<PAGE> 1
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 22, 1996
Commission file number 0-26980
ARV ASSISTED LIVING, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0160968
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
245 FISCHER AVENUE, D-1
COSTA MESA, CA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
<PAGE> 2
Item 7. Financial Statements and Exhibits
The Registrant submits this Form 8-K/A in order to supply the financial
statements and schedules required pursuant to Rule 3-05 of Regulation S-X with
respect to the Registrant's acquisition of Syncare, Inc. ("Syncare"), a
California corporation, and to provide the audited financial statements of
Syncare required thereby. This information should be read in conjunction with
the Registrant's Form 8-K filed with the Commission on August 22, 1996.
Financial Statements of Business Acquired
Exhibit 99.1 "Financial Statements of Syncare, Inc. and subsidiaries, (a
California corporation) June 30, 1996 with Independent Auditors'
Report Thereon."
Exhibit 99.2 "Unaudited Proforma Combined Balance Sheet of ARV Assisted
Living, Inc. as of June 30, 1996, the Unaudited Pro Forma
Combined Statement of Operations for the year ended March 31,
1996 and the Unaudited Pro Forma Combined Statement of Operations
for the three months ended June 30, 1996 and the related notes
thereon."
1
<PAGE> 3
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.
ARV Assisted Living, Inc.
By: /s/ Patrick M. Donovan
-----------------------------
Patrick M. Donovan
Vice President, Finance
(Duly authorized officer)
Date: October 25, 1996
<PAGE> 1
EXHIBIT 99.1
SYNCARE, INC. AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1996
(With Independent Auditors' Report Thereon)
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SynCare, Inc.:
We have audited the accompanying consolidated balance sheet of SynCare, Inc. and
subsidiaries (the Company) as of June 30, 1996 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SynCare, Inc. and
subsidiaries as of June 30, 1996 and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Orange County, California
September 11, 1996
<PAGE> 3
SYNCARE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 53,335
Accounts receivable, less allowance for doubtful accounts 1,184,840
of $100,000 (note 2)
Prepaids 11,708
----------
Total current assets 1,249,883
Furniture and equipment 50,056
Other noncurrent assets 31,959
----------
Total Assets $1,331,898
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 488,336
Income tax payable (note 5) 81,067
Deferred tax liability, net (note 5) 5,172
Amount due to Medicare (note 3) 548,219
----------
Total current liabilities 1,122,794
----------
Shareholders' equity:
Common stock, no par value. Authorized 1,000 shares;
issued and 500
outstanding 2 shares
Retained earnings 208,604
----------
Total shareholders' equity 209,104
Commitments and contingent liabilities (notes 6 and 8)
Subsequent event (note 9)
----------
Total liabilities and shareholders' equity $1,331,898
==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SYNCARE, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Year ended June 30, 1996
<TABLE>
<S> <C>
Revenues:
Net patient service revenue (note 2) $4,765,502
Other income 8,247
----------
Net revenues 4,773,749
----------
Operating expenses:
Therapist services 2,923,226
General and administrative 1,537,325
Pension (note 6) 148,589
Provision for doubtful accounts 50,000
Depreciation and amortization 23,566
Interest expense 39,551
----------
Total operating expenses 4,722,257
----------
Income before income tax expense 51,492
Income tax expense (note 5) 41,450
----------
Net income $ 10,042
==========
Net income per share $ 5,021
==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SYNCARE, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
Year ended June 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at July 1, 1995 2 $500 198,562 199,062
Net income - -- 10,042 10,042
--- ---- ------- -------
Balance at June 30, 1996 2 $500 208,604 209,104
=== ==== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
SYNCARE, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year ended June 30, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 10,042
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 23,566
Provision for doubtful accounts 50,000
Provision for deferred taxes 35,383
Changes in assets and liabilities:
Increase in accounts receivable, net (98,535)
Increase in prepaids (2,031)
Increase in other assets (27,446)
Increase in accounts payable and accrued liabilities 138,759
Increase in income tax payable 81,067
Decrease in amount due to Medicare (128,607)
---------
Net cash provided by operating activities 82,198
Cash flows from investing activities - capital expenditures (47,004)
---------
Net increase in cash and cash equivalents 35,194
Cash and cash equivalents at beginning of year 18,141
---------
Cash and cash equivalents at end of year $ 53,335
=========
Supplemental cash flow disclosure:
Cash paid for income taxes $ 1,600
Cash paid for interest 39,551
=========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
SYNCARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Syncare, Inc. is the parent company for ProMotive Rehabilitation Services,
Inc. (Geri Care), BayCare Rehabilitative Services, Inc. (BayCare) and Pro
Motion Rehabilitation, Inc. (Pro Motion). SynCare, Inc. was incorporated on
July 25, 1995 to be a holding company for Geri Care, BayCare and Pro
Motion. Pro Motion was incorporated on August 6, 1991 as a provider of
physical, occupational and/or speech therapy services on an outpatient
basis. Pro Motion has service contracts with various Skilled Nursing
Facilities (SNF) throughout Southern California. Geri Care and BayCare,
incorporated on June 18, 1992 and August 9, 1995 respectively, provide
rehabilitation services to residents of assisted living facilities. Geri
Care and BayCare are Medicare certified and operate exclusively as Medicare
service providers. Syncare, Inc. is owned and operated by the President and
Vice President who are the sole shareholders of SynCare, Inc. and
previously owned its subsidiaries (collectively referred to as the
Company). The Company's main source of revenue is generated through
providing physical, occupational and speech therapy services. The
consolidated financial statements for the year ended June 30, 1996 include
the activities of the aforementioned companies for the period they were in
existence during the year ended June 30, 1996.
