expect that the cash to be generated from operations of all our properties and our ability to refinance certain ALCs 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 nine-month period ended September 30, 2000, cash provided by operating activities decreased to $1.1 million compared to $1.7 million for the corresponding period in 1999. The primary components of cash used by operating activities for the quarter ended September 30, 2000 were operating losses or $0.1 million offset by depreciation and amortization of $1.7 million, an increase in other assets of $0.6 million and an increase in accounts payable and accrued expenses of $0.2 million. During the nine-month period ended September 30, 2000, our net cash used in investing activities decreased to $0.6 million compared to $15.7 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 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 nine-month period ended September 30, 2000, our net cash used in financing activities was $0.4 million compared to cash provided by financing activities of $15.5 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 $0.3 million and distributions paid of $0.1 million. The mortgage loans are due June 2001 and are in the process of being refinanced with 35-year loans. The $39.2 million of mortgage loans are due June 2001 and are in the process of being refinanced with 35-year loans. We have received the approvals on two communities and are waiting on the approvals necessary to ensure the loans will be available on six other communities. Our debt agreements contain restrictive covenants requiring us to maintain a certain level of debt service coverage. At September 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 September 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 $850,000 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 8 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 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: November 14, 2000 By: /s/ Abdo H. Khoury -------------------------------- Abdo H. Khoury Senior Vice President, and Chief Financial Officer of ARVAL, Managing General Partner Date: November 14, 2000 9 EX-27 2 a67232ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 2,039 0 0 0 0 0 43,784 10,571 38,103 0 39,196 0 0 0 (3,101) 38,103 0 15,976 0 16,101 0 0 2,475 (125) 7 (132) 0 0 0 (132) (3.73) (3.73) Net income per limited partner unit.
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