American Retirement Corporation Reports Second Quarter and Year-to-Date 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 (NYSE NYSE See: New York Stock Exchange :ACR See riser card. ): --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 $1.82 for the second quarter and $1.96 year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. . --Items impacting comparability provided a net benefit of $1.69 per share in the second quarter, yielding $.13 per share without the items. --Free cash flow was $6 million for the second quarter. --Occupancy averaged 94%, up from 92% for last year's second quarter. American Retirement Corporation (NYSE:ACR) today reported second quarter 2005 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 of $1.82 per share, compared with a $.09 per share loss for the prior year second quarter. Second quarter 2005 results included a benefit of $1.71 per share due to the recognition of certain tax benefits and a 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 $.02 per share related to the early repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of a note. 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, "During the second quarter, we had solid operating results and completed transactions consistent with our strategic initiatives of freeing restricted cash, expanding our unit capacity, increasing the mix of owned units versus leased, and improving our balance sheet. Again, our operations showed strong increases in revenue and operating contribution per unit. With occupancies holding strong, and by expanding 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. services and maintaining good cost control, revenues increased by 10% over the second quarter of 2004 and the operating contribution increased 16%." "We completed three transactions during the quarter that released $13 million of restricted cash and created the opportunity for additional releases in the future. We used those funds plus the company's positive cash flow to pay down debt, to buyout Buyout The purchase of a company or a controlling interest of a corporation's shares. Notes: A leveraged buyout is accomplished with borrowed money or by issuing more stock. a lessor's and a joint venture partner's interest in two communities, and to fund development. The buyouts were both accretive and facilitated the planned expansion of those communities. We also announced the start of construction of a number of community expansions and we made good progress on a number of development projects. Finally, with our improved financial results and our future prospects, we were able to recognize certain tax benefits through the income statement into shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. and end the quarter with shareholders' equity of $120 million." (All references to growth rate percentage compare the results of the current period to the prior year comparable period.) Financial Highlights --$122 million of total revenue for the second quarter of 2005, a 10% increase. --Net income of $59 million ($1.82 per diluted share) versus a loss of $2.3 million. --Free cash flow for the second quarter of $6 million. --An operating contribution from the company's three business segments of $41 million, an increase of 16%. Operational Highlights --Occupancy was 94% with the company's large retirement communities ending the quarter at 95% 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 90%. --Retirement Centers produced a 7% 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 7% increase in operating contribution per occupied unit. --Free-standing assisted living communities produced an 8% increase in average monthly revenue per occupied unit, and a 39% increase in 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 and reimbursed expenses. The results for the company's three operating segments for the second quarter of 2005 were as follows:
Three months ended
($ in 000's) June 30,
---------------------------------- ------------------- $ %
2005 2004 Change Change
---------------------------------- ---------- -------- ------- -------
Resident & Healthcare revenue $120,641 $109,110 11,531 10.6%
---------------------------------- ---------- -------- ------- -------
Community operating expense $ 79,896 $ 74,065 5,831 7.9%
---------------------------------- ---------- -------- ------- -------
Community operating contribution $ 40,745 $ 35,045 5,700 16.3%
---------------------------------- ---------- -------- ------- -------
Community operating margin 33.8% 32.1%
---------------------------------- ---------- -------- ------- -------
Management Services op.
contribution $ 516 $ 515 1 0.2%
---------------------------------- ---------- -------- ------- -------
Retirement Centers Segment The company's 29 Retirement Centers exhibited strong increases in revenue and operating contribution for the second quarter of 2005 as follows:
Retirement Centers ($ in 000's): Three Months Ended:
June 30,
------------------------------------------------------- $ %
2005 2004 Change Change
--------------------------------------- ------- ------- ------ -------
Revenues $93,794 $85,578 8,216 9.6%
--------------------------------------- ------- ------- ------ -------
Community Operating Contribution(1) $31,925 $29,032 2,893 10.0%
--------------------------------------- ------- ------- ------ -------
Operating contribution margin 34.0% 33.9%
--------------------------------------- ------- ------- ------ -------
% Ending Occupancy 95% 95%
--------------------------------------- ------- ------- ------ -------
(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 associated with that segment.
