----------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2000
[__] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____ to ____
Commission file number 0-27108
REGENT ASSISTED LIVING, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-1171049
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
121 SW Morrison St., Suite 1000
Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
503-227-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports to be filed
by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
--- ---
As of May 15, 2000, there were 4,507,600 shares of the Registrant's Common
Stock, no par value, outstanding
----------------------------------------------------
<PAGE>
REGENT ASSISTED LIVING, INC.
FORM 10-Q
March 31, 2000
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999. . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2000 and 1999. . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999. . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations . . . . . . . . . . . . . . . . . . . . 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . .. . . . . . . . . . . . . 19
Signatures 20
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS March 31, December 31,
2000 1999
(Unaudited)
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,748,825 $ 4,537,839
Cash held in working capital escrow 249,912 404,598
Accounts receivable, net 502,640 723,081
Prepaid expenses 1,497,994 739,569
Construction advances receivable 254,571 235,706
Land held for sale 2,860,000 2,860,000
------------- -------------
Total current assets 9,113,942 9,500,793
Restricted cash 3,110,492 2,916,182
Property and equipment, net 46,907,772 46,900,983
Investment in and advances to joint ventures 888,519 383,114
Other assets 3,043,743 2,985,291
------------- -------------
Total assets $ 63,064,468 $ 62,686,363
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,298,193 $ 2,266,919
Construction accounts payable 457,696 463,136
Accounts payable and other accrued expenses 5,851,606 5,343,587
------------- -------------
Total current liabilities 8,607,495 8,073,642
Long-term debt 33,241,278 32,275,189
Convertible subordinated notes 9,000,000 9,000,000
Deposits under sales contract 10,329,882 10,194,342
Deferred gains and development fees, net 6,582,378 6,714,156
Other liabilities 1,381,720 1,387,250
------------- -------------
Total liabilities 69,142,753 67,644,579
--------------- --------------
Minority interests in consolidated subsidiaries 319,306 352,389
------------- -------------
Commitments
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized;
1,666,667 shares issued and outstanding in 2000 and 1999 9,349,841 9,349,841
Common stock, no par value, 25,000,000 shares authorized;
4,507,600 shares issued and outstanding in 2000 and 1999 10,619,349 10,619,349
Accumulated deficit (26,366,781) (25,279,795)
------------- -------------
Total shareholders' equity (6,397,591) (5,310,605)
------------- -------------
Total liabilities and shareholders' equity $ 63,064,468 $ 62,686,363
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------ ------------------
<S> <C> <C>
Revenues:
Rental and service $15,321,394 $11,846,037
Management fees 201,446 80,539
------------ ------------
Total revenues 15,522,840 11,926,576
------------ ------------
Operating expenses:
Residence operating expenses 10,342,499 8,586,461
General and administrative 1,452,821 1,284,632
Lease expense 3,441,064 3,202,598
Depreciation and amortization 412,255 320,809
------------ ------------
Total operating expenses 15,648,639 13,394,500
------------ ------------
Operating loss (125,799) (1,467,924)
Interest income 113,879 83,590
Interest expense (857,602) (524,606)
Equity in losses of joint ventures (94,595) (86,316)
Other income (loss), net (5,952) (5,739)
------------ ------------
Loss before minority interests (970,069) (2,000,995)
Minority interests 33,083 -
------------ ------------
Loss before income taxes (936,986) (2,000,995)
Provision for income taxes - -
------------ ------------
Net loss (936,986) (2,000,995)
Preferred stock dividends (150,000) (150,000)
------------ ------------
Net loss available to common shareholders $(1,086,986) $(2,150,995)
============ ============
Basic loss per common share $ (.24) $ (.46)
============ ============
Diluted loss per common share $ (.24) $ (.46)
============ ============
Weighted average common shares outstanding - basic 4,507,600 4,633,000
============ ============
Weighted average common shares outstanding - diluted 4,507,600 4,633,000
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (936,986) $ (2,000,995)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 412,255 320,809
Loss on sale of assets 104 -
Amortization of deferred gains and development fees (131,778) (117,524)
Equity interest in joint ventures 94,595 86,316
Minority interests (33,083) -
Changes in other assets and liabilities:
Cash held in working capital escrow 154,686 284,220
Accounts receivable 273,864 (62,762)
Prepaid expenses (758,425) (1,305,601)
Other assets 5,530 (144,409)
Accounts payable and other accrued expenses 358,019 1,457,670
Other liabilities (5,530) 144,409
------------- -------------
Net cash used in operating activities (566,749) (1,337,867)
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (1,044,506) (2,758,883)
Decrease in construction accounts payable (5,440) (255,878)
Investment in and advances to joint venture - (36,000)
Deposits to replacement reserve account, net (24,939) (25,019)
------------- -------------
Net cash used in investing activities (1,074,885) (3,075,780)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,110,605 1,775,412
Payments on long-term debt (110,111) (7,237,954)
Construction (advances) payments (18,865) 258,236
Payments and deposits for financing arrangements, net (92,047) (151,986)
Restricted cash for financing arrangements, net (169,371) 22,918
Deferred development fees from lease financing arrangements (3,131) (9,949)
Proceeds from lease financing arrangements - 9,626,360
Proceeds from sales contract 135,540 -
Preferred stock dividends - (150,000)
------------- -------------
Net cash provided by financing activities 852,620 4,133,037
------------- -------------
Net decrease in cash and cash equivalents (789,014) (280,610)
Cash and cash equivalents, beginning of period 4,537,839 4,483,048
------------- -------------
Cash and cash equivalents, end of period $ 3,748,825 $ 4,202,438
============= =============
</TABLE>
Supplemental disclosure of non-cash investing and financing activities during
the three months ended March 31, 2000: Transfer of property and equipment
with a cost of $653,423 in exchange for investment in joint venture of
$600,000 and receivable from joint venture of $53,423.
Preferred stock dividends accrued $150,000.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies
The Company
- -----------
Regent Assisted Living, Inc. ("the Company") is an owner, operator, and
developer of private-pay assisted living communities including
stand-alone Alzheimer's communities. Assisted living is part of a
spectrum of long-term care services that provide a combination of
housing, personal services and health care designed to respond to
elderly individuals who require assistance with activities of daily
living in a manner that promotes maximum independence.
As of March 31, 2000, the Company operated 31 assisted living
communities in nine western states. Of the 31 communities, three are
owned in joint ventures and accounted for under the equity method, and
four are operated under management contracts.
As of March 31, 1999, the Company operated 26 assisted living
communities in nine western states. Of the 26 communities, one is owned
in a joint venture and accounted for under the equity method, and two
are operated under management contracts.
Basis of Presentation
- ---------------------
The condensed consolidated financial statements include the accounts of
the Company and its majority owned subsidiary. All significant
inter-company accounts and transactions have been eliminated in
consolidation.
The accompanying unaudited condensed consolidated financial statements
as of March 31, 2000, and for the three month periods ended March 31,
2000 and 1999, have been prepared in conformity with accounting
principles generally accepted in the United States. The financial
information as of December 31, 1999, is derived from the Company's Form
10-K for the year ended December 31, 1999. Certain information or
footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion
of management, the accompanying condensed consolidated financial
statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of
Page 6
<PAGE>
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, Continued
the results of the interim periods presented. The accompanying
condensed consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 1999, included in the
Company's Form 10-K for the year ended December 31, 1999.
Operating results for the three months ended March 31, 2000, are not
necessarily indicative of the results that may be expected for the
remainder of the fiscal year ending December 31, 2000.
2. Property and Equipment:
Property and equipment are stated at cost and consist of the following:
March 31, December 31,
2000 1999
------------ ------------
Land $ 5,364,716 $ 5,364,716
Buildings and improvements 33,445,423 33,332,546
Furniture and equipment 4,314,317 4,289,447
Construction in progress 6,821,918 6,572,177
------------ ------------
49,946,374 49,558,886
Less accumulated depreciation
and amortization (3,038,602) (2,657,903)
------------ ------------
Property and equipment, net $46,907,772 $46,900,983
============ ============
Land, buildings and certain furniture and equipment serve as collateral
for long-term debt.
