<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1999
( ) 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 12, 1999 there were 17,138,235 shares of the Registrant's common
stock, $.01 par value, outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page
<S> <C> <C>
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 .............................. 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1999 and September 30, 1998 ............................. 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
September 30, 1999 and September 30, 1998 ............................. 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 30,
1999 and September 30, 1998 ........................................... 6
Notes to Condensed Consolidated Financial Statements .................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk ............ 23
PART II. OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K...................................... 23
Signatures ...................................................................... 24
</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, 1999 December 31, 1998
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,561 $ 20,400
Assets limited as to use 5,216 4,747
Accounts receivable, net 14,282 11,158
Advances for development projects 4,229 11,136
Inventory 817 826
Prepaid expenses 1,783 1,627
Deferred income taxes 1,565 1,580
Other current assets 3,636 2,972
-------- --------
Total current assets 61,089 54,446
Assets limited as to use, excluding amounts classified as current 69,549 58,035
Land, buildings and equipment, net 429,431 391,468
Notes receivable 77,000 19,731
Costs in excess of net assets acquired, net 39,690 37,790
Other assets 44,823 34,384
-------- --------
Total assets $721,582 $595,854
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,033 $ 1,426
Accounts payable 3,241 6,543
Accrued expenses 18,725 15,376
Other current liabilities 2,138 5,297
-------- --------
Total current liabilities 30,137 28,642
Long-term debt, excluding current portion 266,583 161,261
Convertible subordinated debentures 137,980 137,980
Refundable portion of life estate fees 49,284 48,805
Deferred life estate income 46,451 43,715
Tenant deposits 6,670 6,865
Deferred gain on sale-leaseback transactions 3,281 3,620
Deferred income taxes 17,571 16,631
Other long-term liabilities 8,656 2,493
-------- --------
Total liabilities 566,613 450,012
Shareholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized, no
shares issued or outstanding -- --
Common stock, $.01 par value; 200,000,000 shares authorized,
17,138,235 and 17,118,385 shares issued and outstanding, respectively 171 171
Additional paid-in capital 145,399 145,170
Retained earnings 9,399 501
-------- --------
Total shareholders' equity 154,969 145,842
-------- --------
Total liabilities and shareholders' equity $721,582 $595,854
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues:
Resident and health care revenue $ 41,590 $ 37,604
Management services revenue 1,807 1,223
Development fees 965 2,498
-------- --------
Total revenues 44,362 41,325
Expenses:
Community operating expense 26,871 23,989
Lease expense 3,364 2,561
General and administrative 3,686 3,299
Depreciation and amortization 3,288 3,216
-------- --------
Total operating expenses 37,209 33,065
-------- --------
Operating income 7,153 8,260
Other income (expense):
Interest expense (6,572) (5,276)
Interest income 2,616 1,307
Other 156 (67)
-------- --------
Other expense, net (3,800) (4,036)
Income from continuing operations before income taxes 3,353 4,224
Income tax expense 1,274 1,624
-------- --------
Income from continuing operations 2,079 2,600
Discontinued operations, net of tax -- (290)
-------- --------
Net income $ 2,079 $ 2,310
======== ========
Basic earnings per share:
Basic earnings per share from continuing operations $ 0.12 $ 0.17
Discontinued operations, net of tax -- (0.02)
======== ========
Basic earnings per share $ 0.12 $ 0.15
======== ========
Diluted earnings per share:
Diluted earnings per share from continuing operations $ 0.12 $ 0.17
Discontinued operations, net of tax -- (0.02)
======== ========
Diluted earnings per share $ 0.12 $ 0.15
======== ========
Weighted average shares used for basic earnings per share data 17,138 15,603
Effect of dilutive common stock options -- 92
-------- --------
Weighted average shares used for diluted earnings per share data 17,138 15,695
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues:
Resident and health care revenue $ 122,213 $ 90,647
Management services revenue 4,867 2,030
Development fees 5,330 5,508
--------- --------
Total revenues 132,410 98,185
Expenses:
Community operating expense 77,573 57,259
Lease expense 9,517 6,208
General and administrative 10,449 7,008
Depreciation and amortization 9,993 6,800
--------- --------
Total operating expenses 107,532 77,275
--------- --------
Operating income 24,878 20,910
Other income (expense):
Interest expense (16,759) (12,961)
Interest income 5,941 2,494
Other 303 (33)
--------- --------
Other expense, net (10,515) (10,500)
Income from continuing operations before income taxes and cumulative
effect of accounting change 14,363 10,410
Income tax expense 5,465 3,877
--------- --------
Income from continuing operations before cumulative effect of
accounting change 8,898 6,533
Discontinued operations, net of tax -- (1,127)
--------- --------
Income before cumulative effect of accounting change 8,898 5,406
Cumulative effect of change in accounting for start-up costs, net of tax -- (304)
--------- --------
Net income $ 8,898 $ 5,102
========= ========
Basic earnings per share:
Basic earnings per share from continuing operations before cumulative
effect of accounting change $ 0.52 $ 0.51
Discontinued operations, net of tax -- (0.09)
Cumulative effect of change in accounting principle, net of tax -- (0.02)
--------- --------
Basic earnings per share $ 0.52 $ 0.40
========= ========
Diluted earnings per share:
Diluted earnings per share from continuing operations before cumulative
effect of accounting change $ 0.52 $ 0.50
Discontinued operations, net of tax -- (0.09)