PRINCIPLES OF CONSOLIDATIONS
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
NET PATIENT SERVICE REVENUE
Net patient service revenue is reported at the estimated net realizable
amounts due from patients, third-party payors and others for services
rendered, including estimated retroactive adjustments under reimbursement
agreements with third-party payors. Such contractual adjustments are
accrued on an estimated basis the period the related services are rendered.
Net patient service revenue is adjusted as required in subsequent periods
based on final settlements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
<PAGE> 8
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at historical cost, less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets as follows:
Furniture and equipment 3 to 7 years
Automobiles 3 to 5 years
Furniture and equipment consists of the following:
<TABLE>
<S> <C>
Furniture and equipment $54,221
Automobiles 44,640
-------
98,861
Less accumulated depreciation (48,805)
-------
$50,056
=======
</TABLE>
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered as settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(2) NET PATIENT SERVICE REVENUE AND THIRD-PARTY REIMBURSEMENT
Approximately 80% of net patient service revenue for the year ended June
30, 1996 was derived under Federal and state third-party reimbursement
programs. The Company is reimbursed at a tentative rate with final
settlement determined after submission of annual cost reports by the
Company and audits thereof by the Medicare fiscal intermediary. Management
has provided for its best estimate of amounts due upon settlement of cost
reports, however, the ultimate outcome of such settlements may be different
than amounts provided. The Company's Medicare cost reports have been
audited by the Medicare fiscal intermediary through June 30, 1994.
The Company has also entered into payment agreements with certain
commercial insurance carriers, health maintenance organizations and
preferred provider organizations. The basis for payment to the Company
under these agreements includes discounts from established charges. Such
discounts are recorded in the period the services are rendered.
Both governmental and private pay sources have instituted cost-containment
measures designed to limit payments made to providers of health services, and
there can be no assurance that future measures designed to limit payments made
to providers will not adversely affect reimbursements to the Company.
Furthermore, government reimbursement programs are subject to statutory and
regulatory changes, retroactive rate adjustments, administrative rulings and
government funding restrictions, all of which could materially decrease the
services covered or the rates paid to the Company for its services. In the
opinion of management, retroactive adjustments, if any, would not be material to
the financial position or results of operations of the Company.
<PAGE> 9
(3) AMOUNT DUE TO MEDICARE
Final settlement for third-party reimbursement programs is determined after
submission of the annual cost reports by the Company and audits thereof by
the Medicare fiscal intermediary. Based on an audit of the cost report for
the fiscal year ended June 30, 1994 and the "as filed" cost report for the
fiscal year ended June 30, 1995, it was determined that the Company had
been overpaid by Medicare. This overpayment has been accrued for by the
Company in the accompanying balance sheet as the amount due to Medicare.
(4) OPERATING LEASES
The Company is committed to operating leases for office space that require
annual minimum lease payments as follows:
<TABLE>
<S> <C>
1997 $175,217
1998 140,496
1999 140,496
2000 140,496
2001 70,248
--------
$666,953
========
</TABLE>
Lease expense was $152,136 for the year ended June 30, 1996.
