<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
( ) Transition report pursuant to Section 13 or 15(d) of the
----- Securities Exchange Act of 1934
For the transition period from _________ to ___________
Commission file number 01-13031
AMERICAN RETIREMENT CORPORATION
-------------------------------
(Exact name of Registrant as specified in its charter)
Tennessee 62-1674303
--------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
111 Westwood Place, Suite 402, Brentwood, TN 37027
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(615) 221-2250
-------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required 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 the
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 November 13, 1997 there were 11,406,250 shares of the Registrant's common
stock, $.01 par value, outstanding.
<PAGE> 2
This Form 10-Q/A is being filed to include an adjustment to reduce by $7.7
million the deferred income tax expense for the second quarter of 1997 and the
related deferred tax liability. The adjustment reflects additional tax basis
to the Company related to the gain recognized by the Company's predecessor
partnership upon receipt of the $21.9 million reorganization note issued in
connection with the reorganization of the Company prior to its initial public
offering in May 1997.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page
<S> <C> <C>
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 .........................................3
Condensed Consolidated Statements
of Operations for the Three Months Ended
September 30, 1997 and September 30, 1996.........................................4
Condensed Consolidated Statements
of Operations for the Nine Months Ended
September 30, 1997 and September 30, 1996 ........................................5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 30, 1997
and September 30, 1996 ...........................................................6
Notes to Condensed Consolidated
Financial Statements .............................................................7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations ..................................................................11
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................................21
Item 6. Exhibits and Reports on Form 8-K................................................ 21
Signatures...................................................................... 22
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $133,280 $ 3,222
Assets limited as to use 3,070 1,022
Resident and health care receivables, net 4,071 2,782
Management services receivables 1,185 565
Inventory 421 420
Prepaid expenses 936 340
Deferred income taxes -- 920
-------- --------
Total current assets 142,963 9,271
Assets limited as to use, excluding amounts classified as current 5,022 3,607
Land, buildings and equipment, net 210,975 213,124
Marketable securities 52 52
Other assets 8,631 2,108
-------- --------
Total assets $367,643 $228,162
======== ========
LIABILITIES AND PARTNERS' AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 12,080 $ 8,053
Accounts payable 2,618 2,441
Accrued expenses 8,011 6,239
Redemption payable -- 5,195
Accrued partner distributions -- 1,632
-------- --------
Total current liabilities 22,709 23,560
Tenant deposits 4,474 3,850
Long-term debt, excluding current portion 154,456 162,636
Convertible subordinated debentures 120,000 --
Deferred gain on sale-leaseback transactions 4,186 --
Deferred income taxes 2,654 --
Other long-term liabilities 262 234
-------- --------
Total liabilities 308,741 190,280
Partners' and shareholders' equity:
General and limited partners' interests -- 37,882
Common stock, $.01 par value; 50,000,000 shares authorized
11,406,250 shares issued and outstanding 114 --
Additional paid-in capital 60,213 --
Accumulated deficit (1,425) --
-------- --------
Total partners' and shareholders' equity 58,902 37,882
-------- --------
Total liabilities and partners' and shareholders' equity $367,643 $228,162
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues:
Resident and health care revenue $23,146 $19,639
Management services revenue 497 389
------- -------
Total revenues 23,643 20,028
Expenses:
Community operating expenses 14,708 12,518
Lease expense (net) 653 --
General and administrative 1,971 1,741
Depreciation and amortization 1,685 1,802
------- -------
Total operating expenses 19,017 16,061
------- -------
Income from operations 4,626 3,967
Other income (expense):
Interest expense (3,391) (3,610)
Interest income 421 121
Other 4 (56)
------- -------
Other income (expense), net (2,966) (3,545)
------- -------
Income before income taxes 1,660 422
Income tax expense - current 47 --
Income tax expense - deferred 576 --
------- -------
Net income 1,037 422
Preferred return on special redeemable preferred limited partnership interests -- 195
------- -------
Net income available for distribution to partners and shareholders $ 1,037 $ 227
======= =======
Earnings per share $ 0.09 --
======= =======
Shares used in computing earnings per share data 11,584 9,375
======= =======
Pro forma earnings data:
Income before income taxes, as reported $ 422
Pro forma income tax expense 160
-------
Pro forma income 262
Preferred return on special redeemable preferred
partnership interests 195
-------
Pro forma income available for distribution to partners and shareholders $ 67
=======
Pro forma earnings per common share:
Pro forma income $ 0.03
Preferred return on special redeemable preferred limited partnership interests 0.02
-------
Proforma income available for distribution to partners and shareholders $ 0.01
=======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues:
Resident and health care revenue $66,570 $53,527
Management services revenue 1,462 1,308
------- -------
Total revenues 68,032 54,835
Expenses:
Community operating expenses 42,227 34,245
Lease expense (net) 1,725 --
General and administrative 6,041 4,161
Depreciation and amortization 4,891 4,967
------- -------
Total operating expenses 54,884 43,373
------- -------
Income from operations 13,148 11,462
Other income (expense):
Interest expense (10,002) (8,343)
Interest income 785 253
Other (56) (65)
------- -------
Other income (expense), net (9,273) (8,155)
------- -------
Income before income taxes and extraordinary item 3,875 3,306
Income tax expense - current 139 0
Income tax expense - deferred 3,562 0
------- -------
Income (loss) before extraordinary item 174 3,306
Extraordinary loss or extinguishment of debt -- 2,335
------- -------
Net income (loss) $ 174 $ 971
