Wednesday, February 27, 2008 9:09:05 AM
Assisted Living Concepts, Inc. Reports Annual and Fourth Quarter Results, Completes Acquisition of Cara Vita
Wednesday February 27, 9:00 am ET
MENOMONEE FALLS, WI--(MARKET WIRE)--Feb 27, 2008 --
Highlights:
-- Completed the acquisition of the operations of Cara Vita on January 1,2008
-- Full year annual private pay census up 239 units or 4.7% over the proforma 2006 year
-- Fourth quarter private pay census up 115 units or 2.2% over the proforma fourth quarter of 2006
-- Achieved over 88% of fourth quarter revenue from private pay sources
Assisted Living Concepts, Inc. ("ALC") (NYSE:ALC - News) reported net income of $4.1 million in the 2007 fourth quarter as compared to net income of $4.6 million in the 2006 fourth quarter. Net income in the 2006 fourth quarter before one-time charges was $5.0 million.
ALC reported net income of $17.2 million for the year ended December 31, 2007 as compared to net income and net income from continuing operations of $9.0 million and $10.5 million, respectively, in the year ended December 31, 2006. Net income and net income from continuing operations in the year ended December 31, 2006 before one-time charges were $14.9 million and $16.4 million, respectively.
In 2006, one-time charges included transaction fees of $0.4 million and $3.9 million (net of income tax benefits of $0.3 million and $0.5 million in the fourth quarter and year, respectively) for the fourth quarter and year, respectively, and a non-cash charge of $1.9 million (net of an income tax benefit of $1.2 million) in the year. Transaction fees in 2006 related to legal, audit and other professional fees associated with the separation of ALC from Extendicare Inc., now known as Extendicare Real Estate Investment Trust (Toronto:EXE.TO - News), on November 10, 2006. The other 2006 non-cash charge related to the write-down of an impaired property identified prior to the separation.
"We have achieved an important milestone of almost 90% of our revenues being derived from private pay sources," commented Laurie Bebo, President and Chief Executive Officer of Assisted Living Concepts, Inc. "We continue to be optimistic with the amount of new acquisition deal flow and are pleased with the progress of integrating the operations of Cara Vita into the ALC portfolio."
Diluted earnings per common share for the 2007 and 2006 fourth quarters and 2007 and 2006 years were as follows:
Quarter ended Year ended
December 31, December 31,
2007 2006 2007 2006
------- ------- ------- -------
Diluted earnings per common share from
continuing operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Diluted earnings per common share $ 0.06 $ 0.07 $ 0.25 $ 0.13
Pro forma diluted earnings per common share
excluding one-time charges* $ 0.06 $ 0.07 $ 0.25 $ 0.23
*Includes pro forma adjustments for 2006. See attached tables for 2006 pro
forma and non-GAAP reconciliations and calculations of weighted average
basic and diluted shares.
Prior to November 10, 2006, ALC was a wholly owned subsidiary of Extendicare. The financial results reported until that time reflect the consolidated historical financial statements of the assisted living operations of Extendicare in the United States.
Certain pro forma adjustments in the quarter and year ended December 31, 2006 are necessary to reflect the ongoing operations of ALC following the November 10, 2006 separation of ALC from Extendicare Inc. These adjustments 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 fourth quarter of 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.
Pro forma income statement information for the quarter and year ended December 31, 2006 are included for informational purposes and do not purport to reflect the results of operations ALC would have achieved had ALC operated as a separate independent company in that period. The pro forma financial statements do not reflect the additional cost of being a publicly listed company nor do they remove interest expense related to the capital structure prior to the separation.
Certain non-GAAP financial measures are used in the discussions in this release in evaluating the performance of the business. See tables below for definitions of adjusted EBITDA and adjusted EBITDAR, reconciliations of net income to adjusted EBITDA and adjusted EBITDAR, calculations of adjusted EBITDA and adjusted EBITDAR as a percentage of total revenues, and pro forma and non-GAAP reconciliation information.
