<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ___ to___
Commission file number 1-83938
ASSISTED LIVING CONCEPTS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 93-1148702
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9955 SE Washington, Suite 301
Portland, Oregon 97216
(Address of principal executive offices)
(503) 252-6233
(Registrant's telephone number, including area code)
Indicated by check mark whether Registrant (1) has filed all reports
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 Registrants was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Shares of Registrant's common stock, $.01 par value, outstanding at May 1, 1998
is 15,747,558.
- -------------------------------------------------------------------------------
Page 1 of 21
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
FORM 10-Q
March 31, 1998
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, December 31, 1997 and March 31, 1998............ 3
Condensed Consolidated Statements of Operations,
Three Months Ended March 31, 1997 and 1998............................................. 4
Condensed Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1997 and 1998............................................. 5
Notes to Condensed Consolidated Financial Statements................................... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 8-18
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................ 19
Computation of Earnings to Fixed Charges........................................ 21
</TABLE>
Page 2 of 21
<PAGE>
PART 1
ITEM 1 - FINANCIAL INFORMATION
ASSISTED LIVING CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1998
1997 (UNAUDITED)
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 63,394 $ 29,885
Funds held in trust 1,956 188
Accounts receivable 2,185 3,139
Other current assets 4,504 5,211
-------- --------
Total current assets 72,039 38,423
-------- --------
Property and equipment 100,751 154,118
Construction in progress 103,795 79,402
-------- --------
Total property and equipment 204,546 233,520
Less accumulated depreciation 2,477 3,206
-------- --------
Property and equipment - net 202,069 230,314
-------- --------
Goodwill 13,397 13,684
Other assets 10,800 11,966
-------- --------
Total assets $298,305 $294,387
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 9,873 $ 11,690
Construction payable 18,883 12,595
Construction financing 2,150 -
Current portion of long-term debt 172 268
-------- --------
Total current liabilities 31,078 24,553
Convertible subordinated debentures 100,165 100,165
Long-term debt 26,047 26,033
-------- --------
Total liabilities 157,290 150,751
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none issued and outstanding - -
Common stock, $.01 par value; 80,000,000 shares authorized; issued and
and outstanding 15,646,478 shares and 15,742,062 in 1997 and 1998 156 157
Additional paid-in capital 137,379 138,092
Fair market value in excess of historical cost of acquired net assets
attributable to related party transactions (239) (239)
Retained earnings 3,719 5,625
-------- --------
Stockholders' equity 141,015 143,635
-------- --------
Total liabilities and stockholders' equity $298,305 $294,387
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3 of 21
<PAGE>
ASSISTED LIVING CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
<S> <C> <C>
Revenues $ 9,244 $18,648
------- -------
Operating expenses:
General operating expenses 5,692 11,366
Corporate general and administrative 641 1,068
Building rentals 1,216 3,537
Building rentals to related party 344 365
Depreciation and amortization 506 1,045
------- -------
Total operating expenses 8,399 17,381
------- -------
Operating income 845 1,267
------- -------
Other income (expense):
Interest expense (163) (268)
Interest income 123 700
Other income - 1,375
------- -------
(40) 1,807
------- -------
Income before income taxes 805 3,074
Provision for income taxes 141 1,168
------- -------
Net income $ 664 $ 1,906
======= =======
Net income per common share (basic) $ .06 $ .12
Net income per common share (diluted) $ .06 $ .12
Weighted average common shares outstanding (basic) 11,044 15,688
Weighted average common shares outstanding (diluted) 13,144 17,982
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4 of 21
<PAGE>
ASSISTED LIVING CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 664 $ 1,906
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 506 1,045
Changes in assets and liabilities:
Accounts receivable, net (295) (954)
Other current assets (1,643) (707)
Other assets (192) (1,166)
Accounts payable and accrued expenses (324) 1,817
-------- --------
Net cash (used in) provided by operating activities (1,284) 1,941
-------- --------
INVESTING ACTIVITIES:
Sale (purchase) of funds held in trust (168) 1,768
Acquisitions, net of cash and debt acquired -- (98)
Proceeds from sale and leaseback transactions 2,590 --
Purchases of property and equipment (27,903) (31,291)
-------- --------
Net cash used in investing activities (25,481) (29,621)
-------- --------
FINANCING ACTIVITIES:
Proceeds from short-term construction
borrowings expected to be refinanced 36,350 --
Construction draws (5,168) (6,288)
Repayments of construction financing (2,550) --
Payments on long-term debt (27) (77)
Debt issuance costs of long-term debt (643) --
Proceeds from issuance of common stock 18 536
-------- --------
Net cash (used in) provided by financing activities 27,980 (5,829)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,215 (33,509)
Cash and cash equivalents, beginning of period 2,105 63,394
-------- --------
Cash and cash equivalents, end of period $ 3,320 $ 29,885
======== ========
Supplemental disclosure of cash flow information:
Cash payments for interest $ 1,706 $ 2,100
Cash payments for income taxes -- 116
Extinguishment of construction loan payable from
sale-leaseback -- 2,150
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5 of 21
<PAGE>
ASSISTED LIVING CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Assisted Living Concepts, Inc. and Subsidiaries ("Company") owns, operates and
develops assisted living residences which provide housing to senior citizens who
need help with the activities of daily living such as bathing and dressing. The
Company provides personal care and support services and makes available routine
nursing services designed to meet the needs of its residents.
