-----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, I74Xo0MJ719qIBZix8kC/lY7TRfiT76LPZHkVegbTpScc83bF+INX9SX1xMTcHv/ Oj9Lpcht3PeGc9F45W67Bw== 0000892569-98-002375.txt : 19980817 0000892569-98-002375.hdr.sgml : 19980817 ACCESSION NUMBER: 0000892569-98-002375 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES III LTD PARTNERSHIP CENTRAL INDEX KEY: 0000853274 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330365417 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-30084 FILM NUMBER: 98691586 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STE D 1 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 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES III L P DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 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, 1998 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: 0-26470 AMERICAN RETIREMENT VILLAS PROPERTIES III, L.P. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-365417 (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER 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 III, L.P. (a California limited partnership) Balance Sheets (Unaudited) (In thousands) ASSETS
JUNE 30, DECEMBER 31, 1998 1997 -------- -------- Properties, at cost: Land $ 4,674 $ 4,674 Buildings and improvements, less accumulated depreciation of $4,606 and $4,122 at June 30, 1998 and December 31, 1997, respectively 24,478 24,126 Furniture, fixtures and equipment, less accumulated depreciation of $405 and $373 at June 30, 1998 and December 31, 1997, respectively 964 760 -------- -------- Net properties 30,116 29,560 Cash 1,765 1,086 Restricted cash 158 153 Loan fees, less accumulated amortization of $192 and $175 at June 30, 1998 and December 31, 1997, respectively 53 70 Amounts receivable from affiliates -- 265 Other assets 239 107 -------- -------- $ 32,331 $ 31,241 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable to banks $ 16,685 $ 16,086 Notes payable to others 4,775 4,803 Accounts payable 1,266 974 Accrued expenses 461 328 Amounts payable to affiliate 694 383 Distributions payable to Partners 281 46 -------- -------- Total liabilities 24,162 22,620 -------- -------- Commitments and contingencies Minority interest 84 74 -------- -------- Partners' capital (deficit): General partners' deficit (78) (74) Limited partners' capital, 18,666 units outstanding 8,163 8,621 -------- -------- Total partners' capital 8,085 8,547 -------- -------- $ 32,331 $ 31,241 ======== ========
See accompanying notes to the unaudited financial statements. 2 3 American Retirement Villas Properties III, L.P. (a California limited partnership) Statements of Operations (unaudited) (In thousands, except unit data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 1998 1997 1998 1997 ------- ------- ------- ------- REVENUES: Rent $ 1,987 $ 1,375 $ 3,895 $ 2,752 Assisted living 231 141 448 278 Interest and other 141 25 206 52 ------- ------- ------- ------- Total revenues 2,359 1,541 4,549 3,082 ------- ------- ------- ------- COSTS AND EXPENSES: Rental property operations 1,054 685 2,022 1,376 Assisted living 89 52 176 107 Depreciation and amortization 379 228 714 455 Interest 495 358 968 719 General and administrative 144 133 280 244 Property taxes 70 66 141 131 Advertising 29 14 50 23 Minority interest in operations 37 16 72 38 ------- ------- ------- ------- Total costs and expenses 2,297 1,552 4,423 3,093 ------- ------- ------- ------- Net income (loss) $ 62 $ (11) $ 126 $ (11) ======= ======= ======= ======= Net income (loss) per limited partner unit $ 3.29 $ (0.58) $ 6.69 $ (0.58) ======= ======= ======= =======
See accompanying notes to the unaudited financial statements. 3 4 American Retirement Villas Properties III, L.P. (a California limited partnership) Statements of Cash Flows (unaudited) (In thousands)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 1997 ------- ------- Cash flows from operating activities: Net income (loss) $ 126 $ (11) Adjustments to reconcile net income to net cash provided by Operating activities: Depreciation and amortization 714 455 Interest expense on notes payable to bank added to principal 74 -- Change in assets and liabilities: (Increase) decrease in restricted cash (5) (4) Increase in other assets (218) (100) Increase in accounts payable and accrued liabilities 425 405 Increase in amounts payable from affiliates, net 576 (58) Increase in minority interest 12 16 ------- ------- Net cash provided by operating activities 1,704 703 ------- ------- Cash flows used in investing activities: Improvements and building construction (835) (2,802) Additions to furniture, fixtures and equipment, net (333) (50) ------- ------- Net cash used in investing activities (1,168) (2,852) Cash flows from financing activities: Proceeds from notes payable 663 2,403 Principal repayments on notes payable to banks and others (166) (139) Distributions paid (354) -- ------- ------- Net cash provided by financing activities 143 2,264 ------- ------- Net increase in cash 679 115 Cash at beginning of period 1,086 892 ------- ------- Cash at end of period $ 1,765 $ 1,007 ======= ======= Supplemental disclosure of cash flow information - Cash paid during the period for interest $ 968 $ 719 ======= =======
