Assisted Living Concepts, Inc. Announces Strong 2006 Fourth Quarter and Year End Financial Results; Outlines Expansion Plans
Assisted Living Concepts, Inc. Announces Strong 2006 Fourth Quarter and Year End Financial Results; Outlines Expansion Plans
Feb. 28, 2007 01:49 AM
MILWAUKEE, WI -- (MARKET WIRE) -- 02/27/07 --
Fourth Quarter Highlights:
-- Net income up 24.1% from prior year period
-- Net income from continuing operations excluding one time charges up
32.4% from prior year period
-- Revenue increase of 5.0% over prior year period
-- Pro forma revenue increase of 6.7% over prior year period
-- Pro forma average daily census, private pay census and average revenue
per occupied unit day up 1.6%, 4.7% and 5.6%, respectively
-- $50 million expansion plan of 400 units
-- Pro forma adjusted EBITDAR margins of 30.2%
Assisted Living Concepts, Inc. ("ALC") (NYSE: ALC) reported net income from
continuing operations (excluding one-time charges) of $5.0 million in the
2006 fourth quarter as compared to $3.8 million in the 2005 fourth quarter.
Net income from continuing operations for the 2006 fourth quarter was $4.6
million compared to $3.8 million in the 2005 fourth quarter. Net income for
the 2006 fourth quarter was $4.6 million as compared to $3.7 million in
2005.
Net income from continuing operations (excluding one-time charges and a
non-cash charge) was $16.4 million for the 2006 full year as compared to
$12.7 million in 2005. Net income from continuing operations for 2006 was
$10.5 million compared to $12.7 million in the prior year. Net income for
2006 was $9.0 million as compared to $12.3 million in 2005.
One-time charges included transaction fees of $0.4 million and $3.9 million
for the quarter and year ended December 31, 2006, respectively (net of
income tax benefits of $0.3 million and $0.5 million in the quarter and
year, respectively), related to legal, audit and other professional fees
associated with the November 10, 2006 separation of ALC from Extendicare
Inc. and a non-cash charge of $1.9 million (net of an income tax benefit of
$1.2 million) recorded in 2006 from an impaired property identified prior
to the separation. See attached pro forma and non-GAAP reconciliation
tables.
"We are pleased with the results of our fourth quarter," commented Laurie
Bebo, President and Chief Executive Officer of Assisted Living Concepts,
Inc. "Despite the fact that historically our fourth quarter has not been
our strongest, our team made significant progress toward our goals of
improving private pay mix while increasing occupancy levels. Adjusted
EBITDA and adjusted EBITDAR margins were particularly strong as we continue
to contain costs and improve private pay mix."
Until the separation, ALC was a wholly owned subsidiary of Extendicare
(TSX: EXE). The financial results reported until that time reflect the
combined historical financial statements of the assisted living operations
of Extendicare in the United States. As of December 31, 2006, ALC operated
207 assisted living residences representing 8,302 units.
Certain pro forma adjustments are necessary to reflect the ongoing
operations of ALC following the separation. These adjustments add ALC's
results of operations for the month of January, 2005 which was prior to
Extendicare's purchase of ALC and remove data related to assets and
liabilities that were not transferred to ALC in connection with the
separation, including: (i) three assisted living facilities (168 units)
that were closed in the three months ended March 31, 2006 and (ii) two
free-standing assisted living facilities (141 units) and another 129
assisted living units contained in skilled nursing facilities that were
retained by Extendicare.
Prior to the separation, the basic average number of shares of common stock
was determined by adding the number of outstanding Subordinate Voting
Shares and the number of Multiple Voting shares of Extendicare upon
completion of the separation which was equal to the number of outstanding
shares of Class A and Class B common stock of ALC. For purposes of
determining the diluted weighted average number of shares, the Multiple
Voting Shares were deemed to have been converted into Subordinated Voting
Shares at the 1 to 1.075 conversion rate applicable to the Class B common
stock. This results in an additional 0.9 million shares included in the
fully diluted weighted average number of shares outstanding in both the
quarter and year ended December 31, 2006. After the separation, the basic
weighted average number of shares of common stock was based upon the number
of shares of Class A and Class B common stock of ALC outstanding. For
purposes of determining the diluted weighted average number of shares, the
Class B shares were deemed to have been converted into Class A shares at
the 1 to 1.075 conversion rate applicable to the Class B common stock.
Pro forma combined financial information is included for informational
purposes and does not purport to reflect the results of operations or
financial position of ALC that would have occurred had ALC operated as a
separate independent company in the periods presented. The pro forma
financial statements do not reflect the additional cost of being a publicly
listed company nor do they remove any interest expense related to the
capital structure prior to the separation.
On a pro forma basis, net income from continuing operations for the 2006
fourth quarter (excluding one time non-recurring charges and the non-cash
impairment charge) was $5.0 million compared to $3.8 million in the 2005
fourth quarter. ALC reported pro forma net income from continuing
operations (excluding non-recurring charges and the non-cash impairment
charge) for 2006 of $16.3 million compared to $12.4 million in 2005. See
attached tables for pro forma calculations, assumptions, and reconciliation
to net income.
On a fully diluted basis, pro forma earnings per share from continuing
operations (excluding non-recurring charges and the non-cash impairment
charge) were $0.07 and $0.05 in the quarters ended December 31, 2006 and
2005, respectively, and $0.23 and $0.18 for the years ended December 31,
2006 and 2005, respectively.
On a fully diluted basis, earnings per share from continuing operations
were $0.07 and $0.05 in the fourth quarters ended December 31, 2006 and
2005, respectively, and $0.15 and $0.18 for the year ended December 31,
2006 and 2005, respectively. On a fully diluted basis, earnings per share
were $0.07 and $0.05 in the fourth quarters ended December 31, 2006 and
2005, respectively, and $0.13 and $0.18 for the years ended December 31,
2006 and 2005, respectively.