Cumulative effect of change in accounting principle, net of tax -- (0.02)
--------- --------
Diluted earnings per share $ 0.52 $ 0.39
========= ========
Weighted average shares used for basic earnings per share data 17,126 12,893
Effect of dilutive common stock options 10 171
--------- --------
Weighted average shares used for diluted earnings per share data 17,136 13,064
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
---------------------------------------
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,904 $ 5,102
Loss from discontinued operations, net of tax -- 1,127
Cumulative effect of change in accounting principle, net of tax -- 304
--------- ---------
Income from continuing operations 8,904 6,533
Adjustments to reconcile net income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 9,993 6,800
Amortization of deferred entrance fee revenue (5,683) (1,707)
Proceeds from terminated lifecare contracts 2,176 931
Deferred income taxes 1,631 3,077
Amortization of deferred gain on sale-leaseback transactions (339) (340)
Minority owners' allocation of losses (562) --
Losses from unconsolidated joint ventures 1,292 184
Gain on sale of marketable equity securities -- (80)
Changes in assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable (3,160) (1,345)
(Increase) decrease in inventory 10 (135)
Increase in prepaid expenses (157) (1,082)
Increase in other assets (1,110) (541)
Increase (decrease) in accounts payable (3,416) 2,212
Increase (decrease) in accrued expenses 3,165 (2,640)
Increase (decrease) in tenant deposits (195) 95
Decrease in other liabilities (1,420) (171)
--------- ---------
Net cash and cash equivalents provided by continuing operations 11,129 11,791
Net cash and cash equivalents used in discontinued operations -- (1,081)
--------- ---------
Net cash and cash equivalents provided by operating activities 11,129 10,710
Cash flows from investing activities:
Net additions to land, buildings and equipment (46,765) (20,100)
Expenditures for acquisitions, net of cash received -- (29,166)
Reimbursements from (advances for) development projects, net 6,907 (6,705)
Investments in joint ventures (430) (1,213)
Purchases of assets limited as to use (11,982) (36,630)
Increase in notes receivable (57,269) (15,517)
Proceeds from the sale of marketable securities -- 132
Purchase option payments (7,516) --
Other investing activities 1,144 (1,678)
--------- ---------
Net cash used by investing activities (115,911) (110,877)
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
AMERICAN RETIREMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
---------------------------------------
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from public offerings -- 64,800
Proceeds from the issuance of long-term debt 113,012 53,673
Proceeds from life estate sales, net of refunds 8,261 2,614
Proceeds from exercise of stock options 75 131
Proceeds from issuance of stock through employee stock purchase plan 154 140
Principal payments on indebtedness (3,084) (12,079)
Principal reductions in master trust liability (3,338) (1,389)
Expenditures for financing costs (2,767) (75)
Contributions from minority owners 1,630 --
--------- ---------
Net cash provided by financing activities 113,943 107,815
Net increase in cash and cash equivalents 9,161 7,648
--------- ---------
Cash and cash equivalents at beginning of period 20,400 44,583
--------- ---------
Cash and cash equivalents at end of period $ 29,561 $ 52,231
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 15,423 $ 10,981
========= =========
Income taxes paid $ 5,004 $ 249
========= =========
</TABLE>
Supplemental disclosure of non-cash transactions:
During 1998, the Company acquired Freedom Group, Inc. In conjunction with the
transaction, net assets and liabilities were assumed as follows:
Current assets - $7,378
Other assets - 152,204
Current liabilities - 15,471
Debt - 22,368
Other liabilities - 74,793
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
AMERICAN RETIREMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 1998 amounts have been reclassified to conform with the 1999
presentation. Operating results for the three and nine months ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1999. These financial statements should be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
2. EARNINGS PER SHARE
Basic earnings per share for the three and nine months ended September 30, 1999
and 1998 have been computed on the basis of the weighted average number of
shares outstanding. Diluted earnings per share also includes dilutive common
stock equivalents, which consist of in-the-money stock options. The inclusion of
the effect of the Company's convertible debentures would have been antidilutive
for the periods presented.
The following options to purchase shares of common stock were outstanding during
each of the following periods, but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares for the respective periods and,
therefore, the effect would be antidilutive.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Number of options (in thousands) 1,959 310 1,229 181
Weighted-average exercise price $16.02 $20.07 $16.77 $21.45
</TABLE>
3. LIFECARE AND MASTER TRUST ACCOUNTING
Certain of the Company's communities provide housing and health care services
through entrance fee agreements with the residents. Under these agreements,
residents pay an entrance fee upon entering into a lifecare contract and the
Company provides certain levels of future health care services to the resident
for life.
8
<PAGE> 9
Refundable Portion of Life Estate Fees and Deferred Life Estate Income: The
refundable portion of a life estate fees represents the amount that is due and
refundable to the resident or the resident's estate upon contract termination.
The portion of the purchase price that is not refundable is recorded as deferred
life estate income at the time of purchase and amortized into income over the
resident's estimated life expectancy, estimated annually based upon actuarial
projections. Lifecare income related to residency agreements that are fully
refundable and contingent upon reoccupancy is recognized using the average life
of the related buildings.