As of December 31, 2007, ALC operated 208 assisted living residences representing 8,535 units. Upon completion of the acquisition of the operations of Cara Vita on January 1, 2008, ALC operates 216 assisted living residences consisting of 9,076 units.
Quarters ended December 31, 2007, September 30, 2007, December 31, 2006 and pro forma quarter ended December 31, 2006
Revenues of $56.5 million in the fourth quarter ended December 31, 2007,
-- decreased $1.4 million or 2.4% from $57.9 million in the third quarter
ended September 30, 2007,
-- decreased $2.1 million or 3.5% from $58.6 million in the fourth
quarter ended December 31, 2006, and
-- decreased $1.6 million or 2.7% from $58.1 million in the pro forma
fourth quarter ended December 31, 2006.
Adjusted EBITDA for the fourth quarter of 2007 was $12.5 million, 22.1% of revenues and
-- decreased $0.1 million or 1.0% from $12.6 million and increased from
21.8% of revenues in the third quarter of 2007,
-- decreased $1.3 million or 9.6% from $13.8 million and 23.6% of
revenues in the fourth quarter of 2006, and
-- decreased $1.3 million or 9.2% from $13.8 million and 23.7% of
revenues in the pro forma fourth quarter of 2006.
Adjusted EBITDAR for the fourth quarter of 2007 was $16.0 million, 28.4% of revenues and
-- decreased $0.2 million or 1.0% from $16.2 million and increased from
28.0% of revenues in the third quarter of 2007,
-- decreased $1.5 million or 8.4% from $17.5 million and 29.9% of
revenues in the fourth quarter of 2006, and
-- decreased $1.4 million or 8.1% from $17.4 million and 30.1% of
revenues in the pro forma fourth quarter of 2006.
Pro forma adjustments to the fourth quarter of 2006 remove the revenue, adjusted EBITDA, and adjusted EBITDAR through November 10, 2006 associated with properties retained by Extendicare ($0.5 million, $0.1 million and $0.1 million, respectively). No pro forma adjustments were necessary in the 2007 financial information.
Fourth quarter ended December 31, 2007 compared to the third quarter ended September 30, 2007
Revenues in the fourth quarter of 2007 decreased from the third quarter of 2007 primarily due to the planned reduction in the number of units occupied by Medicaid residents ($1.2 million) and a decrease in the number of units occupied by private pay residents ($0.4 million), partially offset by higher average daily revenue as a result of rate increases ($0.2 million).
Decreased adjusted EBITDA and adjusted EBITDAR in the fourth quarter of 2007 as compared to the third quarter of 2007 resulted primarily from lower revenues as discussed above ($1.4 million) and increases in general and administrative expenses ($0.7 million), partially offset by a decrease in residence operations expenses ($1.9 million) and for EBITDA, a decrease in resident lease expense ($0.1 million). Increased general and administrative expenses primarily related to increased salaries and benefits and professional services associated with the completion of work related to compliance with Sarbanes Oxley Section 404. Decreased residence operations expenses resulted primarily from decreased payroll and benefits expense, other variable expenses associated with reduced census and favorable experience in self-insured liabilities.
Fourth quarter ended December 31, 2007 compared to the fourth quarter ended December 31, 2006
Revenues in the fourth quarter of 2007 decreased primarily due to a decrease of 935 units occupied by Medicaid residents ($5.6 million) and the absence of revenues from properties retained by Extendicare (270 units) that were included through November 10, 2006 ($0.5 million) and from the prior tenant of ALC's corporate office ($0.4 million), partially offset by private pay rate increases ($2.9 million), higher average daily revenue as a result of an increase of 115 units occupied by private pay residents ($1.0 million), and Medicaid rate increases ($0.5 million).