======= =======
Preferred return on special redeemable preferred limited partnership interests -- 909
------- -------
Net income (loss) available for distribution to partners and shareholders $ 174 $ 62
======= =======
Pro forma earnings data:
Income before income taxes and extraordinary item $ 3,875 $ 3,306
Pro forma income tax expense 1,472 1,256
------- -------
Pro forma income before extraordinary item 2,403 2,050
Preferred return on special redeemable preferred
partnership interests -- 909
------- -------
Pro forma income before extraordinary item available
for distribution to partners and shareholders 2,403 $ 1,141
======= =======
Pro forma earnings per common share:
Pro forma income before extraordinary item $ 0.23 $ 0.22
Preferred return on special redeemable preferred limited partnership interests -- 0.10
------- -------
Pro forma income before extraordinary item available for distribution to
partners and shareholders $ 0.23 $ 0.12
======= =======
Shares used in computing pro forma earnings per share data 10,459 9,375
======= =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 174 $ 971
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization 4,891 4,967
Deferred income taxes 3,562 --
Extinguishment of debt -- 2,335
Amortization of deferred gain (228) --
Increase (decrease), net of acquisitions,
in cash due to changes in:
Receivables (1,909) 396
Inventory (1) (20)
Prepaid expenses (568) (36)
Other assets (359) (13)
Accounts payable 178 (370)
Accrued expenses 1,760 2,583
Tenant deposits 611 78
Other long-term liabilities (47) (69)
-------- --------
Net cash provided by operating activities $ 8,064 $ 10,822
Cash flows from investing activities:
Additions to land, building and equipment (16,370) (5,816)
Acquisition of retirement communities -- (63,184)
Acquisition of assisted living residences (11,524) --
Investments in joint ventures (1,030) --
Proceeds from (purchases of)
assets whose use is limited (4,329) 2,345
Proceeds from the maturity of marketable securities -- 50
Proceeds from the sale of assets 28,789 437
-------- --------
Net cash used by investing activities (4,464) (66,168)
Cash flows from financing activities:
Proceeds from initial public offering, net of expenses 45,221 --
Proceeds from convertible debenture
offering, net of expenses 116,600 --
Repayment of reorganization note (21,875) --
Payment of redeemable preferred interests (5,195) (4,805)
Distributions to partners (4,132) (5,192)
Expenditures for financing costs (32) (341)
Proceeds from the issuance of long-term debt 22,441 70,206
Principal payments on long-term debt (26,570) (3,636)
-------- --------
Net cash provided by financing activities 126,458 56,232
Net increase in cash and cash equivalents 130,058 886
-------- --------
Cash and cash equivalents at beginning of period 3,222 3,825
-------- --------
Cash and cash equivalents at end of period $133,280 $ 4,711
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 9,668 $ 6,944
======== ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
AMERICAN RETIREMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
American Retirement Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. 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. Certain 1996 amounts have been reclassified to conform with the 1997
presentation. Operating results for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1997. These financial
statements should be read in conjunction with the combined and consolidated
financial statements and the notes thereto for the year ended December 31, 1996
included in the Registration Statements on Form S-1 (No. 333-23197 and No.
333-34339), as filed with the Securities and Exchange Commission (collectively
the "Registration Statements") relating to the Company's initial public
offering on May 30, 1997 (the "IPO") and its convertible debt offering
described in Note 4.
Prior to the IPO, the Company's facilities were owned, managed and/or operated
by one or more limited partnerships affiliated with the Company's predecessor,
American Retirement communities, LP (the "Partnership" or "Predecessor"). As
the Company is newly formed, all references to the Company in connection with
historical financial data or otherwise include the Predecessor.
2. INITIAL PUBLIC OFFERING
On May 30, 1997, the Company completed the IPO of 3,593,750 shares of common
stock, the proceeds of which (after underwriting discounts and expenses)
amounted to approximately $45.2 million. The Company used approximately $21.9
million of the net proceeds from the IPO to repay the promissory note resulting
from the reorganization discussed below. The balance of the net proceeds are
being used for working capital purposes, including the development and
construction of free-standing assisted living residences and acquisitions.
7
<PAGE> 8
3. Formation of American Retirement Corporation and Pro Forma Adjustments
The Partnership was reorganized concurrent with the IPO such that all of its
assets and liabilities were contributed to the Company in exchange for 7,812,500
shares of common stock and a promissory note in the original principal amount of
approximately $21.9 million (the "Reorganization").
(a) Pro Forma Earnings Data: The pro forma adjustment reflected on the
statements of operations provides for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, assuming the Partnership was subject to taxes.
(b) Pro Forma Earnings per Share: Pro forma earnings per share are based on the
number of shares which would have been outstanding assuming the partners had
been shareholders and is based on the 7,812,500 shares received as a result
of the Reorganization plus 1,562,500 shares representing the value of the
$21.9 million promissory note.
(c) Tax Expense Charge to Income: At the time of the Reorganization and as a
result of the conversion from a limited partnership to a corporation, the
Company recorded as a one-time charge to income a net deferred income tax
expense of approximately $2.9 million resulting from the difference between
the accounting and tax bases of the new corporation's assets and
liabilities.
4. Convertible Debt Offering
During the quarter ended September 30, 1997, the Company issued $120.0 million
of 5 3/4% Convertible Subordinated Debentures Due October 2002 in a public
offering. The debentures, which are non-callable for three years, will be
convertible into shares of the Company's common stock at a conversion price of
$24.00 per share. Subsequent to the end of the third quarter, the underwriters
exercised their over-allotment option and purchased an additional $18.0 million
of debentures.