Master Trust Agreements: Under certain of the Company's residency and care
agreements, each resident entered into a master trust agreement whereby amounts
were paid by the resident into a trust account ("Trust"). These funds were then
available to the communities in the form of a non-interest bearing loan. The
loans provided permanent financing and are collateralized by the land, buildings
and equipment of the related communities.
Upon termination of the resident's occupancy, the resident or the resident's
estate receives payment of the remaining loan balance from the Trust and agrees
to pay a lifecare fee based on a formula in the residency and care agreement,
not to exceed a specified percentage of the resident's original deposit to the
Trust. This lifecare fee is recognized ratably over the estimated life
expectancy of the resident. The amortization of the lifecare fees is included in
resident and health care revenue in the statement of operations and deferred
lifecare fee receivable (included in other noncurrent assets) on the balance
sheet. The Company reports the obligation under the master trust agreements as
refundable portion of life estate fees and deferred life estate income based on
the applicable residency agreements.
9
<PAGE> 10
4. LAND, BUILDINGS, AND EQUIPMENT
A summary of land, buildings, and equipment is as follows (in thousands):
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Land $43,442 $42,498
Land improvements 2,804 2,674
Land held for development 13,558 5,487
Land leased to others 16,845 15,277
Buildings and improvements 336,171 317,435
Furniture, fixtures, and equipment 24,202 21,518
Leasehold improvements 1,044 515
-------- --------
438,066 405,404
Less accumulated depreciation and amortization 36,423 27,625
-------- --------
401,643 377,779
Construction in progress 27,788 13,689
-------- --------
Total $429,431 $391,468
======== ========
</TABLE>
5. LONG TERM DEBT
During the nine months ended September 30, 1999, the Company entered into
various financing commitments including a $100.0 million three-year revolving
credit facility with an additional $50.0 million to be syndicated on a best
efforts basis. The line of credit will be used to fund development, acquisitions
or expansions of senior living communities. At September 30, 1999, $55.2 million
was outstanding under the revolving credit facility. Additionally, the Company
secured a $50.0 million line of credit for the construction and/or expansion of
senior living communities. At September 30, 1999 the full commitment was
available under the $50.0 million line. The Company also entered into a $6.0
million unsecured acquisition line of credit and a $4.5 million secured term
loan. The term loan matures December 31, 1999 and is secured by land. At
September 30, 1999, $4.7 million was outstanding under the $6.0 million
acquisition line of credit that matures May 1, 2001.
During the nine months ended September 30, 1999, the Company also received a
commitment from a REIT for a $50.0 million credit facility that is available for
the development and acquisition of senior living communities.
6. COMMITMENTS AND CONTINGENCIES
The Company finances the costs of certain senior living communities owned by
others that are leased or managed by the Company. The Company is obligated to
and anticipates providing approximately $111.5 million of additional financing
for these communities.
The Company provides development services to senior living communities owned by
others. Under the terms of the development agreements, the Company receives
fixed fees
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<PAGE> 11
ranging from approximately 3.75% to 5.00% of the total construction costs of the
communities. Such fees are recognized over the terms of the development
agreements using the percentage-of-completion method. The Company recognized
$740,000 and $1.6 million of development fee revenue during the three month
periods ended September 30, 1999 and 1998, respectively, and $4.7 million and
$4.6 million during the nine month periods ended September 30, 1999 and 1998,
respectively. The Company owns the land upon which 15 of these senior living
communities are located, and has leased the land for terms of 50 years.
The owners of the senior living communities lease the properties to various
special purpose entities (SPEs). The Company has entered into management
agreements with the SPEs to manage the operations of the leased senior living
communities. The management agreements provide for the payment of management
fees to the Company based on a percentage of each communities' gross revenues
and requires the Company to fund the SPEs' operating deficits above specified
amounts. The Company is required to pledge certificates of deposit to the
lessors as collateral to support the Company's agreements to fund operating
deficits of the SPEs over certain specified amounts. At September 30, 1999, the
Company has pledged certificates of deposit in the aggregate of $41.4 million
that are classified as non-current assets limited as to use. The Company
receives the interest income earned on these certificates of deposit. The
Company has not funded any such operating deficits as of September 30, 1999.
Certain of the management agreements also provide the Company with an option to
purchase the SPEs' interest in the leases at a price determined by an agreed
upon formula. Certain other management agreements provide the Company with a
right of first refusal. As of September 30, 1999, the Company has not assumed
any of the SPEs' lease interests.
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 services company
providing a broad range of care and services to seniors within a residential
setting. The Company currently operates 53 senior living communities in 16
states with an aggregate capacity for approximately 13,500 residents. The
Company currently owns 20 communities, leases nine communities pursuant to
long-term leases, and manages 24 communities pursuant to management agreements.
The Company is currently constructing or developing 20 senior living communities
and expanding seven of its existing communities to add aggregate estimated
capacity for approximately 2,900 residents, including several joint venture
projects with third parties.
The Company's strategy is to develop Senior Living Networks in major
metropolitan regions. These networks are generally made up of large continuing
care retirement communities ("CCRCs") and smaller free-standing assisted living
residences located in the
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<PAGE> 12
same markets. The Company believes that this hub and spoke approach produces
management efficiencies and market penetration by offering a range of senior
living arrangements at various price levels. The Company's methods to develop
Senior Living Networks include: (i) selective acquisitions of senior living
communities, including continuing care retirement communities and assisted
living residences; (ii) development of senior living communities, including
special living units and programs for residents with Alzheimer's and other forms
of dementia; (iii) expansion of existing communities; and (iv) selective
development and acquisition of other properties and businesses that are
complementary to the Company's operations and growth strategy.
