-----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, LZE9jWX6QqrznC1yYlmnNtgc4xHyFeq3omGavzFgIFbJOHf03uY80jkjL147LXzP aJ5JM7jBJkF9jxMv9DIekw== 0000892569-97-000853.txt : 19970401 0000892569-97-000853.hdr.sgml : 19970401 ACCESSION NUMBER: 0000892569-97-000853 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970314 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARV ASSISTED LIVING INC CENTRAL INDEX KEY: 0000949322 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 330160968 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26980 FILM NUMBER: 97568683 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STREET 2: SUITE D-1 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7147517400 MAIL ADDRESS: STREET 1: 245 FISCHER AVENUE STREET 2: SUITE D-1 CITY: COSTA MESA STATE: CA ZIP: 92626 8-K 1 FORM 8-K FOR PERIOD ENDED MARCH 14, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): March 14, 1997 Commission file number 0-26980 ARV ASSISTED LIVING, INC. (Exact name of Registrant as specified in its charter) CALIFORNIA 33-0160968 (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 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. COVELL GARDENS (THE "FACILITY") ARV Assisted Living Inc. ("ARV") has purchased Covell Gardens, a 157-unit assisted living facility which provides full meal, maid and other communal services for senior citizens. This acquisition represents the fourteenth third-party acquisition since the Company's initial public offering in October 1995. The Company acquired Covell Gardens from Covell Gardens, a California general partnership ("Seller"), an unrelated third party, pursuant to a Purchase Agreement and Escrow Instructions dated January 6, 1997 negotiated between the Company and Seller. The purchase closed on March 14, 1997. TERMS OF PURCHASE Covell Gardens' purchase price of $11.9 million was fully financed with cash on hand. It is the Company's intention to finance approximately $5.9 million of this purchase price with a new loan to be secured by a first deed of trust recorded against the facility. OPERATION Covell Gardens' occupancy at March 18,1997 was 92%. While the project is now ten years old, the Facility has been well maintained and is not currently in need of major upgrades or rehabilitation. The Company believes that the purchase price negotiated with the Seller reflects both the occupancy rate and the condition of the Facility. THE FACILITY Covell Gardens is a 157 unit assisted living facility with Phase I constructed in 1987 and Phase II constructed in 1990. The site is an approximate 4.5 acre parcel with one three-story building containing approximately 180,000 square feet. Of its 157 units, 14 units are studios with living/dining room, kitchen and bathroom, 93 units are one bedroom with living room/dining room, kitchen, bathroom and patio/balcony and 50 units are two bedrooms with living room/dining room, kitchen, bathroom and patio/balcony. On-site amenities include outdoor gardens and koi ponds, library, game room, TV lounge area, fully-equipped spa/exercise room, activity room, beauty and barber shop, mini-store and gift shop, soda fountain, mini storage and laundry room. The Company is confident that its experience in assisted living facilities and its knowledge of the senior housing market, including the operation of forty-four other assisted living facilities will enable it to achieve operating efficiencies while maintaining the Facility's occupancy rates at full market rent. 2 3 LOCATION Covell Gardens is located in the City of Davis, Yolo County, California. Covell Gardens is located near two shopping centers, a city park, a municipal golf course, the Sutter Davis Hospital and the University of California, Davis campus. The facility is approximately 20 minutes from downtown Sacramento. MARKET DATA Covell Gardens draws 90% of its residents from Yolo County, California, and the remaining 10% from Napa, Solano and Sacramento Counties, California. COMPETITION Covell Gardens' competition for provision of senior assisted living services within the greater Davis area comes primarily from four area facilities which provide independent and assisted living. Each of the competing facilities was built between 1964 and 1991. SPECIAL RISKS The success of the