The offering resulted in net proceeds to the Company of $116.6 million during
the quarter ended September 30, 1997, after deducting underwriting discounts and
commissions and offering expenses. Underwriting discounts and commissions and
offering expenses are included in other assets and will be amortized
straight-line over the term of the debentures. Additional net proceeds of $17.6
million were received in October 1997 from the exercise of the over-allotment
option.
The Company intends to use the net proceeds of the offering for general
corporate purposes, including the development and construction of free-standing
assisted living residences, possible acquisitions and the possible prepayment of
debt.
8
<PAGE> 9
5. Equity
The following table summarizes the Company's equity transactions for the nine
months ended September 30, 1997:
<TABLE>
<CAPTION>
General and
Limited Additional
Partners' Common Paid-In Accumulated
Interest Stock Capital Deficit Total
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 37,882 $-- $ -- $ -- $ 37,882
Net income (loss) 1,599 -- -- (1,425) 174
Partner distributions (2,500) -- -- (2,500)
Reorganization Note (21,875) -- -- (21,875)
Transfer of partnership equity
for 7,812,500 shares of
common stock (15,106) 78 15,028 0
Net proceeds from issuance of
3,593,750 shares of
common stock 36 45,185 45,221
-------------------------------------------------------------
Balance at September 30, 1997 $ -- $114 $60,213 $(1,425) $ 58,902
=============================================================
</TABLE>
6. Income Taxes
The total provision for income taxes for the three months and nine months ended
September 30, 1997 was $623,000 and $3.7 million, respectively. The provision
for income taxes for the nine months ended September 30, 1997 consisted of
current income tax expense of $139,000 and deferred income tax expense of $3.6
million. The deferred income tax expense includes an increase in deferred income
tax liabilities of $12.2 million primarily related to the Reorganization. The
increase in deferred income tax liabilities is partially offset by an increase
in deferred income tax assets of $2.3 million, also related primarily to the
Reorganization. The Company believes that it is more likely than not that the
benefits of the deferred income tax assets will be realized. Accordingly, the
Company has not established a valuation allowance against the deferred tax
assets. The net deferred income tax liability as of September 30, 1997 was $2.7
million.
7. Earnings per Share
Earnings per share for the quarter ended September 30, 1997 has been computed on
the basis of the weighted average number of shares outstanding, including common
stock equivalents, which consist of stock options. Earnings per share for 1996
periods and the portion of the nine month period ended September 30, 1997 prior
to the IPO is based upon the number of shares which would have been outstanding
assuming the partners had been shareholders prior to the Reorganization as
discussed in Note 3.
8. Subsequent Event
In October 1997, the Company acquired a leasehold interest in Imperial Plaza, a
917 unit senior living community located in Richmond, Virginia. Imperial Plaza
has 778 independent living apartments and 139 assisted living units (including
32 assisted living
9
<PAGE> 10
units that are nearing completion), and is situated on a 30 acre campus in an
established residential neighborhood. At the time of its acquisition, the
community had an occupancy rate of 99.2% with a waiting list.
The Company entered into an operating lease with an initial term of 20 years
and a seven-year renewal option. The Company will have the option to acquire
the community at its fair market value at the expiration of the lease. In
addition, the terms of the lease arrangement include a commitment by the lessor
to fund a $3.5 million capital expenditure program. Expenditures by the Company
for the acquisition of the leasehold interest, the adjoining property, and the
lease purchase option will aggregate approximately $13.2 million, which will be
payable in varying amounts over the next three years. The Company will be
obligated to make annual rental payments of approximately $4.3 million under
the lease. In addition, the Company will be required to maintain a capital
reserve account with payments of approximately $300,000 annually, and to make a
refundable deposit of $5.4 million to secure the performance of its obligations
under the lease.
The Company has entered into a definitive agreement to purchase a 136 unit
retirement community. In addition to the existing units, the acquisition will
include adjoining land and zoning rights to construct up to 40 assisted living
units. While the acquisition is subject to certain conditions, the Company
anticipates that it will close prior to November 30, 1997.
A letter of intent to purchase a home health agency has also been signed and a
closing is anticipated prior to November 30, 1997. The agency will enable the
Company to provide services to two of the Company's senior living markets in
Corpus Christi, TX and San Antonio, TX. The acquisition will replace an agency
previously under management agreement that was affected by the recent
moratorium on home health start-ups.
9. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement establishes and simplifies standards for computing and
presenting earnings per share. SFAS No. 128 will be effective beginning with
the Company's quarter ending December 31, 1997 and requires the restatement of
all previously reported earnings per share data that are presented. Early
adoption of SFAS No. 128 is not permitted. SFAS No. 128 replaces primary and
fully diluted earnings per share. There will be no impact on the calculation of
basic earnings per share for the quarters ended September 30, 1997 and 1996.
Diluted earnings per share is not expected to differ materially from basic
earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
The statement establishes standards for the reporting and display of
comprehensive income
10
<PAGE> 11
and its components. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during
a period except those resulting from investments by owners and distributions to
owners. SFAS No. 130 will be effective for the Company's fiscal year ending
December 31, 1998. Adoption of SFAS No. 130 will not impact the Company's
financial position or results of operations. It will require comparative
presentation for prior periods.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a national senior living and health care company providing a
broad range of care and services to the elderly within a residential setting.
The Company currently operates 23 senior living communities in 12 states with
an aggregate capacity for approximately 6,700 residents. The Company currently
owns 12 communities, leases 4 communities pursuant to long-term leases, and
manages 7 communities pursuant to management agreements. The Company is
currently constructing or developing 34 assisted living residences with an
estimated aggregate capacity for over 2,900 residents and expanding 8 of its
existing owned or leased communities and one of its managed communities, which
will add capacity for approximately 800 additional residents. Additionally, the
Company currently operates ten home health agencies based in its owned or
leased communities, and manages four home health agencies for third parties.