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 95%, level with the second 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 97% occupancy in independent living, 93% in assisted living and 87% in skilled nursing. --Average monthly revenue per occupied unit increased 7% during the quarter to $3,647 versus prior year - 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 education and wellness programs. The operating contribution for Retirement Centers for the second quarter of 2005 was almost $32 million, a 34% margin. This represented a $2.9 million increase or 10% increase over the prior year's second quarter. The Retirement Centers continue to increase the monthly operating contribution per occupied unit, hitting $1,241 per unit in the second quarter of 2005, a 7% improvement from the prior year's second quarter. Free-standing AL's Segment The company's 31 Free-standing AL's exhibited strong increases in revenue and operating contribution for the second quarter of 2005 as follows:
Free-standing AL ($ in 000's): Three Months Ended:
June 30,
------------------------------------------------------ $ %
2005 2004 Change Change
-------------------------------------- ------- ------- ------- -------
Revenues $26,847 $23,532 3,315 14.1%
-------------------------------------- ------- ------- ------- -------
Community Operating Contribution(1) $ 8,820 $ 6,013 2,807 46.7%
-------------------------------------- ------- ------- ------- -------
Operating contribution margin 32.9% 25.6%
-------------------------------------- ------- ------- ------- -------
% Ending Occupancy 90% 86%
-------------------------------------- ------- ------- ------- -------
Note (1): Includes results of 31 Free-standing AL's and excludes
two non-consolidated Free-standing AL's held in joint
ventures
Revenue from the Free-standing AL segment increased 14% to $27 million. --Average occupancy for the Free-standing AL portfolio was 90% for the second quarter, up from 86% a year ago and up from 89% in the first quarter of 2005. --The average monthly revenue per occupied unit increased 8% to $3,500, up from $3,228 per month in June June: see month. 2004. The revenue per occupied unit increase was due to rate increases, reduced discounts and 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 education and wellness services, also contributed significantly to the revenue increase for this segment. The operating contribution for Free-standing AL's for the second quarter of 2005 was almost $9 million, a 33% margin. This represented a $2.8 million or 47% increase over the prior year's second quarter. The Free-standing AL's continue to increase the monthly operating contribution per occupied unit, hitting $1,150 per unit in the second quarter of 2005, a 39% improvement from the prior year's second quarter. For six months year-to-date, over 72% 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 five Retirement Centers and two Free-standing AL's, with an aggregate capacity of 1,351 units. The Management Services segment had an operating contribution of $.5 million in the second quarter of 2005, level with the same prior-year period. Financial Review Revenues for the quarter increased 10% to $122 million versus the prior year quarter, reflecting the increased average occupied units, the incremental rate increase from new residents, rate increases to existing residents and increased ancillary services. Ancillary services revenue was almost $20 million for the quarter, up from $16 million a year ago. Ancillary services revenue currently comprises 16% of total revenue. Community 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. increased 8% for the quarter versus the prior year period, while revenue increased 10%, evidencing good cost control and the low incremental cost Incremental Cost The encompassing change that a company experiences within its balance sheet due to one additional unit of production. Notes: Incremental cost is the overall change that a company experiences by producing one additional unit of good. of additional occupancy. General and administrative expenses increased 11%, reflecting the growth of the Company's business as well as almost $300,000 of unexpected costs related to accounting restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. activities. Net income for the second quarter of 2005 was $59 million or $1.82 per diluted share, compared with a loss of $2 million for the prior year's second quarter. The second quarter included a benefit of $56 million, $1.71 per share, due to certain tax benefits that had not previously been recognized as a result of the Company's losses during the relevant time periods. As a result of the Company's improved financial results and its expectations for continued financial improvement, the Company believes that it is more likely than not that it will recognize the benefits of its deferred tax assets. As such, the Company recognized