BASIS OF PRESENTATION
These condensed consolidated financial statements have been prepared without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. The accompanying condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries that
manage, own and develop assisted living residences and provide ancillary
services such as home health, hospice and durable medical equipment. The
condensed consolidated financial statements also include residences the Company
owns or leases but are operated through joint venture agreements. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1997.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for interim periods. The
results of operations for the three month period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
2. PROPERTY AND EQUIPMENT
The Company's property and equipment are stated at cost and consist of the
following at March 31, 1998 (in thousands):
<TABLE>
<S> <C>
Land $ 9,729
Buildings and improvements 138,453
Equipment 1,795
Furniture 4,141
--------
Sub-total 154,118
Construction in progress 79,402
--------
Total property and equipment 233,520
Less accumulated depreciation (3,206)
--------
Property and equipment, net $230,314
========
</TABLE>
As of March 31, 1998, the Company had begun construction on 26 residences (1,033
units) ($31.5 million). Construction in progress also includes 17 residences
(650 units) ($42.5 million) that have received a certificate of occupancy, but
are pending licensure. As of March 31, 1998, the Company had also entered into
agreements pursuant to which it may purchase, subject to completion of due
diligence and various other conditions, 31 additional sites. The Company has
capitalized $1.7 million of direct costs in conjunction with
Page 6 of 21
<PAGE>
the due diligence associated with these 31 sites (1,218 units). The remaining
$3.7 million relates to costs associated with the site selection and pre-
acquisition costs.
3. SUBSEQUENT EVENTS
On April 1, 1998, the Company entered into $14.6 million of mortgage financing
for seven residences in Texas under a $50 million credit facility. The term of
this financing is 10 years at a 7.73% fixed interest rate non-recourse to the
Company. The debt is secured by buildings, land, furniture and fixtures.
On April 7, 1998, the Company completed the private placement offering of
$75,000,000 of 5.625% Convertible Subordinated Debentures ("Debentures") due May
1, 2003. The Debentures are convertible at any time at or prior to maturity,
unless previously redeemed, at a conversion price of $26.184 per common share,
which equates to an aggregate of approximately 2.86 million shares. Interest is
payable semiannually on May 1 and November 1 of each year, commencing November
1, 1998. The Debentures are unsecured and subordinated to all senior
indebtedness of the Company. The Debentures are redeemable at par, as a whole
or in part, at any time on or after May 15, 2001 at the Company's option.
On April 30, 1998, the Company completed the acquisition of two assisted living
residences in Plano and McKinney, Texas, having units of 66 and 50 units,
respectively. The residences were acquired for a purchase price of
approximately $5.2 million.
4. NET INCOME PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No. 128 Earnings
Per Share (FAS 128) in the fourth quarter of 1997 and has restated all
previously reported amounts. Basic earnings per share (EPS) and diluted EPS
replace primary EPS and fully diluted EPS. Basic EPS is calculated using income
attributable to common shares divided by the weighted average number of common
shares outstanding for the period. Diluted EPS is calculated using income
attributable to common shares (after considering the effects of dilutive
potential common shares) divided by the weighted average number of common shares
and dilutive potential common shares outstanding for the period.
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
March 31, March 31,
1997 1998
------------ ------------
<S> <C> <C>
Numerator for basic net income per share
$ 664 $ 1,906
Effect of conversion of convertible
debentures - 163
------- -------
Number for diluted net income per share $ 664 $ 2,069
======= =======
Denominator
Denominator for basic net income per
common share weighted average shares 11,004 15,688
7% Convertible Debentures 1,855 1,855
Stock Option Dilution 285 439
------- -------
Denominator for diluted net income per
common share weighted average shares 13,144 17,982
======= =======
Basic net income per common share $ .06 $ .12
======= =======
Diluted net income per common share $ .06 $ .12
======= =======
</TABLE>
Page 7 of 21
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company reported net income of $1.9 million or $.12 per diluted share, on
revenue of $18.6 million for the three months ended March 31, 1998.
Operating results for the three month period ended March 31, 1998 include the
operating results of 116 residences and are not necessarily indicative of future
operating financial performance, as the Company intends to significantly expand
its operating base of residences in 1998 and 1999.
RESULTS OF OPERATIONS
Revenues consist of rentals of units in assisted living residences and fees
associated with the provision of services to residents pursuant to contracts
with the residents. Operating expenses include (i) residence operating
expenses, such as staff payroll, food, property taxes, utilities, insurance and
other direct residence operating expenses, (ii) general and administrative
expenses consisting of corporate and support functions such as legal, accounting
and other administrative expenses, (iii) building rentals and (iv) depreciation
and amortization.
The following tables sets forth, for the periods presented, the number of
residences and units operated, average occupancy rates and sources of revenue
for the Company. The portion of revenues received from state Medicaid agencies
are labeled as "Medicaid state portion" while the portion of the Company's
revenues that a Medicaid-eligible resident must pay out of his or her own
resources is labeled "Medicaid resident portion".