3. Administrative Services Agreement:
The Company has entered into an agreement with companies owned by the
majority shareholder whereby the Company will provide executive
assistance, accounting and financial management services, legal and
administrative assistance, insurance, management information services,
and other management services as required. Under the terms of the
agreement, the Company is reimbursed at its cost on a monthly basis for
all services provided.
Page 7
<PAGE>
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, Continued
4. Earnings (Loss) Per Common Share:
Basic earnings per share (EPS) and diluted EPS are computed using the
methods prescribed by Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. Basic EPS is calculated using
income (loss) attributable to common shares (after deducting preferred
dividends) divided by the weighted average number of common shares
outstanding for the period. Diluted EPS is calculated using income
(loss) attributable to common shares (after deducting preferred
dividends and considering the effects of dilutive common equivalent
shares) divided by the weighted average number of common shares and
dilutive common shares outstanding for the period. Basic and diluted
earnings (loss) per common share includes a deduction of preferred
stock dividends declared, which totaled $150,000 for each three month
period ended March 31, 2000 and 1999.
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company
The Company reported revenue of $15.5 million and a net loss of $0.9
million for the quarter ended March 31, 2000. After deducting preferred stock
dividends, net loss per share available to common shareholders on a diluted
basis was $0.24.
Current Communities. The table below sets forth certain information
regarding the Company's communities at March 31, 2000:
Regent
Operations
Community Location Commenced Units(1) Beds(2) Interest
- --------- -------- ---------- -------- ------- --------
Oregon
Park Place Portland 1986 112 112 Lease(3)
Regency Park Portland 1987 122 136 Lease
Regent Court Clackamas 1999 24 48 Lease
Regent Court Corvallis 2000 24 48 Manage(4)
Sheldon Park Eugene 1998 105 117 Lease
Washington
Northshore House Kenmore 1998 85 92 Manage(5)
Regent Court Kent 1999 24 48 Manage(6)
Sterling Park Redmond 1990 154 175 Lease
California
Laurel Springs Bakersfield 1998 111 124 Own
Orchard Park Clovis 1998 112 124 Lease
Regent Court Modesto 1999 24 48 Own(7)
Summerfield House Vacaville 1998 109 122 Own
Sun Oak Citrus Heights 1997 40 50 Manage
Sunnyside Court Fremont 1998 39 45 Lease
Sunshine Villa Santa Cruz 1990 106 124 Lease(8)
The Altenheim Oakland 2000 136 140 Manage
The Palms Roseville 1998 93 104 Lease
Villa Serra Salinas 1998 150 150 Manage
Willow Creek Folsom 1997 98 113 Lease
Page 9
<PAGE>
Idaho
West Wind Boise 1997 48 51 Own(9)
Willow Park Boise 1997 106 120 Lease
Nevada
Mira Loma Henderson 1998 113 126 Lease
New Mexico
Sandia Springs Rio Rancho 1998 107 120 Lease
Texas
Hamilton House San Antonio 1997 111 123 Lease
Parmer Woods Austin 1998 114 130 Lease(10)
Arizona
Canyon Crest Tucson 1998 116 132 Lease
Desert Flower Scottsdale 1999 102 108 Manage(11)
Regent Court Scottsdale 1998 24 44 Lease
Wyoming
Aspen Wind Cheyenne 1998 77 77 Lease
Meadow Wind Casper 1998 51 51 Lease
Spring Wind Laramie 1998 53 53 Lease
----- -----
Totals: 2,690 3,055
===== =====
As of May 15, 2000, construction had commenced on the following four
communities:
Scheduled
Community Location Opening Units(1) Beds(2) Interest
- --------- -------- ---------- -------- ------- --------
California
Autumn Park Merced 1st quarter 2001 72 83 Own(12)
West Covina West Covina 4th quarter 2000 130 142 Lease
Gardens
Arizona
Citrus Park Mesa 3rd quarter 2000 111 127 Lease
Utah
Birch Creek South Ogden 1st quarter 2001 104 113 Own
--- ---
417 465
=== ===
Page 10
<PAGE>
(1) A "unit" is a single- or double-occupancy studio or one or two bedroom
apartment.