The Company completed the IPO and related Reorganization during the second
quarter of 1997. Prior to the IPO, the Company's accounting predecessor
operated as a limited partnership.
The Company reported net income of $1.0 million, or $.09 per share, on revenues
of $23.6 million for the quarter ended September 30, 1997, as compared with pro
forma income of $260,000, or $.03 per share, on revenues of $20.0 million for
the comparable prior year period.
The aggregate estimated cost to complete and lease-up the 34 free-standing
assisted living residences currently under development is approximately $250.0
million to $300.0 million. The Company is currently constructing an $11.6
million expansion at one of its owned communities and is constructing, on
behalf of the lessor, a $14.0 million expansion at one of its leased
communities. In addition, the Company plans to commence additional expansions
at six of its owned communities, which are expected to cost approximately $60.0
million to $70.0 million to complete and lease-up. These eight expansion
projects will add capacity to accommodate approximately 700 additional
residents. In addition to the expansion of its owned and leased communities,
the Company is currently managing the expansion of one of its managed
communities.
11
<PAGE> 12
In addition to the development of new free-standing assisted living
residences, the Company's growth strategy also includes the acquisition of
free-standing assisted living residences and other senior living communities;
home health care agencies; and other properties or businesses that are
complementary to the Company's operations and growth strategy.
RESULTS OF OPERATIONS
The Company's total revenues are comprised of 1) resident and health care
revenues, which include all resident and home health care agency fees, and 2)
management services revenues, which include fees, net of reimbursements, for
the development, marketing and management of retirement communities and home
health care agencies owned by third parties. The Company's resident and health
care revenues are derived from three principal sources: 1) monthly service
fees from independent and assisted living residents; 2) per visit billings
from home health care patients and companion services clients; and 3) per diem
charges from residents receiving nursing care. The Company's operating expenses
are comprised of 1) community operating expenses, which includes all operating
expenses of the Company's owned or leased communities, including the expenses
of its home health care agencies; 2) general and administrative expense, which
includes all corporate office overhead; 3) lease expense; and 4) depreciation
and amortization expense.
The following table sets forth, for the periods indicated, certain
resident capacity and occupancy data for the periods indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
STABLE(1) TOTAL STABLE(1) TOTAL
--------- ----- --------- -----
<S> <C> <C> <C> <C>
END OF PERIOD CAPACITY
Owned 2,914 3,068 3,244 3,372
Leased 483 573 -- --
Managed 2,159 2,159 1,842 2,159
----- ----- ----- -----
Total 5,556 5,800 5,086 5,531
END OF PERIOD OCCUPANCY
Owned 96% 92% 95% 93%
Leased 92% 83% -- --
Managed 94% 94% 95% 90%
----- ----- ----- -----
Total 95% 92% 95% 92%
</TABLE>
- -------------------
(1) Includes communities or expansions thereof that have (i) achieved 95%
occupancy or (ii) have been open at least 12 months. The 12-month
stabilization period may be extended for certain large communities. In the
table above, the stabilized results for the nine months ended September
30, 1996 do not include a large managed community with a capacity of over
240 residents which opened in August 1995.
12
<PAGE> 13
SAME COMMUNITY RESULTS
The following table sets forth certain selected financial and operating
data on a Same Community basis. For purposes of the following discussion, "Same
Community basis" refers to communities that were owned and/or leased by the
Company throughout each of the periods being compared. Revenues on a Same
Community basis do not include any management services revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1997 1996 % 1997 1996 %
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA FOR SAME COMMUNITIES:
(DOLLARS IN THOUSANDS, EXCEPT OTHER DATA)
Monthly/per diem service fees 19,939 18,133 10.0% 46,754 43,606 7.2%
Home health and companion services revenue 2,842 1,506 88.7% 7,122 4,517 57.7%
------ ------ ---- ------ ------ ----
Resident and health care revenue 22,781 19,639 16.0% 53,876 48,123 12.0%
Community operating expenses 14,166 12,518 13.2% 34,542 31,100 11.1%
------ ------ ---- ------ ------ ----
Resident income from operations 8,615 7,121 21.0% 19,334 17,023 13.6%
====== ====== ====== ======
Resident income from operations margin(1) 36.7% 36.3% 1.5% 35.8% 35.4% 0.5%
Lease expense 551 -- -- 1,658 -- --
Depreciation and amortization 1,526 1,726 (11.6)% 3,206 3,794 (15.5)%
------ ------ ---- ------ ------ ----
Income from operations 6,538 5,395 21.2% 14,470 13,229 9.4%
====== ====== ====== ======
Other data:
Number of communities 12 12 10 10
Resident capacity 3,397 3,372 0.7% 2,586 2,586 0.0%
Average occupied units 2,834 2,748 3.2% 2,211 2,173 1.7%
Average occupancy rate(2) 94.9% 93.2% 1.7% 95.7% 94.1% 1.6%
Average monthly revenue per occupied unit(3) $2,345 $2,220 6.6% $2,350 $2,230 5.4%
Average monthly expense per occupied unit(4) $1,436 $1,377 4.3% $1,473 $1,406 4.8%
</TABLE>
- --------------------
(1) "Resident income from operations" margin represents "Resident income from
operations" as a percentage of "Resident and health care revenue."
(2) "Average occupancy rate" is based on the ratio of occupied apartments to
available apartments expressed on a monthly basis for independent and
assisted living residences, and occupied beds to available beds on a per
diem basis for nursing beds.