Quarters ended December 31, 2006 and 2005
Revenue from continuing operations increased $2.8 million or 5.0% to
$58.6 million during the 2006 fourth quarter from $55.8 million in the 2005
fourth quarter and decreased $0.3 million or 0.5% from the third quarter of
2006.
Increased revenue from the 2005 period was primarily due to a higher
average daily revenue rate as a result of rate increases and ALC's efforts
to improve private pay mix, partially offset by the fewer number of census
days that properties retained by Extendicare (270 units) were counted in
the 2006 period. The revenue decrease from the third quarter was
primarily due to the differential in days that the 270 units retained by
Extendicare were counted in the period. Revenue in the third quarter of
2006 and the fourth quarter of 2005 included revenues of $1.3 million and
$1.4 million, respectively, associated with the 270 units retained by
Extendicare. Because these properties were only included in ALC's fourth
quarter 2006 through November 10, 2006 (or 41 days of the 2006 fourth
quarter), they added only $0.5 million of revenues in that period.
Revenue in the 2006 and 2005 fourth quarters and the 2006 third quarter
were aided by $0.1 million, $0.7 million and $0.2 million, respectively,
associated with the amortization of below market leases from Extendicare's
2005 acquisition of ALC. Amortization of the below market leases will end
in January 2007. In addition, the 2006 third and fourth quarters include
$0.2 million of revenue from the current tenant of ALC's recently purchased
corporate office. ALC is expected to continue to collect rent on the
corporate office until June 2007 at which point ALC will take occupancy.
Adjusted EBITDA was $13.9 million in the 2006 fourth quarter compared to
$12.6 million in the 2005 fourth quarter and $12.7 million in the 2006
third quarter. As a percent of revenue, adjusted EBITDA for the 2006
fourth quarter increased to 23.7% compared to 22.6% in the 2005 fourth
quarter and 21.7% in the 2006 third quarter.
Compared to the fourth quarter of 2005, in addition to the revenue impacts
describe above, adjusted EBITDA was impacted by favorable experience in our
self-insurance programs and adjustments to various reserves of
approximately $1.6 million, offset by an increase in general and
administrative expense of $1.7 million related to ongoing expenses of the
separation, including increased salaries and benefits, informational
systems costs, accounting related expenses, and charges for services
provided by Extendicare.
Adjusted EBITDAR was $17.6 million in the 2006 fourth quarter compared to
$16.1 million in the 2005 fourth quarter and $16.3 in the 2006 third
quarter. As a percent of revenue, adjusted EBITDAR for the 2006 fourth
quarter increased to 30.0% compared to 28.8 % in the 2005 fourth quarter
and 27.7% in the 2006 third quarter. Rental expense remained substantially
unchanged in the 2005 and 2006 periods. Adjusted EBITDAR increased for the
same reasons as explained in adjusted EBITDA above.
See attached tables for definitions of adjusted EBITDA and adjusted EBITDAR
and reconciliations of net income to adjusted EBITDA and adjusted EBITDAR.
Pro Forma Quarters ended December 31, 2006 and 2005
Pro forma revenue from continuing operations increased $3.7 million, or
6.7%, during the 2006 fourth quarter to $58.1 million from $54.4 million in
the 2005 fourth quarter. Sequentially, pro forma revenue from continuing
operations increased $0.5 million, or 0.9%, during the 2006 fourth quarter
from $57.5 million in the 2006 third quarter. Revenue in the 2006 and 2005
fourth quarters and the 2006 third quarter were aided by $0.1 million, $0.7
million and $0.2 million, respectively, associated with the amortization of
below market leases from Extendicare's 2005 acquisition of ALC.
Amortization of the below market leases will end in January 2007. In
addition, the 2006 third and fourth quarters included $0.2 million of
revenue from leasing ALC's recently purchased corporate office. ALC is
expected to continue to collect rent on the corporate office until June
2007 at which point ALC will take occupancy.
Pro forma adjusted EBITDA was $13.8 million in the 2006 fourth quarter
compared to $12.4 million in the 2005 fourth quarter and $12.5 million in
the 2006 third quarter. As a percent of revenue, pro forma adjusted EBITDA
for the 2006 fourth quarter increased to 23.8% compared to 22.8% in the
2005 fourth quarter and 21.7% in the 2006 third quarter. See explanation in
quarterly data above for adjusted EBITDA changes as pro forma adjustments
did not materially effect adjusted EBITDA results.
Pro forma adjusted EBITDAR was $17.5 million in the 2006 fourth quarter
compared to $15.9 million in the 2005 fourth quarter. As a percent of
revenue, pro forma adjusted EBITDAR for the 2006 fourth quarter increased
to 30.2% compared to 29.2% in the 2005 fourth quarter. See explanation in
quarterly data above for adjusted EBITDAR changes as pro forma adjustments
did not materially effect adjusted EBITDAR results.
See attached tables for definitions of adjusted EBITDA and adjusted EBITDAR
and reconciliations of net income to pro forma net income and pro forma net
income to pro forma adjusted EBITDA and pro forma adjusted EBITDAR.
