SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 15, 2000
Commission File Number: 0-18942
ILM II SENIOR LIVING, INC.
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(Exact name of registrant as specified in its charter)
Virginia 06-1293758
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(State of organization) (I.R.S. Employer
Identification No.)
1750 Tysons Boulevard, Suite 1200,
Tysons Corner, Virginia 22102
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(Address of principal executive office) (Zip Code)
(888) 257-3550
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(Registrant's telephone number, including area code)
(Page 1 of 12 pages)
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ILM II Senior Living, Inc. (the "Company") hereby amends and restates in
its entirety its Current Report on Form 8-K, originally filed with the
Securities and Exchange Commission (the "Commission") on August 30, 2000, as set
forth below in order to: (i) clarify the transaction costs assumed by Capital
Senior Living Corporation in connection with the previously announced proposed
merger between the Company and Capital; and (ii) file with the Commission pro
forma financial statements showing the effect of the sale of the Company's 75%
co-tenancy interest in its senior living facility located in Santa Barbara,
California.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 15, 2000, the Company caused ILM II Holding, Inc., its
subsidiary ("Holding II") to sell to Capital Senior Living Corporation
("Capital") all of its right and title in and to its 75% co-tenancy interest in
its senior living facility located in Santa Barbara, California. In
consideration for the sale, Capital paid Holding II a cash payment of
approximately $10 million and assumed certain then current transaction expenses
incurred by the Company in connection with the previously announced proposed
merger contemplated by the Amended and Restated Agreement and Plan of Merger
dated October 19, 1999, as amended on April 18, 2000, by and among the Company,
Capital and Capital's wholly owned acquisition subsidiary (the "Merger
Agreement"). The remaining 25% co-tenancy interest in the Santa Barbara facility
was formerly owned by ILM Holding, Inc., a subsidiary of ILM Senior Living, Inc.
("ILM I") and was transferred to Capital at the time the merger between ILM I
and Capital was consummated.
The Company determined to sell its interest in the Santa Barbara facility
because of the following factors: Capital had publicly announced that it did not
receive and was not at that time in possession of sufficient loan proceeds with
which to consummate the previously announced proposed merger; the Company's
Board of Directors believed that the purchase price was fair, from a financial
point of view; and, the Merger Agreement provides that if the proposed merger
was not consummated by September 30, 2000, it could be terminated by either the
Company or Capital and that if Capital had consummated its proposed merger with
ILM I (which it has), the Company would be contractually obligated to sell to
Capital its 75% interest in the Santa Barbara facility.
In connection with the proposed merger, Capital has recently announced
that it is in the process of seeking alternative financing resources. At this
time, there is no certainty as to whether Capital will be able to obtain
alternative financing, or if so obtained, whether it will be sufficient to
consummate the proposed merger. Similarly, there can be no assurance as to
whether the merger will be consummated or, if consummated, as to the timing
thereof.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On August 30, 2000, ILM II Senior Living, Inc. ("ILM II") filed a Form 8-K
that reported that ILM II caused its subsidiary, ILM II Holding, Inc. to sell
all of its right and title in and to its 75% co-tenancy interest in its senior
living facility located in Santa Barbara, California ("Santa Barbara"). In Item
7 of the Form 8-K, ILM II stated that the pro forma financial statements of ILM
II showing the effect of the sale would be filed within 60 days of the filing of
the Form 8-K. This Form 8-K/A includes such financial statements.
(Page 2 of 12 pages)
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(a) Not Applicable.
(b) Unaudited pro forma Consolidated Balance Sheet of ILM II as of May 31,
2000 and unaudited pro forma Consolidated Statements of Income for the nine
months ended May 31, 2000 and for the year ended August 31, 1999 and giving
effect to the sale of Santa Barbara.
(c) Not Applicable.
(Page 3 of 12 pages)
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ILM II SENIOR LIVING, INC.
INDEX
Page
----
Part I. Financial Information
Item 1. Pro Forma Financial Statements
Introduction to Pro Forma Consolidated
Financial Statements (Unaudited)................................6
Pro Forma Consolidated Balance Sheet
May 31, 2000 (Unaudited)........................................7
Pro Forma Consolidated Statement of Income
For the nine months ended May 31, 2000 (Unaudited)..............8
Pro Forma Consolidated Statement of Income
For the year ended August 31, 1999 (Unaudited)..................9
Notes to Pro Forma Consolidated Financial Statements (Unaudited)........10
Part II. Other Information
Signatures....................................................................12
(Page 4 of 12 pages)
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ILM II SENIOR LIVING, INC.
Part I. Financial Information
Item I. Pro Forma Financial Statements
(see next page)
(Page 5 of 12 pages)
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ILM II SENIOR LIVING, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements of
the Company are based on its audited consolidated financial statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended August 31,
1999, and its unaudited consolidated financial statements included in the
Quarterly Report on Form 10-Q for the period ended May 31, 2000, adjusted where
appropriate to give pro forma effect to the sale of the Company's 75% co-tenancy
interest in Villa Santa Barbara on August 16, 2000.