the income tax benefit on its second quarter income statement. The benefit is a non-cash GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). accounting item that increased the Company's shareholders' equity to $120 million as of June 30, 2005. The tax benefit was partially offset by a $794,000 non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. related to the second quarter repayment of a debt. Free cash flow was $6 million for the second quarter, versus $4 million for the second quarter of 2004. For the six months ended June 30, free cash flow was $9 million versus $5 million for the same prior year period. The primary drivers of the increased cash flow were increased operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and entrance fee sale proceeds, net of refunds. 2005 Earnings Outlook The company expects to report net earnings per diluted share of $0.46 to $0.49 for 2005, excluding the effect of the second quarter tax benefit. 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 second-quarter financial results and the other matters described above. The call will be held on Thursday Thursday: see week. , August 4, 2005 at 11:00 a.m. ET 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 August 4, 2005 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 second quarter 2005 results. These filings 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 67 senior living communities in 14 states, with an aggregate unit capacity of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 13,200 units and resident capacity of approximately 14,900. The company owns 18 communities, leases 43 communities, and manages six communities pursuant to management agreements. Approximately 84% 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 operating and financial expectations. 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 significant leverage, (ii) the company's ability to sell its entrance fee units and to increase occupancy at the company's communities (especially its Free-standing AL's), (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 and (vii) the risk factors described in the company's Annual Report on Form 10-K/A for the year ended December December: see month. 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 ended Increase
June 30, (Decrease)
-------------------- -----------------
2005 2004 $ %
-------- -------- ------- --------
Revenues: (restated)
Resident and health care $120,641 $109,110 $11,531 10.6%
Management services 516 515 1 0.2%
Reimbursed expenses 542 524 18 3.4%
-------- -------- ------- --------
Total revenues 121,699 110,149 11,550 10.5%
Operating expenses:
Community operating expenses 79,896 74,065 5,831 7.9%
General and administrative 6,765 6,114 651 10.6%
Lease expense 15,445 14,872 573 3.9%
Depreciation and amortization 8,773 6,547 2,226 34.0%
Amortization of leasehold
acquisition costs 689 728 (39) -5.4%
Loss (gain) on sale of assets 344 (6) 350 5833.3%
Reimbursed expenses 542 524 18 3.4%
-------- -------- ------- --------
Total operating expenses 112,454 102,844 9,610 9.3%
-------- -------- ------- --------
Operating income 9,245 7,305 1,940 26.6%
Other income (expense):
Interest expense (3,916) (8,932) 5,016 56.2%
Interest income 874 669 205 30.6%
Other 5 (364) 369 101.4%
-------- -------- ------- --------
Other expense, net (3,037) (8,627) 5,590 64.8%
-------- -------- ------- --------
Income (loss) before income
taxes and minority interest 6,208 (1,322) 7,530 569.6%
Income tax (benefit) expense (53,392) 75 53,467 71289.3%
-------- -------- ------- --------
Income (loss) from
continuing operations
before minority interest 59,600 (1,397) 60,997 4366.3%
Minority interest in earnings
of consolidated subsidiaries,
net of tax (600) (863) 263 30.5%
-------- -------- ------- --------
Net income (loss) $ 59,000 $ (2,260) $61,260 2710.6%
======== ======== ======= ========
Basic income (loss) per share $ 1.90 $ (0.09)
======== ========
Diluted income (loss) per
share $ 1.82 $ (0.09)
======== ========
Weighted average shares used
for basic earnings (loss) per
share data 31,053 24,290
Effect of dilutive common stock
options 1,278 -
-------- --------
Weighted average shares used
for diluted earnings (loss)
per share data 32,331 24,290
======== ========
------------------------------- -------------------
June 30, December 31,
2005 2004
--------- ----------
Selected Balance Sheet Data:
Cash and cash equivalents $ 46,472 $ 28,454
Restricted cash 39,054 50,134
Working capital deficit (87,180) (98,995)
Land, buildings and
equipment, net 516,786 496,297
Total assets 829,437 749,250
Long-term debt and lease
financing obligations,
including current portion 296,658 335,082
Refundable portion of
entrance fees 83,556 79,148
Current portion of deferred
entrance fee income 35,732 33,800
Long-term deferred entrance
fee income 121,258 111,386
Deferred gain on sale lease-
back transactions 92,965 98,876
Shareholders' equity 120,278 5,701