On a pro forma basis, ALC's average daily revenue rate per unit increased
5.6% to $87.48 in the 2006 fourth quarter from $82.81 in the 2005 fourth
quarter and declined 0.2% from $87.63 in the 2006 third quarter. On a pro
forma basis, ALC's overall average occupied units of private pay residents
and Medicaid residents was 7,168 in the 2006 fourth quarter, an increase of
1.6% from 7,055 in the 2005 fourth quarter and an increase of 1.0% from
7,098 in the 2006 third quarter. On a pro forma basis, private pay
residents average occupied units increased by 4.7% while Medicaid residents
average occupied units decreased by 5.6% as compared to the 2005 fourth
quarter and, on a pro forma basis, private pay residents average occupied
units increased by 2.0% while Medicaid residents average occupied units
decreased by 1.5% as compared to the 2006 third quarter. The decline in the
number of Medicaid residents is consistent with ALC's strategy to move
towards a higher mix of private pay residents. As part of this strategy, we
declined to renew 14 Medicaid contracts in early 2007. During the 2006
fourth quarter the pro forma occupancy percentage increased to 86.4% from
85.8% in the 2006 third quarter and 85.9% in the 2005 fourth quarter.
Years ended December 31, 2006 and 2005
Revenue from continuing operations increased by $26.2 million, or 12.8%, to
$231.1 million during the 2006 year from $204.9 million in 2005.
Increased revenue from the 2005 year was primarily due to increased average
daily revenue rate as a result of rate increases and ALC's efforts to
improve its private pay mix. Because ALC was acquired by Extendicare on
January 31, 2005, the data for 2005 does not include revenues of $15.1
million related to ALC operations in January 2005. After the separation,
data for 2006 does not include properties retained by Extendicare which
resulted in a $0.9 million revenue decrease from the 2005 period. Revenue
in 2006 and 2005 was aided by $1.2 million and $2.5 million, respectively,
associated with the amortization of below market leases from Extendicare's
2005 acquisition of ALC. Amortization of the below market leases will end
in January 2007. In addition, the 2006 year includes $0.4 million of
revenue from leasing ALC's recently purchased corporate office. ALC is
expected to continue to collect rent on the corporate office until June
2007. Adjusting 2005 and 2006 revenue to reflect the addition of the
January 2005 revenue, effects of residences retained by EHSI, elimination
of the amortization of below market leases, and rental income associated
with the corporate office, revenue on an adjusted basis increased by 6.0%
in 2006 over 2005. Other revenue increases in 2006 resulted from three
newly constructed residences opened in 2005 and 2006 (approximately 150
units), additions to four existing facilities (112 units), and an increase
in average rates, partially offset by lower occupancy percentages in the
beginning of 2006.
Adjusted EBITDA was $52.7 million for 2006 compared to $47.2 million in
2005. As a percent of revenue, adjusted EBITDA for 2006 declined to 22.8%
compared to 23.0% in 2005.
Increased adjusted EBITDA was primarily due to the revenue increases
described above and an additional month of adjusted EBITDA from the full
year impact of the acquisition of ALC, partially offset by ongoing general
and administrative expenses resulting from increases in salaries and
benefits, informational systems costs, accounting related services, charges
for services provided by Extendicare, and other items related to ALC
operating as an independent company for a portion of 2006.
Adjusted EBITDAR was $66.9 million in 2006 compared to $60.0 million in
2005. As a percent of revenue, adjusted EBITDAR for 2006 declined to 29.0%
compared to 29.3% in 2005.
Adjusted EBITDAR increased for the same reasons as described above in the
adjusted EBITDA plus an additional $1.4 million for the full year impact of
leases related to Extendicare's acquisition of ALC.
See attached tables for definitions of adjusted EBITDA and adjusted EBITDAR
and reconciliations of net income to adjusted EBITDA and adjusted EBITDAR.
Pro Forma years ended December 31, 2006 and 2005
Pro forma revenue from continuing operations increased $12.3 million, or
5.7%, to $226.6 million for 2006 from $214.3 million in 2005.
Increased pro forma revenue for 2005 was primarily due to increased average
daily revenue rate as a result of rate increases and ALC's efforts to
improve private pay mix. Revenue in 2006 and 2005 was aided by $1.2
million and $2.5 million, respectively, associated with the amortization of
below market leases from Extendicare's acquisition of ALC. Amortization of
the below market leases will end in January 2007. In addition, 2006
includes $0.4 million of revenue from leasing ALC's recently purchased
corporate office. ALC is expected to continue to collect rent on the
corporate office until June 2007. Adjusting 2006 to eliminate the
amortization of below market leases and the rental income associated with
the corporate office, pro forma revenues on an adjusted basis increased by
6.2% over 2005. Other revenue increases resulted from three newly
constructed residences opened in 2005 and 2006 (approximately 150 units),
additions to four existing facilities (112 units), and an increase in
average rates, partially offset by lower occupancy percentages.
Pro forma adjusted EBITDA was $51.9 million in the 2006 year compared to
$47.5 million in 2005. As a percent of revenue, pro forma adjusted EBITDA
for 2006 increased to 22.9% compared to 22.2% in 2005.
Increased pro forma adjusted EBITDA was primarily due the revenue
increases described above, partially offset by ongoing general and
administrative expenses resulting from increases in salaries and benefits,
informational systems contractual costs, increased accounting related
services, charges for services provided by Extendicare, and other items
related to ALC operating as an independent company for a portion of 2006.
Pro forma adjusted EBITDAR was $66.1 million in 2006 compared to $61.8
million in 2005. As a percent of revenue, pro forma adjusted EBITDAR for
the 2006 year increased to 29.2% compared to 28.8% in the 2005 year.
Pro forma adjusted EBITDAR increased for the same reasons as described
above in the pro forma adjusted EBITDA discussion.
See attached tables for definitions of adjusted EBITDA and adjusted EBITDAR
and reconciliation of net income to pro forma net income and pro forma net
income to pro forma adjusted EBITDA and pro forma adjusted EBITDAR.