(3) "Average monthly revenue per occupied unit" is total resident and health
care revenues, excluding home health care agency and companion services
fees, divided by total occupied apartments and nursing beds expressed on a
monthly basis.
(4) "Average monthly expense per occupied unit" is total community operating
expenses, excluding home health care agency and companion services
expenses, divided by total occupied apartments and nursing beds, expressed
on a monthly basis.
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<PAGE> 14
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996.
Revenues Total revenues were $23.6 million for the three months ended September
30, 1997 compared to $20.0 million for the three months ended September 30,
1996, representing an increase of $3.6 million, or 18.0%. Resident and health
care revenues increased by $3.5 million and management services increased by
$108,000. Of the increase in resident and health care revenues, $365,000, or
10.4%, was attributable to revenues derived from two assisted living residences
and an assisted living residence leasehold acquired in May 1997. The remaining
$3.1 million, or 89.6%, of such increase was attributable to Same Community
growth.
Revenues attributable to Same Communities were $22.8 million for the three
months ended September 30, 1997, representing an increase of $3.1 million, or
16.0%, over the same period in 1996. Home healthcare agency and companion
services fees on a Same Community basis increased by $1.3 million, or 88.7%,
over the prior period. Monthly/per diem service fee revenue on a Same
Community basis increased $1.8 million, or 10.0%, over the three months ended
September 30, 1996. Of this increase, 6.6% was due primarily to increases in
average rates (including adjustments to Medicare rates) and 3.4% was due to
higher occupancy. Same Community average occupancy rates increased to 94.9%
for the three months ended September 30, 1997 from 93.2% for the three months
ended September 30, 1996.
Community Operating Expenses Community operating expenses increased to $14.7
million for the three months ended September 30, 1997, as compared to $12.5
million for the three months ended September 30, 1996, representing an increase
of $2.2 million, or 17.5%. Of the increase in community operating expenses,
$539,000, or 24.5%, was attributable to expenses from acquired and newly leased
assisted living residences, and 75.5% of the increase was attributable to Same
Community operating expenses, which increased by $1.6 million over the
comparable period of the prior year. Of such increase, $787,000 was attributable
to increases in home health care agency and companion services. Same Community
operating expenses, exclusive of home health care agency and companion services
expenses, increased 7.6% for the three months ended September 30, 1997, as
compared to the comparable period in the prior year. Community operating expense
as a percentage of resident and health care revenues decreased to 63.5% for the
three months ended September 30, 1997, from 63.7% for the three months ended
September 30, 1996. Same Community operating expense as a percentage of Same
Community resident and health care revenues decreased to 62.2% for the three
months ended September 30, 1997 from 63.7% in the comparable period in the prior
year. Same Community operating expenses exclusive of home health agency and
companion services expenses as a percentage of Same Community revenues exclusive
of home health companion services decreased to 61.2% for the three months ended
September 30, 1997 from 62.6% for the comparable period in 1996, primarily as a
result of higher occupancy.
General and Administrative General and administrative expense increased to $2.0
million for the three months ended September 30, 1997, as compared to $1.7
million for the three months ended September 30, 1996, representing an increase
of $230,000, or 13.2%. Of this increase, $150,000 was directly related to the
growth of the Company's home health care agencies and the
14
<PAGE> 15
remaining increase of $80,000 primarily related to salary and wage expenses of
new employees. General and administrative expense as a percentage of total
revenues decreased to 8.3% for the three months ended September 30, 1997, from
8.7% for the comparable period in the previous year.
Lease Expense The Company incurred lease expense of $653,000 for the three
months ended September 30, 1997, as a result of a sale-leaseback (the
"Sale-Leaseback Transaction") of two of the Company's retirement communities in
January 1997, and the acquisition of a leasehold interest in an assisted living
residence in May 1997. The Company did not incur lease expense prior to the
Sale-Leaseback Transaction.
Depreciation and Amortization Depreciation and amortization expense decreased
to $1.7 million for the three months ended September 30, 1997, from $1.8
million for the three months ended September 30, 1996, representing a decrease
of $117,000, or 6.5%. The decrease was primarily the result of the
Sale-Leaseback Transaction partially offset by increase related to acquired and
newly leased assisted living residences. Same Community depreciation and
amortization expense decreased to $1.5 million for the three months ended
September 30, 1997 from $1.7 million for the three months ended September 30,
1996, as a result of the Sale-Leaseback Transaction.
Income from Operations Income from operations increased to $4.6 million for
the three months ended September 30, 1997 from $4.0 million for the three
months ended September 30, 1996, representing an increase of 16.6%.
Other Income (Expense) Interest expense decreased to $3.4 million for the three
months ended September 30, 1997, from $3.6 million for the three months ended
September 30, 1996, representing a decrease of $219,000, or 6.1%. The decrease
in interest expense was a result of the Sale-Leaseback Transaction. Interest
expense, as percentage of total revenues, decreased to 14.3% for the three
months ended September 30, 1997 from 18.0% for the comparable period in the
prior year. Interest income increased to $421,000 in the three months ended
September 30, 1997 from $121,000 for the comparable period in the previous year,
primarily due to income generated from the investment of the net proceeds of the
IPO and convertible debt offering.
Income Tax Expense The effective tax rate for the three months ended September
30, 1997 was 37.5%. From inception through May 30, 1997, the Company was a
partnership and accordingly incurred no federal or state income tax liability.
A pro forma adjustment has been reflected to provide for income taxes as though
the Company had been subject to corporate income taxes for the three months
ended September 30, 1996.