At the end of the third quarter, the Company announced that, as a result of
changes in the senior living industry environment, it would shift from filling
out its Senior Living Networks by developing new assisted living residences to
selective acquisitions of existing communities within those networks. The
Company believes that increases in construction costs, particularly in the high
growth markets the Company has targeted, and an expected increase in the number
of existing properties available for acquisition currently makes acquisitions of
existing communities a more attractive alternative than denovo development. As a
result of this decision, the Company deferred several planned and early-stage
projects currently in its development pipeline and suspended all new
free-standing assisted living development. It also delayed two major community
expansions until early next year.
The Company reported net income of $2.1 million on revenues of $44.4 million for
the quarter ended September 30, 1999, as compared with income of $2.3 million on
revenues of $41.3 million for the comparable prior year period. As a result of
the shift to an acquisitions-oriented strategy for building the Senior Living
Networks, during the third quarter of 1999, the Company recognized a significant
reduction in development fee revenues; a trend that will continue in the fourth
quarter of 1999 and in 2000. Third quarter development fee revenue was less than
$1.0 million versus the $2.5 million of development fee income that the Company
reported for the third quarter of 1998. Earnings were also impacted by greater
than expected start-up losses associated with a recently acquired community and
two community expansions, whose openings were delayed, together with negative
operational variances at four of the Company's large stabilized communities.
Lease expense increased due to the acquisition of leasehold interests in three
recently added communities and a community expansion, which is leased.
RESULTS OF OPERATIONS
The Company's total revenues are comprised of (i) resident and health care
revenues, (ii) management services revenue and (iii) development fees. The
Company's resident and health care revenues are comprised of (i) monthly service
fees and ancillary revenues from independent and assisted living residents
representing 83.1% and 82.8% of total resident and health care revenues for the
three months ended September 30, 1999 and 1998, respectively, and 82.5% and
85.0% of total resident and health care revenues for the nine months ended
September 30, 1999 and 1998, respectively, (ii) per diem charges from
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<PAGE> 13
residents receiving nursing care representing 14.1% of total resident and health
care revenues for the three months ended September 30, 1999 and 1998, and 14.2%
and 13.7% of total resident and health care revenues for the nine months ended
September 30, 1999 and 1998, respectively, and (iii) the amortization of
entrance fees over each resident's actuarially determined life expectancy, net
of health care benefit utilization, representing 2.8% and 3.1% for the three
months ended September 30, 1998 and 1998, respectively, and 3.3% and 1.3% for
the nine months ended September 30, 1999 and 1998, respectively (the Company did
not own entrance fee communities prior to July 1, 1998). Management services
revenue represented 4.1% and 3.0% of total revenues for the three months ended
September 30, 1999 and 1998, respectively, and 3.7% and 2.1% of total revenues
for the nine months ended September 30, 1999 and 1998, respectively. Development
fees represented 2.2% and 6.0% of total revenues for the three months ended
September 30, 1999 and 1998, respectively, and 4.0% and 5.6% for the nine months
ended September 30, 1999 and 1998, respectively. Approximately 95.8% and 95.6%
of the Company's total revenues for the three months ended September 30, 1999
and 1998, respectively, and 95.5% and 95.3% of the Company's total revenues for
the nine months ended September 30, 1999 and 1998, respectively, were
attributable to private pay sources, with the balance attributable to Medicare,
including Medicare-related private pay co-insurance and, to a lesser extent,
Medicaid.
The Company's operating expenses are comprised of (i) community operating
expenses, which includes all operating expenses of the Company's owned or leased
communities; (ii) general and administrative expense, which includes all
corporate office overhead; (iii) lease expense; and (iv) 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, 1999 SEPTEMBER 30, 1998
----------------------- ----------------------
END OF PERIOD CAPACITY STABLE(1) TOTAL STABLE(1) TOTAL
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Owned 5,042 5,284 4,727 5,042
Leased 2,475 2,475 2,073 2,173
Managed 4,046 5,476 3,797 4,493
------ ------ ------ ------
Total 11,563 13,235 10,597 11,708
====== ====== ====== ======
END OF PERIOD OCCUPANCY
Owned 95% 92% 94% 91%
Leased 93% 90% 92% 89%
Managed 93% 80% 93% 84%
--- --- --- ---
Total 94% 87% 93% 88%
=== === === ===
- --------------------
</TABLE>
(1) Includes communities or expansions thereof that have (i) achieved 95%
occupancy or (ii) have been open at least 12 months.
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<PAGE> 14
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. One community, at which a
significant expansion was opened during 1998, has been excluded from the
comparative data and will return to the Same Community group upon stabilization
of the expansion.