Adjusted EBITDA and adjusted EBITDAR decreased in the fourth quarter of 2007 primarily due to decreased revenues discussed above ($2.1 million) and an increase in general and administrative expenses ($0.5 million) (excludes the impact of non-cash stock compensation), partially offset by a reduction in residence operations expenses ($1.1 million) and, for adjusted EBITDA, a decrease in rental expense ($0.2 million). Increased general and administrative expenses primarily related to a full quarter of public company expenses in 2007, including expenses associated with the implementation of work related to compliance with Sarbanes Oxley Section 404. Residence operations expense decreased primarily as a result of reduced census, the absence of expenses associated with properties retained by Extendicare and favorable experience in our self-insurance programs partially offset by inflationary factors.
Fourth quarter ended December 31, 2007 compared to the pro forma fourth quarter ended December 31, 2006
Revenue decreased in the fourth quarter of 2007 for the reasons discussed above in the comparison of the fourth quarter of 2007 to the fourth quarter of 2006 and because of the pro forma adjustment to revenues of $0.5 million associated with properties retained by Extendicare.
Adjusted EBITDA and adjusted EBITDAR for the fourth quarter of 2007 decreased for the reasons discussed above in the comparison of the fourth quarter of 2007 to the fourth quarter of 2006, offset by the pro forma adjustment to both adjusted EBITDA and adjusted EBITDAR of $0.1 million associated with properties retained by Extendicare.
Years ended December 31, 2007 and 2006 and pro forma year ended December 31, 2006
Revenues in the year ended December 31, 2007 were $229.3 million and:
-- decreased $1.8 million or 0.8% from $231.1 in the year ended December
31, 2006 and
-- increased $2.7 million or 1.2% from $226.6 million in the pro forma
year ended December 31, 2006.
Adjusted EBITDA for the year ended December 31, 2007 was $50.3 million and 21.9% of revenues and:
-- decreased $2.7 million or 5.2% from $53.0 million and 22.9% of
revenues in the year ended December 31, 2006, and
-- decreased $1.9 million or 3.7% from $52.2 million and 23.0% of revenue
in the pro forma year ended December 31, 2006.
Adjusted EBITDAR for the year ended December 31, 2007 was $64.6 million and 28.2% of revenues and:
-- decreased $2.7 million or 4.0% from $67.3 million and 29.1% of
revenues in the year ended December 31, 2006, and
-- decreased $1.9 million or 2.9% from $66.5 million and 29.3% of
revenues in the pro forma year ended December 31, 2006.
Pro forma adjustments to the year ended December 31, 2006 remove the revenue, adjusted EBITDA, and adjusted EBITDAR associated with properties retained by Extendicare ($4.5 million, $0.8 million and $0.8 million, respectively). No pro forma adjustments were necessary in the 2007 financial information.
Year ended December 31, 2007 compared to the year ended December 31, 2006
Revenues decreased in 2007 primarily from a decrease in the number of units occupied by Medicaid residents ($15.2 million), the absence of revenues associated with properties retained by Extendicare (270 units) that were included only in the 2006 period ($4.5 million), and the elimination of non-recurring revenues associated with the amortization of below market leases from Extendicare's 2005 acquisition of ALC which ended in January 2007 ($1.0 million), partially offset by private pay rate increases ($8.8 million), an increase of units occupied by private pay residents ($8.4 million), and Medicaid rate increases ($1.7 million).
Adjusted EBITDA and adjusted EBITDAR decreased primarily because of the increase in general and administrative expenses ($2.6 million) and the decline in revenues ($1.8 million) discussed above, partially offset by decreased residence operations expenses ($1.7 million). Increased general and administrative expenses were primarily associated with additional expenses from being a public company in 2007. Decreased residence operations expenses resulted from the inclusion of properties retained by Extendicare in the 2006 residence operations expense and reduced expenses associated with lower census, partially offset by inflationary factors.
Year ended December 31, 2007 compared to the pro forma year ended December 31, 2006
Revenues increased in the year ended December 31, 2007 compared to the pro forma year ended December 31, 2006 because the revenue decreases discussed above in the comparison of the year ended December 31, 2007 to the year ended December 31, 2006 were more than offset by the pro forma adjustments in 2006 to revenues of $4.5 million associated with properties retained by Extendicare.