Net Income As a result of the foregoing factors, the Company reported net
income of $1.0 million for the three months ended September 30, 1997. For the
three months ended September 30, 1996, the Company reported pro forma income of
$262,000 and pro forma income available for distribution to partners and
shareholders of $67,000. The adjustment for net income available for
distribution to partners and shareholders relates to $10.0 million of preferred
limited partnership interests which were fully redeemed in January 1997.
15
<PAGE> 16
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenues Total revenues were $68.0 million for the nine months ended September
30, 1997, compared to $54.8 million for the comparable period in 1996,
representing an increase of $13.2 million, or 24.1%. Resident and health care
revenues increased by $13.0 million, and management services revenues increased
by $154,000. Of the increase in resident and health care revenues, $7.3 million,
or 55.9% was attributable to revenues derived from two senior living communities
acquired in May 1996 and two assisted living residences and one assisted living
residence leasehold acquired in May 1997. The remaining $5.8 million, or 44.1%,
of such increase was attributable to Same Community growth.
Revenues attributable to Same Communities were $53.9 million for the nine months
ended September 30, 1997, representing an increase of $5.8 million, or 12.0%,
over the comparable period in 1996. Home health care agency and companion
services fees on a Same Community basis increased by $2.6 million, or 57.7%,
over the comparable 1996 period. Monthly/per diem service fee revenue on a Same
Community basis increased $3.1 million, or 7.2%, over the comparable 1996
period. Of this increase, 5.4% was primarily the result of increases in average
rates (including adjustments to Medicare rates) and 1.8% was due to higher
occupancy. Same Community average occupancy rates increased to 95.7% for the
nine months ended September 30, 1997 from 94.1% for the comparable period in
1996.
Community Operating Expenses Community operating expenses increased to $42.2
million for the nine months ended September 30, 1997, as compared to $34.2
million for the comparable period in 1996, representing an increase of $8.0
million, or 23.3%. Of the increase in community operating expenses, $4.5
million, or 56.9%, was attributable to expenses from acquired senior living
communities and acquired and newly leased assisted living residences, and 43.1%
of the increase was attributable to Same Community operating expenses, which
increased by $3.4 million, or 11.1%, over the comparable 1996 period. Of such
increase, $1.6 million was attributable to increases in home health care agency
and companion services expenses. Same Community operating expenses, exclusive
of home health care agency and companion services expenses, increased 6.6% for
the nine months ended September 30, 1997, as compared to the comparable period
in 1996. Community operating expense as a percentage of resident and health
care revenues decreased to 63.4% for the nine months ended September 30, 1997
from 64.0% for the comparable period in 1996, primarily as a result of the
growth of home health and companion services operations. Same Community
operating expense as a percentage of Same Community resident and health care
revenues declined to 64.1% for the nine months ended September 30, 1997 from
64.6% for the comparable period in 1996. Same Community operating expenses
exclusive of home health agency and companion services expenses as a percentage
of Same Community revenues, exclusive of home health and companion services
revenue decreased to 62.7% for the nine months ended September 30, 1997 from
63.1% for the comparable period in 1996, primarily as a result of higher
occupancy.
16
<PAGE> 17
General and Administrative General and administrative expense increased to
$6.0 million for the nine months ended September 30, 1997, as compared to $4.2
million for the comparable period in 1996, representing an increase of $1.9
million, or 45.2%. Of this increase, $720,000 was directly related to the
growth of the Company's home health care agencies and approximately $510,000 of
the increase related to salary and wage expenses of new employees. The
remaining increase of approximately $650,000 resulted from continued
investments in infrastructure necessary to support the Company's growth.
General and administrative costs as a percentage of total revenues increased to
8.9% for the nine months ended September 30, 1997 from 7.6% for the comparable
period of the prior year.
Lease Expense The Company incurred lease expense of $1.7 million for the nine
months ended September 30, 1997, primarily as a result of the Sale-Leaseback
Transaction, as well as the acquisition of a leasehold interest in an assisted
living residence in May 1997. The Company did not incur lease expense prior to
the Sale-Leaseback Transaction.
Depreciation and Amortization Depreciation and amortization expense decreased
to $4.9 million for the nine months ended September 30, 1997, representing a
decrease of $76,000, or 1.5%, over the comparable period of the previous year.
This decrease was primarily the result of the Sale-Leaseback Transaction
partially offset by increases related to the acquisitions of two retirement
communities in May 1996 and two assisted living residences and one assisted
living residence leasehold acquired in May 1997. Same Community depreciation
and amortization expense decreased to $3.2 million for the nine months ended
September 30, 1997 from $3.8 million for the nine months ended September 30,
1996, as a result of the Sale-Leaseback Transaction.
Income from Operations Income from operations increased to $13.1 million for
the nine months ended September 30, 1997 from $11.5 million for the nine months
ended September 30, 1996, representing an increase of 14.7%.
Other Income (Expense) Interest expense increased to $10.0 million for the
nine months ended September 30, 1997 from $8.3 million for the comparable
period in 1996, representing an increase of $1.7 million, or 19.9%. The
increase in interest expense was primarily related to indebtedness incurred in
connection with the acquisition of two senior living communities in May 1996
partially offset by the reduction of indebtedness related to the Sale-Leaseback
Transaction. Interest expense, as a percentage of total revenues, decreased to
14.7% for the nine months ended September 30, 1997 from 15.2% in 1996. Interest
income increased to $785,000 for the nine months ended September 30, 1997 from
$253,000 for the comparable period in 1996, primarily due to income generated
from the investment of net proceeds of the IPO and convertible debt offering.
