Affordable Residential Communities Announces Third Quarter 2006 Results.DENVER Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. -- Affordable Residential Communities Inc. (NYSE NYSE See: New York Stock Exchange :ARC) today announced results for the third quarter ended September September: see month. 30, 2006. Third Quarter Operating Results Consolidated gross revenue for the third quarter of 2006 was $61.2 million compared to $61.6 million in the second quarter of 2006 and $65.7 million in the third quarter of 2005. Net loss attributable to common stockholders for the third quarter of 2006 was ($9.8) million, or ($0.24) per share, compared to net income of $0.2 million, or $0.01 per share, in the second quarter of 2006 and a net loss of ($126.9) million, or ($3.10) per share, in the third quarter of 2005. The third and second quarter of 2006 results include gains on sales of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $5.2 million, or $0.13 per share, and $15.6 million, or $0.38 per share, respectively. Net loss attributable to common stockholders for the third quarter of 2005 includes $101.0 million of impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and executive severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charges, net of minority interest. Net loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in the third quarter of 2006 was ($12.7) million, as compared to ($12.8) million in the second quarter of 2006, reflecting a reduction in retail net segment losses and decreased depreciation and interest expense partially offset by decreased community net segment income. As compared to the third quarter of 2005 loss from continuing operations of ($117.8) million, net segment income reflects increased net segment income and reduced property management, general and administrative and interest expenses. The 2005 results from continuing operations include $94.7 million of impairment and executive severance charges, net of minority interest. Net segment income was $33.8 million in the third quarter of 2006 as compared to $34.8 million in the second quarter of 2006, reflecting decreased community net segment income partially offset by decreased retail net segment losses. Community net segment income decreased to $34.9 million the third quarter of 2006 as compared to $36.9 million in the second quarter of 2006 primarily as a result of higher operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. primarily for repairs and maintenance. Net segment income increased by $9.9 million as compared to the $23.9 million recorded in the third quarter of 2005, reflecting increased real estate net segment income and reduced retail sales net segment loss. Retail net segment loss was ($1.1) million in the third quarter of 2006, as compared to ($1.7) million in the second quarter of 2006 and ($4.7) million in the third quarter of 2005. Third quarter 2006 results reflect decreased operating expenses, increased gross margins and lower volume of homes sold. The decreased operating expenses resulted primarily from decreased commissions incurred for leasing activity and decreased advertising expenses. Net occupancy decreased by 121 residents during the third quarter of 2006 to overall occupancy of 83.3% compared with a net occupancy decrease of 85 residents in the second quarter of 2006 to 83.5% and a net occupancy increase of 351 residents to 85.2% in the third quarter of 2005. As compared to the second quarter of 2006, the Company had approximately equal homeowner and home renter activity. As compared to the third quarter of 2005, the Company had lower homeowner and home renter move-outs, higher homeowner and home renter move-ins and lower home sales and lease with option to purchase transactions. General and administrative and property management expenses were $5.0 million and $1.5 million, respectively, in the third quarter of 2006 as compared to $5.0 million and $1.6 million in the second quarter of 2006, respectively, and $7.3 million and $3.0 million in the third quarter of 2005, respectively. As compared to the third quarter of 2005, such expenses reflect lower employee costs for salary and benefits and travel and lower costs related to compliance with Company's internal control evaluation as required by the Sarbanes-Oxley Act See SOX. . In addition, the third quarter of 2005 includes a $1.0 million charge for executive severance. Interest expense was $18.7 million in the third quarter of 2006, as compared to $20.0 million in the second quarter of 2006 and $19.6 million in the third quarter of 2005. As compared to the second quarter of 2006, interest expense reflects decreases in rates on the Company's variable rate debt, primarily due to the refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. of our senior variable rate mortgage and revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. mortgage facility, as discussed below. As compared to the third quarter of 2005, interest expense also reflects lower average debt balances as a result of repayments from the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of community sales in the first nine months of 2006. Nine Month Operating Results Consolidated gross revenue for the nine months ended September 30, 2006, was $183.2 million as compared to $193.0 million in the nine months ended September 30, 2005. Real estate revenue was $174.1 million in the nine months ended September 30, 2006 as compared to $156.9 million in the nine months ended September 30, 2005. Retail home sales revenue for the nine months ended September 30, 2006, was $7.6 million as compared to $34.6 million in the nine months ended September 30, 2005. Net loss attributable to common shareholders for the nine months ended September 30, 2006 was ($13.5) million, or ($0.33) per share, compared to a net loss of ($161.0) million, or ($3.94) per share, in the nine months ended September 30, 2005. Net income in the nine months ended September 30, 2006 includes gains on sales of discontinued operations of $31.1 million, or $0.75 per share, associated with the closing of community sales contracts Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. as discussed below. Net income in the nine months ended September 30, 