Facility depends to a large extent on increasing gross revenues, holding or decreasing costs, and on the abilities of the on-site management teams which the Company assembles. To achieve increased revenue and stable operating cost goals, policies used by the former owners may need to be altered. This could result in short term resident dissatisfaction and/or relocation. Moreover, given that the Facility is not newly constructed, unforeseen circumstances could necessitate major renovation or more refurbishing than originally planned. The relatively low vacancy rates enjoyed throughout the primary market may induce other operators to create new, competitive facilities. 3 4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. The Registrant submits this Form 8-K in order to supply the financial statements and schedules required pursuant to Rule 3-14 of Regulation S-X with respect to the Registrant's acquisition of Covell Gardens, a 157-unit assisted living facility located in Davis, California and to provide the pro forma financial statements reflecting the acquisition of Covell Gardens required thereby. Financial Statements of Real Estate Operations Acquired Exhibit 99.1 "Historical Summary of Gross Income and Direct Operating Expenses of Covell Gardens for the year ended December 31, 1996." Exhibit 99.2 A statement showing the estimated taxable operating results for Covell Gardens based on its most recent 12-month period. Exhibit 99.3 "Unaudited Pro Forma Combined Balance Sheet of ARV Assisted Living, Inc. as of December 31, 1996 and the Unaudited Pro Forma Combined Statement of Operations for the nine months ended December 31, 1996 and the Unaudited Pro Forma Combined Statement of Operations for the year ended March 31, 1996 and the related notes thereon." 4 5 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. ARV Assisted Living, Inc. By: /s/ Patrick M. Donovan ----------------------------------------- Patrick M. Donovan Vice President Finance (duly authorized financial officer) Date: March 29, 1997 EX-99.1 2 HISTORICAL SUMMARY OF GROSS INCOME 1 Exhibit 99.1 COVELL GARDENS Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 (With Independent Auditors' Report Thereon) 2 INDEPENDENT AUDITORS' REPORT To the Board of Directors Covell Gardens (ARV Assisted Living, Inc.): We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses of Covell Gardens, Davis, California (Historical Summary) for the year ended December 31, 1996. This Historical Summary is the responsibility of Covell Gardens' management. Our responsibility is to express an opinion on the Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Form 8-K of ARV Assisted Living, Inc. The presentation is not intended to be a complete presentation of Covell Gardens' revenues and expenses. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of Covell Gardens for the year ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Sacramento, California February 15, 1997 3 COVELL GARDENS Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 Gross income: Rental revenue $2,751,038 Other income 61,499 ---------- Total income 2,812,537 ---------- Direct operating expenses: Administrative 137,882 Marketing 54,029 Food service 641,308 Assisted living 174,674 Resident services 276,230 Maintenance 122,767 Utilities 135,030 Taxes and insurance 111,108 ---------- Total expenses 1,653,028 ---------- Excess of revenue over direct operating expenses $1,159,509 ==========
See accompanying notes to historical summary. 4 COVELL GARDENS Notes to Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 (1) BUSINESS Covell Gardens is an independent and assisted living facility (ALF) located in Davis, California. The objective of Covell Gardens is to provide residents with independent housing and assisted living care. Covell Gardens has 157 living units (124 independent living units and 33 ALF units). (2) BASIS OF PRESENTATION The Historical Summary presents only specified revenues and expenses and is not a complete presentation of Covell Gardens' revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting. GROSS INCOME Gross income is comprised of monthly rental charges for Covell Gardens' independent living and ALF units as well as ancillary charges for housekeeping services. DIRECT