Income Tax Expense The conversion from a non-taxable limited partnership to a
taxable corporation in May 1997 resulted in a one-time $3.0 million charge
against income related to the recognition of a net deferred income tax liability
for the amount of the difference between the accounting and tax bases of the
Company's assets and liabilities. A pro forma adjustment has
17
<PAGE> 18
been reflected to provide for income taxes as though the Company had been
subject to corporate income taxes for the nine months ended September 30, 1996.
Net Income. As a result of the foregoing factors, the Company reported net
earnings of $174,000 for the nine months ended September 30, 1997. Adjusting for
the effect of the income tax charge referenced above, the Company reported pro
forma income of $2.4 million for the nine months ended September 30, 1997. For
the nine months ended September 30, 1996, the Company reported pro forma income
before extraordinary item of $2.0 million, pro forma income before extraordinary
item available for distribution to partners and shareholders of $1.1 million,
and net income of $62,000. The extraordinary item related to a January 1996 debt
restructure. The adjustment for net income available for distribution to
partners and shareholders relates to $10.0 million of preferred limited
partnership interests which were fully redeemed in January 1997.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the IPO, the Company received net proceeds of approximately $45.2
million, after deducting underwriting discounts and other offering costs. The
Company used $21.9 million of the net proceeds from the IPO to repay the
Reorganization Note to the limited partners of the Predecessor. The Company
expects to use the remaining net proceeds from the IPO to fund its growth
strategy.
During the quarter ended September 30, 1997, the Company sold $120.0 million of
its 5-3/4% Convertible Subordinated Debentures Due October 2002 in a public
offering. The debentures, which are non-callable for three years, will be
convertible into shares of the Company's common stock at a conversion price of
$24.00 per share. Subsequent to quarter end, the underwriters exercised their
over-allotment option and purchased $18.0 million of additional debentures.
The offering resulted in proceeds to the Company of $116.6 million during the
quarter ended September 30, 1997, after deducting underwriting discounts and
commissions and offering expenses. Additional proceeds of $17.6 million were
received in October 1997 from the exercise of the over-allotment option. The
Company intends to use the net proceeds of the offering for general corporate
purposes, including the development and construction of free-standing assisted
living residences, possible acquisitions of business engaged in activities
similar or complementary to the Company's business, and the possible prepayment
of debt.
The Company has traditionally financed its activities from net proceeds from
private placements of equity interests, long-term mortgage borrowing, and cash
flows from operations. At September 30, 1997, the Company had $286.5 million of
indebtedness outstanding, including $143.2 million payable to General Electric
Capital Corporation ("GECC"), with fixed maturities ranging from December 31,
2001 to April 30, 2003. The Company has the capacity to borrow up to an
additional $17.0 million from GECC to finance future acquisitions or
expansions. The Company also maintains a $2.5 million secured line of credit
with a bank that is available for working capital and to secure various debt
instruments. At September 30, 1997, approximately $2.2 million of this line of
credit had been used to obtain letters of credit. The Company also
18
<PAGE> 19
maintains a $5.0 million line of credit with a bank that is available for land
acquisitions. No borrowings were outstanding under this line of credit at
September 30, 1997.
All of the Company's owned communities are subject to mortgages. Nine of the
Company's twelve owned communities serve as blanket collateral for the
indebtedness payable to GECC described above. As of September 30, 1997,
approximately 83.2% of the Company's indebtedness bore interest at fixed rates,
with a weighted average interest rate of 7.2%. The Company's variable rate
indebtedness carried an average rate of 8.0% as of September 30, 1997.
The Company has entered into non-binding letters of intent (the "REIT
Facilities") pursuant to which Nationwide Health Properties, Inc. ("NHP") and
National Health Investors, Inc. ("NHI"), at the Company's request and upon
satisfaction of certain conditions, would develop, construct, or acquire up to
$110.0 million and $100.0 million, respectively, of senior living communities
and lease the communities to the Company. Currently, the Company has been
allocated $41.6 million and $4.7 million, respectively, in commitments under the
REIT Facilities.
Net cash provided by operating activities was $8.1 million for the nine months
ended September 30, 1997, as compared with $10.8 million for the nine months
ended September 30, 1996. The Company's unrestricted cash balance was $133.3
million as of September 30, 1997, as compared to $3.2 million as of December
31, 1996, primarily as a result of the proceeds from the IPO and convertible
debenture offering.
Net cash used by investing activities was $4.5 million and $66.2 million,
respectively, for the nine month periods ended September 30, 1997 and 1996.
During the nine months ended September 30, 1997, the Company acquired an
aggregate of $11.5 million of assisted living residence assets, made capital
expenditures, including construction activity, in an aggregate amount of $16.4
million, and sold an aggregate of $28.8 million of assets, primarily in the
Sale-Leaseback Transaction.
Net cash provided by financing activities was $126.5 million and $56.2 million,
respectively, for the nine month periods ended September 30, 1997 and 1996. The
convertible debt offering resulted in net proceeds of $116.6 million during the
quarter ended September 30, 1997. Net IPO proceeds, after repayment of the
Reorganization Note, as discussed above, were $23.3 million. In January 1997,
the Company redeemed the remaining $5.2 million of preferred partnership
interests in its Predecessor, and made $1.6 million of cash distributions to
the limited and general partner owners of its Predecessor. Prior to the IPO,
the Company made a final $2.5 million cash distribution to the limited and
general partner owners of its Predecessor. Following the IPO and conversion from
partnership to corporate form, the Company does not anticipate declaring or
paying cash dividends on its Common Stock in the foreseeable future. The
Company intends to retain future cash flow to fund its growth strategy.
