SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 9, 1996
INTEGRATED LIVING COMMUNITIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-21263 52-1967027
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
24850 Old 41 Road, Suite 10, Bonita Springs, FL 34135
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 947-7200
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Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 9, 1996, Integrated Living Communities, Inc. (the
"Company"), through a wholly-owned subsidiary, purchased all the assets used in,
and assumed certain liabilities related to, the operation of the Terrace Gardens
Continuous Care Retirement Center ("Terrace Gardens"), a 258 unit/342 bed
assisted living and senior housing facility located in Wichita, Kansas which
also includes a 100 bed nursing facility. The Company used a portion of the
proceeds from its initial public offering of Common Stock, which was completed
on October 9, 1996, to pay the $12.2 million purchase price. The assets were
purchased from Herbert L. Krumsick, Jon Kardatzke, Louis Weiss, Chester West,
Ross G. Tidemann, Nestor R. Weigand, Jr. and Terrace Gardens, L.P.
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<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
1. The balance sheets of Terrace Gardens as of December 31, 1994 and
1995 and the related statements of operations, changes in owners'
deficit and cash flows for the years ended December 31, 1993, 1994
and 1995, and the notes thereto, audited by KPMG Peat Marwick LLP,
independent accountants, are incorporated herein by reference from
the Company's Registration Statement on Form S-1 (No. 333-05877).
2. The unaudited balance sheet of Terrace Gardens as of June 30, 1996
and the related unaudited statements of operations and cash flows for
the six months ended June 30, 1995 and 1996 are included herein.
(b) Pro forma financial information.
1. The unaudited pro forma consolidated balance sheet of Integrated
Living Communities, Inc. as of June 30, 1996, giving effect to the
acquisition of the Terrace Gardens facility as if such transaction
occurred on June 30, 1996.
2. The unaudited pro forma consolidated statement of operations of
Integrated Living Communities, Inc. for the fiscal year ended
December 31, 1995, giving effect to the acquisition of the Terrace
Gardens facility, as if such acquisition occurred on the first day of
the fiscal year.
3. The unaudited pro forma consolidated statement of operations of
Integrated Living Communities, Inc. for the six months ended June 30,
1996, giving effect to the acquisition of the Terrace Gardens
facility as if such acquisition was consummated on January 1, 1995.
(c) Exhibits.
2. Asset Purchase Agreement, made as of the _____ day __________,
1996, by and among Integrated Living Communities, Inc., Herbert L.
Krumsick, Jon Kardatzke, Louis Weiss, Chester West, Ross G. Tidemann,
Nestor R. Weigand, Jr., and Terrace Gardens, L.P. (previously filed
with the Commission as Exhibit 2.1 to, and incorporated herein by
reference from, the Company's Registration Statement on Form S-1 (No.
333-05877)).
23. Consent of KPMG Peat Marwick LLP.
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<PAGE>
Terrace Gardens Tenants in Common
(D/B/A Terrace Gardens Healthcare and Retirement Center)
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1996
----------------- -------------
(unaudited)
Assets
<S> <C> <C>
Cash ...................................... $ 319 $ 457
Accounts receivable ....................... 449 387
Other current assets ...................... 52 79
------- -------
Total Current Assets ..................... 820 923
Property, plant and equipment ............. 8,045 7,895
Other long term assets .................... 139 133
------- -------
Total Assets ........................... $ 9,004 $ 8,951
======= =======
Liabilities and Partners' Equity
Current liabilities ........................ $ 999 $ 1,211
Long term debt ............................. 8,093 7,927
------- -------
Total Liabilities ......................... 9,092 9,138
Owner's deficit ............................ (88) (187)
------- -------
Total Liabilities and Equity ............ $ 9,004 $ 8,951
======= =======
</TABLE>
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<PAGE>
Terrace Gardens Tenants in Common
(D/B/A Terrace Gardens Healthcare and Retirement Center)
Statements of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
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1995 1996
---- ----
(unaudited)
<S> <C> <C>
Monthly service fees........................ $ 2,853 $ 2,467
Other revenues.............................. 134 157
-------- --------
Total Revenues............................. 2,987 2,624
Operating expenses.......................... 2,066 1,966
Administrative.............................. 251 245
Interest.................................... 380 339
Depreciation and amortization............... 173 173
-------- --------
Total Expenses............................. 2,870 2,723
--------- ---------
Net Earnings............................ $ 117 $ (99)
========= =========
</TABLE>
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<PAGE>
Terrace Gardens Tenants in Common
(D/B/A Terrace Gardens Healthcare and Retirement Center)
Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
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1995 1996
---- ----
(unaudited)
<S> <C> <C>
Net cash provided by operations............. $ 281 $ 333
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Payments of long term debt.................. (140) (157)
Distributions to tenants.................... (130) (15)
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Net cash used in financing................. (270) (172)
Purchase of property, plant and equipment... (5) (23)
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Net cash used in investing................. (5) (23)
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Increase (decrease) in cash................. 6 138
Cash, beginning of period................... 205 319
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Cash, end of period......................... $ 211 $ 457
========= =========
</TABLE>
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<PAGE>
Note Basis of Presentation
The accompanying unaudited condensed financial statements of Terrace
Gardens Tenants in Common (d/b/a Terrace Gardens Healthcare and Retirement
Center) ("Terrace Gardens") have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1996. For
further information, refer to the financial statements and footnotes thereto of
Terrace Gardens included in the Registration Statement on Form S-1 of Integrated
Living Communities, Inc. (No. 333-05877). The balance sheet at December 31, 1995
has been derived from the audited financial statements at that date.
