Alternative Living Services Reports Third Quarter Financial Results-Achieves Record Capacity to Serve 14,315 Residents and Posts Record Quarterly Earnings of $0.26 Per Share.BROOKFIELD Brookfield. 1 Village (1990 pop. 18,876), Cook co., NE Ill., a residential suburb of Chicago; inc. 1893. The noted Chicago Zoological Park (Brookfield Zoo) is there. 2 City (1990 pop. 35,184), Waukesha co., SE Wis. , Wis adv. 1. Certainly; really; indeed. v. t. 1. To think; to suppose; to imagine; - used chiefly in the first person sing. present tense, I wis. See the Note under Ywis. .--(BUSINESS WIRE)--Nov. 3, 1998--Alternative Living Services, Inc. (AMEX AMEX See: American Stock Exchange : ALI Ali (älē`) (Ali ibn Abu Talib), 598?–661, 4th caliph (656–61). The debate over his right to the caliphate caused a major split in Islam into Sunni and Shiite branches, and he is regarded by the Shiites as the first Imam, or leader: ), the nation's largest and one of the most experienced health care providers operating assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. residences, reported record earnings for the three-month period ending September September: see month. 30, 1998. At quarter end the Company operated or managed 336 residences with a total capacity of 14,315 and had 7,846 resident capacity under construction or development for a total identified capacity of 22,161. OPERATING AND FINANCIAL RESULTS For the three months ended September 30, 1998, the Company reported revenues of $66.3 million and net income of $5.8 million, or $0.26 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share on 22.4 million weighted average common shares outstanding. This compares to revenues of $36.1 million and net income of $1.2 million or $0.06 per share on 19.1 million weighted average common shares outstanding for the comparable period in 1997. "The scale of our operations and the power of our organization continue to be apparent in the results of the third quarter," noted Bill Lasky Las·ky , Jesse Louis 1880-1958. American motion-picture producer who helped found Paramount studios (1933). The pictures he produced include Sergeant York (1941) and The Great Caruso (1951). , President and Chief Executive Officer. "With a resident capacity in excess of 14,000 and a revenue run rate in excess of $250 million our ability to grow earnings and cash flow is highly visible." For the nine months ended September 30, 1998, the Company reported revenues of $168.0 million and net income of $14.3 million, or $0.64 per diluted share on 22.4 million weighted average common shares outstanding. This compares to revenues of $89.1 million and net income of $79,000 or $0.00 per share on 19.0 million weighted average common shares outstanding for the same period in 1997. STABILIZED sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. RESIDENCE RESULTS For the quarter ended September 30, 1998, the Company operated 178 stabilized residences with a resident capacity of 7,621. These residences had an average occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy for the quarter of 94%. For the three months ended September 30, 1998, these residences achieved revenues of $46.7 million and an operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of $19.3 million or 41%. The Company defines stabilized residences as those that have reached 95% occupancy or have been open for 12 months as of the beginning of the reporting period. SAME RESIDENCE RESULTS The Company operated 97 residences that were stabilized for the entire third quarter of 1997 and 1998. For these residences, revenues for the three months ended September 30, 1998, were $24.9 million, an 8% increase over revenues of $23.0 million for the comparable period in 1997. These residences produced operating margins of 42% and 41% during the three-month periods ended September 30, 1998 and 1997, respectively. Average occupancy for these residences was 95% and 94% in the third quarters of 1998 and 1997, respectively. FINANCING ACTIVITIES During the quarter the Company closed $92 million of financing from conventional lenders at a weighted average interest rate of 7.5%. In addition, the Company closed $26 million of REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). financing during the quarter at an average effective lease rate of 8.75%. As previously reported, in October October: see month. the Company obtained a $200 million construction/mini-perm credit facility with a consortium of seven banks. The Company currently has unused debt and lease arrangements in place totaling more than $350 million. RESIDENCE DEVELOPMENT During the quarter ended September 30, 1998, the Company opened 37 newly constructed residences with a resident capacity of 1,691. In addition, the Company completed the acquisition of six properties in Kansas Kansas, state, United States Kansas (kăn`zəs), midwestern state occupying the center of the coterminous