American Retirement Reports Improved Third Quarter and Year-to-Date 2003 Results.Business Editors 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.--(BUSINESS WIRE)--Nov. 6, 2003 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. ), a leading national provider of senior living housing and care, today reported its financial results for the three and nine months ended September September: see month. 30, 2003. Highlights of the quarter were: -- The Company produced its third consecutive quarter of positive 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. , recording a $7.6 million improvement over the third quarter of 2002. -- Revenue increased by $8.9 million - an 11% increase - over the prior year period to $93.5 million. -- The Company completed a $171 million transaction with Health Care Property Investors, Inc. (HCPI HCPI Harmonized Consumer Price Index ) and 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). were used to repay debt of $158 million, including $52 million of 19.5% debt. The transaction also resulted in $93 million of gain on sale, of which $23 million was recognized in the third quarter. -- The Company's balance sheet includes $95 million of deferred gains from sale-leaseback sale-lease·back n. See leaseback. transactions. -- The acquisition of a leasehold An estate, interest, in real property held under a rental agreement by which the owner gives another the right to occupy or use land for a period of time. leasehold n. interest in two Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). retirement communities that the Company previously managed. -- Overall 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 rose to 91% from 90% over the last year, fueled by an increase from 79% to 83% in 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. portfolio ("Free-standing AL's"), while the Company's portfolio of large retirement communities ("Retirement Centers") remained at 94%. -- The Company's Free-standing AL results were driven by a 5% increase in occupied units and an 8% increase in revenue per unit. -- The Company's five consolidated entry fee communities achieved record entrance fee apartment sales, resulting in $9.3 million of gross entry fee receipts, or $6.1 million net of refunds paid to prior residents, up from $ 9.0 million in the 2002 third quarter. Total revenue for the third quarter grew by $8.9 million to $93.5 million, an increase of 11% when compared to third quarter 2002. The Company reported third quarter earnings of $9.9 million, or $0.41 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, versus a third quarter prior year loss of $22.6 million, or $1.30 loss per share. Current quarter results include a gain, net of taxes, prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. and transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). , of $21.5 million related to the transaction with HCPI. Excluding this gain, the loss for the quarter was $10.5 million. Revenue from Retirement Centers rose 8% or $5.0 million to $70.7 million in the third quarter of 2003 from $65.7 million for the same prior-year period. Revenue from Free-standing AL's jumped 15% to $19.9 million in 2003's third quarter compared with last year's third quarter result of $17.3 million. Management services brought in $1.5 million in 2003 third-quarter revenue up from $.4 million for the same prior-year period. 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 American Retirement, commented, "During the third quarter, we continued to make substantial operational progress and we also achieved a significant improvement in our capital structure. The Free-standing AL's continue to improve for us, with year-over-year increases of 5% in occupied units and 8% in revenue per unit. Our Free-standing AL's have now reached the point where they are fully staffed, so as we make revenue gains, most of it reaches the bottom line. For the nine months of 2003, their revenue increased $10.2 million and community operating contribution increased by $7.5 million - which means we achieved an 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. margin of 74%." "Additionally, the HCPI transaction was a major step forward in addressing our capital structure. We not only repaid a large portion of expensive debt, but also demonstrated that the value inherent in the Company's remaining owned communities is substantial in relation to the debt secured by them." Moreover, the Company's five consolidated entry fee communities achieved record quarter's entrance fee sales, resulting in $9.3 million of gross entry fee receipts, or $6.1 million net of refunds paid to prior residents. In addition, the Company acquired a leasehold interest in two Alabama retirement communities that it previously managed. For the nine months ended September 30, 2003, revenue rose by 12% to $272.4 million compared to $242.5 million in the comparable prior-year period. The Company narrowed its net loss in the 2003 nine-months to $10.6 million, or $0.59 loss per share from a loss of $80.1 million, or $4.63 loss per share, in the first nine months of 2002. For 2003, the first nine months revenue from Retirement Centers increased 9% or $17.0 million to $206.6 million from $189.6 million in the same period last year. Revenue from Free-standing AL's surged 21% to $58.1 million in 2003's first nine months compared with last year's result of $47.9. Management services revenue tripled to $3.3 million for the nine months ended September 30, 2003 from $1.1 million in the comparable same prior-year period.