(5) INCOME TAXES
The provision for income tax expense for the year ended June 30, 1996
consists of the following:
<TABLE>
<S> <C>
Current:
Federal $ 63,539
State 17,528
--------
81,067
--------
Deferred:
Federal (32,272)
State (7,345)
--------
(39,617)
--------
$ 41,450
========
</TABLE>
Federal statutory rate of 34% to the Company's provision for income taxes
is as follows:
<TABLE>
<S> <C>
Income tax expense at statutory rate $17,507
State income tax expense, net of Federal income
tax benefit 11,569
Tax penalties 8,017
Other 4,357
-------
$41,450
=======
</TABLE>
<PAGE> 10
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at June 30, 1996 are
presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 43,300
Cost report reserve 59,321
State tax 5,959
Accrued vacation 20,569
--------
129,149
Less valuation allowance (59,321)
--------
69,828
Deferred tax liability - reserve
for penalties and interest 75,000
--------
Net deferred tax liability $ 5,172
========
</TABLE>
Based on the Company's current and expected pretax earnings, management
believes it is more likely than not that the Company will realize certain
of the benefits of the existing deferred tax assets as of June 30, 1996.
Recognition of the remaining balances will require generation of future
taxable income. There can be no assurance that the Company will generate
any earnings or any specific level of earnings in future years. Certain tax
planning or other strategies could be implemented, if necessary, to
supplement income from operations to fully realize recorded net tax
benefits.
(6) SIMPLIFIED EMPLOYEE PENSION PLAN
The Company has a Simplified Employee Pension (SEP) plan, whereby
contributions to each eligible employee's, account are made at the
Company's discretion and range between 0% to 15% of the employees' gross
wages. An employee becomes eligible to participate in the plan upon
completing one year of continuous employment with the Company. The Company
is to make 100% of the contributions and the employee is not required to
match contributions in any way. Furthermore, all contributions vest
immediately and are entirely self directed by the employees. Contributions
by the Company to the SEP were $148,589 for the year ended June 30, 1996.
At June 30, 1996, the Company had accrued a contribution of $77,287 which
is included in accounts payable and accrued liabilities in the accompanying
consolidated balance sheet.
(7) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 106 (SFAS 107), "Disclosure about Fair
Value of Instruments." The estimated fair value amounts have been
determined using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts that could be realized in a current market exchange. The use of
different market assumptions or estimation methodologies may have a
material impact on the estimated fair value amounts. The carrying amounts
reported in the consolidated balance sheet for cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities and amounts
due to Medicare approximate fair value due to the short-term nature of
these instruments.
<PAGE> 11
(8) CONTINGENCIES
The Company is involved in certain litigation arising in the ordinary
course of business. Management believes that settlement of this litigation
will not have a material adverse impact on the consolidated financial
statements.
(9) SUBSEQUENT EVENT
On August 22, 1996, ARV Health Care Inc., a wholly-owned subsidiary of ARV
Assisted Living, Inc. (ARVAL), entered into an agreement to acquire all of
the Company's outstanding stock. The purchase price to be paid by ARVAL
shall be based on the initial valuation of the Company plus the net asset
value of the Company at the time of closing; provided, however, that the
purchase price does not exceed $1,500,000. Thirty days after the closing
date (the second closing date), the initial value, net asset value and
purchase price is to be recalculated using updated financial and other
information.
<PAGE> 1
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements give effect to
the acquisition of SynCare, Inc. The Unaudited Pro Forma Combined Financial
Statements are based on the assumptions and adjustments described in the
accompanying notes and should be read in conjunction therewith and in
conjunction with the historical financial statements of ARV Assisted Living,
Inc. and subsidiaries ("ARVAL" or the "Company") and the notes thereto included
in the Company's report on Form 10-Q as of and for the three month period ended
June 30, 1996 and the Company's consolidated financial statements as of and for
the year ended March 31, 1996. The Unaudited Pro Forma Combined Financial
Statements do not purport to present the financial position or the results of
operations of ARVAL had the transaction assumed therein occurred on the dates
indicated, nor are they necessarily indicative of the results of operations
which may be achieved in the future.
