-----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, UDQ/AvzGhxionHZsLp4e1G4EPyt+i3XWdUz6x3OlZRXpVxYxLxqI1XxcFquOQ04v CKp1ARYMjfA2ovgGUJfWOQ== 0001095811-00-001401.txt : 20000515 0001095811-00-001401.hdr.sgml : 20000515 ACCESSION NUMBER: 0001095811-00-001401 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 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: 628150 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 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: 0-26470 AMERICAN RETIREMENT VILLAS PROPERTIES III, L.P. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-0365417 - -------------------------------- -------------------- (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 III, L.P. (a California limited partnership) Condensed Balance Sheets (Unaudited) (In thousands) ASSETS
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ Properties, at cost: Land $ 2,224 $ 2,224 Buildings and improvements, less accumulated depreciation of $3,118 and $2,976 at March 31, 2000 and December 31, 1999, respectively 12,632 12,768 Furniture, fixtures and equipment, less accumulated depreciation of $572 and $527 at March 31, 2000 and December 31, 1999, respectively 707 746 -------- -------- Net properties 15,563 15,738 Cash 2,366 2,190 Restricted cash 170 168 Loan fees, less accumulated amortization of $305 and $240 at March 31, 2000 and December 31, 1999, respectively 338 401 Other assets 266 289 -------- -------- $ 18,703 $ 18,786 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable to banks $ 13,286 $ 13,323 Notes payable to others 2,333 2,342 Accounts payable 77 116 Accrued expenses 549 486 Amounts payable to affiliate 88 118 Distributions payable to Partners 164 286 -------- -------- Total liabilities 16,497 16,671 -------- -------- Commitments and contingencies Minority interest 142 115 -------- -------- Partners' capital (deficit): General partners' deficit (138) (139) Limited partners' capital, 18,666 units outstanding 2,202 2,139 -------- -------- Total partners' capital 2,064 2,000 -------- -------- $ 18,703 $ 18,786 ======== ========
See accompanying notes to the unaudited financial statements. 2 3 American Retirement Villas Properties III, L.P. (a California limited partnership) Condensed Statements of Income (unaudited) (In thousands, except unit data)
FOR THE THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ------- ------- Revenues: Rent $ 1,907 $ 1,954 Assisted living 268 265 Interest and other 91 109 ------- ------- Total operating revenues 2,266 2,328 ------- ------- Costs and expenses: Rental property operations 1,115 1,088 Assisted living 179 157 General and administrative 91 119 Depreciation and amortization 271 288 Property taxes 56 80 Advertising 24 18 Interest 383 413 ------- ------- Total operating costs and expenses 2,119 2,163 ------- ------- Operating income 147 165 Income tax expense 3 -- ------- ------- Loss from continuing operations before minority interest in income of majority owned entities, gain on sale of properties and change in accounting principle 144 165 Minority interest in income of majority owned entities 80 51 ------- ------- Net income before gain on sale of properties and change in accounting principle 64 114 Gain on sale of properties -- 4,739 ------- ------- Net income before cumulative effect of change in accounting principle 64 4,853 Cumulative effect of change in accounting principle -- (96) ------- ------- Net income $ 64 $ 4,757 ======= ======= Net income per limited partner unit before cumulative effect of change in accounting principle 3.39 257.40 Cumulative effect of change in accounting principle -- (5.09) ------- ------- Net income per limited partner unit $ 3.39 $252.31 ======= =======
See accompanying notes to the unaudited financial statements. 3 4 American Retirement Villas Properties III, L.P. (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 $ 64 $ 4,757 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 271 288 Profit on sale of properties -- (4,739) Cumulative effect of change in accounting principle -- 96 Change in assets and liabilities: Increase in restricted cash (2) (2) Decrease in other assets 21 230 Increase (decrease) in accounts payable and accrued expenses 24 (583) Increase (decrease) in amounts payable to affiliate, net (30) 270 Increase in minority interest 80 2 ------- -------- Net cash provided by operating activities 428 319 ------- -------- Cash flows provided by (used in) investing activities: Proceeds from sale of senior apartment projects -- 4,030 Additions to furniture, fixtures and equipment (30) (18) ------- -------- Net cash provided by (used in) investing securities (30) 4,012 ------- -------- Cash flows used in financing activities: Principal repayments on notes payable to banks and others (46) (36) Distributions paid (176) (4,083) ------- -------- Net cash used in financing activities (222) (4,119) ------- -------- Net increase in cash 176 212 Cash at beginning of period 2,190 1,900 ------- -------- Cash at end of period $ 2,366 $ 2,112 ======= ======== Supplemental schedule of cash flow information - Cash paid during the period for interest $ 383 $ 413 ======= ======== Supplemental schedule of non-cash investing and financing activities: Note receivable from sale of senior apartments $ -- $ 2,765 Notes payable assumed by the buyer of the senior apartments -- 10,605