(2) "Beds" reflects the actual number of beds used by the Company for
census purposes, which in no event is a number greater than the maximum
number of licensed beds permitted under the community's license.
(3) The Company completed a lease-acquisition of Park Place during the
second quarter of 1998. The Company previously managed this community.
(4) The Company owns a 40 percent interest in a joint venture which owns
the Corvallis community.
(5) The Company owns a 50 percent interest in a joint venture which owns
the Kenmore community.
(6) The Company owns a 10 percent interest in a joint venture which owns
the Kent community.
(7) The Company owns a 55 percent co-tenancy interest in the Modesto
community.
(8) The Company sold the Santa Cruz community in a prior period pursuant to
a sale-leaseback transaction and is accounted for as a capital lease.
(9) The Company purchased West Wind in June 1999. Previously, this
community was operated pursuant to a lease arrangement.
(10) The Company completed a sale-leaseback transaction of its Austin
community in February 1999.
(11) The Company's Chairman and Chief Executive Officer purchased Desert
Flower in September 1999 pursuant to a sale-manageback transaction
accounted for under the deposit method.
(12) The Company owns a 75 percent interest in a joint venture which owns
the Merced community.
As of May 15, 2000, the Company has entered into an agreement to manage
a 104-bed community being developed by a third party and has four additional new
communities in varying stages of development. If all four communities are
developed, total operations of the Company will increase by approximately 411
beds to a total of approximately 4,035 beds.
11
<PAGE>
The Company continues to pursue its primary strategy of developing new
communities and is therefore engaged in negotiations to acquire additional sites
and is pursuing joint venture opportunities with parties who control parcels of
land in strategic markets. The Company currently has one site under option.
There is no assurance that the Company will elect to acquire this site or that
the Company will be able to develop successfully any of the sites it has
acquired or will in the future acquire.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of total revenues represented by certain items included in the
Company's condensed consolidated financial statements.
Percentage of Revenues
Three Months Ended March 31,
2000 1999
---- ----
Revenues 100.0% 100.0%
Expenses:
Residence operating expenses 66.6 72.0
General and administrative expenses 9.4 10.8
Lease expense 22.2 26.8
Depreciation and amortization 2.6 2.7
------ ------
Total operating expenses 100.8 112.3
Operating loss (.8) (12.3)
Other income (expense):
Interest income .7 .7
Interest expense, net (5.5) (4.4)
Equity in losses of joint ventures (.6) (.7)
Other income, net - (.1)
------ ------
Loss before minority interests (6.2) (16.8)
Minority interests .2 -
------ ------
Loss before income taxes (6.0) (16.8)
Provision for income taxes - -
------ ------
Net loss (6.0) (16.8)
Preferred stock dividends (1.0) (1.2)
------ ------
Net loss available to common shareholders (7.0)% (18.0)%
====== ======
Page 12
<PAGE>
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999
Revenues. For the three month period ended March 31, 2000, revenues
totaled $15.5 million compared to $11.9 million in the three month period ended
March 31, 1999, an increase of $3.6 million or 30.2 percent. During the first
quarter of 2000, the Company operated 31 communities comprised of seven
stabilized communities, 17 newly developed communities, and seven communities
operated pursuant to management contracts, three of which are owned in joint
ventures and accounted for under the equity method. The Company operated 26
communities during the first quarter of 1999, comprised of five stabilized
communities, 18 newly developed communities, and three communities operated
pursuant to management contracts, of which one is owned in a joint venture and
accounted for under the equity method. A community is considered "stabilized"
for reporting purposes after it first attains occupancy of 95.0 percent and
prior to that time is considered "newly developed."