OPERATING EXPENSES Direct operating expenses include only those costs comparable to the proposed future operations of Covell Gardens. Costs such as mortgage interest, depreciation, amortization, management fees and attorneys' fees are excluded from the Historical Summary. EX-99.2 3 ESTIMATED TAXABLE OPERATING RESULTS 1 Exhibit 99.2 ARV Assisted Living, Inc. Purchase of Covell Gardens Pro Forma Estimates of Cash Flow and Federal Taxable Income For the Year Ended December 31, 1996 The following unaudited pro forma estimates present the cash flow and the Federal Taxable Income of Covell Gardens for the year ended December 31, 1996 as if Covell Gardens had been acquired on January 1, 1996. The pro forma does not purport to represent operations of ARV as a whole nor does it purport to represent actual or expected operations of the Company for any period in the future. Estimate of Cash Flow: Historical Operating Income $ 1,159,509 Less: Property Taxes (47,314) ----------- Pro Forma Estimate of Cash Flow 1,112,195 =========== Estimate of Federal Taxable Income: Pro Forma Estimate of Cash Flow 1,112,195 Less: Estimated Depreciation & Amortization Expense (Federal Income Tax Basis) (331,429) ----------- Pro Forma Estimate of Federal Taxable Income $ 780,766 ===========
EX-99.3 4 UNAUDITED PROFORMA COMBINED BALANCE SHEET 1 Exhibit 99.3 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following Unaudited Pro Forma Combined Financial Statements give effect to the acquisition of Covell Gardens ("Covell") and the sale leaseback transaction described in Note 1. The Unaudited Pro Forma Combined Financial Statements are based on the assumptions and adjustments described in the accompanying notes and should be read in conjunction therewith and in conjunction with the historical financial statements of ARV Assisted Living, Inc. and subsidiaries ("ARVAL" or the "Company") and the notes thereto included in the Company's report on Form 10-Q as of and for the nine month period ended December 31, 1996 and the Company's consolidated financial statements as of and for the year ended March 31, 1996. The Unaudited Pro Forma Combined Financial Statements do not purport to present the financial position or the results of operations of ARVAL had the transactions assumed therein occurred on the dates indicated, nor are they necessarily indicative of the results of operations which may be achieved in the future. 2 ARV ASSISTED LIVING, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET December 31, 1996
COVELL GARDENS HISTORICAL ACQUISITION SALE/LEASEBACK PRO FORMA PRO FORMA ARVAL HISTORICAL(2) TRANSACTION(1)(5) ADJUSTMENTS(6) COMBINED ------------ ------------- ----------------- ------------ ----------- ASSETS Cash $ 8,386,000 $ 53,000 $ 23,178,000(a) $(11,900,000)(a) $19,717,000 Fees receivable from affiliates 4,167,000 393,000 - 4,560,000 Investments in real estate 48,134,000 - - 48,134,000 Other assets 6,684,000 37,000 - 6,721,000 ------------ ----------- ------------ ------------ ----------- Total current assets 67,371,000 483,000 23,178,000 (11,900,000) 79,132,000 Restricted cash 314,000 - - 314,000 Property, furniture and equipment, net 87,634,000 10,081,000 (28,982,000)(b) 836,000 (b) 70,069,000 500,000 (b) Other non-current assets 8,129,000 500,000 1,283,000 (c) (500,000)(c) 9,412,000 ------------ ----------- ------------ ------------ ----------- Total non-current assets 96,077,000 10,581,000 (27,699,000) 836,000 79,795,000 ------------ ----------- ------------ ------------ ----------- Total assets $163,448,000 $11,064,000 $(4,521,000) $(11,064,000) $158,927,000 ============ =========== =========== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 8,710,000 $ 242,000 $ (290,000)(d) $ (242,000)(d) $ 8,420,000 Notes payable, current portion 1,796,000 - - 1,796,000 Notes payable and other amounts due to affiliates 150,000 - - 150,000 ------------ ----------- ------------ ------------ ----------- Total current liabilities 10,656,000 242,000 (290,000) (242,000) 10,366,000 Deferred revenue 1,114,000 - - 1,114,000 Notes payable, less current portion 89,324,000 10,205,000 (4,231,000)(d) (10,205,000)(d) 85,093,000 ------------ ----------- ------------ ------------ ----------- Total non-current liabilities 90,438,000 10,205,000 (4,231,000) (10,205,000) 86,207,000 Total liabilities 101,094,000 10,447,000 (4,521,000) (10,447,000) 96,573,000 Minority interest 8,405,000 - - - 8,405,000 Shareholders' equity: Common stock 60,682,000 - - 60,682,000 Accumulated equity (deficit) (6,733,000) 617,000 - (617,000)(b) (6,733,000) ------------ ----------- ------------ ------------ ----------- Total shareholders' equity 53,949,000 617,000 - (617,000) 53,949,000 ------------ ----------- ------------ ------------ ----------- Total liabilities and shareholders' equity $163,448,000 $11,064,000 $ (4,521,000) $(11,064,000) $158,927,000 ============ =========== ============ ============ ============
See accompanying notes to unaudited pro forma combined financial statements. 3 ARV ASSISTED LIVING, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS Year Ended March 31, 1996
COVELL GARDENS HISTORICAL ACQUISITION SALE/LEASEBACK PRO FORMA PRO FORMA ARVAL HISTORICAL(2) TRANSACTION(5) ADJUSTMENTS(6) COMBINED ------------ -------------- -------------- -------------- ------------ REVENUES: Assisted living facility revenues $ 25,479,000 $ 2,441,000 $ 6,455,000 (e) $ - $34,375,000 Management fees 2,822,000 - - 2,822,000 Development fees 1,500,000 - - - 1,500,000 Interest income 1,070,000 - 1,159,000 (f) (570,000)(e) 1,659,000 Other income 2,192,000 83,000 - - 2,275,000 ------------ ----------- ----------- ------------ ----------- Total revenue 33,063,000 2,524,000 7,614,000 (570,000) 42,631,000 EXPENSES Assisted living facility operating expenses 16,395,000 1,461,000 4,438,000 (g) - 22,294,000 Assisted living facility lease expenses 6,644,000 - 2,974,000 (h) - 9,618,000 General and administrative 7,644,000 - - - 7,644,000 Depreciation and amortization 1,031,000 - 873,000 (i) 331,000(f) 1,305,000 (930,000)(j) Discontinued project costs and accounts receivable written-off 395,000 - - - 395,000 Interest 1,544,000 - (110,000)(k) - 1,434,000 ------------ ----------- ----------- ------------ ---------- Total expenses 33,653,000 1,461,000 7,245,000 331,000 42,690,000 ------------ ----------- ----------- ------------ ---------- Income before minority interest and income tax expense (590,000) 1,063,000 369,000 (901,000) (59,000) Income tax expense (benefit) 375,000 361,000 125,000(l) (307,000(g) 554,000 ------------ ----------- ----------- ------------ ---------- Net income (loss) (965,000) 702,000 244,000 (594,000) (613,000) ============ =========== =========== ============ ========== Preferred dividends declared $ 351,000 $ 351,000 ------------ ---------- Net loss available for common shares $ (1,316,000) $ (964,000) ============ ========== Net loss per common share $ (0.21) $ (0.15) ============ ========== Weighted average common shares outstanding 6,246,000 6,246,000 ============ ========== See accompanying notes to unaudited pro forma combined financial statements.
4 ARV ASSISTED LIVING, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS Nine Months Ended December 31, 1996
COVELL GARDENS HISTORICAL ACQUISITION SALE/LEASEBACK PRO FORMA PRO FORMA ARVAL HISTORICAL(2) TRANSACTION(1)(5) ADJUSTMENTS(6) ARVAL --------- -------------- ----------------- -------------- --------- REVENUE: Assisted living facility revenues $50,830,000 $2,031,000 $2,060,000(e) $ - $54,921,000 Services 5,323,000 - 5,323,000 Interest Income 1,647,000 - 869,000(f) (446,000)(e) 2,070,000 Other income 462,000 48,000 - - 510,000 ----------- ---------- ---------- ---------- ---------- Total revenue 58,262,000 2,079,000 2,929,000 (446,000) 62,824,000 EXPENSES Assisted living facility operating expenses 32,429,000 1,259,000 1,357,000 (g) - 35,045,000 Assisted living facility lease expenses 8,736,000 - 2,230,000 (h) - 10,966,000 General and administrative 4,932,000 - - - 4,932,000 Depreciation and amortization 2,935,000 484,000 (i) 248,000(f) 2,749,000 (918,000)(j) Interest 4,149,000 - (58,000)(k) - 4,091,000 Other 2,694,000 - - 2,694,000 ----------- ---------- ---------- --------- ----------- Total expenses 55,875,000 1,259,000 3,095,000 248,000 60,477,000 ----------- ---------- ---------- --------- ----------- Income (loss) before income tax expense (benefit), minority interest and extraordinary item 2,387,000 820,000 (166,000) (694,000) 2,347,000 Income tax expense (benefit) 893,000 307,000 (62,000)(l) (260,000)(g) 