SUNRISE ASSISTED LIVING INC
8-K, 2000-10-13
NURSING & PERSONAL CARE FACILITIES
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 30, 2000

SUNRISE ASSISTED LIVING, INC.
(Exact name of registrant as specified in its charter)

         
Delaware 0-20765 54-1746596
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation of organization) File Number) Identification No.)

7902 Westpark Drive
McLean, Virginia 22102
(Address of principal executive offices) (Zip Code)

(703) 273-7500
(Registrant’s telephone number, including area code)



 

Item 2. Acquisition or Disposition of Assets.

      On September 30, 2000, Sunrise Assisted Living, Inc. completed the previously announced sale of 11 assisted living communities to Metropolitan Senior Housing, LLC, a real estate venture company formed by AEW Capital Management, on behalf of a public pension fund client, and Sunrise. AEW Capital Management has a 75% ownership interest in Metropolitan Senior Housing, LLC and Sunrise has a 25% ownership interest in Metropolitan Senior Housing, LLC. Metropolitan Senior Housing, LLC closed on the remaining eight properties for an aggregate purchase price of $111 million. The eight properties have a total resident capacity of 684 and are located in seven states. Metropolitan assumed approximately $75 million of debt secured by the eight properties. On June 29, 2000, Sunrise closed on the first three properties for an aggregate purchase price of $44 million.

      The Sunrise Management Services Division will continue to operate the communities under long-term operating agreements. Sunrise will use the net proceeds from the transaction for general corporate purposes, which may include debt reduction, continuance of the company’s repurchase program and future development needs.

Metropolitan also has an option to purchase three additional Sunrise properties located in New York, Illinois and California on or before June 30, 2001.

Item 7. Financial Statements and Exhibits.

(a)   Financial statements of businesses acquired
 
Not applicable
 
(b)   Pro Forma Financial Information

         
Unaudited Pro Forma Consolidated Financial Information of
   Sunrise Assisted Living, Inc. 4
Unaudited Pro Forma Consolidated Balance Sheet at
   June 30, 2000 5
Unaudited Pro Forma Consolidated Statement of Income
   for the Six Months Ended June 30, 2000 6
Unaudited Pro Forma Consolidated Statement of Income
   for the Year Ended December 31, 1999 7
Notes to Unaudited Pro Forma Consolidated Financial
   Information 8

(c)   Exhibits

        2.1   Limited Liability Company Agreement of Metropolitan Senior Housing, LLC, a Delaware Limited Liability Company, dated as of June 29, 2000 (Exhibit 10.1 to Sunrise’s Form 10-Q for the quarter ended June 30, 2000).

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  2.2   Purchase and Sale Agreement dated as of June 29, 2000, by and between certain Sunrise affiliates and Metropolitan Senior Housing, LLC for the sale of three (3) properties (Exhibit 10.2 to Sunrise’s Form 10-Q for the quarter ended June 30, 2000).
 
  2.3   Purchase and Sale Agreement dated as of June 29, 2000, by and between certain Sunrise affiliates and Metropolitan Senior Housing, LLC for the sale of eight (8) properties (Exhibit 10.3 to Sunrise’s Form 10-Q for the quarter ended June 30, 2000).

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SUNRISE ASSISTED LIVING, INC.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

      The following statements set forth the unaudited pro forma financial information of Sunrise Assisted Living, Inc. giving effect to the sale of the 11 properties to Metropolitan Senior Housing, LLC for cash and assumption by the purchaser of certain outstanding debt. The unaudited pro forma consolidated balance sheet gives effect to the sale of the eight properties sold on September 30, 2000 as if it had been consummated on June 30, 2000. The sale of the first three properties occurred on June 29, 2000 and is already reflected in the June 30, 2000 unaudited consolidated balance sheet included in Sunrise’s Form 10-Q for the quarter ended June 30, 2000. The unaudited pro forma consolidated income statements for the six months ended June 30, 2000 and the year ended December 31, 1999 give effect to the sale as if it had occurred as of the beginning of each period presented. The unaudited pro forma consolidated statements do not purport to be indicative of the financial position or results of operations for future periods or indicative of the results that actually would have been realized had the sale taken place at June 30, 2000 or during the periods covered by the income statements. The pro forma adjustments are based on available information and adjustments that management believes are reasonable. The unaudited pro forma consolidated financial statements should be read in conjunction with Sunrise’s audited consolidated financial statements for the year ended December 31, 1999 (included in Form 10-K for the year ended December 31, 1999) and its unaudited consolidated financial statements for the period ended June 30, 2000 (included in Form 10-Q for the six months ended June 30, 2000) and the accompanying notes.

