American Retirement Corporation Reports Fourth Quarter and Full Year 2005 Results.NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn. -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Retirement Corporation: --Reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $2.17 for the full year, including a second-quarter tax benefit and debt extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. cost of $1.69 per share, and $.12 for the fourth quarter. --Reported 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. earnings for the quarter were affected by Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth costs (approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $.01 per share), non-cash equity compensation expenses (approximately $.02 per share) and increases in utility costs. --Free cash flow was $22 million for the full year, an increase of 127% over 2004. For the fourth quarter, free cash flow was $8 million, an increase of 214% versus the prior year. American Retirement Corporation (NYSE NYSE See: New York Stock Exchange : ACR See riser card. ) today reported fourth quarter 2005 diluted earnings of $.12 per share, compared with $.08 per share for the prior year's fourth quarter. Bill Sheriff, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the company, commented, "We finished the year solidly, with excellent cash flow from our operations. We completed an acquisition during the quarter that has a strong strategic fit, is already showing good improvement and will be immediately accretive. We began initiatives in pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. and home health to expand our ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. service offerings. We now have seven community expansions or new developments under construction and have made significant pre-construction progress on a number of other projects." "Our operations showed strong year over year increases in revenue and operating contribution with occupancies increasing slightly," he added. "We did experience some negatives in the quarter with Hurricane Wilma expenses, pharmacy start-up Start-up The earliest stage of a new business venture. costs and increased utilities, each costing about $.01 per share. In addition, with the increase of our stock price, our non-cash equity-based compensation expense for the fourth quarter reached $1.3 million. Our cash flow for the quarter was very strong - reaching a record $8 million of free cash flow. Good operations, strong entry fee sales, reduced leverage and the decreased cost of our capital were the key drivers. For all of 2005, we produced $22 million of free cash flow or $41 million before principal payments on debt. We will continue to balance the use of that cash between strengthening our balance sheet and investing in development and acquisitions." (All references to growth rate percentage compare the results of the current period to the prior year comparable period.) Financial Highlights --$130 million of total revenue for the fourth quarter of 2005, an 11% increase, and $495 million of total revenue for the full year of 2005, also an 11% increase. --Net income of $4 million ($.12 per diluted share) for the fourth quarter of 2005 versus $2 million ($.08 per diluted share) for the fourth quarter of 2004. --Community operating contribution from the company's three business segments for the fourth quarter of $44 million, an increase of 14%. --Fourth quarter 2005 income from operations of $9 million, a 60% increase over the same prior year period. Operational Highlights --Occupancy was 94%, with the company's large retirement communities ending the quarter at 96% and the 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 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. communities ending at 91%. --Same community results showed a 9% increase in revenue and a 13% increase in operating contribution for the year. --Free-standing assisted living communities produced a 9% increase in average monthly revenue per occupied oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. unit, and a 27% increase in monthly operating contribution per occupied unit. Operating Review The company operates in three business segments: --The Retirement Centers ("Retirement Centers") include CCRCs (continuing care continuing care a professional convention that a veterinarian who is treating an animal is obliged to continue treating that case unless an arrangement is made with its custodian to transfer the care to another practitioner or to a specialist. retirement centers), Entrance-Fee Communities ("EF Communities") and congregate con·gre·gate tr. & intr.v. con·gre·gat·ed, con·gre·gat·ing, con·gre·gates To bring or come together in a group, crowd, or assembly. See Synonyms at gather. adj. 1. Gathered; assembled. 2. living residences. --Free-standing assisted living communities ("Free-standing AL's") are smaller than Retirement Centers and provide assisted living and specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. care such as Alzheimer's Noun 1. Alzheimer's - a progressive form of presenile dementia that is similar to senile dementia except that it usually starts in the 40s or 50s; first symptoms are impaired memory which is followed by impaired thought and speech and finally complete helplessness and memory enhancement programs. --The Management Services segment includes fees from management agreements for communities owned by others, development fees and reimbursed expenses. For the full year of 2005, the results for the company's three operating segments were as follows:
Year ended
($ in 000's) Dec. 31, $ %
------------------------------------- -------------------
2005 2004 Change Change
----------------------------------------------------------------------
Resident & Healthcare revenue $488,383 $443,443 44,940 10.1%
----------------------------------------------------------------------
Community operating expense $326,504 $300,797 25,707 8.5%
----------------------------------------------------------------------
Community operating contribution(1) $161,879 $142,646 19,233 13.5%
----------------------------------------------------------------------
Community contribution margin 33.1% 32.2%
----------------------------------------------------------------------
Management Services op. contribution $3,528 $1,882 1,646 87.5%
----------------------------------------------------------------------
(1) The company evaluates the performance of its business segments primarily based upon their operating contributions, which the company defines as revenue from the segment less operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding depreciation, associated with that segment. For the fourth quarter of 2005, the results for the company's three operating segments were as follows:
Three months ended
($ in 000's) Dec. 31, $ %
------------------------------------- -------------------
2005 2004 Change Change
----------------------------------------------------------------------
Resident & Healthcare revenue $126,614 $115,293 11,321 9.8%
----------------------------------------------------------------------
Community operating expense $84,315 $77,055 7,260 9.4%
----------------------------------------------------------------------
Community operating contribution $42,299 $38,238 4,061 10.6%
----------------------------------------------------------------------
Community contribution margin 33.4% 33.2%
----------------------------------------------------------------------
Management Services op. contribution $1,848 $443 1,405 317.2%
----------------------------------------------------------------------
Retirement Centers Segment The company's 29 Retirement Centers exhibited strong increases in revenue and operating contribution for the fourth quarter of 2005 as follows:
Three months
Retirement Centers ($ in 000's): ended:
--------------------------------------
Dec. 31, $ %
---------------------------------------------------------
2005 2004 Change Change
----------------------------------------------------------------------
Resident & Healthcare revenue $ 97,594 $89,787 $7,807 8.7%
----------------------------------------------------------------------
Community operating contribution $32,784 $30,702 $2,082 6.8%
----------------------------------------------------------------------
Community contribution margin 33.6% 34.2%
----------------------------------------------------------------------
% Ending Occupancy 96% 96%
----------------------------------------------------------------------
The Retirement Center segment continued to produce strong revenue gains. --Ending 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 was 96%, level with the fourth quarter of 2004, though the number of occupied units increased 2% due to the acquisition of Galleria Woods in the first quarter. --The Retirement Centers ended the quarter with 98% occupancy in the independent living, 95% in the assisted living and 91% in the skilled nursing components of the segment. --Average monthly revenue per occupied unit increased 6% during the quarter versus the prior year to $3,771 - due to increases in monthly service fees and per diem per diem adj. or n. Latin for "per day," it is short for payment of daily expenses and/or fees of an employee or an agent. rates in skilled nursing, turnover of residents (the "Mark to Market" effect of reselling or reletting units at higher current rates) and increased ancillary services, primarily driven by the company's Innovative Senior Care therapy, education and wellness programs. The operating contribution for Retirement Centers was $33 million for the fourth quarter of 2005, and $127 million for the full year of 2005. This represented a $2 million or 7% increase over the prior year's fourth quarter and a $10 million or 9% increase over the prior year. The Retirement Centers continue to produce increased monthly operating contribution per occupied unit, attaining $1,267 per unit in the fourth quarter of 2005, a 4% improvement from the prior year's fourth quarter. Free-standing AL's Segment The company's 32 Free-standing AL's exhibited strong increases in revenue and operating contribution for the fourth quarter of 2005 as follows:
Three months
Free-standing AL's ($ in 000's) (1): ended:
--------------------------------------
Dec. 31, $ %
---------------------------------------------------------
2005 2004 Change Change
----------------------------------------------------------------------
Resident & Healthcare revenue $29,020 $25,506 3,514 13.8%
----------------------------------------------------------------------
Community operating contribution $9,515 $7,536 1,979 26.3%
----------------------------------------------------------------------
Community contribution margin 32.8% 29.5%
----------------------------------------------------------------------
% Ending Occupancy 91% 89%
----------------------------------------------------------------------