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
====================================================================================================
Stabilized Start-up
Total Residences Residences Residences Total
--------------- ------------- ----------
<S> <C> <C> <C>
Residences operated (end of period) 35 31 66
Units operated (end of period) 1,163 1,190 2,353
Average occupancy rate 91.9% 68.5% 80.1%
Sources of revenue:
Medicaid state portion 13.6% 8.1% 11.4%
Medicaid resident portion 7.6% 4.2% 6.3%
Private 78.8% 87.7% 82.3%
------- ------- -------
Total 100.0% 100.0% 100.0%
======================================================
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
===================================================================================================
Stabilized Start-up
Total Residences Residences Residences Total
------------- ------------- ---------
<S> <C> <C> <C>
Residences operated (end of period) 64 52 116
Units operated (end of period) 2,286 2,029 4,315
Average occupancy rate 93.7% 51.4% 74.6%
Sources of revenue:
Medicaid state portion 13.7% 7.8% 11.8%
Medicaid resident portion 7.9% 3.5% 6.5%
Private 78.4% 88.7% 81.7%
------- ------- -------
Total 100.0% 100.0% 100.0%
=====================================================
</TABLE>
Page 8 of 21
<PAGE>
The following tables set forth, for the periods presented, the compilation of
results from stabilized and start-up and from other ancillary services,
including corporate activities. Stabilized residences are defined as those
residences which were operating for more than twelve months prior to the
beginning of the period or had achieved a 95% occupancy rate as of the beginning
of the reporting period. Start-up residences are defined as those residences
which were operating for less than twelve months prior to the beginning of the
period or had not achieved a 95% occupancy rate as of the beginning of the
reporting period.
<TABLE>
<CAPTION>
COMPILATION OF STABILIZED AND START-UP RESIDENCES
THREE MONTHS ENDED MARCH 31, 1997
======================================================================================================================
Stabilized Start-up Corporate &
Residences Residences Ancillary Services Total
------------------------------------------------------------------------
<S> <C> <C> <C> C>
Revenue $5,599 $3,645 $ - $9,244
Residence operating expense 3,235 2,457 - 5,692
------------------------------------------------------------------------
Residence operating Income 2,364 1,188 - 3,552
Corporate overhead - - 641 641
Building rentals 1,076 484 - 1,560
Depreciation and amortization 172 313 21 506
------------------------------------------------------------------------
Total other operating expenses 1,248 797 662 2,707
------------------------------------------------------------------------
Operating income 1,116 391 (662) 845
Interest expense (342) (476) 655 (163)
Interest income - - 123 123
------------------------------------------------------------------------
Pre-tax income (loss) 774 (85) 116 805
Provision for income taxes - - 141 141
------------------------------------------------------------------------
Net income (loss) $ 774 $ (85) $ 25 $ 664
========================================================================
Residences operated 35 31 66
Units operated 1,163 1,190 2,353
Average occupancy rate 91.9% 68.5% 80.1%
</TABLE>
<TABLE>
<CAPTION>
COMPILATION OF STABILIZED AND START-UP RESIDENCES
THREE MONTHS ENDED MARCH 31, 1998
======================================================================================================================
Stabilized Start-up Corporate &
Residences Residences Ancillary Services Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $11,271 $5,637 $1,740 $18,648
Residence operating expense 6,311 3,755 1,300 11,366
------------------------------------------------------------------------
Residence operating income 4,960 1,882 440 7,282
Corporate overhead - - 1,068 1,068
Building rentals 2,531 1,321 50 3,902
Depreciation and amortization 269 645 131 1,045
------------------------------------------------------------------------
Total other operating expenses 2,800 1,966 1,249 6,015
------------------------------------------------------------------------
Operating income (loss) 2,160 (84) (809) 1,267
Interest expense (214) (948) 894 (268)
Interest income 1 3 696 700
Other income 1 1,374 - 1,375
------------------------------------------------------------------------
Pre-tax income (loss) 1,948 345 781 3,074
Provision for income taxes - - 1,168 1,168
------------------------------------------------------------------------
Net income (loss) $ 1,948 $ 345 $ (387) $ 1,906
========================================================================
Residences operated 64 52 116
Units operated 2,286 2,029 4,315
Average occupancy rate 93.7% 51.4% 74.6%
</TABLE>
Page 9 of 21
<PAGE>
The following table sets forth, for the periods presented, the results of
operations for the 51 residences which were operating for both periods in their
entirety (in thousands).
COMPILATION OF SAME STORE RESIDENCES
THREE MONTHS ENDED
MARCH 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
=================================================================================================
Three Three
Months Ended Months Ended
March 31, March 31,
1997 1998
--------------------------------------
<S> <C> <C>
Revenue $8,058 $8,836
Residence operating expense 4,785 4,964
------------------------------------
Residence operating income 3,273 3,872
Building rentals 1,485 1,999
Depreciation and amortization 295 181
------------------------------------
Total other operating expenses 1,780 2,180
------------------------------------
Operating income 1,493 1,692
Interest expense (542) (214)
Interest income 2 1
Other income - 1
------------------------------------
Pre-tax income $ 953 $1,480
====================================
Residences operating 51 51
Units operating 1,778 1,778
Average occupancy rate 88.1% 95.6%
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUE. For the three months ended March 31, 1998, revenues were $18.6
million compared to $9.2 million in the three months ended March 31, 1997, an
increase of $9.4 million or 102%. Of this increase, $5.6 million or 60% related
to the opening of an additional 50 operating residences (1,962 units) since
March 31, 1997. The remaining $3.8 million or 40% of the increase was
attributable to the 66 residences that had operating results as of March 31,
1997 and $1.7 million from ancillary services. For the three months ended March
31, 1998, revenues for the 51 Same Store Residences were $8.8 million as
compared to $8.1 million for the three months ended March 31, 1997, an increase
of $700,000 of 8.7%. This increase for the 51 Same Store Residences was
primarily attributable to increases in average monthly rents to $1,727 and an
average occupancy rate of 95.6% for the three months ended March 31, 1998 from
average monthly rents of $1,700 and an average occupancy rate of 88.1% for the
three months ended March 31, 1997. Of the $18.6 million in revenue reported for
the three months ended March 31, 1998, $11.3 million or 60.8% was attributable
to Stabilized Residences, $5.6 million or 30.1% was attributable to Start-up
Residences and the remaining $1.7 million was mainly due to ancillary revenues.