ALC's average daily revenue rate per unit increased 7.2% to $87.47 in the
2006 year from $81.63 in 2005. ALC's overall average occupied units
decreased 0.8% to 7,049 in 2006 from 7,103 in 2005. Private pay residents
average occupied units increased by 0.4% while Medicaid average occupied
units declined by 3.6% as compared to 2005. The decline in the number of
Medicaid residents is consistent with ALC's strategy to move towards a
higher private pay mix. For 2006, average occupancy decreased to 85.2% from
87.5% in 2005.
Discontinued Operations
Losses from discontinued operations in the year ended December 31, 2006 of
$1.5 million resulted from ALC's decision to close poorly performing
assisted living residences in Oregon (45 units) and Texas (60 units) and
not to renew a lease at a facility in Washington (63 units).
Expansion Plans
Beginning in March, 2007 we intend to add 20 units each to 20 of our
existing owned buildings (a total of 400 units). The expansion is expected
to take approximately 12 months to complete construction and an additional
12 months to stabilize occupancy at the expanded residences. Existing
residents at the selected properties are not expected to be impacted. We
expect our cost to be approximately $125,000 per additional unit for a
total of $50 million. This unit cost includes the addition of common areas
such as media rooms, family gathering areas and other practical attractive
areas to further enhance the residents' experiences in all parts of the
house. Our process of selecting buildings for the expansion consisted of
identifying what we believe to be our best performing buildings as
determined by factors such as current occupancy, strength of the local
management team, private pay mix of the current population, and demographic
trends for the area. "The expansion units are expected to produce a strong
return on capital," states Ms. Bebo, "and further improve the existing high
margins on these buildings."
About Us
Assisted Living Concepts, Inc. of Milwaukee, Wisconsin, separated from
Extendicare Inc. on November 10, 2006 and is an operator of assisted living
residences in the United States. ALC and its subsidiaries operate 207
assisted living residences with capacity for over 8,300 residents in 17
states. ALC's assisted living facilities typically consist of 35 to 60
units and offer residents a supportive, home-like setting and assistance
with the activities of daily living. ALC employs approximately 4,500
people.
ALC has scheduled a conference call on Wednesday, February 28, 2007 at
10:00 a.m. (ET) to discuss its financial results for the fourth quarter.
The toll-free number for the live call is 800-475-4971; the passcode is
8902807, and the leader name is Laurie Bebo. A taped rebroadcast will be
available approximately one hour following the live call until midnight on
March 30, 2007. To access the rebroadcast of the call, click on the
Investor Relations section of ALC's website: www.alcco.com.
The attached statements reflect certain reclassifications to the prior
period figures to conform to the 2006 presentation.
Forward-looking Statements
Statements contained in this release other than statements of historical
fact, including statements regarding anticipated financial performance,
business strategy and management's plans and objectives for future
operations including managements expectations about its expansion plans,
are forward-looking statements. These forward-looking statements can be
identified as such because the statements generally include words such as
"expect," "intend," "will," "anticipate," "believe," "estimate," "plan,"
"strategy" or "objective" or other similar expressions. These
forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in, or
implied by, these statements. In addition to the risks and uncertainties
related to these statements, other risks and uncertainties are identified
in ALC's filings with United States Securities and Exchange Commissions and
include, but are not limited to, the following: changes in the health care
industry in general and the long-term care industry in particular because
of political and economic influences; changes in regulations governing the
industry and ALC's compliance with such regulations; changes in government
funding levels for health care services; resident care litigation,
including exposure for punitive damage claims and increased insurance
costs, and other claims asserted against ALC; ALC's ability to maintain and
increase census levels; ALC's ability to attract and retain qualified
personnel; the availability and terms of capital to fund ALC's capital
expenditures; changes in competition; and demographic changes. Given these
risks and uncertainties, readers are cautioned not to place undue reliance
on ALC's forward-looking statements. All forward-looking statements
contained in this report are necessarily estimates reflecting the best
judgment of the party making such statements based upon current
information, and ALC's assumes no obligation to update any forward-looking
statement.
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Income
(in thousands, except earnings per share)
Year Ended December 31,
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenues $ 58,554 $ 55,784 $ 231,148 $ 204,949
Expenses:
Residence operations
(exclusive of
depreciation and
amortization and
residence lease
expense shown below) 37,992 38,415 153,347 138,126
General and
administrative 3,001 1,288 10,857 6,789
Residence lease
expense 3,702 3,464 14,291 12,852
Depreciation and
amortization 4,172 4,130 16,699 14,750
Transaction costs 680 -- 4,415 --
Impairment of
long-lived asset -- -- 3,080 --
----------- ----------- ----------- -----------
Total operating
expenses 49,547 47,297 202,689 172,517
----------- ----------- ----------- -----------
Income from operations 9,007 8,487 28,459 32,432
Other expense:
Interest expense,
net (1,489) (2,123) (9,197) (11,603)
----------- ----------- ----------- -----------
Income from continuing
operations before income
taxes 7,518 6,364 19,262 20,829