OPERATIONAL HIGHLIGHTS
----------------------
Retirement Centers
------------------
Three Months Ended
---------------------------------
Sept 30, Sept 30, $ %
2003 2002 Change Change
---------------------------------
Community Revenue $70,650 $65,666 $4,984 7.6%
Community Operating Contribution(1) 22,145 20,500 1,645 8.0%
(1) The Company evaluates the performance of its business segments,
primarily, based upon their operating contributions, which the
Company defines as revenue for the segment less operating expenses
associated with that segment.
The 26 Retirement Centers produced an 8% increase in community revenue and operating contribution for the third quarter of 2003 compared with the third quarter of 2002. The increases resulted from rising occupancy, rate increases, the acquisition of the two Alabama communities during the quarter and increased 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 provided by the Company. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite a difficult selling environment during the third quarter, the Retirement Centers maintained their historically high occupancy levels. At September 30, 2003, overall occupancy at the Retirement Centers was at 94%, with 95% occupancy in independent living, 93% in assisted living and 89% in skilled nursing. Five of the Company's consolidated Retirement Centers are entry fees communities. In the third quarter of 2003, the Company sold 68 entry-fee apartments at these Retirement Centers, producing $9.3 million of proceeds or $6.1 million after refunds to previous residents. With the success of the Company's marketing program, the current unsold apartments available for sale at the end of September 2003 dropped to an aggregate potential entrance fee sale value of $19.2 million from $22.3 million a year ago. Free-standing AL's The Company currently operates 31 Free-standing AL's, including three communities which have been segregated as being held for sale and have been treated as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Occupancy for the Free-standing AL portfolio reached 83% at the end of the 2003 third quarter, up from 79% a year ago. Currently, 19 of the 31 Free-standing AL's are at greater than 80% occupancy and nine are at greater than 90% occupancy. The following table presents quarterly Free-standing AL operating results for the three months ended September 30, 2003 and 2002 (in thousands):
Three Months Ended
-----------------------------------
Sept 30, Sept 30, $ %
-----------------------------------
2003 2002 Change Change
-----------------------------------
Revenues 19,948 17,320 2,628 15.2%
Community Operating Contribution 4,535 1,983 2,552 128.7%
% Occupancy 83% 79% 4pts 5%
Note: Excludes three Free-standing AL's held for sale and as
discontinued operations
The 31 Free-standing AL's produced a 15% increase in community revenue and a 129% increase in operating contribution for the third quarter of 2003 when compared to the third quarter of 2002. This improvement was driven primarily by occupancy increases and higher revenue per unit. Average revenue per unit increased by 9.4% - from $2,805 per month September 2002 to $3,070 per month September 2003 - due to rate increases, fewer and lower discounts, and increased ancillary services. Compared with the 2003 second quarter, revenue from the Free-standing AL's improved 3% or $.6 million. The operating contribution from the segment jumped 20% or $.8 million from the second quarter of 2003. The Free-standing AL's continue to demonstrate the high incremental margin that results from increasing revenue in a portfolio that is 83% occupied. Management Services The Company's management services business segment includes management contracts on five Retirement Centers, with an aggregate capacity of 1,801 units and two joint-venture Free-standing AL's. The Company receives the cash flow benefit, including the net entry fee sales proceeds, of one of those communities. Management services revenue rose to $1.5 million in the third quarter of 2003 from $.4 million in the same prior-year period, resulting mainly from improvements in operating results at the managed communities. During the quarter, the Company acquired a leasehold interest in two of the Retirement Centers that it previously managed, and entered into a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. management contract pursuant to a sale-manageback of a Retirement Center that it previously owned. FURTHER INFORMATION 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 third-quarter financial results. The call will be held on Thursday Thursday: see week. , November November: see month. 