RESIDENCE OPERATING EXPENSES. For the three months ended March 31, 1998,
general operating expenses were $11.4 million as compared to $5.7 million for
the three months ended March 31, 1997, an increase of $5.7 million. Of this
increase, $3.7 million or 64.9% related to the opening of an additional 50
operating
Page 10 of 21
<PAGE>
residences (1,962 units) since March 31, 1997. The remaining $2 million or 35.1%
of the increase was attributable to the 66 residences that had operating results
as of March 31, 1997 and $1.3 million from ancillary services. For the three
months ended March 31, 1998, residence operating expenses for the 51 Same Store
Residences were $5.0 million as compared to $4.8 million for the three months
ended March 31, 1997. This increase is due to the increase in staffing and food
costs to accommodate the increase in occupancy. Of the $11.4 million in
residence operating expenses reported for the three months ended March 31, 1998,
$6.3 million or 55.3% was attributable to Stabilized Residences, $3.8 million or
33.3% was attributable to Start-up Residences and approximately $1.3 million was
attributable to ancillary services.
CORPORATE, GENERAL AND ADMINISTRATIVE. Corporate, general and administrative
expenses for the three months ended March 31, 1998 were $1.1 million compared to
$641,000 for the 1997 period. Corporate, general and administrative expenses
increased due to the expansion of the corporate offices, increased personnel at
both corporate and regional offices and increased activity due to the number of
operating residences.
BUILDING RENTALS. Building rentals for the three months ended March 31, 1998
were $3.9 million compared to $1.6 million for the 1997 period, which represents
an increase of $2.3 million or 144%. This increase was directly related to the
27 operating leases entered into from March 31, 1997 to March 31, 1998. The
Company had 68 operating leases as of March 31, 1998 compared to 33 at March 31,
1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was $1.0
million in the three month period ended March 31, 1998 compared to $506,000 for
the three months ended 1997, which represents an increase of $494,000, or 97.6%.
This increase is the result of the additional facilities developed and owned by
the Company during the three months ended March 31, 1998.
INTEREST EXPENSE. Interest expense, net of capitalized interest, was $268,000
for the three months ended March 31, 1998 compared to $163,000 for the three
months ended March 31, 1997. The Company' s gross interest expense was $2.1
million for the three months ended March 31, 1998 compared to $1.1 million for
the three months ended March 31, 1997. The increase in interest expense is due
to mortgage and bond financing to fund development activity. Capitalized
interest for the three months ended March 31, 1998 was $1.8 million compared to
$946,000 for the three months ended March 31, 1997.
INTEREST INCOME. Interest income was $700,000 for the three month period ended
March 31, 1998 compared to $123,000 in the corresponding 1997 period, an
increase of $577,000. The increase in interest income is directly related to
the offerings completed in October 1997 from which the Company received
approximately $155 million net of offering expense of $8.4 million.
OTHER INCOME. Other income for the three months ended March 31, 1998 was $1.4
million compared to $0 for the period in 1997. The $1.4 million represents that
portion of the net operating losses of a joint venture (including management
fees paid to the Company) attributable to the Company's joint venture partner.
INCOME BEFORE INCOME TAXES. Income before income taxes for the three months
ended March 31, 1998, was $3.1 million compared to $805,000 for the period in
1997. The Company's income before income taxes has continued to increase as the
number of operating residences increases. As the Company has matured in certain
of its regions and occupancy has increased, the operating income of the
residences in such regions has been able to cover general corporate overhead
plus provide additional income.
Page 11 of 21
<PAGE>
PROVISION FOR INCOME TAXES. The Company's provision for income taxes for the
three months ended March 31, 1998 was $1.2 million or 38% compared to $141,000
or 17.5% for the same period in 1997. The Company utilized all its operating
loss carryforwards from previous periods to offset taxes otherwise payable
through 1996.
NET INCOME. The Company achieved net income for the three months ended March
31, 1998 of $1.9 million or $.12 per diluted share compared to $664,000 or $.06
per diluted share for the same period in 1997. This increase is due to the
number of residences opened in 1997 and the stabilization of the residences
throughout 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had positive working capital of approximately of
$13.9 million including liabilities for construction payables and construction
financing. Exclusive of construction related activities, working capital was
$26.5 million. As of March 31, 1998, the Company had $26.3 million of mortgage
financing on 15 residences. This mortgage financing will be repaid with the
proceeds from sale leaseback transactions that will be completed when additional
residences that are currently under construction are completed.
Net cash provided by operating activities was approximately $1.9 million during
the three month period ended March 31, 1998, and the primary source of funds was
from net income.
Net cash used for investing activities totaled $29.6 million during the three
month period ended March 31, 1998. The primary use of cash was $31.3 million
related to the development of new assisted living residences.
Net cash used in financing activities totaled $5.8 million during the three
month period ended March 31, 1998. The Company incurred a temporary decline in
construction draws during the first quarter resulting in a $6.3 million decrease
in those payables.