<PAGE> 2
ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
HISTORICAL OTHER PRO FORMA PRO FORMA
ARVAL ACQUISITIONS(1) ADJUSTMENTS(5) ARVAL
------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 42,109,000 $ 37,000 $ (341,000)(a) $ 41,805,000
Fees receivable from affiliates 908,000 -- -- 908,000
Accounts receivable, less allowance for
doubtful accounts of $100,000 -- -- -- --
Deferred project costs 1,162,000 -- -- 1,162,000
Investments in real estate 8,652,000 -- -- 8,652,000
Other assets 2,574,000 64,000 (22,000)(b) 2,616,000
------------- ---------- ----------- -------------
Total current assets 55,405,000 101,000 (363,000) 55,143,000
Restricted cash 5,366,000 -- -- 5,366,000
Property, furniture and equipment 65,833,000 3,030,000 861,000 (c) 69,724,000
Notes receivable from affiliates 277,000 -- -- 277,000
Deferred tax asset 2,044,000 -- -- 2,044,000
Other non-current assets 6,641,000 13,000 (1,881,000)(c) 4,773,000
------------- ---------- ----------- -------------
Total non-current assets 80,161,000 3,043,000 (1,020,000) 82,184,000
------------- ---------- ----------- -------------
Total assets $ 135,566,000 $3,144,000 $(1,383,000) $ 137,327,000
============= ========== =========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 5,369,000 150,000 -- 5,519,000
Deferred revenue, current portion 46,000 7,000 -- 53,000
Income tax payable --
Amount due to Medicare --
Notes payable, current portion 3,458,000 -- -- 3,458,000
Notes payable and other amounts due to affiliates 121,000 10,000 (22,000)(b) 109,000
------------- ---------- ----------- -------------
Total current liabilities 8,994,000 167,000 (22,000) 9,139,000
Deferred revenue 1,397,000 -- -- 1,397,000
Notes payable, less current portion 71,744,000 360,000 -- 72,104,000
------------- ---------- ----------- -------------
Total non-current liabilities 73,141,000 360,000 -- 73,501,000
Total liabilities 82,135,000 527,000 (22,000) 82,640,000
Minority interest 1,131,000 -- 1,256,000 (c) 2,387,000
Shareholders' equity:
Common stock 60,035,000 -- -- 60,035,000
Accumulated equity (deficit) (7,735,000) 2,617,000 (2,617,000)(c) (7,735,000)
------------- ---------- ----------- -------------
Total shareholders' equity 52,300,000 2,617,000 (2,617,000) 52,300,000
------------- ---------- ----------- -------------
Total liabilities and shareholders' equity $ 135,566,000 $3,144,000 $(1,383,000) $ 137,327,000
============= ========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
SYNCARE, INC. PRO FORMA PRO FORMA
ACQUISITION(2) ADJUSTMENTS(6) COMBINED
-------------- -------------- -------------
<S> <C> <C> <C>
ASSETS
Cash $ 53,000 $ -- $ 41,858,000
Fees receivable from affiliates -- -- 908,000
Accounts receivable, less allowance for
doubtful accounts of $100,000 1,185,000 -- 1,185,000
Deferred project costs -- -- 1,162,000
Investments in real estate -- -- 8,652,000
Other assets 12,000 -- 2,628,000
----------- --------- -------------
Total current assets 1,250,000 -- 56,393,000
Restricted cash -- -- 5,366,000
Property, furniture and equipment 50,000 -- 69,774,000
Notes receivable from affiliates -- -- 277,000
Deferred tax asset (5,000) -- 2,039,000
Other non-current assets 32,000 375,000 (a) 5,180,000
----------- --------- -------------
Total non-current assets 77,000 375,000 82,636,000
----------- --------- -------------
Total assets $ 1,327,000 $ 375,000 $ 139,029,000
=========== ========= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities 488,000 -- 6,007,000
Deferred revenue, current portion -- -- 53,000
Income tax payable 81,000 -- 81,000
Amount due to Medicare 548,000 -- 548,000
Notes payable, current portion 0 -- 3,458,000
Notes payable and other amounts due to affiliates 0 -- 109,000
----------- --------- -------------
Total current liabilities 1,117,000 -- 10,256,000
Deferred revenue -- -- 1,397,000
Notes payable, less current portion -- -- 72,104,000
----------- --------- -------------
Total non-current liabilities -- -- 73,501,000
Total liabilities 1,117,000 -- 83,757,000
Minority interest -- -- 2,387,000
Shareholders' equity:
Common stock 1,000 584,000 (b) 60,620,000
Accumulated equity (deficit) 209,000 (209,000)(b) (7,735,000)
----------- --------- -------------
Total shareholders' equity 210,000 375,000 52,885,000
----------- --------- -------------
Total liabilities and shareholders' equity $ 1,327,000 $ 375,000 $ 139,029,000
=========== ========= =============
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE> 3
ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Historical Other Pro Forma Pro Forma