See accompanying notes to the unaudited financial statements. 4 5 American Retirement Villas Properties III, 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 III, 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. RECENT ACCOUNTING DEVELOPMENTS In April 1998, the Accounting Standards Executive Committee issued Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-up Activities," which is effective for fiscal years beginning after December 15, 1998. The SOP provides guidance on the financial reporting of start-up activities and organizational costs. It requires costs of start-up activities and organizational costs to be expensed when incurred and, upon adoption, the write-off as a cumulative effect of a change in accounting principle of any previously capitalized start-up or organizational costs. We adopted the provisions of SOP 98-5 on January 1, 1999 and reported a charge of approximately $96,000 in 1999 for the cumulative effect of this change in accounting principle. (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 $112,000 and $116,000, for the three-month periods ended March 31, 2000 and 1999, respectively. Additionally, we pay ARV a partnership management fee of 10 percent of cash flow before distributions, as defined in the Partnership Agreement, which amounted to $44,000 and $52,000 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) Increase/ 2000 1999 (decrease) ------ ------ ---------- Revenues: Rent ............................................ $ 1.9 $ 1.9 (2.4)% Assisted living ................................. 0.3 0.3 1.3% Interest and other revenue ...................... 0.1 0.1 16.8% ------ ------ ----- Total operating revenues ................ 2.3 2.3 (2.7)% ------ ------ ----- Costs and expenses: Rental property operations ...................... 1.1 1.1 2.6% Assisted living ................................. 0.1 0.1 13.9% General and administrative ...................... 0.1 0.1 (24.1)% Depreciation and amortization ................... 0.3 0.3 (5.9)% Property taxes .................................. 0.1 0.1 (29.5)% Interest ........................................ 0.4 0.4 (7.3)% Minority interest in operations ................. 0.1 0.1 58.4% ------ ------ ----- Total costs and expenses ................ 2.2 2.2 (0.6)% ------ ------ ----- Operating income ........................ 0.1 0.1 (41.9)% Gain on sale of property .......................... -- 4.7 100.0% ------ ------ ----- Income before cumulative effect of change in accounting principle ........................... 0.1 4.8 (98.6)% Cumulative effect of change in accounting principle -- (0.1) 100.0% ------ ------ ----- Net income ............................. $ 0.1 $ 4.7 (98.6)% ====== ====== =====
The decrease in rental revenue is attributable to: o one and a half months of rent from senior apartments in 1999 due to the sale of the three apartment projects on February 19, 1999; offset by o average occupancy increase at our assisted living communities to 98.5% for the three-month period ended March 31, 2000 compared to 93.4% for the three-month period ended March 31, 1999; and o an increase in average rental rate per occupied unit to $1,704 for the three-month period ended March 31, 2000 compared to $1,528 the three-month period ended March 31, 1999; Assisted living and other revenues is remained constant. The increase in rental property operations and assisted living operating expenses is attributable to increased wages of staff. General and administrative expenses decreased due to a reduction of expenses previously allocated due to cost-cutting efforts. The decrease in depreciation and amortization expense is related to the sale of the three senior apartments on February 19, 1999. Property taxes decreased due to the sales of the senior apartments on February 19, 1999. The decrease in interest expense is related to the buyers assumption of the notes payable for the three senior apartments sold on February 19, 1999. The increase in minority interest is a result of our improved financial results from a community in which we hold a 50% partnership interest. 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 remained constant at $0.4 million compared to $0.4 million in 1999. During the three-month period ended March 31, 2000, our net cash used in investing activities was $0.03 million compared to cash provided by investing activities of $3.9 million for the corresponding period in 1999. The decrease was a result of the sale of the three senior apartment projects in 1999. During the three-month period ended March 31, 2000, our net cash used in financing activities was $0.2 million compared to cash used in financing activities of $4.1 million for the corresponding period in 1999. In 1999 the cash used in financing activities was the result of distribution of the sale proceeds from the senior apartment sale to the partners. We contemplate spending approximately $300,000 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 they 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 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 III, A CALIFORNIA LIMITED PARTNERSHIP By: ARV Assisted Living, Inc., a Delaware Corporation (Managing General Partner) By: /s/ Douglas M. Pasquale ----------------------------------------- Douglas M. Pasquale Chairman of the Board of ARVAL Date: May 12, 2000 By: /s/ Abdo H. Khoury ----------------------------------------- Abdo H. Khoury Senior Vice President, Chief Financial Officer of ARVAL 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 2,366 0 0 0 0 0 19,253 3,690 18,703 0 15,619 0 0 0 2,064 18,703 0 2,266 0 1,736 0 0 383 67 3 64 0 0 0 64 3.39 3.39 Net income per limited partner unit.
-----END PRIVACY-ENHANCED MESSAGE-----