STATEMENT OF OPERATIONS DATA FOR SAME COMMUNITIES:
(DOLLARS IN THOUSANDS, EXCEPT OTHER DATA)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- -------------------------------
1999 1998 % change 1999 1998 % change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Resident and health care revenues $37,610 $35,879 4.8% $74,289 $71,191 4.4%
Community operating expense 23,198 22,516 3.0% 44,076 43,195 2.0%
------- ------- ------- -------
Resident income from operations 14,412 13,363 7.8% 30,213 27,996 7.9%
Resident income from operations margin(1) 38.3% 37.2% 40.7% 39.3%
Lease expense 2,188 2,134 2.5% 4,378 4,247 3.1%
Depreciation and amortization 2,977 2,914 2.2% 5,041 4,753 6.1%
------- ------- ------- -------
Income from operations 9,247 8,316 11.2% 20,794 18,996 9.5%
Other data:
Resident capacity 6,505 6,505 4,254 4,254
Number of communities 21 21 15 15
Average occupancy rate(2) 95% 92% 95% 92%
Average monthly revenue per occupied unit(3) $2,304 $2,272 1.4% $2,244 $2,221 1.1%
Average monthly expense per occupied unit(4) $1,421 $1,426 (0.3%) $1,332 $1,347 (1.2%)
</TABLE>
(1) "Resident income from operations margin" represents "Resident income from
operations" as a percentage of "Resident and health care revenues."
(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 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 divided by total occupied apartments and nursing beds, expressed on a
monthly basis.
14
<PAGE> 15
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1998
Revenues Total revenues were $44.4 million for the three months ended September
30, 1999 compared to $41.3 million for the three months ended September 30,
1998, representing an increase of $3.0 million, or 7.3%. Resident and health
care revenue increased by $4.0 million, management services revenue increased by
$584,000, and development fees decreased by $1.5 million. The increase in
resident and health care revenue was primarily attributable to Same Community
revenue increases and revenues derived from senior living communities acquired
or leased after September 30, 1998. Management services revenue increased as a
percentage of total revenue to 4.1% for the three months ended September 30,
1999 from 3.0% in the comparable period in 1998. The increase in management
services revenue is related to management fees from newly developed and managed
assisted living communities and acquisition fees. Development fees decreased as
a percentage of total revenues to 2.2% for the three months ended September 30,
1999 from 6.0% in the comparable 1998 period. The decrease in development fees
is related to the Company's decision to move to an acquisitions-oriented method
of building its Senior Living Networks and, therefore, to discontinue new
development of free-standing assisted living residences, for which the Company
receives development fees. The Company expects that this change in its strategy
for building its Senior Living Networks will cause significantly lower levels of
development fees in the fourth quarter of 1999 and in 2000.
Resident and health care revenues attributable to Same Communities were $37.6
million for the three months ended September 30, 1999, as compared to $35.9
million for the three months ended September 30, 1998. This increase was derived
from a 3.4% increase in occupied units and a 1.4% increase in average rates.
Same Community average occupancy rates increased to 95% for the three months
ended September 30, 1999 as compared to 92% for the comparable 1998 period.
Community Operating Expense Community operating expense increased to $26.9
million for the three months ended September 30, 1999, as compared to $24.0
million for the three months ended September 30, 1998, representing an increase
of $2.9 million, or 12.0%. The increase in community operating expense was
primarily attributable to expenses from communities acquired or leased after
September 30, 1998 and an on-balance sheet acquisition of an assisted living
community that is in the fill-up stage. Community operating expense as a
percentage of resident and health care revenues increased to 64.6% for the three
months ended September 30, 1999 from 63.8% for the three months ended September
30, 1998. The increase in community operating expenses as a percentage of
resident and health care revenues is primarily attributable to greater than
expected start-up losses associated with a recently acquired community and two
community expansions, whose openings were delayed, and to negative operational
variances at four of the Company's large stabilized communities.
Same Community operating expenses increased to $23.2 million for the three
months ended September 30, 1999 as compared to $22.5 million for the three
months ended
15
<PAGE> 16
September 30, 1998. Same Community operating expense as a percentage of Same
Community revenues decreased to 61.7% for the three months ended September 30,
1999 from 62.8% in the comparable period in the prior year primarily as a result
of economies related to higher occupancy.
General and Administrative General and administrative expense increased to $3.7
million for the three months ended September 30, 1999, as compared to $3.3
million for the three months ended September 30, 1998, representing an increase
of $387,000, or 11.7%. The increase was primarily related to increases in
salaries and benefits. General and administrative expense as a percentage of
total revenues increased to 8.3% for the three months ended September 30, 1999
as compared to 8.0% for the three months ended September 30, 1998.
Lease Expense Lease expense increased to $3.4 million for the three months
ended September 30, 1999, from $2.6 million for the three months ended September
30, 1998. The increase was attributable to leases entered into after September
30, 1998, including several acquisitions of leasehold interests. Same Community
lease expense remained unchanged at $2.1 million.
Depreciation and Amortization Depreciation and amortization expense increased
to $3.3 million for the three months ended September 30, 1999, from $3.2 million
for the three months ended September 30, 1998, representing an increase of
$72,000, or 2.2%. Same Community depreciation and amortization expense increased
to $3.0 million for the three months ended September 30, 1999, from $2.9 million
for the three months ended September 30, 1998, representing an increase of
$63,000, or 2.2%. The increases were primarily related to capital expenditures.
Other Income (Expense) Interest expense increased to $6.6 million, net of
capitalized interest of $441,000, for the three months ended September 30, 1999,
from $5.3 million, net of capitalized interest of $250,000, for the three months
ended September 30, 1998, representing an increase of $1.3 million, or 24.6%.