The Unaudited Pro Forma Consolidated Balance Sheet at May 31, 2000, gives
pro forma effect to the sale of Villa Santa Barbara "as if" it had occurred on
May 31, 2000. The Unaudited Pro Forma Consolidated Statement of Income for the
year ended August 31, 1999, gives pro forma effect to the sale of Villa Santa
Barbara "as if" it had occurred on September 1, 1998. The Unaudited Pro Forma
Consolidated Statement of Income for the nine months ended May 31, 2000 gives
effect to the sale of Villa Santa Barbara "as if" it had occurred on September
1, 1998. Further details about the pro forma adjustments are set forth in
Footnote 2 of the accompanying notes to the unaudited pro forma consolidated
financial statements.
The Pro Forma Consolidated Balance Sheet and Pro Forma Consolidated
Statements of Income are presented for informational purposes only and do not
necessarily reflect the financial position or results of operations of the
Company which would have actually resulted had the transaction for which the
statements give pro forma effect actually occurred at the times assumed.
Additionally, the statements do not purport to represent the Company's future
financial position or results of operations.
These statements and the accompanying notes should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the historical consolidated statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1999, and the Company's Unaudited Quarterly Report on Form 10-Q for
the period ended May 31, 2000.
(Page 6 of 12 pages)
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<TABLE>
<CAPTION>
ILM II SENIOR LIVING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
May 31, 2000 (Unaudited)
(Dollars in thousands, except per share data)
Assets
------
Pro Forma
May 31, 2000 Adjustments May 31, 2000
------------ ----------- ------------
Operating investment properties, at cost:
Operating investment properties, at cost:
<S> <C> <C> <C>
Land $ 5,842 $ (1,150)(1A) $ 4,692
Building and improvements 28,021 (4,010)(1B) 24,011
Furniture, fixtures and equipment 3,815 -- 3,815
-------- -------- --------
37,678 (5,160) 32,518
Less: accumulated depreciation (9,727) 969 (1C) (8,758)
-------- -------- --------
27,951 (4,191) 23,760
Unamortized mortgage fees 1,425 (178)(1D) 1,247
Less: accumulated amortization (1,215) 121 (1E) (1,094)
-------- -------- --------
210 (57) 153
Loan origination fees 144 -- 144
Less: accumulated amortization (72) -- (72)
-------- -------- --------
72 -- 72
Cash and cash equivalents 621 9,184 (1F) 9,805
Accounts receivable - related 383 (149)(1G) 234
party
Prepaid expenses and other assets 83 -- 83
Deferred rent receivable 14 -- 14
-------- -------- --------
$ 29,334 $ 4,787 $ 34,121
======== ======== ========
Liabilities and Shareholders' Equity
------------------------------------
Accounts payable and accrued $ 79 $ -- $ 79
expenses
Accounts payable-related party 129 -- 129
Construction loan payable 1,165 (600)(1H) 565
Preferred shareholders' minority
Interest in subsidiary 141 -- 141
-------- -------- --------
Total liabilities 1,514 (600) 914
Contingencies
Shareholders' equity:
Common stock, $0.01 par value,
12,500,000 shares authorized
5,181,236 shares issued 52 -- 52
and outstanding
Additional paid-in capital 44,823 -- 44,823
Accumulated deficit (17,055) $ 5,387(1I) (11,668)
-------- -------- --------
Total shareholder's equity 27,820 $ 5,387 33,207
-------- -------- --------
$ 29,334 $ 4,787 $ 34,121
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
(Page 7 of 12 pages)
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ILM II SENIOR LIVING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the nine months ended May 31, 2000 (Unaudited)
(Dollars in thousands, except per share data)
Pro Forma
Nine Months Nine Months
Ended Ended
May 31, 2000 Adjustments May 31, 2000
------------ ----------- ------------
REVENUES
Rental income $ 4,084 $ (509)(2A) $ 3,575
Interest income 32 -- 32
------- ------- -------
4,116 (509) 3,607
EXPENSES
Depreciation expense 893 (108)(2B) 785
Amortization expense 137 (12)(2C) 125
General and administrative 202 (28)(2D) 174
Professional fees 1,022 (141)(2E) 881
Directors' compensation 70 -- 70
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2,324 (289) 2,035
------- ------- -------
NET INCOME $ 1,792 $ (220) $ 1,572
======= ======= =======
Basic earnings per share of common $ 0.35 $ 0.30
stock ======= =======
The above earnings per share of common stock are based upon the 5,181,236 shares
outstanding for each period.
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
(Page 8 of 12 pages)
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ILM II SENIOR LIVING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the year ended August 31, 1999
(Dollars in thousands, except per share data)
Pro Forma
Year Ended Year Ended
August 31, August 31,
1999 Adjustments 1999
----------- ----------- -----------
REVENUES:
Rental and other income $ 5,265 $ (651)(3A) $ 4,614
Interest income 56 -- 56
------- ------- -------
5,321 (651) 4,670
EXPENSES:
Depreciation expense 1,235 (149)(3B) 1,086
Amortization expense 184 (16)(3C) 168
General and administrative 344 (47)(3D) 297
Professional fees 1,778 (244)(3E) 1,534
Director compensation 83 -- 83
------- ------- -------
3,624 (456) 3,168
------- ------- -------
NET INCOME $ 1,697 $ (195) $ 1,502
======= ======= =======
Earnings per share of common stock $ 0.32 $ 0.03 $ 0.29
======= ======= =======
The above earnings per share of common stock are based upon the 5,181,236 shares
outstanding during the year.