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SUNRISE ASSISTED LIVING, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(dollars in thousands)

                             
Pro Forma
Historical Adjustments Pro Forma
ASSETS
Current Assets:
Cash and cash equivalents $ 40,725 $ 26,938   A $ 67,663
Accounts receivable, net 18,081 18,081
Notes receivable 3,229 3,229
Deferred income taxes 2,470 2,470
Assets held for sale 34,356 34,356
Prepaid expenses and other current assets 53,191 — 53,191
Total current assets 152,052 26,938 178,990
Property and equipment, net 817,552 (72,957 ) B 744,595
Notes receivable 63,530 63,530
Management contracts and leaseholds, net 24,713 24,713
Costs in excess of assets acquired, net 35,162 35,162
Investments in unconsolidated assisted living facilities, net 26,409 54   C 26,463
Investments 5,750 5,750
Other assets 25,908 (2,042 ) C 23,866
Total assets $ 1,151,076 $ (48,007 ) $ 1,103,069
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 4,082 $ — $ 4,082
Accrued expenses and other current liabilities 23,928 23,928
Deferred revenue 7,524 26,778   D 34,302
Current maturities of long-term debt 117,493 (903 ) E 116,590
Total current liabilities 153,027 25,875 178,902
Long-term debt, less current maturities 625,235 (73,882 ) E 551,353
Investments in unconsolidated assisted living facilities 3,180 3,180
Deferred income taxes 22,128 22,128
Other long-term liabilities 3,698 — 3,698
Total liabilities 807,268 (48,007 ) 759,261
Minority interests 3,841 3,841
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding — —
Common stock, $0.01 par value, 60,000,000 shares authorized, 21,654,577 and 21,938,742 shares issued and outstanding in 2000 and 1999 217 217
Additional paid-in capital 299,864 299,864
Retained earnings 39,886 — 39,886
Total stockholders’ equity 339,967 — 339,967
Total liabilities and stockholders’ equity $ 1,151,076 $ (48,007 ) $ 1,103,069

See accompanying notes to unaudited pro forma consolidated financial information.

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SUNRISE ASSISTED LIVING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(in thousands, except per share data)

                                     
Pro Forma
Historical Adjustments Pro Forma
Operating revenue:
Resident fees $ 133,552 $ (20,039 ) F $ 113,513
Management and contract services 12,824 1,202   G 14,026
Income from property sales 12,755 15,475   H 28,230
Total operating revenue 159,131 (3,362 ) 155,769
Operating expenses:
Facility operating 82,163 (12,298 ) F 69,865
Management and contract services 4,384 4,384
Facility development and pre-rental 3,209 3,209
General and administrative 13,632 13,632
Depreciation and amortization 15,986 (1,703 ) F 14,283
Facility lease 5,435 — 5,435
Total operating expenses 124,809 (14,001 ) 110,808
Income from operations 34,322 10,639 44,961
Interest income (expense):
Interest income 6,229 6,229
Interest expense (24,049 ) 3,017   F (21,032 )
Total interest expense (17,820 ) 3,017 (14,803 )
Equity in losses of unconsolidated assisted living facilities (1,590 ) 277   J (1,313 )
Minority interests (165 ) — (165 )
Income before income taxes 14,747 13,933 28,680
Provision for income taxes (5,752 ) (5,434 ) K (11,186 )
Net income $ 8,995 $ 8,499 $ 17,494
 
Net income per common share — Basic $ 0.41 $ 0.80
Weighted average common shares outstanding 21,819 21,819
Net income per common share — Diluted $ 0.41 $ 0.79
Weighted average common shares outstanding 22,026 22,026

See accompanying notes to unaudited pro forma consolidated financial information.