(1) Includes results of 32 Free-standing AL's and excludes nine non-consolidated Free-standing AL's held in joint ventures. The revenue increase in the Free-standing AL segment of 14% to $29 million was driven by the following factors: --Average occupancy for the Free-standing AL portfolio was 91% for the fourth quarter, up from 89% a year ago and up from 90% in the third quarter of 2005. --The average monthly revenue per occupied unit increased 9% to $3,678, up from $3,372 per month in the fourth quarter of 2004. The revenue per occupied unit increase was due to rate increases, reduced promotional allowances, increased care services and turnover of residents (the "Mark to Market" effect of reletting units at higher current rates). --The increased use of ancillary services, particularly Innovative Senior Care therapy, education and wellness services, also contributed significantly to the revenue increase for this segment. The operating contribution for Free-standing AL's was over $9.5 million for the fourth quarter of 2005 and almost $35 million for the full year. This represented a $2 million or 26% increase over the prior year's fourth quarter and a $9 million or 34% increase over the prior year. The Free-standing AL's continue to increase the monthly operating contribution per occupied unit, hitting $1,206 per unit in the fourth quarter of 2005, a 21% improvement from the prior year's fourth quarter. For 2005, 63% of the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenue from the Free-standing AL segment fell to operating contribution. Management Services Segment The company's Management Services business segment includes management contracts on six Retirement Centers and nine Free-standing AL's, with an aggregate capacity of 2,363 units. The Management Services segment had an operating contribution of $1.8 million in the fourth quarter of 2005, an increase of $1.4 million. This resulted from fees for development management services to third parties, from the addition of the former Epoch communities for part of the quarter and improved performance at the managed communities. Financial Review Revenues for the quarter increased 11% to $130 million versus the prior year quarter and increased 11% to $495 million for the full year, reflecting the increased average occupied units, the incremental rate increase from the mark to market effect for new residents, rate increases to existing residents and increased ancillary services. Ancillary services revenue was over $22 million for the quarter, up from $18 million a year ago. Ancillary services revenue currently comprises 17% of total revenue. Community operating expenses increased 9% for the quarter versus the prior year period, while revenue increased 11%, evidencing good cost control in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite an increase in utility costs. General and administrative expenses increased $2 million from the fourth quarter of 2004 as a result of $1.2 million of non-cash compensation expense, a portion of Hurricane Wilma expenses and the growth of the Company's business. Net income for the fourth quarter of 2005 was $4 million or $.12 per diluted share, compared with $2 million for the prior year's fourth quarter. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net income was $70 million, which included the second quarter benefit of $56 million of past tax benefits, and a $794,000 cost related to the second quarter early payment of a debt. Free cash flow was $8 million for the fourth quarter, versus $2 million for the fourth quarter of 2004. For the twelve months ended December December: see month. 31, 2005, free cash flow was $22 million versus $10 million for the same prior year period. 2006 Earnings Outlook The company expects to report net earnings per diluted share for 2006 in a range of $.65 to $.67 per diluted share, which includes an estimated $.12 of share-based, non-cash compensation expense. This guidance does not include the impact of potential future acquisitions. Conference Call Information American Retirement Corporation will hold a conference call with Bill Sheriff, Chairman, President and Chief Executive Officer, and Bryan Bryan, city (1990 pop. 55,002), seat of Brazos co., E central Tex.; inc. 1872. Settled in the early 19th cent. in an area of large plantations, Bryan was long a cotton center. Richardson Richardson, city (1990 pop. 74,840), Dallas and Collins counties, N Tex., a suburb of Dallas; founded in the 1850s, inc. as a city 1956. Richardson manufactures telecommunications equipment, medical devices, supercomputers, computer chips, and fiber optics. , Chief Financial Officer, to discuss the company's 2005 fourth quarter and full year financial results and the other matters described above. The call will be held Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 24, 2006 at 9:30 a.m. ET (8:30 a.m. Central) and parties may participate by either calling (877) 252-6354 or through the company's website at www.arclp.com. Click on the broadcast icon to listen to the earnings call - Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. (TM) is required to listen to this webcast. In addition, the call will be archived on the company's website until the next regularly scheduled earnings conference call. If any material information is disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). on the conference call that has not been previously disclosed publicly, that information will also be available at the Investors Welcome portion of the company's website. Additional Filings The company will file