Capital expenditures for 1998 are estimated to approximate $160 million to $190
million, related primarily to the development of additional residences, of which
approximately $31.3 million had been spent through March 31, 1998. On April 13,
1998, the Company completed the issuance of $75 million in Convertible
Subordinated Debentures and intends to use these funds in conjunction with
current working capital resources to develop additional residences. In addition,
as of March 31, 1998, the Company had outstanding $138 million in commitments
from several health care REITs to finance additional residences through sale and
leaseback transactions and $50 million in mortgage financing ($14.6 million of
which was utilized during April, 1998). The Company also anticipates being able
to continue to utilize tax-exempt bond financing for approximately $28 million
from the states of Ohio, Oregon and Washington. The Company does not anticipate
any significant capital expenditures within the foreseeable future with respect
to the residences developed since 1994 and those currently operating or those
pending licensure as of March 31, 1998.
The Company expects that its cash on hand, together with cash flow from
operations and available REIT and mortgage financing, will be sufficient to meet
is 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 public and private debt and equity,
conventional mortgage financing, 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.
Page 12 of 21
<PAGE>
As of March 31, 1998, the Company had invested excess cash balances in short-
term certificates of deposit and U.S. Treasury securities.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which established requirements for disclosure
of comprehensive income. The objective of SFAS No. 130 is to report all changes
in equity that result from transactions and economic events other than
transactions with owners. Comprehensive income is the total of net income and
all other non-owner changes in equity. The Company will comply with the
provisions of SFAS No. 130 as they become applicable.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
changes the way segment information is reported for public companies and
requires those companies to report selected segment information in interim
financial reports to stockholders. The Statement is effective for financial
statements for fiscal years beginning after December 15, 1997. The Company
plans to adopt SFAS No. 131 for the fiscal year ended December 31, 1998.
RISK FACTORS
Except for the historical information contained herein, the matters discussed
herein are foreword looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The following discussion highlights
some of these risks and others are discussed elsewhere herein or in other
documents filed by the Company with the Securities and Exchange Commission.
ANTICIPATED OPERATING LOSSES OF NEW RESIDENCES. The Company anticipates that
each residence will have an operating loss (prior to depreciation, rent or
interest, if any) of $20,000 during the first three to four months of operation.
To the extent the Company sells a residence and leases it back or otherwise
finances it, the aggregate loss may increase by up to an additional $100,000.
The Company currently plans to open 60 to 70 residences in 1998. The Company
estimates that the losses to be incurred during 1998 due to start-up residences
could range from $1.0 million to $3.2 million. The success of the Company's
future operations is directly tied to the expansion of its operational base.
There can be no assurance that the Company will not experience unforeseen
expenses, difficulties, complications and delays in connection with the
expansion of its operational base which could have a material adverse effect on
the Company's financial condition and results of operations.
In April 1997, in order to mitigate the impact of start-up losses associated
with the opening of newly constructed residences, the Company entered into a
joint venture agreement with a third party investor to operate certain new
assisted living residences owned and developed by the Company. Pursuant to the
joint venture agreement, the Company has acquired a 10% interest for $300,000
and the joint venture partner has acquired a 90% interest for $2.0 million in
the joint venture. The joint venture concurrently entered into a non-cancelable
management agreement with the Company pursuant to which the Company will manage
the properties operated by the joint venture for an amount equal to the greater
of 8% of gross revenues or $2,000 per month per property. As of March 31, 1998,
24 residences owned or leased by the Company were being operated by the joint
venture. The Company anticipates 5 to 10 new residences will enter the joint
venture per quarter. The revenues and expenses of the joint venture are
consolidated with those of the Company. In addition, the Company will recognize
10% of the losses or profits, if any, of the joint venture, net of the effect of
management fees paid to the Company. The Company may seek to acquire the joint
venture partner's 90% interest in the future, but has no contractual right to
purchase such interest. While the use of such joint venture agreements is
intended to mitigate the impact on the Company of start-up losses associated the
opening of new residences or otherwise, the Company may, to the extent it does
not acquire the partner's interest, forgo a portion of future operating profits,
if any, from the residences operated by the joint venture. The Company expects
it will, from time to time, enter into additional partnering
Page 13 of 21
<PAGE>
arrangements, which may be similar to the current structure, for some of its
future development projects. There can be no assurance that the Company will be
able to enter into any such future arrangements or, if entered into, that such
arrangements will achieve the desired results.
Due to the successful completion of recent debt and equity financing, the
Company expects to retain a higher percentage of its residences. Historically,
the Company has relied extensively on sale/leaseback financings from REITs to
finance its development efforts. The Company expects to make additional
investments in its management infrastructure to further support its growth
strategy. While the Company believes that the resulting effects of the recent
completed offerings, the increased focus on asset ownership, its accelerated
development program and anticipated additions to its corporate infrastructure
will negatively impact its earnings prospects over the next 12 to 18 months, it
believes that these measures will positively affect its long-term prospects.
NO ASSURANCE AS TO ABILITY TO DEVELOP OR ACQUIRE ADDITIONAL ASSISTED LIVING
RESIDENCES. The Company's prospects for growth are directly affected by its
ability to develop and, to a lesser extent, acquire additional assisted living
residences. While the Company currently plans to open 60 to 70 residences in
1998, there can be no assurance that such residences will be completed. The
success of the Company's growth strategy will also depend upon, among other
factors, the Company's ability to obtain government licenses and approvals, the
Company's ability to obtain financing and the competitive environment for
development and acquisitions. The nature of such licenses and approvals and the
timing and likelihood of obtaining them vary widely from state to state,
depending upon the residence, or its operation, and the type of services to be
provided. The successful development of additional assisted living residences
will involve a number of risks, including the possibility that the Company may
be unable to locate suitable sites at acceptable prices or may be unable to
obtain, or may experience delays in obtaining, necessary zoning, land use,
building, occupancy, and other required governmental permits and authorizations.