The increase in interest expense was primarily attributable to indebtedness
incurred in connection with acquisitions and development activity. Interest
income increased to $2.6 million in the three months ended September 30, 1999
from $1.3 million for the comparable period of the prior year, primarily due to
income generated from certificates of deposit and notes receivable associated
with certain synthetic leasing transactions and management agreements.
Income Tax Expense The provision for income taxes was $1.3 million for the
three months ended September 30, 1999 as compared to $1.6 million for the three
months ended September 30, 1998. The Company's effective tax rate was 38% for
the three months ended September 30, 1999 and 1998.
Discontinued Operations During 1998, the Company suspended operations of
certain of its home health care agencies pending either institution of a
prospective pay system
16
<PAGE> 17
acceptable to the Company, or major revisions to the United States interim
payment system now in effect. During the fourth quarter of 1998, the Company
determined that an acceptable reimbursement system would not be implemented in
the near term and discontinued its home health care operations. The operating
results and cash flows of the home health care division for the three months
ended September 30, 1998 have been reclassified to discontinued operations. The
Company recorded losses from home health care operations, net of tax, of
$290,000 in the three months ended September 30, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1998
Revenues Total revenues were $132.4 million for the nine months ended September
30, 1999 compared to $98.2 million for the nine months ended September 30, 1998,
representing an increase of $34.2 million, or 34.9%. Resident and health care
revenue increased by $31.6 million, management services revenue increased by
$2.8 million, and development fees decreased by $178,000. The increase in
resident and health care revenue was attributable to revenues derived from
communities acquired pursuant to the July 1998 acquisition of Freedom Group,
Inc. (the "FGI Transaction") and other senior living communities acquired or
leased after September 30, 1998. Management services revenue increased as a
percentage of total revenue to 3.7% for the nine months ended September 30, 1999
from 2.1% in the comparable period in 1998. The increase in management services
revenue is related to new management agreements entered into in the FGI
Transaction. Development fees decreased as a percentage of total revenues to
4.0% for the nine months ended September 30, 1999 from 5.6% in the comparable
1998 period. Development fee revenue decreased due to the Company's move to an
acquisitions-oriented method of building the Company's Senior Living Networks.
The Company expects development fees to continue to be significantly lower in
the fourth quarter of 1999 and in 2000.
Resident and health care revenues attributable to Same Communities were $74.3
million for the nine months ended September 30, 1999, as compared to $71.2
million for the nine months ended September 30, 1998. This increase was derived
from a 3.3% increase in occupied units and a 1.1% increase in average rates.
Same Community average occupancy rates increased to 95% for the nine months
ended September 30, 1999 as compared to 92% for the comparable 1998 period.
Community Operating Expenses Community operating expenses increased to $77.6
million for the nine months ended September 30, 1999, as compared to $57.3
million for the nine months ended September 30, 1998, representing an increase
of $20.3 million, or 35.5%. The increase in community operating expenses was
primarily attributable to expenses from communities acquired pursuant to the FGI
Transaction and other senior living communities acquired or leased after
September 30, 1998. Community operating expenses as a percentage of resident and
health care revenues increased to 63.5% for the nine months ended September 30,
1999 from 63.2% for the nine months ended September 30, 1998.
17
<PAGE> 18
Same Community operating expenses increased to $44.1 million for the nine months
ended September 30, 1999, as compared to $43.2 million for the nine months ended
September 30, 1998, representing an increase of $882,000, or 2.0%. Same
Community operating expense as a percentage of Same Community revenues decreased
to 59.3% for the nine months ended September 30, 1999 from 60.7% in the
comparable period in the prior year primarily as a result of economies related
to higher occupancy.
General and Administrative General and administrative expense increased to
$10.4 million for the nine months ended September 30, 1999, as compared to $7.0
million for the nine months ended September 30, 1998, representing an increase
of $3.4 million, or 49.1%. The increase was primarily related to increases in
salaries and benefits including corporate personnel retained as a result of the
FGI Transaction. General and administrative expense as a percentage of total
revenues increased to 7.9% for the nine months ended September 30, 1999 as
compared to 7.1% for the nine months ended September 30, 1998.
Lease Expense Lease expense increased to $9.5 million for the nine months ended
September 30, 1999, from $6.2 million for the nine months ended September 30,
1998, representing an increase of $3.3 million, or 53.3%. The increase was
attributable to leases entered into after September 30, 1998, including the
acquisition of several leasehold interests. Same Community lease expense
increased to $4.4 million for the nine months ended September 30, 1999 from $4.2
million for the nine months ended September 30, 1998.
Depreciation and Amortization Depreciation and amortization expense increased
to $10.0 million for the nine months ended September 30, 1999, from $6.8 million
for the nine months ended September 30, 1998, representing an increase of $3.2
million, or 47.0%. The increase was primarily attributable to senior living
communities acquired after September 30, 1998 and the amortization of the costs
in excess of net assets acquired resulting from the FGI Transaction. Same
Community depreciation and amortization expense increased to $5.0 million for
the nine months ended September 30, 1999, from $4.8 million for the nine months
ended September 30, 1998, representing an increase of $288,000, or 6.1%,
primarily related to capital expenditures at the related communities.
Other Income (Expense) Interest expense increased to $16.8 million, net of
capitalized interest of $1.5 million, for the nine months ended September 30,
1999, from $13.0 million, net of capitalized interest of $1.1 million, for the
nine months ended September 30, 1998, representing an increase of $3.8 million,
or 29.3%. The increase in interest expense was primarily attributable to
indebtedness incurred in connection with acquisitions and development activity.