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SUNRISE ASSISTED LIVING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share data)

                             
Pro Forma
Historical Adjustments Pro Forma
Operating revenue:
Resident fees $ 217,397 $ (36,833 ) F $ 180,564
Management and contract services 30,805 2,209   G 33,014
Income from property sales 7,017 40,050   I 47,067
Total operating revenue 255,219 5,426 260,645
Operating expenses:
Facility operating 131,055 (22,464 ) F 108,591
Management and contract services 6,439 6,439
Facility development and pre-rental 7,184 (3 ) F 7,181
General and administrative 20,715 20,715
Depreciation and amortization 25,448 (6,085 ) F 19,363
Facility lease 7,903 7,903
Non-recurring charge 5,069 — 5,069
Total operating expenses 203,813 (28,552 ) 175,261
Income from operations 51,406 33,978 85,384
Interest income (expense):
Interest income 10,849 10,849
Interest expense (32,599 ) 1,811   F (30,788 )
Total interest expense (21,750 ) 1,811 (19,939 )
Equity in losses of unconsolidated assisted living facilities (1,239 ) 767   J (472 )
Minority interests (376 ) — (376 )
Income before income taxes 28,041 36,556 64,597
Provision for income taxes (7,828 ) (10,236 ) K (18,064 )
Net income $ 20,213 $ 26,320 $ 46,533
 
Net income per common share —Basic $ 0.96 $ 2.21
Weighted average common shares outstanding 21,045 21,045
Net income per common share —Diluted $ 0.94 $ 2.16
Weighted average common shares outstanding 21,589 21,589

      See accompanying notes to unaudited pro forma consolidated financial information.

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SUNRISE ASSISTED LIVING, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

     
A. Reflects the estimated net cash proceeds to Sunrise from the sale of the
remaining eight properties.
B. Reflects the net property, plant and equipment of the remaining eight
properties sold.
C. Reflects the deferred financing costs associated with the debt assumed of
$2.0 million and the investment in joint venture of $0.05 million.
D. Reflects the estimated total amount of gain on the sale of the remaining
eight properties as if the transaction was consummated on June 30, 2000.
E. Reflects the debt outstanding on the remaining eight properties that is
assumed upon the sale of the eight properties.
F. Reflects the elimination of the consolidated operating results of the
eleven properties sold.
G. Reflects the recording of a management fee equal to approximately 7% of
operating revenues as described in the operating agreements, as Sunrise
will manage the eleven properties after the sale.
H. Reflects the recognition of an additional quarter of the deferred revenue
from the sale of the original three properties and approximately one-half
of the gain associated with the sale of the remaining eight properties,
assuming all necessary contingencies have been met or waived. The actual
gain will differ from this amount due to the transaction actually
occurring on September 30, 2000.
I. Reflects the recognition of all of the gain associated with the sale of
the eleven properties, assuming all necessary contingencies have been met
or waived.
J. Sunrise retains a 25% ownership interest in the joint venture that
purchased the properties. Reflects the 25% equity in earnings of the
properties.
K. Reflects the income tax effects of eliminating the consolidated operating
results, including the management fee, equity in earnings, the gain
recognition at a 39% income tax rate for the six-months ended June 30,
2000 and the gain recognition at a 28% income tax rate for the
twelve-months ended December 31, 1999.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

     
SUNRISE ASSISTED LIVING, INC.
(Registrant)
 
Date: October 13, 2000 By: /s/ Larry E. Hulse
Larry E. Hulse
Chief Financial Officer
 
Date: October 13, 2000 By: /s/ Carl G. Adams
Carl G. Adams
Chief Accounting Officer

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INDEX TO EXHIBITS

             
Exhibit No. Exhibit Name Page No.
2.1 Limited Liability Company Agreement of
Metropolitan Senior Housing, LLC, a Delaware
Limited Liability Company, dated as of June 29,
2000 (Exhibit 10.1 to Sunrise’s Form 10-Q for
the quarter ended June 30, 2000).
 
2.2 Purchase and Sale Agreement dated as of June 29,
2000, by and between certain Sunrise affiliates
and Metropolitan Senior Housing, LLC for the
sale of three (3) properties (Exhibit 10.2 to
Sunrise’s Form 10-Q for the quarter ended June
30, 2000).
 
2.3 Purchase and Sale Agreement dated as of June 29,
2000, by and between certain Sunrise affiliates
and Metropolitan Senior Housing, LLC for the
sale of eight (8) properties (Exhibit 10.3 to
Sunrise’s Form 10-Q for the quarter ended June
30, 2000).

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