ARVAL Acquisitions(1) Adjustments(5) ARVAL
------------ --------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Assisted living facility revenues $ 25,479,000 $ 3,615,000 $ -- $ 29,094,000
Therapy services revenue -- --
Management fees 2,822,000 -- (67,000)(d) 2,755,000
Development fees 1,500,000 -- -- 1,500,000
Interest income 1,070,000 -- (327,000)(d) 743,000
Other income 2,192,000 50,000 -- 2,242,000
------------ ----------- ----------- ------------
Total revenue 33,063,000 3,665,000 (394,000) 36,334,000
Expenses
Assisted living facility operating expenses 16,395,000 2,529,000 -- 18,924,000
Assisted living facility lease expenses 6,644,000 -- 6,644,000
Therapy services operating expenses -- -- -- --
General and administrative 7,644,000 -- 7,644,000
Depreciation and amortization 1,031,000 304,000 -- 1,335,000
Discontinued project costs and accounts
receivable written-off 395,000 -- -- 395,000
Interest 1,544,000 46,000 -- 1,590,000
------------ ----------- ----------- ------------
Total expenses 33,653,000 2,879,000 -- 36,532,000
------------ ----------- ----------- ------------
Income (loss) before income tax expense (590,000) 786,000 (394,000) (198,000)
Income tax expense 375,000 267,000 (134,000)(e) 508,000
------------ ----------- ----------- ------------
Net income (loss) (965,000) 519,000 (260,000) (706,000)
============ =========== =========== ============
Preferred dividends declared $ 351,000 $ 351,000
------------ ------------
Net loss available for common shares $ (1,316,000) $ (1,057,000)
============ ============
Net loss per common share $ (0.21) $ (0.17)
============ ============
Weighted average common shares outstanding 6,246,000 6,246,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
SynCare, Inc Pro Forma Pro Forma
Acquisition(2) Adjustments(6) Combined
-------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Assisted living facility revenues $ -- $ -- $ 29,094,000
Therapy services revenue 4,766,000 680,000(c) 5,446,000
Management fees -- -- 2,755,000
Development fees -- -- 1,500,000
Interest income -- -- 743,000
Other income 8,000 -- 2,250,000
---------- --------- ------------
Total revenue 4,774,000 680,000 41,788,000
Expenses
Assisted living facility operating expenses 3,122,000 -- 22,046,000
Assisted living facility lease expenses -- -- 6,644,000
Therapy services operating expenses 1,537,000 1,537,000
General and administrative -- -- 7,644,000
Depreciation and amortization 24,000 16,000(d) 1,375,000
Discontinued project costs and accounts
receivable written-off -- -- 395,000
Interest 40,000 -- 1,630,000
---------- --------- ------------
Total expenses 4,723,000 16,000 41,271,000
---------- --------- ------------
Income (loss) before income tax expense 51,000 664,000 517,000
Income tax expense 41,000 226,000(e) 775,000
---------- --------- ------------
Net income (loss) 10,000 438,000 (258,000)
========== ========= ============
Preferred dividends declared $ 351,000
------------
Net loss available for common shares $ (609,000)
============
Net loss per common share $ (0.10)
=============
Weighted average common shares outstanding 42,573(f) 6,288,573
========= =============
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE> 4
ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Historical Other Pro Forma Pro Forma
ARVAL Acquisitions(1) Adjustments(5) ARVAL
----------- --------------- -------------- -----------
Revenue:
<S> <C> <C> <C> <C>
Assisted living facility revenues $13,446,000 $938,000 $ -- $14,384,000
Therapy services revenue -- -- -- --
Management fees 612,000 -- (16,000)(d) 596,000
Development fees 333,000 -- -- 333,000
Interest Income 817,000 -- (69,000)(d) 748,000
Other income 137,000 5,000 -- 142,000
----------- -------- -------- -----------
Total revenue 15,345,000 943,000 (85,000) 16,203,000
Expenses
Assisted living facility operating expenses 8,462,000 657,000 -- 9,119,000
Assisted living facility lease expenses 2,747,000 -- -- 2,747,000
Therapy services operating expenses -- -- -- --
General and administrative 1,606,000 -- -- 1,606,000
Depreciation and amortization 667,000 77,000 -- 744,000
Discontinued project costs and accounts
receivable written-off 61,000 -- -- 61,000
Interest 1,401,000 10,000 -- 1,411,000
----------- -------- -------- -----------
Total expenses 14,944,000 744,000 -- 15,688,000
----------- -------- -------- -----------
Income (loss) before income tax expense 401,000 199,000 (85,000) 515,000
Income tax expense (benefit) 150,000 68,000 (29,000)(e) 189,000
----------- -------- -------- -----------
Net income (loss) $ 251,000 $131,000 $(56,000) $ 326,000