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
(Page 9 of 12 pages)
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ILM II SENIOR LIVING, INC.
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
1. Disposition of Assets
On August 15, 2000, ILM II Senior Living, Inc. (the "Company") caused ILM
II Holding, Inc., its subsidiary ("Holding II"), to complete the sale of its 75%
co-tenancy interest in its senior living facility located in Santa Barbara,
California ("Villa Santa Barbara"), to Capital Senior Living Corporation
("Capital") for $10,143,750. In consideration for the sale, the Company received
$9,543,750 in cash and Capital contributed $600,000 toward the Company's
outstanding construction loan debt and assumed certain then current transaction
expenses incurred by the Company in connection with the previously announced
proposed merger contemplated by the Amended and Restated Agreement and Plan of
Merger dated October 19, 1999, as amended on April 18, 2000 (the "Merger
Agreement"), by and among the Company, Capital and Capital's wholly-owned
acquisition subsidiary. The remaining 25% co-tenancy interest in Villa Santa
Barbara was formerly owned by ILM Holding, Inc. ("Holding I"), a subsidiary of
ILM Senior Living, Inc. ("ILM I") and was transferred to Capital at the time the
merger between ILM I and Capital was consummated.
A gain on the sale of approximately $5.8 million has been presented on
the accompanying Pro Forma Consolidated Balance Sheet at May 31, 2000, as
an increase to equity. It is anticipated that this gain will result in a
built-in gain tax which would be reduced by available Net Operating Loss
Carryforwards from the period when the Company was a so-called "C"
Corporation (prior to the Company's conversion to a Real Estate Investment
Trust (REIT) for 1996).
No additional interest income has been presented in the accompanying
unaudited statements of income, as some portion of the cash received in the
transaction is available for dividends.
2. Pro Forma Adjustments
The pro forma adjustments to the consolidated balance sheet and
consolidated statements of income are detailed below (dollars in
thousands):
PRO FORMA CONSOLIDATED BALANCE SHEET
MAY 31, 2000
------------
[1] To reflect the sale of ILM II Holding, Inc.'s 75%
co-tenancy interest in its senior living facility
located in Santa Barbara, California and repayment
of related debt.
(A) To record land sold. $ - $ 1,150
(B) To record buildings and improvements
sold. 4,010
(C) To record accumulated depreciation on
buildings and improvements sold. 969
(D) To record unamortized mortgage fees relating
to the Santa Barbara facility sold. 178
(E) To record accumulated amortization on
unamortized mortgage fees relating to the
Santa Barbara facility sold. 121
(F) To record cash proceeds from sale, net
of debt repayment of $600 and base rent
of $361. 9,184
(G) To record accounts receivable-related party
relating to the Santa Barbara facility sold. 149
(H) To record payment on construction loan
payable. 600
(I) To record approximate gain on sale of
assets net of Pro Forma income and
expense adjustments. 5,387
------------------
$10,874 $ 10,874
==================
(Page 10 of 12 pages)
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ILM II SENIOR LIVING, INC.
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
(Continued)
PRO FORMA CONSOLIDATED STATEMENT OF INCOME Nine Months
Ended
May 31,2000
-----------
[2] Adjustment to reflect the elimination of revenues
and expenses relating to the 75% co-tenancy
interest in ILM II Holding, Inc.'s senior living
facility located in Santa Barbara, California.
(A) To eliminate rental income received from ILM
II Lease Corporation. $509
(B) To eliminate depreciation expense recorded on
the buildings and improvements sold. 108
(C) To eliminate amortization expense on mortgage
fees relating to debt on the Santa Barbara
facility. 12
(D) To eliminate general and administrative
expenses specific to the Santa Barbara facility. 28
(E) To eliminate professional fees specific to the
Santa Barbara facility. 244
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended
August 31,
1999
----------
[3] Adjustment to reflect the elimination of revenues
and expenses relating to the 75% co-tenancy
interest in ILM II Holding, Inc.'s senior living
facility located in Santa Barbara, California.
(A) To eliminate rental income received from ILM
II Lease Corporation. $651
(B) To eliminate depreciation expense recorded on
the buildings and improvements sold. 149
(C) To eliminate amortization expense on mortgage
fees relating to debt on the Santa Barbara 16
facility.
(D) To eliminate general and administrative
expenses specific to the Santa Barbara facility. 47
(E) To eliminate professional fees specific to the
Santa Barbara facility. 244
(Page 11 of 12 pages)
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ILM II SENIOR LIVING, INC.
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.
By: ILM II SENIOR LIVING, INC.
By: /s/ J. William Sharman, Jr.
-------------------------------------
J. William Sharman, Jr.
Chairman of the Board of Directors
President and Chief Executive Officer
Dated: November 1, 2000
(Page 12 of 12 pages)