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated financial statements
have been prepared based on (i) the audited consolidated financial statements of
the Company for the year ended December 31, 1995, (ii) the unaudited
consolidated financial statements of the Company as of and for the six months
ended June 30, 1996, (iii) the audited financial statements of Terrace Gardens
Tenants in Common, d/b/a Terrace Gardens Health Care and Retirement Center
("Terrace Gardens") for the year ended December 31, 1995 and (iv) the unaudited
financial statements of Terrace Gardens as of and for the six months ended June
30, 1996.
The pro forma consolidated balance sheet as of June 30, 1996 was
prepared as if the acquisition of the Terrace Gardens facility had been
consummated as of June 30, 1996. The pro forma consolidated statements of
operations for the year ended December 31, 1995 and the six months ended June
30, 1996 were prepared as if the acquisition of the Terrace Gardens facility had
been consummated on January 1, 1995. The pro forma financial statements were
prepared as if the Company had issued 1,639,785 shares of Common Stock,
representing the number of shares required to be sold by the Company at the
initial public offering price of $8.00 per share (net of underwriting discounts)
in order for the Company to pay the purchase price for the Terrace Gardens
facility. The Company used the proceeds from its initial public offering to pay
the purchase price for Terrace Gardens.
The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The unaudited pro
forma combined financial information set forth below is not necessarily
indicative of the Company's combined financial position or the results of
operations that actually would have occurred if the transaction had been
consummated on the dates shown. In addition, they are not intended to be a
projection of results of operations that may be obtained in the Company's
future. The unaudited pro forma consolidated financial information should be
read in conjunction with the financial statements and related notes thereto
included elsewhere or incorporated by reference in this Report.
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<PAGE>
INTEGRATED LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
ILC Terrace Gardens
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Adjust- Pro forma
Actual Actual ments(a) consolidated
------ ------ -------- ------------
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents.................... $ 120 $ 457 $ (457) $ 120
Accounts receivable.......................... 355 387 (387) 355
Prepaid expenses and other current assets.... 407 79 (79) 407
------ ----- ------- ------
Total current assets........................ 882 923 (923) 882
------ ------ -------- ------
Assets limited as to use..................... 705 --- 705
Property, plant and equipment, net........... 50,626 7,895 4,385 62,906
Other assets................................. 3,252 133 (133) 3,252
------ ------ -------- --------
$55,465 $8,951 $3,329 $67,745
======= ====== ======= =======
Liabilities and Stockholder's Equity
Accounts payable............................. $ 828 $ 176 $ (176) $ 828
Accrued expenses............................. 1,309 711 (631) 1,389
Current portion of long-term debt............ --- 324 (324) ---
------ ------ -------- ------
Total current liabilities................... 2,137 1,211 (1,131) 2,217
------- ------- --------- -------
Note payable to parent company............... 3,363 --- 3,363
Refundable deposits.......................... 5,398 --- 5,398
Deferred income taxes........................ 324 --- 324
Unearned entrance fees....................... 3,912 --- 3,912
Long-term debt less current portion.......... --- 7,927 (7,927) ---
------ ------- --------- -------
Total liabilities........................... 15,134 9,138 (9,058) 15,214
------ ------- --------- -------
Stockholder's equity
Common stock, $.01 par value. Authorized
100,000,000 shares; 3,897,900 shares issued
and outstanding actual and 5,537,685 shares
issued and outstanding pro forma............ 39 --- 16 55
Additional paid-in capital................. 42,359 --- 12,184 54,543
Retained earnings (deficit)................ (2,067) (187) 187 (2,067)
------- -------- ------ --------
Net stockholder's equity................... 40,331 (187) 12,387 52,531
------- -------- ------ --------
$55,465 $8,951 $3,329 $67,745
======= ====== ====== =======
</TABLE>
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<PAGE>
INTEGRATED LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ILC Terrace Gardens
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Pro Forma
Actual Actual Adjustments Consolidated
------ ------ ----------- ------------
Revenues:
<S> <C> <C> <C> <C>
Monthly service and entrance fees............ $15,123 $5,642 $20,765