Income tax expense (2,919) (2,590) (8,727) (8,119)
----------- ----------- ----------- -----------
Net income from
continuing operations 4,599 3,774 10,535 12,710
Loss from discontinued
operations, net of taxes (28) (92) (1,526) (368)
----------- ----------- ----------- -----------
Net income $ 4,571 $ 3,682 $ 9,009 $ 12,342
=========== =========== =========== ===========
Weighted average common
shares:
Basic 69,338 69,322 69,326 69,322
Diluted 70,205 70,205 70,205 70,205
Per share data:
Basic earnings per common
share:
Income from continuing
operations $ 0.07 $ 0.05 $ 0.15 $ 0.18
Loss from discontinued
operations -- -- (0.02) --
----------- ----------- ----------- -----------
Net income $ 0.07 $ 0.05 $ 0.13 $ 0.18
=========== =========== =========== ===========
Diluted earnings per common
share:
Income from continuing
operations $ 0.07 $ 0.05 $ 0.15 $ 0.18
Loss from discontinued
operations -- -- $ (0.02) --
----------- ----------- ----------- -----------
Net income $ 0.07 $ 0.05 $ 0.13 $ 0.18
=========== =========== =========== ===========
Adjusted EBITDA(1) $ 13,859 $ 12,617 $ 52,653 $ 47,182
=========== =========== =========== ===========
Adjusted EBITDAR(1) $ 17,561 $ 16,081 $ 66,944 $ 60,034
=========== =========== =========== ===========
(1) See Non-GAAP Financial Measures
ASSISTED LIVING CONCEPTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended
December 31,
--------------------
2006 2005
---------- ---------
OPERATING ACTIVITIES:
Net income $ 9,009 $ 12,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,699 14,920
Amortization of purchase accounting adjustments
for:
Leases and debt (527) (663)
Below market resident leases (1,187) (2,488)
Provision for bad debt 214 458
Provision for self-insured liabilities 415 795
Payments of self-insured liabilities (271) (371)
Loss on impairment of long-lived assets and
discontinued operations 5,018 --
Deferred income taxes 335 3,347
Changes in assets and liabilities:
Accounts receivable (1,258) (1,079)
Other assets -- 4
Supplies, prepaid expenses and other current
assets (3,274) (651)
Accounts payable 107 764
Accrued liabilities (687) 3,010
Income taxes payable/ receivable (999) 1,845
Changes in other non-current assets (7,264) 110
Other long-term liabilities 2,649 2,525
Current due to stockholder and affiliates 76 (3,471)
---------- ---------
Cash provided by operating activities 19,055 31,397
INVESTING ACTIVITIES:
Payment for acquisitions (4,619) (144,578)
Cash balances in acquisitions -- 6,522
Payments for new construction projects (3,338) (15,198)
Payments for purchases of property and equipment (12,832) (5,822)
Proceeds from sales of property and equipment 79 --
---------- ---------
Cash used in investing activities (20,710) (159,076)
FINANCING ACTIVITIES:
Capital contributions (distributions) from (to)
Extendicare (541) 9,521
Capital contributions to ALC 44,219 101,648
Proceeds from debt to finance ALC acquisition -- 60,000
Interest bearing advances from Extendicare to
payoff debt -- 51,016
Repayment of interest bearing advances to
Extendicare (25,200) (3,798)
Payments of long-term debt (2,312) (84,388)
Deferred financing fees (999) --
---------- ---------
Cash provided by financing activities 15,167 133,999
---------- ---------
Increase in cash and cash equivalents 13,512 6,320
Cash and cash equivalents, beginning of year 6,439 119
---------- ---------
Cash and cash equivalents, end of year $ 19,951 $ 6,439
========== =========
ASSISTED LIVING CONCEPTS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------
ASSETS 2006 2005
---------------------
(In thousands
except share and
Current Assets: per share data)
---------------------
Cash and cash equivalents $ 19,951 $ 6,439
Investments 5,332 --
Accounts receivable, less allowances of $1,086
and $872 respectively 5,395 4,351
Supplies, prepaid expenses and other current
assets 8,178 4,904
Income tax receivable 90 --
Deferred income taxes 1,552 392
Due from Extendicare and affiliates:
Deferred federal income taxes -- 350
Other -- 76
---------- ----------
Total current assets 40,498 16,512
Property and equipment, net 374,612 378,362
Goodwill and other intangible assets, net 18,102 19,953
Restricted cash 10,947 3,975
Other assets 3,181 1,696
Net assets of discontinued operations -- 199
---------- ----------
Total Assets $ 447,340 $ 420,697
========== ==========
LIABILITIES AND STOCKHOLDERS’ EQUITY AND PARENT’S INVESTMENT
Current Liabilities:
Accounts payable $ 5,134 $ 5,027
Accrued liabilities 19,580 20,267
Accrued state income taxes -- 570
Current maturities of long-term debt 2,732 2,925
Current portion of self-insured liabilities 300 300
---------- ----------
Total current liabilities 27,746 29,089
Accrual for self-insured liabilities 1,171 1,027
Long-term debt 87,904 128,601
Deferred income taxes 5,146 814
Other long-term liabilities 8,535 7,181
Due to Extendicare and affiliates:
Deferred federal income taxes -- 3,324
Interest-bearing advances -- 47,218
---------- ----------
Total Liabilities 130,502 217,254
---------- ----------
Preferred stock, par value $0.01 per share,
25,000,000 shares authorized, none issued or
outstanding -- --
Series A Common Stock, par value $0.01 per
share, 400,000,000 authorized, 59,501,918
issued and outstanding 595 --
Series B Common Stock, par value $0.01 per
share, 75,000,000 authorized, 9,956,337
issued and outstanding 100 --
Additional paid-in capital 313,474 --
Accumulated other comprehensive income 530 --
Retained earnings 2,139 --
----------
Parent’s Investment -- 203,443
----------
Total Stockholders’ Equity 316,838 --
---------- ----------
Total Liabilities and Stockholders’ Equity and
Parent’s Investment $ 447,340 $ 420,697
========== ==========
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
Three months ended Year ended
Actual December 31, December 31,
-------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Average Occupied Units by
Payer Source (all continuing
residences)
Private 5,232 5,129 5,167 5,195
Medicaid 2,016 2,149 2,058 2,138
--------- --------- --------- ---------
Total 7,248 7,278 7,225 7,333