6, 2003 at 11:00 a.m. ET and parties may participate by either calling 877-252-9256 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 web cast. In addition, the call will be archived on the Company's website (click on the broadcast icon). Any material information disclosed on the conference call that has not been previously disclosed publicly will also be available at the Investor Relations Investor relations The process by which the corporation communicates with its investors. portion of the Company's web site. Additional Filings The Company's results are described in greater detail in the Company's Form 10-Q Form 10-Q See 10-Q. , which will be filed with the Securities and Exchange Commission on or about November 7th, 2003. The Company also will file on or about November 6th 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 Securities and Exchange Commission, which includes supplemental information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the third quarter 2003 results. These filings will be available through the Investor Relations 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 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 care. Established in 1978, the Company believes that it is a leader in the operations and management of senior living communities, including independent living communities, 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 communities, Free-standing AL's, and the development of 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 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 was inspired by the vision of its founders, Dr. Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs F. Frist v. t. 1. To sell upon credit, as goods. , Sr. and Jack C. Massey Mas·sey , (Charles) Vincent 1887-1967. Canadian politician who served as high commissioner for Canada in Great Britain (1935-1946) and as governor-general (1952-1959). , to enhance the lives of seniors by providing 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 of its residents. The Company currently operates 65 senior living communities in 14 states, with an aggregate unit capacity of approximately 12,900 units and resident capacity of approximately 14,500. The Company owns 19 communities, leases 39 communities, and manages seven communities pursuant to management agreements. Approximately 88 percent of the Company's revenues come from private pay sources. 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. STATEMENT 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information made pursuant to the safe harbor 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 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. 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 and its strategy to improve financial and operating results. 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 financial condition and significant leverage, including the fact that its cash flow does not currently cover its obligations, (ii) the possibility of future defaults under the Company's debt or lease agreements, (iii) the Company's ability to sell its entry-fee units and to increase occupancy at the Company's communities (especially its Free-standing AL's), (iv) the Company's ability to improve the Company's results of operations, increase cash flow and reduce expenses, (v) the risks associated with the 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, (vi) 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. , (vii) 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 (viii) the risk factors described in the Company's 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. for the year ended December December: see month. 31, 2002 under the caption "Risk Factors" and in the Company's other filings with the Securities and Exchange Commission. 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 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
September 30, (Decrease)
------------------- ----------------
2003 2002 $ %
--------- --------- -------- -------
Revenues:
Resident and health care $90,598 $82,986 $7,612 9.2%
Management services 1,504 432 1,072 248.1%
Reimbursed expenses 1,430 1,198 232 19.4%
--------- --------- -------- -------
Total revenues 93,532 84,616 8,916 10.5%
Operating expenses:
Community operating expenses 63,918 60,503 3,415 5.6%
General and administrative 6,351 8,637 (2,286) -26.5%