Management services and other................ 1,146 301 1,447
------- ------ ------
Total revenues............................. 16,269 5,943 22,212
------- ------ ------
Expenses:
Facility operations.......................... 11,243 4,068 15,311
Facility rents............................... 2,430 --- 2,430
Corporate administrative and general......... 1,005 546 1,551
Depreciation and amortization................ 415 345 $(47)(b) 713
Loss on impairment
of long-lived assets....................... 5,126 -- 5,126
Interest..................................... --- 739 (739)(b) ---
------ ------ ------- -----
Total expenses............................. 20,219 5,698 (786) 25,131
------ ----- ------- ------
Earnings (loss) before income taxes
and minority interest.......................... (3,950) 245 786 (2,919)
Minority interest................................ 37 --- --- 37
----- ----- ---- -----
Earnings (loss) before income taxes.............. (3,987) $ 245 $ 786 (2,956)
======= ======= ========
Federal and state income taxes.............. (643) (246)(c)
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Net loss......................................... $(3,344) $ (2,710)
======== =========
Net earnings per common share.................... $ (.86) $ (.49)
======== ========
Weighted average shares outstanding.............. 3,898 5,538
======= ========
</TABLE>
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<PAGE>
INTEGRATED LIVING COMMUNITIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ILC Terrace Gardens
--- ---------------
Pro forma
Actual Actual Adjustments Consolidated
------ ------ ----------- ------------
Revenues:
<S> <C> <C> <C> <C>
Monthly service and entrance fees............ $10,568 $2,467 $13,035
Management services and other................ 727 157 884
------ ------ -------
Total revenues............................. 11,295 2,624 13,919
------ ----- ------
Expenses:
Facility operations.......................... 7,138 1,966 9,104
Facility rents............................... 1,309 --- 1,309
Corporate administrative and general......... 678 245 923
Depreciation and amortization................ 480 173 $(24)(b) 629
Interest..................................... --- 339 (339)(b) ---
------ ----- -------- ------
Total expenses............................. 9,605 2,723 (363) 11,965
------ ----- ------- --------
Earnings (loss) before income taxes............. 1,690 $ (99) $ 363 1,954
======= ======
Federal and state income taxes.................. 651 752 (c)
------ -------
Net earnings.................................... $ 1,039 $ 1,202
======== ========
Net earnings per common share................... $ .27 $ .22
======== =======
Weighted average shares outstanding............. 3,898 5,538
======== =======
</TABLE>
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<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Adjustments
(a) To reflect the purchase price of, and estimated transaction costs related
to, the acquisition of the Terrace Gardens facility and the issuance of
1,639,785 shares of Common Stock, representing the number of shares sold
by the Company at the initial public offering price of $8.00 per share
(net of underwriting discounts) in order for the Company to pay the
purchase price for the Terrace Gardens facility, and to eliminate the
assets and liabilities retained by the seller.
(b) To reflect the impact of the Company's new basis in the assets of Terrace
Gardens and the elimination of amortization of deferred financing fees and
interest expense on debt not assumed. The Company assumed a 40 year life
for building and improvements and a 10 year life for equipment.
(c) To adjust consolidated income tax expense for the effect of the adjustment
above.
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<PAGE>
SIGNATURES
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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.
Date: October 23, 1996
INTEGRATED LIVING COMMUNITIES, INC.
By: /s/ John B. Poole
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John B. Poole
Senior Vice President--Chief Financial
Officer
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The Board of Directors and Stockholders
Intergrated Living Communities, Inc.:
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Current Report on Form 8-K
dated October 9, 1996 of Integrated Living Communities, Inc. of our report dated
June 5, 1996, relating to the financial statements of Terrace Gardens Tenants in
Common (d/b/a Terrace Gardens Healthcare and Retirement Center) as of December
31, 1994 and 1995, and for each of the three years in the period ended December
31, 1995, which report is included in the Registration Statement on Form S-1 of
Integrated Living Communities, Inc. (No. 333-05877).
KPMG Peat Marwick LLP
Baltimore, Maryland
October 22, 1996