The Company is dependent upon these permits and authorizations to construct and
operate its residences and any delay or inability to obtain such permits could
adversely affect the results of operations. The Company may also incur
construction costs that exceed original estimates, may not complete construction
projects on schedule and may experience competition in the search for suitable
development sites. The Company relies on third-party general contractors to
construct its new assisted living facilities. There can be no assurance that
the Company will not experience difficulties in working with general contractors
and subcontractors, which could result in increased construction costs and
delays. Further, facility development is subject to a number of contingencies
over which the Company will have little control and that may adversely affect
project cost and completion time, including shortages of, or the inability to
obtain, labor or materials, the inability of the general contractor or
subcontractors to perform under their contracts, strikes, adverse weather
conditions and changes in applicable laws or regulations or in the method of
applying such laws and regulations. Accordingly, if the Company is unable to
achieve its development plans, its business, financial condition and results of
operations could be adversely affected. There can be no assurance that the
Company will be successful in developing or acquiring any particular residence,
that the Company's rapid expansion will not adversely affect its operations or
that any residence developed or acquired by the Company will be successful. The
various risks associated with the Company's development or acquisition of
assisted living residences and uncertainties regarding the profitability of such
operations could have a material adverse effect on the Company's financial
condition and results of operations.
NEED FOR ADDITIONAL FINANCING TO FUND FUTURE DEVELOPMENT AND ACQUISITIONS. To
achieve its growth objectives, the Company will need to obtain sufficient
financial resources to fund its development, construction and acquisition
activities. The estimated cost to complete and fund start-up losses for new
facilities that will be developed during 1998 is between $160 million and $190
million; accordingly, the Company's future growth will depend on its ability to
obtain additional financing on
Page 14 of 21
<PAGE>
acceptable terms. The Company will, from time to time, seek additional funding
through public and/or private financing sources, including equity and/or debt
financing. If additional funds are raised by issuing equity securities, the
Company's stockholders may experience dilution. There can be no assurance that
adequate funding will be available as needed or on terms acceptable to the
Company. A lack of available funds may require the Company to delay or eliminate
all or some of its development projects and acquisition plans.
The Company's aggregate annual fixed debt and lease payment obligations as of
March 31, 1998 totaled approximately $27.5 million (adjusted to give effect to
the issuance of the 5.625% Debentures closed in April of 1998.). These fixed
payment obligations will significantly increase as the Company pursues its
development plan. Failure to meet these obligations may results in the Company
being in default of its financing agreements and, as a consequence, the Company
may lose its ability to operate any individual residence or other residences
which may be cross-defaulted. There can no assurance that the Company will
generate sufficient cash flow to meet its current or future obligations. The
Company has not historically covered its fixed charges with earnings. In
addition, the Company anticipates, there is a risk that, upon completion of
construction, permanent financing for newly developed residences may not be
available or may be available only on terms that are unfavorable or unacceptable
to the Company.
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON STATE MEDICAID WAIVER PROGRAMS. As of
March 31, 1998, 24.5% of the Company's properties are in Texas, 13.2% are in
Oregon, 11.9% in Ohio, 9.9% are in Indiana and 9.3% in Washington; therefore,
the Company is dependent on the economies of Texas, Oregon, Ohio, Indiana and
Washington and, to a certain extent, on the continued funding of state Medicaid
waiver programs. During the years ended December 31, 1995, 1996, 1997 and the
three months ended March 31, 1998, direct payments received from state Medicaid
agencies accounted for approximately 21.4%, 13.8%, 11.3% and 11.8%, respectively
of the Company's revenue while the tenant-paid portion of Medicaid residents
accounted for approximately 9.6%, 7.6%, 6.0% and 6.5%, respectively, of the
Company's revenue during these periods. The Company expects that state Medicaid
reimbursement programs will constitute a significant source of revenue for the
Company in the future. The Company intends to continue developing and operating
assisted living residences in other states. Adverse changes in general economic
factors affecting these states' respective health care industries or in these
states' laws and regulatory environment, including Medicaid reimbursement rates,
could have a material adverse effect on the Company's financial condition and
results of operations.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS. A portion of the Company's
revenues will be dependent upon reimbursement from third-party payors, including
state Medicaid programs and private insurers. For the years ended December 31,
1995, 1996, 1997 and the three months ended March 31, 1998, the Company
received, as a percentage of total revenue, under Medicaid programs 21.4%,
13.8%, 11.3% and 11.8%, respectively. Furthermore, there can be no assurance
the Company's proportionate percentage of revenue received from Medicaid
programs will not increase. The revenues and profitability of the Company will
be affected by the continuing efforts of governmental and private third-party
payors to contain or reduce the costs of health care by attempting to lower
reimbursement rates, increasing case management review of services and
negotiating reduced contract pricing. In an attempt to reduce the federal and
certain state budget deficits, there have been, and management expects that
there will continue to be, a number of proposals to limit Medicaid reimbursement
in general. Adoption of any such proposals at either the federal or the state
level could have a material adverse effect on the Company's business, financial
condition, results of operations and prospects.
Page 15 of 21
<PAGE>
GOVERNMENT REGULATION. Federal and state governments regulate various aspects
of the Company's business. The development and operation of assisted living
facilities and the provision of health care services are subject to federal,
state and local licensure, certification and inspection laws that regulate,
among other matters, the number of licensed beds, the provision of services,
equipment, staffing (including professional licensing), operating policies and
procedures, fire prevention measures, environmental matters, resident
characteristics, physical design and compliance with building and safety codes.