United States. It is bordered by Missouri (E), Oklahoma (S), Colorado (W), and Nebraska (N). and two properties in Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee (one still in construction at September 30) and assumed management of one property in Kansas pending its acquisition. These eight operating residences added 324 to the Company's resident capacity in the September 30, 1998, quarter. As a result, the Company's net resident capacity increased during the third quarter by 2,015, resulting in 336 operating and managed residences with a resident capacity of 14,315 at the end of the quarter. At September 30, 1998, the Company had 57 residences (2,611 capacity) under construction and 115 residences (5,235 capacity) under development (i.e. the site is under control and development activities have commenced) resulting in total identified Company capacity of 22,161. As of today the Company operates or manages 340 residences with a resident capacity of 14,497. Alternative Living Services offers supportive supportive adjective Pertaining to a Pt management philosophy in which only the Sx of a particular condition are treated; supportive measures are often taken when no specific and/or effective therapy is available or accessible–eg, viral meningitis, or and health care services to our nation's frail elderly frail elderly, n.pl older persons (usually over the age of 75 years) who are afflicted with physical or mental disabilities that may interfere with the ability to independently perform activities of daily living. and is the nation's largest operator of free-standing free-standing Managed care adjective Referring to a physically and, often, financially discrete entity–eg, a surgical center, that is separate from, but may be affiliated with, a hospital; FS facilities may provide ambulatory surgery, emergency or Alzheimer's/dementia care residences. ALS Als (äls), Ger. Alsen, island, 121 sq mi (313 sq km), Sønderjylland co., S Denmark, in the Lille Bælt, separated from the mainland by the narrow Alensund. currently operates in 25 states and has residences under construction and development in many of its existing markets as well as in six additional states. The Company's common stock is traded on the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. under the symbol "ALI." Except for the historical information contained in the press release, the matters discussed herein contain 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. that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These include risks associated with, among other things, substantial debt and operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. payment obligations, integration of acquired operations, managing rapid expansion and business diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , the need for additional financing, the possibility of rising interest rates, securing necessary licensing and permits, construction delays, cost increases on new construction and increased competition. These and other risks are set forth in the reports filed by the Company with the Securities and Exchange Commission. -0-
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
------------------- -------------------
1998(2) 1997(1) 1998(2) 1997(1)
--------- --------- --------- ---------
Revenue:
Resident service fees $64,544 $35,528 $164,830 $87,783
Other 1,742 614 3,139 1,321
--------- --------- --------- ---------
Operating revenue 66,286 36,142 167,969 89,104
Operating expenses:
Residence operations 40,492 22,563 104,063 56,153
Lease expense 11,901 6,672 30,952 18,088
General and administrative 6,307 4,155 16,292 11,480
Depreciation and amortization 5,534 3,023 13,180 6,828
--------- --------- --------- ---------
Total operating expense 64,234 36,413 164,487 92,549
Operating income (loss) 2,052 (271) 3,482 (3,445)
Other income (expense):
Interest expense, net (2,744) (1,617) (5,285) (2,236)
Other, net 12 (43) (85) (67)
Equity in losses of
unconsolidated
affiliates (32) (58) (54) (195)
Minority interest in
losses of consolidated
subsidiaries 5,984 3,190 15,672 6,022
--------- --------- --------- ---------
Total other income
(expense), net 3,220 1,472 10,248 3,524
Income before income taxes 5,272 1,201 13,730 79
Income taxes (549) --- (549) ---
========= ========= ========= =========
Net income $ 5,821 $ 1,201 $ 14,279 $ 79
========= ========= ========= =========
Net income per share
Basic $ 0.27 $ 0.06 $ 0.65 $ 0.00
========= ========= ========= =========
Diluted $ 0.26 $ 0.06 $ 0.64 $ 0.00
========= ========= ========= =========
Weighted average shares
outstanding
Basic 21,946 19,087 21,876 18,989
========= ========= ========= =========
Diluted 22,409 19,087 22,386 18,989
========= ========= ========= =========
(1) Includes the effect of the merger of the Company and Sterling
House Corporation in October 1997, which was accounted for as a
pooling of interests.