See accompanying notes to the unaudited financial statements. 4 5 American Retirement Villas Properties III, L.P. (a California limited partnership) Notes to Financial Statements (Unaudited) June 30, 1998 (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING All adjustments, consisting only of recurring accruals, have been made that are necessary to present fairly the financial position and results of operations for the periods covered by this report. The results of operations for the three months and six months ended June 30, 1998, are not necessarily indicative of the operating results for the full year. Pursuant to Regulation S-X Rule 10-1(5), American Retirement Villas Properties III, L.P.'s (the "Partnership") significant accounting policies are described in the Partnership's December 31, 1997 Form 10-K filed with the Securities and Exchange Commission. The Partnership follows the same accounting policies for interim reporting purposes. This quarterly report should be read in conjunction with such financial statements. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. (2) TRANSACTIONS WITH AFFILIATES The Partnership has an agreement with ARV Assisted Living, Inc., the Partnership's Managing General Partner, providing for a property management fee of five percent of gross revenues amounting to $113,000 and $223,000, for the three-month and the six-month periods ended June 30, 1998, respectively. Additionally, a partnership management fee of 10 percent of cash flow before distributions, as defined in the Partnership Agreement, amounted to $46,000 and $97,000 for the three-month and the six-month periods ended June 30, 1998, respectively. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUE Revenue includes rental income, assisted living income, interest earned on cash balances and other revenue. Revenue increased $818,000 and $1.5 million for the three-month and six-month periods ended June 30, 1998, respectively, compared with the corresponding periods in 1997. These increases resulted primarily from the operations of Villa Las Posas, which opened in December 1997, and by an increase in residents using assisted living services during 1998. COSTS AND EXPENSES Total costs and expenses includes rental property operations (consisting of, but not limited to, property management costs, payroll related expenses, utilities, food, and maintenance expenses), assisted living expenses, general and administrative (comprised of, but not limited to, costs for accounting, partnership administration, bad debt, data processing, investor relations, insurance and professional services), depreciation and amortization, property taxes, advertising and interest. Costs and expenses increased $745,000 and $1.3 million for the three-month and six-month periods ended June 30, 1998, compared with the corresponding periods in 1997. The increase resulted primarily from the operations of Villa Las Posas which commenced operations in December 1997. 5 6 LIQUIDITY AND CAPITAL RESOURCES The General Partners expect that the cash to be generated from operations of all the Partnership's 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, the Partnership's liquidity is sustained primarily from cash flow provided by operating activities. During the six-month period ended June 30, 1998, cash provided by operating activities increased to $1.7 million compared to $703,000 for the corresponding period in 1997. During the six-month period ended June 30, 1998, the Partnership's net cash used in investing activities decreased to $1.2 million compared to net cash used in investing activities of $2.9 million for the corresponding period in 1997. The Partnership's investing activities consisted of capital improvements and the purchase of furniture and fixtures at its operating properties. During 1997, additional cash was used in the construction of Villa Las Posas. During the six-month period ended June 30, 1998, the Partnership's net cash provided by financing activities was $143,000 compared to net cash provided by financing activities of $2.3 million for the corresponding period in 1997. The Partnership's financing activities consisted of borrowings from its construction loan and principal reduction on its notes payable to banks and others. During the six-month period ended June 30, 1998, the Partnership made $354,000 in distributions to the partners. The General Partners 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. The General Partners believe that if the inflation rate increases they will be able to pass the subsequent increase in operating expenses onto the residents of the facilities by way of higher rental and assisted living rates. On March 12, 1997, ARVP III obtained a $7.7 construction loan from Bank United of Texas for financing the construction of Villa Las Posas. The terms of the construction loan provide for the interest rate to be equal to the 30 day LIBOR rate plus 2.75 percent. As of June 30, 1998, the