Interest income increased to $5.9 million in the nine months ended September 30,
1999 from $2.5 million for the comparable period of the prior year, primarily
due to income generated from certificates of deposit and notes receivable
associated with certain synthetic leasing transactions and management
agreements.
18
<PAGE> 19
Income Tax Expense The provision for income taxes was $5.5 million for the nine
months ended September 30, 1999 as compared to $3.9 million for the nine months
ended September 30, 1998. The Company's effective tax rate was 38% and 37% for
the nine months ended September 30, 1999 and 1998, respectively.
Discontinued Operations During 1998, the Company suspended operations of
certain of its home health care agencies pending either institution of a
prospective pay system acceptable to the Company, or major revisions to the
United States interim payment system now in effect. During the fourth quarter of
1998, the Company determined that an acceptable reimbursement system would not
be implemented in the near term and discontinued its home health care
operations. The operating results and cash flows of the home health care
division for the nine months ended September 30, 1998 have been reclassified to
discontinued operations. The Company recorded losses from home health care
operations, net of tax, of $1.1 million in the nine months ended September 30,
1998.
Cumulative Effect of Change in Accounting Principle The Company elected, in
1998, early adoption of the AICPA's Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities (the "SOP"). The SOP requires that costs incurred
during start-up activities be expensed as incurred. Initial application of the
SOP is as of the beginning of the fiscal year in which the SOP is first adopted.
Accordingly, effective January 1, 1998 the Company wrote off $304,000, net of
tax, of unamortized start-up and organizational costs as the cumulative effect
of a change in accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its activities with long-term mortgage
borrowings, the net proceeds from public offerings of debt and equity, and cash
flows from operations. At September 30, 1999, the Company had $410.6 million of
indebtedness outstanding, including $138.0 million of 5 3/4% convertible
subordinated debentures due in 2002, and $124.3 million of indebtedness to a
capital corporation, with fixed maturities ranging from December 1999 to April
2028. As of September 30, 1999, approximately 66.7% of the Company's
indebtedness bore interest at fixed rates, with a weighted average interest rate
of 6.8%. The Company's variable rate indebtedness carried an average rate of
7.2% as of September 30, 1999. As of September 30, 1999, the Company had working
capital of $31.0 million.
Net cash provided by operating activities was $11.1 million for the nine months
ended September 30, 1999 as compared to $10.7 million for the nine months ended
September 30, 1998. The Company's unrestricted cash balance was $29.6 million as
of September 30, 1999.
Net cash used in investing activities was $115.9 million for the nine months
ended September 30, 1999, as compared with $110.9 million for the nine months
ended September 30, 1998. During the nine months ended September 30, 1999, the
Company made additions to land, buildings and equipment including construction
activity of $46.8
19
<PAGE> 20
million, increased notes receivable by $57.3 million, purchased $12.0 million of
assets limited as to use pursuant to certain leasing transactions, and made $7.5
million of purchase option payments for certain communities currently leased or
managed by the Company.
Net cash provided by financing activities was $113.9 million for the nine months
ended September 30, 1999, as compared with $107.8 million for the nine months
ended September 30, 1998. The Company had borrowings of $113.0 million under
long-term debt arrangements with associated financing cost payments of $2.8
million, made principal payments under long-term debt arrangements of $3.1
million, received $8.3 million from the sale of life estate contracts, net of
refunds, and made principal payments under master trust agreements of $3.3
million during the nine months ended September 30, 1999.
During the nine months ended September 30, 1999, the Company entered into
various financing commitments including a $100.0 million three-year revolving
credit facility with an additional $50.0 million to be syndicated on a best
efforts basis. The line of credit will be used to fund development, acquisitions
or expansions of senior living communities. At September 30, 1999, $55.2 million
was outstanding under the revolving credit facility. Additionally, the Company
secured a $50.0 million line of credit for the construction and/or expansion of
senior living communities. At September 30, 1999, the full commitment was
available under the $50.0 million line. The Company also entered into a $6.0
million unsecured acquisition line of credit and a $4.5 million secured term
loan. The $4.5 million term loan is secured by land and matures December 31,
1999, although the Company anticipates that the term loan will be renewed for an
additional one year period. At September 30, 1999, $4.7 million was outstanding
under the $6.0 million acquisition line of credit which matures May 1, 2001.
During the nine months ended September 30, 1999, the Company also received a
commitment from a REIT for a $50.0 million credit facility that is available for
the development and acquisition of senior living communities.
The Company's various credit facilities contain numerous financial covenants
that require the Company to maintain certain prescribed debt service coverage,
liquidity, net worth, capital expenditure reserve and occupancy levels. All but
one of the Company's owned communities are subject to mortgages. Each of the
Company's debt agreements contains restrictive covenants that generally relate
to the use, operation, and disposition of the communities that serve as
collateral for the subject indebtedness, and prohibit the further encumbrance of
such community or communities without the consent of the applicable lender. The
Company does not believe such restrictions are material to its business because
the Company does not intend to further encumber its owned properties and does
not believe the covenants relating to the use, operation, and disposition of its
communities materially limit its operations. Substantially all of such
indebtedness is cross-defaulted.