(2) The September 30, 1998, periods include in general and
administrative costs $500,000 related to terminated merger and
acquisition discussions and a $549,000 income tax benefit from
the recognition of deferred tax assets and liabilities as
the Company moved into a tax paying position.
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
COMPARISON OF STABILIZED AND START-UP RESIDENCES
THREE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
(In Thousands, Except Per Share Data)
Mgmt. Three
Stabilized Start-up and Months
Residences Residences Overhead Ended
(1) (2) (3) 9/30/98
--------- --------- --------- ---------
Revenue $ 46,683 $ 17,861 $ 1,742 $ 66,286
Residence operations expenses 27,355 13,137 --- 40,492
--------- --------- --------- ---------
Residence operating income 19,328 4,724 1,742 25,794
Lease expense 8,231 3,430 240 11,901
General and administrative --- --- 6,307 6,307
Depreciation and amortization 1,682 3,403 449 5,534
--------- --------- --------- ---------
Operating income (loss) 9,415 (2,109) (5,254) 2,052
Interest income (expense), net (2,240) (2,118) 1,614 (2,744)
Other income (expense), net (4) --- 16 12
Equity in losses of
unconsolidated affiliates --- --- (32) (32)
Minority interest in losses of
consolidated subsidiaries --- 5,984 --- 5,984
--------- --------- --------- ---------
Total other income
(expense), net (2,244) 3,866 1,598 3,220
Income (loss) before
income taxes 7,171 1,757 (3,656) 5,272
Income taxes --- --- (549) (549)
--------- --------- --------- ---------
Net income (loss) $ 7,171 $ 1,757 $ (3,107) $ 5,821
========= ========= ========= =========
Net income per share
Basic $ 0.33 $ 0.08 $ (0.14) $ 0.27
========= ========= ========= =========
Diluted $ 0.32 $ 0.08 $ (0.14) $ 0.26
========= ========= ========= =========
Weighted average shares
outstanding
Basic 21,946 21,946 21,946 21,946
========= ========= ========= =========
Diluted 22,409 22,409 22,409 22,409
========= ========= ========= =========
(1) Stabilized residences are those 178 residences that have achieved
95% occupancy or have been operating for 12 months, as of the
beginning of the reporting period.
(2) Start-up residences are those 97 residences that have been newly
developed by the Company or acquired and require marketing and
other support services to properly position the facility within
ALS's operating strategy.
(3) The Company manages 16 residences and has minority interests in
an additional 45 unconsolidated residences which it manages.
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
September 30, December 31,
1998 1997
------------- -------------
ASSETS
Cash $65,957 $79,838
Short-term investments -- 90,000
Preopening costs, net of amortization 8,610 5,785
Other current assets 23,410 23,210
------------- -------------
Current assets 97,977 198,833
Land 42,617 34,143
Building and improvements 398,134 160,991
Furniture, fixtures and equipment 41,751 23,702
Construction in progress 97,897 114,277
------------- -------------
Total property and equipment 580,399 333,113
Less: accumulated depreciation (16,944) (9,500)
------------- -------------
Property and equipment, net 563,455 323,613
Other assets 75,506 31,106
------------- -------------
Total assets $736,938 $553,552
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $55,821 $ 69,305
Convertible debt 228,574 210,000
Long-term obligations, less current
installments 251,576 108,069
Deferred gain on sale and other 17,792 12,421
Minority interest 13,132 9,860
Stockholders' equity 170,043 143,897
------------- -------------
Total liabilities and stockholders'
equity $736,938 $553,552
============= =============
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