on or about February 24, 2006 a Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. with the SEC which includes supplemental information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's fourth quarter and full year 2005 results. This filing will also be available through the Investors Welcome section of the company's website - www.arclp.com. Company Profile American Retirement Corporation is a national senior living and health care services provider offering a broad range of care and services to seniors, including independent living, assisted living, skilled nursing and Alzheimer's care. Established in 1978, the company believes that it is a leader in the operation and management of senior living communities, including independent living communities, continuing care retirement communities, Free-standing AL's, and the development of specialized care programs for residents with Alzheimer's and other forms of dementia dementia (dĭmĕn`shə) [Lat.,=being out of the mind], progressive deterioration of intellectual faculties resulting in apathy, confusion, and stupor. In the 17th cent. . The company's operating philosophy is to enhance the lives of seniors by striving to provide the highest quality of care and services in well-operated communities designed to improve and protect the quality of life, independence, personal freedom, privacy, spirit, and dignity Dignity See also Noblemindedness. cherub celestial being symbolizing dignity, glory, and honor. [Heraldry: Halberts, 23] cloves symbolic of stateliness. [Plant Symbolism and Folklore: Jobes, 350] dahlia symbol of dignity. of its residents. The company currently operates 76 senior living communities in 19 states, with an aggregate unit capacity of approximately 14,300 units and resident capacity of approximately 16,000. The company owns 27 communities (including nine communities in joint ventures), leases 43 communities, and manages six communities pursuant to management agreements. Approximately 83% of the company's revenues come from private pay sources. Risks of Forward Looking Statements Statements contained in this press release and statements made by or on behalf of American Retirement Corporation relating hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. may be deemed to constitute 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. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions 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. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the company or its management, including, without limitation, all statements regarding the company's future earnings and results of operations and future share-based compensation expenses, all statements regarding the financial effects of recently completed acquisitions, and all statements regarding potential acquisitions and planned expansions and development. These forward-looking statements may be affected by certain risks and uncertainties, including without limitation the following: (i) the risk associated with the company's debt and lease obligations, (ii) the company's ability to sell its entrance fee units and to increase occupancy at the company's communities, (iii) the risk that the company will be unable to improve the company's results of operations, increase cash flow and reduce expenses, (iv) the risks associated with adverse market conditions of the senior housing industry and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. economy in general, (v) the risk that the company is unable to obtain liability insurance in the future or that the costs thereof (including deductibles) will be prohibitive pro·hib·i·tive also pro·hib·i·to·ry adj. 1. Prohibiting; forbidding: took prohibitive measures. 2. , (vi) the company's ability to obtain new financing or extend and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. modify existing debt, (vii) the risk that the company will not be able to successfully integrate acquired communities into the company's operations, (viii) the risk of changes in government reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. programs including caps on therapy reimbursements, (ix) the risk that the company will be unable to locate acquisition opportunities at prices that the company deems acceptable or to successfully complete planned expansions and developments of new units, and (x) the risk factors described in the company's Annual Report on Form 10-K/A for the year ended December 31, 2004 under the caption "Risk Factors" and in the company's other filings with the SEC. In light of the significant uncertainties inherent in the forward-looking statements included herein, the company's actual results could differ materially from such forward-looking statements. The company does not undertake any obligation to publicly release any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to any forward-looking statements contained herein to reflect events and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events.
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Three months Increase (Decrease)
ended December 31,
------------------- ----------------
2005 2004 $ %
--------- --------- -------- -------
Revenues:
Resident and health care $126,614 $115,293 $11,321 9.8%
Management services 1,848 443 1,405 317.2%
Reimbursed expenses 1,099 532 567 106.6%
--------- --------- -------- -------
Total revenues 129,561 116,268 13,293 11.4%
Operating expenses:
Cost of community service
revenue, exclusive of
depreciation 84,315 77,055 7,260 9.4%