========= ========= ========= =========
Percent of Occupancy by Payer
Source (all continuing
residences)
Private 72.2% 70.5% 71.5% 70.8%
Medicaid 27.8% 29.5% 28.5% 29.2%
Percent of Revenue by Payer
Source (all continuing
residences)
Private 79.6% 77.5% 79.0% 77.3%
Medicaid 20.4% 22.5% 21.0% 22.7%
Average Revenue per Occupied
Unit Day by Payer Source
Private $ 96.19 $ 90.53 $ 96.20 $ 89.82
Medicaid $ 64.03 $ 62.79 $ 64.11 $ 62.30
Combined $ 87.24 $ 82.34 $ 87.06 $ 81.63
Occupancy Percentage (all
continuing residences) 86.4% 85.8% 85.0% 87.5%
Pro Forma Year ended
Three months ended December 31,
------------------------------- ----------------
December September December
31, 2006 30, 2006 31, 2005 2006 2005
--------- --------- --------- ------- -------
Average Occupied Units
by Payer Source (all
continuing residences)
Private 5,163 5,063 4,932 5,012 4,990
Medicaid 2,005 2,035 2,123 2,037 2,113
--------- --------- --------- ------- -------
Total 7,168 7,098 7,055 7,049 7,103
========= ========= ========= ======= =======
Percent of Occupancy by
Payer Source (all
continuing residences)
Private 72.0% 71.3% 69.9% 71.1% 70.3%
Medicaid 28.0% 28.7% 30.1% 28.9% 29.7%
Percent of Revenue by
Payer Source (all
continuing residences)
Private 79.5% 78.6% 77.1% 78.8% 77.3%
Medicaid 20.5% 21.4% 22.9% 21.2% 22.7%
Average Revenue per
Occupied Unit Day by
Payer Source
Private $ 96.54 $ 96.51 $ 91.35 $ 96.90 $ 89.15
Medicaid $ 64.13 $ 65.55 $ 62.97 $ 64.29 $ 62.21
Combined $ 87.48 $ 87.63 $ 82.81 $ 87.47 $ 81.37
Occupancy Percentage
(all continuing
residences) 86.4% 85.8% 85.9% 85.2% 87.3%
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDAR
Adjusted EBITDA is defined as net income from continuing operations before
income taxes, interest expense net of interest income, depreciation and
amortization, transaction costs and non-cash, non-recurring gains and
losses, including disposal of assets and impairment of long-lived assets
and loss on refinancing and retirement of debt. Adjusted EBITDAR is defined
as adjusted EBITDA before rent expenses incurred for leased assisted living
properties. Adjusted EBITDA and adjusted EBITDAR are not measures of
performance under accounting principles generally accepted in the United
States of America, or GAAP. We use adjusted EBITDA and adjusted EBITDAR as
key performance indicators and adjusted EBITDA and adjusted EBITDAR
expressed as a percentage of total revenues as a measurement of margin.
We understand that adjusted EBITDA and adjusted EBITDAR, or derivatives
thereof, are customarily used by lenders, financial and credit analysts,
and many investors as a performance measure in evaluating a company's
ability to service debt and meet other payment obligations or as a common
valuation measurement in the long-term care industry. Moreover, ALC's
revolving credit facility contains covenants in which a form of EBITDA is
used as a measure of compliance, and we anticipate EBITDA will be used in
covenants in any new financing arrangements that we may establish. We
believe adjusted EBITDA and adjusted EBITDAR provide meaningful
supplemental information regarding our core results because these measures
exclude the effects of non-operating factors related to our capital assets,
such as the historical cost of the assets.
We report specific line items separately, and exclude them from adjusted
EBITDA and adjusted EBITDAR because such items are transitional in nature,
and would otherwise distort historical trends. In addition, we use adjusted
EBITDA and adjusted EBITDAR to assess our operating performance and in
making financing decisions. In particular, we use adjusted EBITDA and
adjusted EBITDAR in analyzing potential acquisitions and internal expansion
possibilities. Adjusted EBITDA and adjusted EBITDAR performance are also
used in determining compensation levels for our senior executives. Adjusted
EBITDA and adjusted EBITDAR should not be considered in isolation or as a
substitute for net income, cash flows from operating activities, and other
income or cash flow statement data prepared in accordance with GAAP, or as
a measure of profitability or liquidity. We present adjusted EBITDA and
adjusted EBITDAR on a consistent basis from period to period, thereby
allowing for comparability of operating performance.
Adjusted EBITDA and Adjusted EBITDAR Reconciliation Information
The following table sets forth a reconciliation of net income to adjusted
EBITDA and adjusted EBITDAR (in thousands):
Three Months Ended Year Ended
December 31, December 31,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income $ 4,571 $ 3,682 $ 9,009 $ 12,342
Loss from discontinued operations, net
of tax benefit 28 92 1,526 368
Provision for income taxes 2,919 2,590 8,727 8,119
-------- -------- -------- --------
Income from continuing operations
before income taxes 7,518 6,364 19,262 20,829
Add:
Depreciation and amortization 4,172 4,130 16,699 14,750
Interest expense, net 1,489 2,123 9,197 11,603
Transaction costs 680 -- 4,415 --
Loss on impairment of long-lived
assets -- -- 3,080 --
-------- -------- -------- --------
Adjusted EBITDA 13,859 12,617 52,653 47,182
Add: Lease expense 3,702 3,464 14,291 12,852
-------- -------- -------- --------
Adjusted EBITDAR $ 17,561 $ 16,081 $ 66,944 $ 60,034
======== ======== ======== ========
The following table sets forth the calculations of adjusted EBITDA and
adjusted EBITDAR percentages (in thousands except percentages):
Three Months Ended Year Ended
December31, December 31,
-------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues $ 58,554 $ 55,784 $ 231,148 $ 204,949
--------- --------- --------- ---------
Adjusted EBITDA $ 13,859 $ 12,617 $ 52,653 $ 47,182
--------- --------- --------- ---------
Adjusted EBITDAR $ 17,561 $ 16,081 $ 66,944 $ 60,034
--------- --------- --------- ---------
Adjusted EBITDA as percent of
total revenue 23.7% 22.6% 22.8% 23.0%
--------- --------- --------- ---------
Adjusted EBITDAR as percent of
total revenue 30.0% 28.8% 29.0% 29.3%
--------- --------- --------- ---------
Assisted Living Concepts, Inc.