During the three months ended March 31, 2000, rental and service
revenues from "Same Residences", the twenty-two communities that the Company
operated at the beginning of both periods, comprised of seven stabilized and
fifteen newly developed communities, increased by $3.1 million over the three
months ended March 31, 1999. Of this increase, $0.4 million was from the seven
stabilized communities and $2.7 million was from the fifteen newly developed
communities. Revenues from the remaining two newly developed communities in
operation during the first quarter of 2000 increased by $0.4 million compared to
revenue from the remaining one newly developed community in operation during the
first quarter of 1999. Overall average occupancy at the Company's seven
stabilized communities was 96.3 percent for the three month period ended March
31, 2000, whereas occupancy was 95.2 percent at the Company's five stabilized
communities for the same period in 1999.
Residence Operating Expenses. Residence operating expenses were $10.3
million for the three month period ended March 31, 2000, and $8.6 million for
the same period in 1999, an increase of $1.7 million or 20.5 percent. Residence
operating expenses from the twenty-two Same Residences increased by $1.6 million
over the first quarter of 1999. Of this increase, $0.3 million was from the
seven stabilized communities and $1.6 million was from the fifteen newly
developed communities. Residence operating expenses for all other newly
developed communities for the three month period ended March 31, 2000 include
$0.4 million of start-up operating expenses and pre-opening costs, whereas such
expenses totaled $0.2 million in 1999. Residence operating expenses from Same
Residences totaled 66.7 percent and 70.6 percent of rental and service revenue
for the three month periods ended March 31, 2000 and 1999, respectively.
General and Administrative Expenses. General and administrative
expenses were $1.5 million for the three month period ended March 31, 2000,
compared to $1.3 million
Page 13
<PAGE>
for the three month period ended March 31, 1999. The increase of $0.2 million is
due primarily to the increase in operations related to the implementation of the
Company's plan for growth.
Lease Expense. Lease expense for the Company's leased communities was
$3.4 million for the three month period ended March 31, 2000, compared to $3.2
million for the same period in 1999. The increase of $0.2 million relates
primarily to the opening and sale-leaseback of three newly developed communities
offset by the acquisition of a previously leased community.
Depreciation and Amortization. Depreciation and amortization expense
was $0.4 million for the three month period ended March 31, 2000, compared to
$0.3 million for the three month period ended March 31, 1999.
Interest Income. Interest income is earned from the Company's
investment of cash and cash equivalents in high quality, short-term securities
placed with institutions with high credit ratings.
Interest Expense. Interest expense increased for the three month period
ended March 31, 2000, to $0.9 million from $0.5 million for the three month
period ended March 31, 1999. Interest expense related to the operation of
communities increased $0.1 million in the current period as compared to the same
period in the prior year. The Company capitalized a nominal amount of interest
charges during the three months ended March 31, 2000, whereas the Company
capitalized $0.3 million of interest charges during the three months ended March
31, 1999.
Equity in Losses of Joint Ventures. Equity in losses of joint ventures
resulted from the operations of the Company's 50 percent owned Kenmore,
Washington community; the 10 percent owned Kent, Washington community; and the
40 percent owned Corvallis, Oregon community.
Net Income (Loss). Net operating results increased by $1.1 million
during the three month period ended March 31, 2000, compared to the same period
in 1999. The Company reported a loss of $0.9 million for the first quarter of
2000, whereas the Company reported a loss of $2.0 million for the first quarter
of 1999. The increase in net results is primarily due to an increase in
residence operating profits (rental and service revenue less residence operating
expenses) of $1.7 million, offset by increases in general and administrative
expenses, lease expense, depreciation, interest expense and equity in losses of
joint venture, all as discussed above.
Page 14
<PAGE>
Liquidity and Capital Resources
At March 31, 2000, the Company had $0.5 million of working capital,
compared to working capital of $1.4 million at December 31, 1999. The decrease
relates primarily to a decrease in cash and cash equivalents of $0.8 million (as
described below).
Net cash used in operating activities totaled $0.6 million for the
three month period ended March 31, 2000, resulting primarily from a net loss of
$0.9 million, adjusted $0.3 million for non-cash items (depreciation,
amortization, equity interest in joint ventures and minority interests) offset
by the release of $0.2 million of cash held in working capital escrow, and an
increase in net current assets of $0.2 million.