Failure to comply with these laws and regulations could result in the denial of
reimbursement, the imposition of fines, suspension or decertification from the
Medicare and Medicaid program and, in extreme cases, the revocation of a
facility's license or closure of a facility. There can be no assurance that
federal, state, or local governments will not impose additional restrictions on
the Company's activities that could materially adversely affect the Company.
State and local laws regulating the Company's operations vary significantly
from one jurisdiction to another. In certain states in which the Company is
currently developing assisted living facilities, a certificate of need ("CON")
or other similar approval may be required for the acquisition or construction of
new facilities, the expansion of the number of licensed units or beds or
services, or the opening of a home health care agency or hospice. The Company
could be adversely affected by the failure or inability to obtain such approval,
changes in the standards applicable for such approval and possible delays and
expenses associated with obtaining such approval.
Federal and state fraud and abuse laws, such as "anti-kickback" laws and
"self-referral" laws, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. Although the Company has established policies and procedures
that it believes are sufficient to ensure that its facilities will operate in
substantial compliance with applicable regulatory requirements, there can be no
assurance that such fraud and abuse laws will be interpreted in a manner
consistent with the practices of the Company.
PRICING PRESSURES. The health care services industry is currently
experiencing market-driven reforms from forces within and outside the industry
that are exerting pressure on health care and related companies to reduce health
care costs. These market-driven reforms are resulting in industry-wide
consolidation that is expected to increase the downward pressure on health care
service providers' margins, as larger buyer and supplier groups exert pricing
pressure on health care providers. The ultimate timing or effect of market-
driven reforms cannot be predicted. No assurance can be given that any such
reforms will not have a material adverse effect on the Company's business,
results of operations, financial condition and prospects.
HEALTH CARE REFORM. Health care and related services is an area of extensive
and dynamic regulatory change. Changes in the law, new interpretations of
existing laws, or changes in payment methodology, may have a dramatic effect on
the definition of permissible or impermissible activities, the relative costs
associated with doing business and the amount of reimbursement by both
government and other third-party payors and may be applied retroactively.
In addition, to the reforms enacted and considered by Congress from time to
time, state legislatures periodically consider various health care reform
proposals. Congress and state legislatures can be expected to continue to
review and assess alternative health care delivery systems and payment
methodologies and public debate of these issues can be expected to continue in
the future. The ultimate timing or effect of legislative efforts cannot be
predicted and may impact the Company in different ways. There can be no
assurances that either the states or the federal government will not impose
additional regulations upon the activities of the Company or HCI which might
adversely affect their businesses, the financial condition, results of
operations and prospects.
Page 16 of 21
<PAGE>
STAFFING AND LABOR COSTS. The Company will compete with other providers of
long-term care with respect to attracting and retaining qualified personnel.
The Company will also be dependent upon the available labor pool of low-wage
employees. A shortage of nurses and/or trained personnel may require the
Company to enhance its wage and benefits package in order to compete. No
assurance can be given that the Company's labor costs will not increase, or
that, if they do increase, they can be matched by corresponding increases in
revenues.
COMPETITION. The long-term care industry is highly competitive and the Company
expects that the assisted living business, in particular, will become more
competitive in the future. The Company will be competing with numerous other
companies providing similar long-term care alternatives, such as home health
agencies, life care at home, community-based service programs, retirement
communities and convalescent centers. The Company expects that as assisted
living receives increased attention and the number of states which include
assisted living in their Medicaid waiver programs increases, competition will
grow from new markets entrants, including publicly and privately held companies
focusing primarily on assisted living. Nursing facilities that provide long-term
care services are also a source of competition to the Company. Moreover, in the
implementation of the Company's expansion program, the Company expects to face
competition for development and acquisitions of assisted living residences. Some
of the Company's present and potential competitors are significantly larger and
have, or may obtain, greater financial resources than those of the Company.
Consequently, there can be no assurance that the Company will not encounter
increased competition in the future which could limit its ability to attract
residents or expand its business and could have a material adverse effect on the
Company's financial condition, results of operations and prospects.
DIFFICULTIES OF MANAGING RAPID GROWTH. The Company expects that the number of
residences which it owns, leases or otherwise operates will increase
substantially as it pursues its growth strategy. This rapid growth will place
significant demands on the Company's management resources. The Company's
ability to manage its growth effectively will require it to continue to expand
its operational, financial and management information systems and to continue to
attract, train, motivate, manage and retain key employees. To the extent such
growth is attributable to acquisitions of existing facilities or businesses, the
Company's success will depend partly on its ability to integrate effectively
such facilities and businesses into the Company's management, information and
operating systems. If the Company is unable to manage its growth effectively,
its business, financial condition and results of operations could be adversely
affected.
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL. The Company depends,
and will continue to depend, upon the services of Mr. McBride, its Chief
Executive Officer, Dr. Wilson, its Chief Operating Officer and President, Ms.
Marsh, its Vice President/Controller and Chief Accounting Officer, Mrs. Baldwin,
its Director of Operations, Mr. Gordon, its Vice President/Treasurer, Ms.