Pro Forma and Non-GAAP Reconciliation Information
(in thousands, except earnings per share data)
Three Months Ended
December 31, 2006
-------------------------------------
Actual Adjustments Pro Forma
Revenues $ 58,554 $ (489)(A) $ 58,065
----------- ----------- -----------
Expenses:
Residence operations (exclusive
of depreciation and amortization
and residence lease expense
shown below) 37,992 (436)(A) 37,556
General and administrative 3,001 -- 3,001
Residence lease expense 3,702 -- 3,702
Depreciation and amortization 4,172 (30) 4,142
Transaction costs 680 -- 680
----------- ----------- -----------
Total operating expenses 49,547 (466) 49,081
----------- ----------- -----------
Income from operations 9,007 (23) 8,984
Other expense:
Interest expense, net (1,489) 1 (1,488)
----------- ----------- -----------
Income from continuing operations
before income taxes 7,518 (22) 7,496
Income tax expense 2,919 (9)(C) 2,910
----------- ----------- -----------
Income from continuing operations 4,599 (13) 4,586
----------- ----------- -----------
Loss from discontinued operations,
net of tax (28) 28 --
----------- ----------- -----------
Net income 4,571 15 4,586
----------- ----------- -----------
Non recurring charges:
Transaction fees 680 -- 680
Income tax benefit on transaction
fees (281) -- (281)
----------- ----------- -----------
Net income excluding one time
charges $ 4,970 $ 15 $ 4,985
=========== =========== ===========
Net income from continuing
operations excluding one time
charges $ 4,998 $ (13) $ 4,985
=========== =========== ===========
Pro forma basic weighted average
shares (D) 69,338 -- 69,338
Pro forma diluted weighted average
shares (D) 70,205 -- 70,205
Adjusted EBITDA $ 13,859 $ (53) $ 13,806
=========== =========== ===========
Adjusted EBITDAR $ 17,561 $ (53) $ 17,508
=========== =========== ===========
Basic pro forma earnings per
share(E) $ 0.07
===========
Diluted pro forma earnings per share
(E) $ 0.07
===========
Three Months Ended
December 31, 2005
-------------------------------------
Actual Adjustments Pro Forma
Revenues $ 55,784 $ (1,382)(A) $ 54,402
----------- ----------- -----------
Expenses:
Residence operations (exclusive
of depreciation and amortization
and residence lease expense
shown below) 38,415 (1,182)(A) 37,233
General and administrative 1,288 -- 1,288
Residence lease expense 3,464 (1) 3,463
Depreciation and amortization 4,130 (189) 3,941
Transaction costs -- -- --
----------- ----------- -----------
Total operating expenses 47,297 (1,372) 45,925
----------- ----------- -----------
Income from operations 8,487 (10) 8,477
Other expense:
Interest expense, net (2,123) 22 (2,101)
----------- ----------- -----------
Income from continuing operations
before income taxes 6,364 12 6,376
Income tax expense 2,590 5 2,595
----------- ----------- -----------
Income from continuing operations 3,774 7 3,781
----------- ----------- -----------
Loss from discontinued operations,
net of tax (92) 92 --
----------- ----------- -----------
Net income 3,682 99 3,781
----------- ----------- -----------
Non recurring charges:
Transaction fees -- -- --
Income tax benefit on transaction
fees -- -- --
----------- ----------- -----------
Net income excluding one time
charges $ 3,682 $ 99 $ 3,781
=========== =========== ===========
Net income from continuing
operations excluding one time
charges $ 3,774 $ 7 $ 3,781
=========== =========== ===========
Pro forma basic weighted average
shares (D) 69,322 -- 69,322
Pro forma diluted weighted average
shares (D) 70,205 -- 70,205
Adjusted EBITDA $ 12,617 $ (199) $ 12,418
=========== =========== ===========
Adjusted EBITDAR $ 16,081 $ (200) $ 15,881
=========== =========== ===========
Basic pro forma earnings per
share(E) $ 0.05
===========
Diluted pro forma earnings per share
(E) $ 0.05
===========
Assisted Living Concepts, Inc.