878,000 ----------- ---------- ---------- --------- ----------- Income (loss) before minority interest and extraordinary item 1,494,000 513,000 (104,000) (434,000) 1,469,000 Minority interest in earnings of majority owned partnerships 241,000 - - - 241,000 ----------- ---------- ---------- --------- ----------- Income (loss) before extraordinary item 1,253,000 513,000 (104,000) (434,000) 1,228,000 Extraordinary item, loss from early extinguishment of debt, net of income tax benefit of $231 386,000 - - - 386,000 ----------- ---------- ---------- --------- ----------- Net income $ 867,000 $ 513,000 $ (104,000) $(434,000) $ 842,000 =========== ========== ========== ========= =========== Net income available for common shares $ 867,000 $ 842,000 =========== =========== Earnings (loss) per common share: Income (loss) before extraordinary item $ 0.13 $ 0.13 Extraordinary item, early extinguishment of debt (0.04) (0.04) ---------- ----------- Net income per common share $ 0.09 $ 0.09 ========== =========== Weighted average common shares outstanding 9,366,000 9,366,000 ========== ===========
See accompanying notes to unaudited pro forma combined financial statements. 5 ARV ASSISTED LIVING, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (1) On February 28, 1997, the Company completed a sale/leaseback transaction in which four assisted living/retirement facilities containing 505 units were sold for $29 million. One of these facilities was purchased in November 1995, and three were purchased in fiscal 1997. The Company concurrently entered into a long-term operating lease for these facilities. (2) On March 14, 1997, the Company acquired Covell Gardens ("Covell"), a 157 unit assisted living facility located in the city of Davis, Yolo County, California. The purchase price of $11.9 million was paid for with cash on hand. (3) The Unaudited Pro Forma Combined Balance Sheet at December 31, 1996 presents the historical balance sheet of the Company and Covell Gardens as of December 31, 1996, and the pro forma balance sheet of the Company as if the transaction described in note (1) above and the acquisition described in note (2) above had been completed as of December 31, 1996. (4) The Unaudited Pro Forma Combined Statements of Operations for the year ended March 31, 1996 and the nine months ended December 31, 1996 present the historical operations of the Company and Covell Gardens, and the pro forma operations of the Company as if the transaction described in note (1) above and the acquisition described in note (2) above had occurred at the beginning of each period. (5) Pro forma adjustments for the transaction described in note (1) above are as follows: a) To reflect cash received from the sale of the facilities b) To reflect the sale of the facilities c) To record the lease and related deposits d) To eliminate the payable and the loan related to the facilities e) To reflect revenue generated from the facilities f) To reflect the increase in interest income due to cash received from the sale mentioned in note (1) above, based upon the rate of 5% earned on cash equivalents g) To reflect operating expenses related to the facilities h) To record lease expense i) To reflect the depreciation expense related to the facilities as if they were acquired at the beginning of the period j) To reflect the decrease in depreciation expense associated with the sale of the facilities k) To reflect the decrease in interest expense related to the loan repaid l) To reflect the pro forma change in income tax expense (benefit) (6) Pro forma adjustments for the acquisition described in note (2) above are as follows: a) To reflect the use of cash subsequent to December 31, 1996 for the purchase of Covell Gardens b) To reflect the allocation of purchase price to property and elimination of equity c) To reflect the write-off of loan costs and preopening costs d) To eliminate debt as no debt was assumed e) To reflect the decrease in interest income due to cash used to fund the acquisition mentioned in note (2) above, based upon the rate of 5% earned on cash equivalents f) To reflect the new depreciation expense associated with the acquisition g) To reflect the pro forma change in income tax expense (benefit) -----END PRIVACY-ENHANCED MESSAGE-----