Haile, its Vice President/Financial Operations, Ms. Campbell, its Senior Vice
President/General Counsel and Ms. Gorshe, its Vice President/Community
Relations. The Company has entered into employment agreements with Mr. McBride
and Dr. Wilson and its senior executive officers and has obtained a $500,000 key
employee insurance policy covering Dr. Wilson's life. The Company is also
dependent upon its ability to attract and retain management personnel who will
be responsible for the day-to-day operations of each residence. The loss of the
services of any or all of such officers or the Company's inability to attract
additional management personnel in the future could have a material adverse
effect on the Company's financial condition or results of operations.
LIABILITY AND INSURANCE. The provision of health care services entails an
inherent risk of liability. In recent years, participants in the long-term care
industry have become subject to an increasing number of
Page 17 of 21
<PAGE>
lawsuits alleging malpractice or related legal theories, many of which involve
large claims and significant defense costs. The Company currently maintains
liability insurance intended to cover such claims and the Company believes that
its insurance is in keeping with industry standards. There can be no assurance,
however, that claims in excess of the Company's insurance coverage or claims not
covered by the Company's insurance coverage (e.g., claims for punitive damages)
will not arise. A successful claim against the Company not covered by, or in
excess of, the Company's insurance coverage could have a material adverse effect
upon the Company's financial condition and results of operations. Claims against
the Company regardless of their merit or eventual outcome, may also have a
material adverse effect upon the Company's ability to attract residents or
expand its business and would require management to devote time to matters
unrelated to the operation of the Company's business. In addition, the Company's
insurance policies must be renewed annually. There can be no assurance that the
Company will be able to obtain liability insurance coverage in the future or
that, if such coverage is available, it will be available on acceptable terms.
ENVIRONMENTAL RISKS. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be held liable for the cost of removal or remediation of
certain hazardous or toxic substances, including, without limitation, asbestos-
containing materials, that could be located on, in or under such property. Such
laws and regulations often impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of the hazardous or toxic
substances. The costs of any required remediation or removal of these
substances could be substantial and the liability of an owner or operator as to
any property is generally not limited under such laws and regulations and could
exceed the property's value and the aggregate assets of the owner or operator.
The presence of these substances or failure to remediate such substances
properly may also adversely affect the owner's ability to sell or rent the
property, or to borrow using the property as collateral. Under these laws and
regulations, an owner, operator or an entity that arranges for the disposal of
hazardous or toxic substances, such as asbestos-containing materials, at a
disposal site may also be liable for the costs of any required remediation or
removal of the hazardous or toxic substances at the disposal site. In
connection with the ownership or operation of its properties, the Company could
be liable for these costs, as well as certain other costs, including
governmental fines and injuries to persons or properties. As a result, the
presence, with or without the Company's knowledge, of hazardous or toxic
substances at any property held or operated by the Company, or acquired or
operated by the Company in the future, could have an adverse effect on the
Company's business, financial condition and results of operations.
Environmental audits performed on the Company's properties have not revealed any
significant environmental liability that management believes would have a
material adverse effect on the Company's business, financial condition or
results of operations. No assurance can be given that existing environmental
audits with respect to any other Company's properties reveal all environmental
liabilities.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to various factors and
events, including the liquidity of the market for the Common Stock, variations
in the Company's operating results, new statutes or regulations or changes in
the interpretation of existing statutes or regulations affecting the health care
industry generally or assisted living residence businesses in particular. In
addition, the stock market in recent years has experienced broad price and
volume fluctuations that often have been unrelated to the operating performance
of particular companies. These market fluctuation also may adversely affect the
market price of the Common Stock.
Page 18 of 21
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Exhibit Number 12.1 Computation of Fixed Charge to Earnings
Exhibit Number 27 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1998.
Page 19 of 21
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) the Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASSISTED LIVING CONCEPTS, INC.
Registrant
May 14, 1998 By: /s/ RHONDA S. MARSH
----------------------
Name: Rhonda S. Marsh
Title: Vice President/Controller
Chief Accounting Officer
Page 20 of 21
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGE:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------ -------------------
<S> <C> <C>
Income (Loss) before provision for income taxes $3,074 $ 825
Add fixed charges
Interest costs including amortization of debt
issuance cost 268 162
------ ------
Earnings $3,342 $ 987
====== ======
Fixed Charges
Interest expense including amortization of debt
issuance cost 268 162
Capitalized interest 946 1,338
------ ------
Total Fixed Charges 1,214 1,500
====== ======
Ratio of Earnings to Fixed Charges 2.75 .66
Excess (Deficiency) of Earnings to Cover Fixed Charges $2,128 $ (513)
</TABLE>
Page 21 of 21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> MAR-31-1997 MAR-31-1998
<CASH> 3,320 29,885
<SECURITIES> 8,668 188
<RECEIVABLES> 1,025 3,139
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,699 38,423
<PP&E> 138,345 233,520
<DEPRECIATION> 1,105 3,206
<TOTAL-ASSETS> 159,473 294,387
<CURRENT-LIABILITIES> 67,076 24,553
<BONDS> 32,655 126,198
0 0
0 0
<COMMON> 55 157
<OTHER-SE> 59,687 143,478
<TOTAL-LIABILITY-AND-EQUITY> 159,473 294,387
<SALES> 9,244 18,648
<TOTAL-REVENUES> 9,244 18,648
<CGS> 8,399 17,381
<TOTAL-COSTS> 8,399 17,381
<OTHER-EXPENSES> (123) (2,075)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 163 268
<INCOME-PRETAX> 805 3,074
<INCOME-TAX> 141 1,168
<INCOME-CONTINUING> 664 1,906
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 664 1,906
<EPS-PRIMARY> .06 .12
<EPS-DILUTED> .06 .12
</TABLE>