Lease expense 14,967 15,283 (316) -2.1%
Depreciation and amortization,
inclusive of general and
administrative depreciation
and amortization of $578 and
$617 9,329 9,200 129 1.4%
Amortization of leasehold
acquisition costs 591 736 (145) -19.7%
Loss on sale of assets 232 22 210 954.5%
Reimbursed expenses 1,099 532 567 106.6%
General and administrative 9,611 7,569 2,042 27.0%
--------- --------- -------- -------
Total operating expenses 120,144 110,397 9,747 8.8%
--------- --------- -------- -------
Income from operations 9,417 5,871 3,546 60.4%
Other income (expense):
Interest expense (4,114) (4,444) 330 7.4%
Interest income 1,203 794 409 51.5%
Other (292) 443 (735) -165.9%
--------- --------- -------- -------
Other expense, net (3,203) (3,207) 4 0.1%
--------- --------- -------- -------
Income before income taxes
and minority interest 6,214 2,664 3,550 133.3%
Income tax expense 2,336 (300) 2,636 878.7%
--------- --------- -------- -------
Income from continuing
operations before minority
interest 3,878 2,964 914 30.8%
Minority interest in (earnings)
losses of consolidated
subsidiaries, net of tax 105 (851) (956) -112.3%
--------- --------- -------- -------
Net income $3,983 $2,113 $1,870 -88.5%
========= ========= ======== =======
Basic income (loss) per share $0.13 $0.08
========= =========
Diluted income (loss) per share $0.12 $0.08
========= =========
Weighted average shares used for
basic earnings (loss) per share
data 31,073 24,997
Effect of dilutive common stock
options 1,880 1,609
--------- ---------
Weighted average shares used for
diluted earnings (loss) per share
data 32,953 26,606
========= =========
------------------------------------------------------
December December
31, 31,
2005 2004
--------- ---------
Selected Balance Sheet Data:
Cash and cash equivalents $40,771 $28,454
Restricted cash 28,435 50,134
Working capital deficit (90,509) (98,995)
Land, buildings and
equipment, net 551,298 496,297
Total assets 879,474 749,250
Long-term debt, including
current portion 146,583 135,956
Capital lease and lease
financing obligations,
including current portion 177,417 199,126
Refundable portion of
entrance fees 85,164 79,148
Current portion of deferred
entrance fee income 38,407 33,800
Long-term deferred entrance
fee income 122,417 111,386
Deferred gain on sale lease-
back transactions 89,012 98,876
Shareholders' equity 132,755 5,701
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Year ended
December 31, Increase (Decrease)
------------------- ----------------
2005 2004 $ %
--------- --------- -------- -------
Revenues:
Resident and health care $488,383 $443,443 $44,940 10.1%
Management services 3,528 1,882 1,646 87.5%
Reimbursed expenses 3,089 2,284 805 35.2%
--------- --------- -------- -------
Total revenues 495,000 447,609 47,391 10.6%
Operating expenses:
Cost of community service
revenue, exclusive of
depreciation 326,504 300,797 25,707 8.5%
Lease expense 60,936 60,076 860 1.4%
Depreciation and amortization,
inclusive of general and
administrative depreciation
and amortization of $1,925 and
$1,990 36,392 31,148 5,244 16.8%
Amortization of leasehold
acquisition costs 2,567 2,917 (350) -12.0%
Loss (gain) on sale of assets 709 (41) 750 1829.3%
Reimbursed expenses 3,089 2,284 805 35.2%
General and administrative 30,327 28,671 1,656 5.8%
--------- --------- -------- -------
Total operating expenses 460,524 425,852 34,672 8.1%
--------- --------- -------- -------
Income from operations 34,476 21,757 12,719 58.5%
Other income (expense):
Interest expense (15,815) (31,477) 15,662 49.8%
Interest income 4,364 2,783 1,581 56.8%
Other 192 447 (255) -57.0%
--------- --------- -------- -------
Other expense, net (11,259) (28,247) 16,988 60.1%
--------- --------- -------- -------
Income (loss) before income
taxes and minority interest 23,217 (6,490) 29,707 457.7%
Income tax (benefit) expense (47,530) 2,421 49,951 2063.2%
--------- --------- -------- -------
Income (loss) from
continuing operations
before minority interest 70,747 (8,911) 79,658 893.9%
Minority interest in earnings of
consolidated subsidiaries, net of
tax (1,049) (2,406) 1,357 56.4%
--------- --------- -------- -------
Net income (loss) $69,698 $(11,317) $81,015 715.9%
========= ========= ======== =======
Basic income (loss) per share $2.29 $(0.48)
========= =========
Diluted income (loss) per share $2.17 $(0.48)
========= =========
Weighted average shares used for
basic earnings (loss) per share
data 30,378 23,798
Effect of dilutive common stock
options 1,746 -
--------- ---------
Weighted average shares used for
dilutive earnings (loss) per
share data 32,124 23,798
========= =========
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
GAAP RECONCILIATION
FREE CASH FLOW
($'s in thousands)
Free cash flow is presented to provide additional information
concerning cash flow available to meet future debt service obligations
and working capital requirements. Free cash flow should not be
considered as a measure of financial performance or liquidity under
U.S. generally accepted accounting principles. Free cash flow should
not be considered in isolation or as alternative to financial
statement data presented in the Company's consolidated financial
statements as an indicator of financial performance or liquidity. Free
cash flow, as presented, may not be comparable to similarly titled
measures of other companies. The following table reconciles Free cash
flow, as described above, to net income (loss) as reflected in the
Company's consolidated statements of earnings.