Net cash used in investing activities totaled $1.1 million for the
three month period ended March 31, 2000, consisting primarily of development and
construction costs.
Net cash provided by financing activities totaled $0.9 million during
the three month period ended March 31, 2000, consisting of property and
equipment financing proceeds totaling $1.1 million, and proceeds of $0.1 million
from a sale-manageback arrangement with the Company's Chairman and Chief
Executive Officer, offset by repayment of long-term debt of $0.1 million and an
increase in restricted cash for financing arrangements of $0.2 million.
During January 2000, the Company obtained an $8.8 million loan, the
proceeds of which will be used to construct and fund initial operations at the
Company's 113-bed South Ogden, Utah community. As of March 31, 2000, the Company
has drawn down approximately $900,000 on this loan.
Also during January 2000, the Company entered into a joint venture
arrangement with an independent third party for the purpose of developing a
116-bed assisted living community in Salt Lake City, Utah. The Company's initial
capital contribution for its 50 percent joint venture interest totaled $1.1
million, comprised of $600,000 of incurred development costs and a $500,000
development fee. The joint venture partner contributed $1.1 million in cash,
which was utilized to acquire the land for the project.
During the remainder of 2000, the Company intends to utilize current
working capital resources primarily for operating requirements. At March 31,
2000, the Company has capitalized costs totaling approximately $6.8 million
related to communities under construction or development, encumbered by $2.7
million in outstanding debt. The Company intends to finance substantially all of
the remaining cost of developing each new community through joint venture
arrangements, as well as conventional financing with commercial banks and other
financial institutions.
In addition to the Company's Corvallis community that commenced
operations in March 2000, the Company anticipates completing construction of the
Mesa community in 2000. The Company has entered into a sale-leaseback
arrangement with a REIT for this community and anticipates operations will
commence during the third quarter of 2000. The Company has two additional
communities under construction that are anticipated to commence operations in
2001. The Company has obtained financing necessary to
Page 15
<PAGE>
complete these communities. Additionally, the Company has entered into a
long-term lease for the West Covina assisted living community being constructed
by an unrelated third party and expects to commence operation of this community
during the fourth quarter of 2000.
The Company anticipates capital expenditures for 2000 will include
additional architectural fees and other development costs related to at least
four assisted living communities and construction costs related to at least
three new assisted living communities. During 2000, the Company anticipates
commencing construction on the four communities currently under development. The
total cost to develop and construct these four communities, including the
estimated initial operating deficits, will likely be between $31.0 million to
$35.0 million. A substantial portion of these costs may be incurred during 2000.
The Company is currently discussing with commercial banks and other
financing sources the terms of potential financing with which the Company will
construct new communities currently under development. Each of the pending
financing transactions is subject to a number of conditions, including the
negotiation and execution of definitive documents and the satisfactory
completion of due diligence on the related properties, and there is no assurance
that any of these financing transactions will be completed on the terms
proposed, or at all. Provided that the Company can obtain financing upon
acceptable terms, the Company estimates that it has the necessary equity capital
invested in one of these four communities in order to complete construction and
to fund the initial operating deficits. Additional equity capital will be
required prior to commencing construction on the remaining three communities.
To finance additional growth, the Company may enter into additional
arrangements with one or more unrelated parties regarding the joint development
and ownership of one or more of the Company's communities currently under
construction or development. Furthermore, the Company may utilize various forms
of financing that would permit a community to be sold to or initially developed
by a third party who would incur the initial operating deficits and permit the
Company to manage the community for a customary fee. The Company, under such
financing methods, would likely have the option to either purchase the community
or enter into a long-term lease at such time as the Company deems appropriate.
The Company has not obtained any commitments for this form of financing.
If the Company is unable to obtain additional required financing, or if
such financing is not available on acceptable terms, the Company expects that
its plan to commence construction of up to four additional communities by the
end of 2000 would likely be delayed or curtailed. Furthermore, if the Company
expands its growth plan, development activities do not result in the
construction of a community on a site, the Company experiences a decline in the
operations of its current communities or the Company does not achieve and
sustain anticipated occupancy levels at its new
Page 16
<PAGE>
communities, then the Company may require additional financing to complete its
growth plan.