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Six months ended Increase
June 30, (Decrease)
-------------------- -----------------
2005 2004 $ %
-------- -------- ------- --------
Revenues: (restated)
Resident and health care $238,330 $217,061 $21,269 9.8%
Management services 1,016 939 77 8.2%
Reimbursed expenses 1,344 1,292 52 4.0%
-------- -------- ------- --------
Total revenues 240,690 219,292 21,398 9.8%
Operating expenses:
Community operating expenses 159,233 147,917 11,316 7.7%
General and administrative 13,356 12,702 654 5.1%
Lease expense 30,955 29,693 1,262 4.3%
Depreciation and amortization 18,044 13,460 4,584 34.1%
Amortization of leasehold
acquisition costs 1,388 1,446 (58) -4.0%
Loss (gain) on sale of assets 356 (111) 467 420.7%
Reimbursed expenses 1,344 1,292 52 4.0%
-------- -------- ------- --------
Total operating expenses 224,676 206,399 18,277 8.9%
-------- -------- ------- --------
Operating income 16,014 12,893 3,121 24.2%
Other income (expense):
Interest expense (7,473) (18,633) 11,160 59.9%
Interest income 1,594 1,271 323 25.4%
Other 144 (253) 397 156.9%
-------- -------- ------- --------
Other expense, net (5,735) (17,615) 11,880 67.4%
-------- -------- ------- --------
Income (loss) before income
taxes and minority interest 10,279 (4,722) 15,001 317.7%
Income tax expense (52,357) 220 52,577 23898.6%
-------- -------- ------- --------
Income (loss) from continuing
operations before minority
interest 62,636 (4,942) 67,578 1367.4%
Minority interest in earnings of
consolidated subsidiaries, net
of tax (1,011) (1,825) 814 44.6%
-------- -------- ------- --------
Net income (loss) $ 61,625 $ (6,767) $68,392 1010.7%
======== ======== ======= ========
Basic income (loss) per share $ 2.06 $ (0.30)
======== ========
Diluted income (loss) per share$ 1.96 $ (0.30)
======== ========
Weighted average shares used for
basic earnings (loss) per share
data 29,976 22,770
Effect of dilutive common stock
options 1,540 -
-------- --------
Weighted average shares used for
dilutive earnings (loss) per
share data 31,516 22,770
======== ========
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
months months
ended ended
March 31, June 30,
2005 2005
Net income $ 2,625 $ 61,625
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 19,685
Loss on extinguishment of debt - 794
Amortization of deferred entrance fee revenue (4,064) (8,894)
Proceeds from entrance fee sales, net of
refunds 7,805 18,211
Deferred income tax benefit (765) -
Amortization of deferred gain on sale-
leaseback transactions (2,956) (5,911)
Amortization of deferred compensation 218 412
Minority interest in earnings of consolidated
subsidiaries 71 671
Tax benefit from exercise of stock options 395 558
(Gains) losses from unconsolidated joint
ventures (66) (160)
Loss (gain) on sale of assets 12 356
-------- --------
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
Proceeds from refundable entrance fee sales,
net of refunds (1,521) (2,737)
Adjustments for lease escalators and other
accruals 1,004 2,220
Additions to land, building and equipment (19,629) (27,533)
Plus: Development expenditures (funded
separately) 693 2,266
Distributions to minority interest holders (984) (2,378)
Principal reductions in master trust
liability (285) (553)
Other adjustments for transactions /
refinancings 15,015 15,764
-------- --------
Free cash flow before principal payments 7,634 18,699
Principal payments on long-term debt (4,897) (9,869)
-------- --------
Free cash flow $ 2,737 $ 8,830
======== ========
Quarter Ended
------------------
March 31, June 30,
2005 2005
Net income $ 2,625 $ 59,000
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
Loss on extinguishment of debt 794
Amortization of deferred entrance fee revenue (4,064) (4,830)
Proceeds from entrance fee sales, net of
refunds 7,805 10,406
Deferred income tax benefit (765) 765
Amortization of deferred gain on sale-
leaseback transactions (2,956) (2,955)
Amortization of deferred compensation 218 194
Minority interest in earnings of consolidated
subsidiaries 71 600
Tax benefit from exercise of stock options 395 163
(Gains) losses from unconsolidated joint
ventures (66) (94)
Loss (gain) on sale of assets 12 344
-------- --------
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
Proceeds from refundable entrance fee sales,
net of refunds (1,521) (1,216)
Adjustments for lease escalators and other
accruals 1,004 1,216
Additions to land, building and equipment (19,629) (7,904)
Plus: Development expenditures (funded
separately) 693 1,573
Distributions to minority interest holders (984) (1,394)
Principal reductions in master trust
liability (285) (268)
Other adjustments for transactions /
refinancings 15,015 749
-------- --------
Free cash flow before principal payments 7,634 11,065
Principal payments on long-term debt (4,897) (4,972)
-------- --------
Free cash flow $ 2,737 $ 6,093
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