=========== ======== ======== ===========
Net income available for common shares $ 251,000 $ 326,000
=========== ===========
Net income per common share $ 0.03 $ 0.04
=========== ===========
Weighted average common shares outstanding 8,805,000 8,805,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SynCare, Inc. Pro Forma Pro Forma
Acquisition(2) Adjustments(6) Combined
-------------- -------------- -----------
Revenue:
<S> <C> <C> <C>
Assisted living facility revenues -- $ -- $14,384,000
Therapy services revenue $1,247,000 170,000(c) 1,417,000
Management fees -- -- 596,000
Development fees -- -- 333,000
Interest Income -- -- 748,000
Other income -- -- 142,000
---------- -------- -----------
Total revenue 1,247,000 170,000 17,620,000
Expenses
Assisted living facility operating expenses -- -- 9,119,000
Assisted living facility lease expenses -- -- 2,747,000
Therapy services operating expenses 1,062,000 -- 1,062,000
General and administrative 344,000 -- 1,950,000
Depreciation and amortization 6,000 4,000(d) 754,000
Discontinued project costs and accounts
receivable written-off -- -- 61,000
Interest 25,000 -- 1,436,000
---------- -------- -----------
Total expenses 1,437,000 4,000 17,129,000
---------- -------- -----------
Income (loss) before income tax expense (190,000) 166,000 491,000
Income tax expense (benefit) (65,000) 50,000(e) 174,000
---------- -------- -----------
Net income (loss) $ (125,000) $116,000 $317,000
========== ======== ===========
Net income available for common shares $317,000
===========
Net income per common share $0.04
===========
Weighted average common shares outstanding 42,573(f) 8,847,573
======== ===========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE> 5
ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) As of June 30, 1996, the Company has acquired 2 assisted living facilities
and increased ownership in ARVP II since March 31, 1996, through direct
purchases for its own account, or purchases of controlling partnership
interests.
(2) On August 19, 1996 the Company acquired SynCare in a stock for stock
merger. Pursuant to the terms of the purchase agreement, the ARVI stock
issued as consideration for SynCare was valued at $13.75 per share, ARVI's
closing price on August 19, 1996. The purchase price was $1,171,000. At
the close of October 7, 1996 ARVI issued 85,146 new shares to the founders
of SynCare, 50% of which are subject to a three year earn-out.
(3) The Unaudited Pro Forma Combined Balance Sheet at June 30, 1996 presents
the historical balance sheet of the Company as of June 30, 1996, the pro
forma balance sheet of the Company as if the acquisitions described in
note (1) above, had been completed as of June 30, 1996, and the pro forma
balance sheet of the Company after giving effect to the acquisition
described in note (2) above as if the event had also occurred on June 30,
1996.
(4) The Unaudited Pro Forma Combined Statement of Operations for the year
ended March 31, 1996 and the three months ended June 30, 1996 present the
historical operations of the Company, the pro forma operations of the
Company as if the acquisitions described in note (1) above had occurred at
the beginning of each period, and the pro forma combined operations of the
Company as if the acquisition described in note (2) had occurred at the
beginning of each period.
(5) Pro forma adjustments related to acquisitions described in note (1) above
are as follows:
a) To reflect the use of cash for the purchase of the limited
partnership interests described in note (1) above
b) To eliminate amounts owed to/from entities acquired
c) To record the assets and liabilities acquired in connection with the
purchase of the majority partnership interest at fair value,
minority interest and the elimination of the partners' equity in the
limited partnerships referenced in note (1) and note (2) above
d) To eliminate management fees and interest income from entities
acquired
e) To reflect the pro forma change in income tax expense (benefit).
(6) Pro forma adjustments for the acquisition described in note (2)
above are as follows:
a) To record the goodwill in connection with the purchase
b) To record the stock issued in connection with the purchase
c) To reflect the additional revenue related to additional cost
reimbursement
d) To reflect the new amortization expense
e) To reflect the pro forma change in income tax expense (benefit).
f) To reflect additional shares issued in conjunction with the
acquisition, net of the shares subject to a three year earn-out
agreement.