During the nine months ended September 30, 1997, the Company repaid $14.6
million of indebtedness with a portion of the proceeds from the Sale-Leaseback
Transaction, repaid $6.9 million of term loans, and made $5.1 million of
principal payments on its long-term debt. During the nine months ended
September 30, 1997, the Company incurred $8.2 million of new
19
<PAGE> 20
long-term debt in connection with the acquisition of two assisted living
residences and incurred $14.2 million related to construction activity.
In October 1997, the Company acquired a leasehold interest in Imperial Plaza, a
917 unit senior living community located in Richmond, Virginia. Imperial Plaza
has 778 independent living apartments and 139 assisted living units (including
32 assisted living units that are nearing completion), and is situated on a 30
acre campus in an established residential neighborhood. At the time of its
acquisition, the community had an occupancy rate of 99.2% with a waiting list.
The Company entered into an operating lease with an initial term of 20 years and
a seven-year renewal option. The Company will have the option to acquire the
community at its fair market value at the expiration of the lease. In addition,
the terms of the lease arrangement include a commitment by the lessor to fund a
$3.5 million capital expenditure program. Expenditures by the Company for the
acquisition of the leasehold, the related property, and the purchase option will
aggregate approximately $13.2 million, which will be payable in varying amounts
over the next three years. The Company will be obligated to make annual rental
payments of approximately $4.3 million under the lease. In addition, the Company
will be required to maintain a capital reserve account with payments of
approximately $300,000 annually, and to make a refundable deposit of $5.4
million to secure the performance of its obligations under the lease.
The Company is currently constructing an $11.6 million expansion at one of its
owned communities, and a $14.0 million expansion for the benefit of the lessor
of one of the retirement communities sold and leased back in the Sale Leaseback
Transaction. The Company also plans to expand certain of its other owned
communities; to open home health care agencies at certain of its owned and/or
leased communities that do not currently operate home health care agencies; to
develop new assisted living residences; and to acquire assisted living
residences and selected senior living and health care services assets.
The Company expects that its current cash, together with cash flow from
operations, the REIT Facilities, and the proceeds of borrowings available to it
under existing credit arrangements, will be sufficient to meet its operating
requirements and to fund its anticipated growth for at least the next 12 to 18
months. The Company expects to use a wide variety of financing sources to fund
its future growth, including public and private debt and equity, conventional
mortgage financing, and unsecured bank financing, among other sources. There can
be no assurance that financing from such sources will be available in the future
or, if available, that such financing will be available on terms acceptable to
the Company.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements within the meaning of
the federal securities laws, which are intended to be covered by the safe
harbors created thereby. Those statements include, but may not be limited to,
the discussions of the Company's operating and growth strategy, including its
development plans and possible acquisitions. Investors are cautioned that all
forward-looking statements involve risks and uncertainties including, without
20
<PAGE> 21
limitation, those set forth under the caption "Risk Factors" in the
Registration Statements. Although the Company believes that the assumptions
underlying the forward-looking contained herein are reasonable, any of the
assumptions could prove to be inaccurate, and therefore, there can be no
assurance that the forward-looking statements included in this Form 10-Q will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. The Company
undertakes no obligation to publicly release nay revisions to any
forward-looking statements contained herein to reflect events and circumstances
occurring of unanticipated events.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Registration Statement on Form S-1 (No. 333-23197) relating to the Company's
IPO was declared effective by the Commission on May 29, 1997. The Company used
$21.9 million of the net proceeds from the IPO to repay the Reorganization Note
to the limited partners of the Predecessor. Through September 30, 1997, the
Company has also used approximately $4.2 million of the net proceeds from the
IPO for the construction of assisted living residences, $600,000 for purchases
of real estate, $5.0 million to repay certain indebtedness, and $610,000 for
working capital. The remaining $12.9 million of the net proceeds from the IPO
are invested as follows: $8.9 million in commercial paper; $2.0 million in
municipal bonds; $1.5 million in money market accounts; and $500,000 in a
corporate bond. The Company expects to use the remaining $12.9 million of net
proceeds to fund its growth strategy.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
--------
Exhibit 27 -- Financial Data Schedule for SEC use only.
b. Reports on Form 8-K
-------------------
None
21
<PAGE> 22
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.
American Retirement Corporation
Date: February 13, 1998 By: /s/ George T. Hicks
----------------------------
George T. Hicks
Executive Vice President and
Chief Financial Officer
(principal financial and
accounting officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q OF
AMERICAN RETIREMENT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 133,280
<SECURITIES> 0
<RECEIVABLES> 5,256
<ALLOWANCES> 0
<INVENTORY> 421
<CURRENT-ASSETS> 142,963
<PP&E> 228,092
<DEPRECIATION> 17,117
<TOTAL-ASSETS> 367,643
<CURRENT-LIABILITIES> 22,709
<BONDS> 274,456
0
0
<COMMON> 114
<OTHER-SE> 57,978
<TOTAL-LIABILITY-AND-EQUITY> 367,643
<SALES> 0
<TOTAL-REVENUES> 68,032
<CGS> 0
<TOTAL-COSTS> 54,884
<OTHER-EXPENSES> 56
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<INTEREST-EXPENSE> 10,002
<INCOME-PRETAX> 3,875
<INCOME-TAX> 3,701<F1>
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<FN>
<F1>INCOME TAX EXPENSE INCLUDES A NON-RECURRING CHARGE RESULTING FROM THE
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PROFORMA TAX AND EPS DATA IS INCLUDED IN FORM 10Q.
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