Partnership had $5.9 million outstanding under this construction loan. In addition, the Partnership has long-term notes payable to banks and others of $15.6 million as of June 30, 1998. In July 1998, the Board of Directors of the Managing General Partner approved the refinancing of the Partnership's three assisted living communities. This refinancing will allow the Partnership to refinance the existing Villa Las Posas construction debt before its September maturity, to take advantage of lower interest rates available in the current environment and to provide a return of capital to the limited partners by borrowing against the increased value of these properties. As a result of this refinancing, the Partnership's long-term debt is expected to be approximately $30.0 million. In order to refinance certain long-term debt, the Partnership will pay a prepayment penalty of approximately $145,000. The savings on the interest rate of the new debt will mitigate the effect of the prepayment penalty. The Partnership contemplates spending approximately $800,000 for capital expenditures during 1998 for physical improvements at its communities. Of this amount, approximately $130,000 has been contracted as of June 30, 1998. Funds for these improvements are expected to be available from operations. A portion of the funds for these improvements is expected to come from the refinancing referenced above. There are no known material trends, favorable or unfavorable, in the Partnership's capital resources, and there is no expected change in the mix of such resources. There are no known material trends, favorable or unfavorable, other than those disclosed above, in the Partnership's capital resources. There is no expected change in the mix of such resources. YEAR 2000 ISSUE Certain computer programs utilized by the Partnership were written using two digits rather than four to define the year. As a result, those programs may recognize a date using "00" as the year 1900 rather than the year 2000. In the event this were to occur with any of the Partnership's computer programs, a system failure or miscalculation causing disruptions of operations could occur. Such a failure could cause the temporary inability to process transactions, send invoices or engage in similar normal business activities. Unrelated to the Year 2000 Issue, the Managing General Partner, which provides accounting services, intends to replaced substantially all of its accounting information systems software during 1998/1999. The Managing General Partner believes that with the conversion to the new accounting software, the Year 2000 Issue will not pose significant business or operating issues. 6 7 The Partnership is assessing its remaining software and operating equipment to determine whether any existing programs will have to be modified or replaced so that these systems will function properly with respect to dates in the year 2000 and thereafter. This assessment is expected to be completed during the fourth quarter of 1998. The Partnership has initiated communications with the third-party providers of certain of its administrative services, as well as its significant suppliers of services and products to determine the extent to which the Partnership is vulnerable to those parties' failures to remediate their own Year 2000 Issues. The Partnership plans to have completed its evaluation of those suppliers during the first quarter of 1999. The Partnership does not presently believe that third party Year 2000 Issues will have a material adverse effect on the Partnership. However, there can be no guarantee that the systems of other companies on which the Partnership's operations or systems rely will be timely remedied or that a failure by another company to remediate its systems in a timely manner would not have a material adverse effect on the Partnership. The Partnership expects to successfully implement the changes necessary to address these Year 2000 Issues, and does not believe that the cost of such actions will have a material effect on the Partnership. There can be no assurance, however, that there will not be delays in, or increased costs associated with, the implementation of such changes, and the Partnership's inability to implement such changes could have a material adverse effect on the Partnership's business, operating results, and financial condition. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 7 8 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 thereunto duly authorized. AMERICAN RETIREMENT VILLAS PROPERTIES III A CALIFORNIA LIMITED PARTNERSHIP By: ARV Assisted Living, Inc. a Delaware Corporation (Managing General Partner) By: /s/ Howard G. Phanstiel --------------------------- Howard G. Phanstiel Chief Executive Officer and Chairman the Board Date: August 14, 1998 By: /s/ Paul Kuliev --------------------------- Vice President, Controller Date: August 14, 1998 8 9 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 1,765 0 0 0 0 0 35,127 5,011 32,331 0 0 0 0 0 8,085 32,331 0 2,359 0 1,802 0 0 495 62 0 62 0 0 0 62 3.29 3.29
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