Three Six Nine Twelve
months months months months
ended ended ended ended
March 31, June 30, Sept. 30, Dec. 31,
2005 2005 2005 2005
Net income $2,625 $61,625 $65,715 $69,698
Adjustments to reconcile net
income to cash and cash
equivalents provided by
operating activities:
Tax benefit from release of
tax valuation allowance - (55,697) (55,697) (55,697)
Depreciation and amortization 10,066 19,685 29,572 39,633
Loss on extinguishment of
debt - 794 794 794
Amortization of deferred
entrance fee revenue (4,064) (8,894) (13,418) (18,264)
Proceeds from entrance fee
sales, net of refunds 7,805 18,211 26,463 37,404
Deferred income tax benefit (765) - - -
Amortization of deferred gain
on sale-leaseback transactions (2,956) (5,911) (8,867) (11,815)
Amortization of deferred
compensation 218 412 695 1,947
Minority interest in earnings
of consolidated subsidiaries 71 671 1,154 1,049
Tax benefit from exercise of
stock options 395 558 847 2,266
(Gains) losses from
unconsolidated joint ventures (66) (160) (260) (6)
Loss (gain) on sale of assets 12 356 477 709
----------------------------------------
Net cash and cash equivalents
provided by operating
activities (before changes in
assets and liabilities,
exclusive of acquisitions and
sale leaseback transactions) 13,341 31,650 47,475 67,718
Proceeds from refundable
entrance fee sales, net of
refunds (1,521) (2,737) (4,611) (6,210)
Adjustments for lease
escalators and other accruals 1,004 2,220 3,502 4,565
Additions to land, building
and equipment (19,629) (27,533) (44,303) (56,447)
Plus: Development
expenditures (funded
separately) 693 2,266 5,929 12,587
Distributions to minority
interest holders (984) (2,378) (3,222) (4,066)
Principal reductions in
master trust liability (285) (553) (817) (1,071)
Other adjustments for
transactions / refinancings 15,015 15,764 24,319 24,319
----------------------------------------
Free cash flow 7,634 18,699 28,272 41,395
Principal payments on long-
term debt (4,897) (9,869) (14,527) (19,441)
----------------------------------------
Free cash flow after principal
payments $2,737 $8,830 $13,745 $21,954
========================================
Quarter Ended
----------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
2005 2005 2005 2005
Net income $2,625 $59,000 $4,090 $3,983
Adjustments to reconcile net
income to cash and cash
equivalents provided by
operating activities:
Tax benefit from release of
tax valuation allowance - (55,697) - -
Depreciation and amortization 10,066 9,619 9,887 10,061
Loss on extinguishment of debt - 794 - -
Amortization of deferred
entrance fee revenue (4,064) (4,830) (4,524) (4,846)
Proceeds from entrance fee
sales, net of refunds 7,805 10,406 8,252 10,941
Deferred income tax benefit (765) 765 - -
Amortization of deferred gain
on sale-leaseback transactions (2,956) (2,955) (2,956) (2,948)
Amortization of deferred
compensation 218 194 283 1,252
Minority interest in earnings
of consolidated subsidiaries 71 600 483 (105)
Tax benefit from exercise of
stock options 395 163 289 1,419
(Gains) losses from unconsolidated
joint ventures (66) (94) (100) 254
Loss (gain) on sale of assets 12 344 121 232
----------------------------------------
Net cash and cash equivalents
provided by operating activities
(before changes in assets and
liabilities, exclusive of
acquisitions and sale leaseback
transactions) 13,341 18,309 15,825 20,243
Proceeds from refundable
entrance fee sales, net of
refunds (1,521) (1,216) (1,874) (1,599)
Adjustments for lease
escalators and other accruals 1,004 1,216 1,282 1,063
Additions to land, building
and equipment (19,629) (7,904) (16,770) (12,144)
Plus: Development
expenditures (funded
separately) 693 1,573 3,663 6,658
Distributions to minority
interest holders (984) (1,394) (844) (844)
Principal reductions in
master trust liability (285) (268) (264) (254)
Other adjustments for
transactions / refinancings 15,015 749 8,555 -
----------------------------------------
Free cash flow 7,634 11,065 9,573 13,123
Principal payments on long-
term debt (4,897) (4,972) (4,658) (4,914)
----------------------------------------
Free cash flow after principal
payments $2,737 $6,093 $4,915 $8,209
========================================
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