Pro Forma and Non-GAAP Measures Reconciliation Information
(in thousands, except earnings per share data)
Year Ended
December 31, 2006
-------------------------------
Pro
Actual Adjustments Forma
Revenues $231,148 $ (4,518)(A) $226,630
-------- ----------- --------
Expenses:
Residence operations (exclusive of
depreciation and amortization and
residence lease expense shown
below) 153,347 (3,718)(A) 149,629
General and administrative 10,857 -- 10,857
Residence lease expense 14,291 -- 14,291
Depreciation and amortization 16,699 (576) 16,123
Transaction costs 4,415 -- 4,415
Impairment of long-lived assets 3,080 -- 3,080
-------- ----------- --------
Total operating expenses 202,689 (4,294) 198,395
-------- ----------- --------
Income from operations 28,459 (224) 28,235
Other expense:
Interest expense, net (9,197) 21 (9,176)
-------- ----------- --------
Income from continuing operations
before income taxes 19,262 (203) 19,059
Income tax expense 8,727 (81)(C) 8,646
-------- ----------- --------
Income from continuing operations 10,535 (122) 10,413
-------- ----------- --------
Loss from discontinued operations, net
of tax (1,526) 1,526 --
-------- ----------- --------
Net income 9,009 1,404 10,413
-------- ----------- --------
Non recurring charges:
Transaction fees 4,415 -- 4,415
Non cash loss on impairment of long
lived assets 3,080 -- 3,080
Income tax benefit on loss on
impairment of long lived assets and
transaction fees (1,630) -- (1,630)
-------- ----------- --------
Net income excluding one time charges
and a non-cash charge $ 14,874 $ 1,404 $ 16,278
======== =========== ========
Net income (loss) from continuing
operations excluding one time charges
and a non-cash charge $ 16,400 $ (122) $ 16,278
======== =========== ========
Pro forma basic weighted average shares
(D) 69,326 -- 69,326
Pro forma diluted weighted average
shares (D) 70,205 -- 70,205
Adjusted EBITDA $ 52,653 $ (800) $ 51,853
======== =========== ========
Adjusted EBITDAR $ 66,944 $ (800) $ 66,144
======== =========== ========
Basic pro forma earnings per share (E) $ 0.23
========
Diluted pro forma earnings per share
(E) $ 0.23
========
Year Ended
December 31, 2005
----------------------------------
Pro
Actual Adjustments Forma
15,102(B)
Revenues $ 204,949 $ (5,707)(A) $214,344
----------- ----------- --------
Expenses:
Residence operations (exclusive of
depreciation and amortization and
residence lease expense shown 11,078(B)
below) 138,126 (4,571)(A) 144,633
General and administrative 6,789 1,163(B) 7,952
Residence lease expense 12,852 1,362(B) 14,214
Depreciation and amortization 14,750 177(B) 14,927
Transaction costs -- -- --
Impairment of long-lived assets -- -- --
----------- ----------- --------
Total operating expenses 172,517 9,209 181,726
----------- ----------- --------
Income from operations 32,432 186 32,618
Other expense:
Interest expense, net (11,603) (730) (12,333)
----------- ----------- --------
Income from continuing operations
before income taxes 20,829 (544) 20,285
Income tax expense 8,119 (210)(C) 7,909
----------- ----------- --------
Income from continuing operations 12,710 (334) 12,376
----------- ----------- --------
Loss from discontinued operations, net
of tax (368) 368 --
----------- ----------- --------
Net income 12,342 34 12,376
----------- ----------- --------
Non recurring charges:
Transaction fees -- -- --
Non cash loss on impairment of long
lived assets -- -- --
Income tax benefit on loss on
impairment of long lived assets and
transaction fees -- -- --
----------- ----------- --------
Net income excluding one time charges
and a non-cash charge $ 12,342 $ 34 $ 12,376
=========== =========== ========
Net income (loss) from continuing
operations excluding one time charges
and a non-cash charge $ 12,710 $ (334) $ 12,376
=========== =========== ========
Pro forma basic weighted average shares
(D) 69,322 -- 69,322
Pro forma diluted weighted average
shares (D) 70,205 -- 70,205
Adjusted EBITDA $ 47,182 $ 363 $ 47,545
=========== =========== ========
Adjusted EBITDAR $ 60,034 $ 1,725 $ 61,759
=========== =========== ========
Basic pro forma earnings per share (E) $ 0.18
========
Diluted pro forma earnings per share
(E) $ 0.18
========
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
ASSISTED LIVING CONCEPTS, INC.
The pro forma adjustments included in the unaudited pro forma condensed
combined financial information are as follows:
(A) To remove operations (including related depreciation and amortization
and lease costs) of three discontinued assisted living facilities
(168 units) and two free-standing EHSI assisted living facilities
(141 units) and another 129 assisted living units contained within skilled
nursing facilities were not transferred to ALC. These assets and operations
are included in the historical statements of income through November 10,
2006.
(B) To add the results of operations of ALC for the month of January 2005,
including pro forma amortization of purchase accounting adjustments and
lease costs. The historical statement of income for the year ended December
31, 2005 includes operations of ALC beginning February 1, 2005, the day
after ALC was acquired by Extendicare.
(C) To reflect the income tax effect of the other pro forma adjustments at
applicable income tax rates.
(D) The basic weighted average shares of common stock was determined from
the number of outstanding Subordinate Voting Shares of Extendicare on the
separation date, November 10, 2006, which would have approximated the
number of outstanding shares of Class A common stock, and the number of
outstanding Multiple Voting Shares of Extendicare for the applicable
periods, which would have approximated the number of outstanding shares of
Class B common stock. For purposes of determining the diluted weighted
average shares, the Multiple Voting Shares were deemed to have been
converted into Subordinate Voting Shares at the 1 to 1.075 conversion ratio
applicable to the Class B common stock. This conversion feature resulted in
an additional 0.9 million shares included in the diluted weighted average
shares outstanding.
(E) Pro forma earnings per share represent pro forma earnings from
continuing operations before the net impact of transaction fees and the non
cash loss on impairment of long lived assets.
Pro Forma adjusted EBITDA and adjusted EBITDAR
The following table sets forth a reconciliation of pro forma net income to
adjusted EBITDA and adjusted EBITDAR:
Three Months Ended Year Ended
December 31, December 31,
----------------- -----------------
(In thousands): 2006 2005 2006 2005
-------- -------- -------- --------
Pro forma net income $ 4,586 $ 3,781 $ 10,413 $ 12,376
Pro forma provision for income taxes 2,910 2,595 8,646 7,909
-------- -------- -------- --------
Pro forma income from continuing
operations before income taxes 7,496 6,376 19,059 20,285
Add:
Pro forma depreciation and
amortization 4,142 3,941 16,123 14,927
Pro forma interest expense, net 1,488 2,101 9,176 12,333
Pro forma transaction costs
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