2005, includes $101.0 million, or $2.47 per share, of impairment and executive severance charges, net of minority interest. Community Sales Results During the second quarter of 2006, the Company discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: , and entered into contracts to sell, two communities in addition to the previously announced contracts to sell 38 communities. Through September 30, 2006, the Company has closed sales for 39 of these 40 communities, resulting in $83.7 million of cash proceeds net of related debt, defeasance defeasance n. an antiquated word for a document which terminates the effect of an existing writing such as a deed, bond, or contract if some event occurs. DEFEASANCE, contracts, conveyancing. and other closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, of $74.3 million. The Company expects to close the sale of one additional community during 2007. However, there can be no assurance that the Company will realize net cash proceeds from the sale of this community or that the sale under this contract will ultimately close. For the third quarter and first nine months of 2006, the Company recorded gains totaling $5.2 million and $31.1 million, respectively, on the closing of the above-mentioned community sales. The Company records such gains on sales only when the sales close. In the third quarter of 2005, the Company recorded charges of $6.5 million for the discontinued communities in which the Company expected to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. a loss. There can be no assurances that the remaining community sale transactions will close, or that, if it does close, any gain will be recognized with respect to any such transaction. Balance Sheet and Liquidity At September 30, 2006, the Company had $31.1 million in cash and cash equivalents, approximately $105.8 million of additional borrowing capacity available under its lease receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed line of credit and approximately $18.7 million available under its consumer finance facility. On July 11, 2006, as previously announced, the Company entered into a $230 million mortgage debt facility in which it repaid approximately $175 million of its senior variable rate mortgage and its revolving credit mortgage facility and, with the additional $55 million, paid debt issuance expenses and partially repaid its lease receivables facility and its consumer finance facility. The Company also used the excess funds to complete a partial defeasance of one of its communities that is held for sale. As a result of the refinancing Refinancing An extension and/or increase in amount of existing debt. , the Company increased the proportion of our fixed rate debt to approximately 91% at September 30, 2006, as compared to 75% at June 30, 2006. At September 30, 2006, the Company had approximately $1.1 billion in outstanding debt. The weighted average interest rate on the Company's aggregate outstanding debt was 6.64% at September 30, 2006 as compared to 7.12% at June 30, 2006. Approximately 98% of the Company's outstanding debt is due in 2008 or later. Third Quarter 2006 Conference Call The Company will host a conference call, tomorrow, Friday, November 3, 2006, at 9:00 A.M. Eastern time. The call will be webcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the from the Company's website at www.aboutarc.com under the section titled "Webcast". Participants should follow the instructions provided on the website for the download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and installation of audio applications necessary to join the webcast. The call also can be accessed live over the phone by dialing (800) 289-0533 or (913) 981-5525 for international callers. A replay will be available at approximately 8:00 P.M. Eastern time after the call and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 for international callers; the password is 2709498. The replay will be available from November 3, 2006 through November 10, 2006, and also will be archived on ARC's website. About Affordable Residential Communities Inc. Affordable Residential Communities Inc. ("ARC"), excluding discontinued operations, currently owns and operates approximately 57,375 homesites located in 276 communities in 24 states. ARC is focused on the acquisition, renovation, repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. and operation of primarily all-age manufactured home communities with headquarters in Englewood, CO. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements that are not historical facts. Actual results may differ materially from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: general risks affecting the real estate industry; the Company's ability to maintain or increase rental rates and occupancy with respect to properties currently owned; the Company's assumptions on rental home and home sales and financing activity; completion of pending acquisitions and sales, if any, and terms of and timing with respect thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. ; the Company's growth and expansion into new markets or successful integration of acquisitions; and the effect of interest rates. Additional factors that could cause the Company's results to differ materially from those described in the forward-looking statements can be found in the Company's 2005 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. (included under the heading "Forward-Looking Statements"), and in the Company's Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. filed with the Securities and Exchange Commission ("SEC") and available at the SEC's internet site (http://www.sec.gov). The forward-looking statements contained in this news release speak only as of the date of the release, and the Company assumes no obligation to update the forward-looking statements or update the reasons why actual results could differ from those contained in the forward-looking statements. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (a) The Company removed a net 586 lots from its homesite count from December 31, 2004 to September 30, 2006 as part of its ongoing review of operations. [TABLE OMITTED] |
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