Certain operating lease agreements contain restrictive covenants. As of
March 31, 2000, the Company was in compliance with the covenants of all lease
agreements except for two covenants relating to the Company's Willow Creek
assisted living community in Folsom, California and Regent Court community in
Scottsdale, Arizona. The Company believes the ultimate resolution of this matter
will not have a material adverse impact on the Company's financial position,
results of operations, or cash flows.
The Company does not presently intend to pay dividends to holders of
its Common Stock and intends to retain future earnings to finance the
development of assisted living communities and expand its business.
Forward-Looking Statements
The information set forth in this report in the sections entitled
"Overview" and "Liquidity and Capital Resources" regarding the Company's
acquisition of sites for development, the Company's development, construction,
financing and opening of new assisted living communities, and the Company's
plans to develop, construct and operate new communities constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and is subject to the safe harbor created by that section. The
development of additional assisted living communities will involve a number of
risks including, without limitation, the risk that the Company will be unable to
locate suitable sites, risks relating to the inability to obtain, or delays in
obtaining, necessary zoning, land use, building, occupancy and other required
governmental permits and authorizations, risks that financing may not be
available on satisfactory terms, environmental risks, risks that construction
costs may exceed original estimates, risks that construction and lease-up may
not be completed on schedule, and risks relating to the competitive environment
for development. The foregoing risks could cause the Company to significantly
delay or curtail its planned growth and could cause one or more of the Company's
new communities to not be profitable. Additional factors that could cause
results to differ materially from those projected in the forward-looking
statements include, without limitation, the ability of the Company to raise
additional financing upon terms acceptable to the Company, increases in the
costs associated with new construction, competition, and acceptance of the
Company's prototype community in new geographic markets. The Company's growth
strategy is subject to the risk that occupancy rates at newly-developed
communities may not be achieved or sustained at expected levels, in which case,
the Company will experience greater than anticipated operating losses in
connection with the opening of new communities and the Company's need for
additional financing to meet its growth plans will likely increase. Furthermore,
the Company's growth will place increasing pressure on the Company's management
controls and require the Company to locate, train, assimilate, and retain
additional community managers and support staff. There is no assurance that the
Company will be able to manage this growth successfully.
Page 17
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's earnings are affected by changes in interest rates as a
result of its variable rate indebtedness. The Company manages this risk by
obtaining fixed rate borrowings when possible. At March 31, 2000, the Company's
variable rate borrowings totaled $11.8 million. If market interest rates average
one percent more in 2000 than in 1999, the Company's interest expense would
increase and income before taxes would decrease by $118,000. These amounts are
determined by considering the impact of hypothetical interest rate on the
Company's outstanding variable rate borrowings as of March 31, 2000, and does
not consider changes in the actual level of borrowings which may occur
subsequent to March 31, 2000. This analysis also does not consider the effects
of the reduced level of overall economic activity that could exist in such an
environment nor does it consider likely actions that management could take with
respect to the Company's financial structure to mitigate the exposure to such a
change.
Page 18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
A discussion of the Company's material legal proceeding appears in Item
3 of the Company's Annual Report on Form 10-K filed for the year ended December
31, 1999.
Item 3. Defaults Upon Senior Securities
The Company elected to not pay the quarterly six percent dividend with
respect to its preferred stock. The $150,000 dividend was due and payable March
31, 2000. For each quarter year the dividend is not paid, the dividend increases
by one percent to a maximum rate of 12 percent or a specific prime rate plus 300
basis points.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
27 Financial Data Schedule.
Reports on Form 8-K
There were no reports on Form 8-K for the period ended March 31, 2000
19
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGENT ASSISTED LIVING, INC.
By:/s/Steven L. Gish Date: May 15, 2000
-------------------------
Steven L. Gish
Chief Financial Officer
20
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF REGENT ASSISTED LIVING, INC. AS OF MARCH
31, 2000, AND THE RELATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS IN THE
PERIOD ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
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<RECEIVABLES> 794,211
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<SALES> 15,321,394
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