The aggregate estimated cost to complete and lease-up the 20 senior living
communities currently under construction or development is approximately $325
million to $350
20
<PAGE> 21
million. In addition, the Company plans to expand seven of its communities,
which is expected to cost approximately $70 million to $80 million to complete
and lease-up.
The Company expects that its current cash, together with cash flow from
operations and 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 months. The Company expects to use a
wide variety of financing sources to fund its future growth, including
conventional mortgage financing, leasing, unsecured bank financing, and public
and private debt and equity, among other sources. Recent declines in the market
price of the Company's Common Stock make offerings of Common Stock to the public
unlikely in the near term. 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.
YEAR 2000 COMPLIANCE
The Company has assessed the impact of Year 2000 issues on the Company's
business, results of operations, and financial condition. The majority of the
Company's critical information systems were purchased from outside vendors who
have upgraded their applications to be Year 2000 compliant. The Company has
evaluated other Year 2000 implications associated with its community operations,
such as elevators, security systems, HVAC systems, utilities and other major
services or supplies. The Company substantially completed the remediation of its
systems and services and developed contingency plans during the quarter ended
September 30, 1999.
The potential impact of Year 2000 issues is also dependent upon corrective
measures taken by the businesses and other entities that the Company deems
critical to its operations. It is not possible at present, however, to determine
the effect on the Company if third party remediation efforts are not completed
in a timely manner.
While the Company expects to adequately resolve Year 2000 issues, no assurances
can be given that supplier disruption and potential delay in reimbursement from
certain agencies would not have a material impact on the Company. The Company
will address the possible consequences of these issues through
community-specific supplier contingency plans and a prudent level of liquidity.
The Company is unable to quantify the potential effect of Year 2000 issues on
its results of operations, liquidity, and financial position. The total cost of
compliance measures incurred and anticipated are not estimated to be material
and are being funded through operating cash flows and expensed as incurred.
21
<PAGE> 22
OTHER MATTERS
At the end of the third quarter, the Company added three properties to three of
its Senior Living Networks that did not have an effect on the third quarter's
results. These included assisted living communities in Houston and Tampa and a
skilled nursing center for its CCRC in Phoenix.
In Houston, the Company arranged for the acquisition of a 96 resident-capacity
community, "The Hampton at Cypress Station," which will be operated by ARC
pursuant to a management agreement. The 3-story building, opened in February
1999, includes a 77 resident assisted living unit and a 19 resident Alzheimer's
unit.
In its Tampa Senior Living Network, the Company secured a management contract,
with an option to purchase, for an 86 resident-capacity community, which has
been open since 1998. The community includes 60 resident assisted living beds
and 26 resident Alzheimer's beds, and will be operated under the name "Homewood
at Countryside."
In Phoenix, the Company secured a management contract for an up-scale private
pay skilled nursing center with 128 beds. The new health center will be operated
under the name "Freedom Plaza Health Center," and is fifty percent (50%) owned
by the Company's chief executive officer, W.E. Sheriff. It opened in 1996 and is
located adjacent to Freedom Plaza and Plaza Del Rio Health Center, both
currently managed by ARC. Freedom Plaza, combined with Plaza Del Rio, is an
up-scale CCRC with 350 independent living units, 78 assisted living and
Alzheimer's units and 128 nursing beds. Freedom Plaza Health Center will become
the preferred health center for the residents of Freedom Plaza, while the older
Plaza Del Rio will become a resource for the surrounding community and ARC's
Phoenix network. Additionally, a 40 unit assisted living expansion is planned
for Freedom Plaza Health Center. The Company has an option to purchase the
Freedom Plaza Health Center (including the AL expansion) at a formula price
beginning in 2009.
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 forward-looking statements include all statements
that are not historical statement of facts and those regarding the intent,
belief or expectations of the Company or its management including, but not
limited to, the discussions of the Company's operating and growth strategy
(including its development plans and possible acquisitions), financing needs,
projections of revenue, income or loss, capital expenditures, and future
operations. Investors are cautioned that all forward-looking statements involve
risks and uncertainties including, without limitation, those set forth under the
caption "Risk Factors" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of these 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
22
<PAGE> 23
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 any revisions to any
forward-looking statements contained herein to reflect events and circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk from exposure to changes in interest rates
based on its financing, investing, and cash management activities. The Company
utilizes a balanced mix of debt maturities along with both fixed-rate and
variable-rate debt to manage its exposures to changes in interest rates. The
Company has entered into an interest rate swap agreement with a major financial
institution to manage its exposure. The swap involves the exchange of fixed
interest rate payments without exchanging the notional principal amount.
Receipts on the agreement are recorded as a reduction to interest expense. At
September 30, 1999, the Company's outstanding principal under its existing swap
agreement was $35.6 million maturing July 1, 2008. Under the agreement the
Company receives a fixed rate of 6.87% and pays a floating rate based upon a
foreign currency basket with a maximum rate through July 1, 2002 of 6.87% and
8.12% thereafter. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." The
Company does not expect changes in interest rates to have a material effect on
income or cash flows in the remainder of fiscal 1999, although there can be no
assurances that interest rates will not significantly change and materially
affect the Company.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial Data Schedule for SEC use only (1998)
27.2 Financial Data Schedule for SEC use only (1999)
b. Reports on Form 8-K
None
23
<PAGE> 24
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: November 15, 1999 By: /s/ George T. Hicks
-------------------
George T. Hicks
Executive Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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