Lease expense 11,884 11,077 807 7.3%
Depreciation and amortization 6,215 4,718 1,497 31.7%
Amortization of leasehold
acquisition costs 659 521 138 26.5%
Asset impairments - 2,511 (2,511) -100.0%
Reimbursed expenses 1,430 1,198 232 19.4%
--------- --------- -------- -------
Total operating expenses 90,457 89,165 1,292 1.4%
--------- --------- -------- -------
Operating income (loss) 3,075 (4,549) 7,624 167.6%
Other income (expense):
Interest expense (14,464) (11,415) 3,049 -26.7%
Interest income 600 1,049 (449) -42.8%
Gain (loss) on sale of assets 23,149 (1,885) 25,034 1328.1%
Other (195) 962 (1,157) -120.3%
--------- --------- -------- -------
Other expense, net 9,090 (11,289) (20,379) 180.5%
--------- --------- -------- -------
Income (loss) from continuing operations
before income taxes,
and minority interest 12,165 (15,838) 28,003 176.8%
Income tax expense 1,361 100 1,261 1261.0%
--------- --------- -------- -------
Income (loss) from continuing
operations before minority
interest 10,804 (15,938) 26,742 167.8%
Minority interest in earnings of
consolidated subsidiaries, net of
tax (671) - (671) -
--------- --------- -------- -------
Income (loss) from continuing
operations 10,133 (15,938) 26,071 163.6%
Discontinued operations, net of
tax (254) (6,631) (6,377) -96.2%
--------- --------- -------- -------
Net income (loss) $9,879 $(22,569) $32,448 143.8%
========= ========= ======== =======
Basic earnings (loss) per share $0.53 $(1.30)
========= =========
Diluted earnings (loss) per share $0.41 $(1.30)
========= =========
Weighted average shares used for
basic earnings (loss) per share
data 18,739 17,310
========= =========
Weighted average shares used for
diluted earnings (loss) per share
data 24,578 17,310
========= =========
----------------------------------------------------------------------
September December
30, 31,
2003 2002
--------- ---------
Selected Balance Sheet Data:
Cash and cash equivalents $17,363 $18,244
Working capital 5,023 15,725
Land, buildings and equipment,
net 466,826 578,804
Total assets 718,811 839,998
Long-term debt, including current
portion 354,970 540,651
Refundable portion of entrance
fees 61,188 60,066
Shareholders' equity 5,515 12,907
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Nine months ended Increase
September 30, (Decrease)
------------------- ----------------
2003 2002 $ %
--------- --------- -------- -------
Revenues:
Resident and health care $264,680 $237,468 $27,212 11.5%
Management services 3,278 1,117 2,161 193.5%
Reimbursed expenses 4,402 3,885 517 13.3%
--------- --------- -------- -------
Total revenues 272,360 242,470 29,890 12.3%
Operating expenses:
Community operating expenses 185,794 171,694 14,100 8.2%
General and administrative 19,169 21,061 (1,892) -9.0%
Lease expense 32,174 61,540 (29,366) -47.7%
Depreciation and amortization 18,705 15,083 3,622 24.0%
Amortization of leasehold
acquisition costs 1,707 10,645 (8,938) -84.0%
Asset impairments - 2,561 (2,561) -100.0%
Reimbursed expenses 4,402 3,885 517 13.3%
--------- --------- -------- -------
Total operating expenses 261,951 286,469 (24,518) -8.6%
--------- --------- -------- -------
Operating income (loss) 10,409 (43,999) 54,408 123.7%
Other income (expense):
Interest expense (41,240) (31,579) 9,661 -30.6%
Interest income 2,164 3,977 (1,813) -45.6%
Gain (loss) on sale of assets 23,170 (1,938) 25,108 1295.6%
Other 261 1,792 (1,531) -85.4%
--------- --------- -------- -------
Other expense, net (15,645) (27,748) (12,103) 43.6%
--------- --------- -------- -------
Loss from continuing operations
before income taxes,
and minority interest (5,236) (71,747) 66,511 92.7%
Income tax expense 1,555 319 1,236 387.5%
--------- --------- -------- -------
Loss from continuing operations
before minority interest (6,791) (72,066) 65,275 90.6%
Minority interest in earnings of
consolidated subsidiaries, net of
tax (1,912) - (1,912) -
--------- --------- -------- -------
Loss from continuing operations (8,703) (72,066) 63,363 87.9%
Discontinued operations, net of
tax (1,871) (7,992) 6,121 76.6%
--------- --------- -------- -------
Net loss $(10,574) $(80,058) $69,484 86.8%
========= ========= ======== =======
Basic loss per share $(0.59) $(4.63)
========= =========
Diluted loss per share $(0.59) $(4.63)
========= =========
Weighted average shares used for
basic loss per share data 18,049 17,288
========= =========
Weighted average shares used for
diluted loss per share data 18,049 17,288
========= =========
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