Adjusted EBITDA and adjusted EBITDAR decreased because the revenue decreases discussed above in the comparison of the year ended December 31, 2007 to the year ended December 31, 2006 were only partially offset by pro forma adjustments in 2006 to both adjusted EBITDA and adjusted EBITDAR of $0.8 million associated with properties retained by Extendicare.
Share repurchase program
On December 14, 2006, ALC announced a share repurchase program for up to $20 million of its Class A common stock. On August 20, 2007 and December 18, 2007, ALC announced that its Board of Directors authorized increases to the stock repurchase program of $20 million and $25 million, respectively, bringing the total authorization to $65 million. In the fourth quarter of 2007, ALC repurchased 1.7 million shares of its Class A common stock at an aggregate cost of $11.5 and an average price of $6.85 per share. During 2007, ALC repurchased 4.7 million shares of its Class A common stock at an aggregate cost of $39.1 and an average price of $8.34 per share.
Acquisitions
Effective January 1, 2008, ALC completed its previously announced acquisition of the operations of BBLRG, LLC doing business as Cara Vita, consisting of eight assisted living residences and a total of 541 leased units for a purchase price of $14.4 million. The residences, five of which are located in Georgia, and one in each of South Carolina, Alabama and Florida, were 92% occupied with all private pay residents as of December 31, 2007. The lease has an initial term expiring in March 2015 with three five-year renewal options.
Expansion Plan Update
As of December 31, 2007, ALC had finished the design phase for most of the expansion units in its program to add 400 units onto existing ALC residences and is currently receiving construction bids on the additions. To date, bids have been consistent with our original guidance of $125,000 per unit. Construction is expected to be completed during the second half of 2008.
Financing Activities
As of December 31, 2007 ALC had availability of $58.0 million under its revolving credit facility.
Investor Call
ALC has scheduled a conference call for today, February 27, 2008 at 10:00 a.m. (Eastern Time) to discuss its financial results for the fourth quarter. The toll-free number for the live call is 877-764-2008, or international 612-332-1020. A taped rebroadcast will be available approximately one hour following the live call until midnight on March 27, 2008. To access the rebroadcast of the call, dial 800-475-6701, or international 320-365-3844: the access code is 909438.
About Us
Assisted Living Concepts, Inc. and its subsidiaries operate 216 assisted living residences with capacity for over 9,000 residents in 20 states. ALC's assisted living facilities typically consist of 40 to 60 units and offer residents a supportive, home-like setting and assistance with the activities of daily living. ALC employs approximately 4,800 people.
The attached statements reflect certain reclassifications to the prior period figures to conform to the 2007 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 improving private payer mix, are forward-looking statements. These forward-looking statements generally include words such as "expect," "intend," "will," "anticipate," "believe," "estimate," "plan," "strategy" or "objective." Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. In addition to the risks and uncertainties referred to in the release in connection with forward-looking 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 senior 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. ALC assumes no obligation to update any forward-looking statement.
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Income
(In thousands, except earnings per share)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Revenues $ 56,502 $ 58,554 $ 229,347 $ 231,148
--------- --------- --------- ---------
Expenses:
Residence operations
(exclusive of depreciation
and amortization and
residence lease expense
shown below) 36,875 37,992 151,684 153,347
General and
administrative 3,584 3,001 13,073 10,857
Residence lease
expense 3,556 3,702 14,310 14,291
Depreciation and
amortization 4,554 4,172 17,642 16,699
Transaction costs -- 680 56 4,415
Loss on impairment of
long-lived assets -- -- -- 3,080
--------- --------- --------- ---------
Total operating
expenses 48,569 49,547 196,765 202,689
--------- --------- --------- ---------
Income from operations 7,933 9,007 32,582 28,459
Other expense:
Interest expense, net (1,614) (1,489) (5,091) (9,197)
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 6,319 7,518 27,491 19,262
Income tax expense (2,264) (2,919) (10,312) (8,727)
--------- --------- --------- ---------
Net income from continuing
operations 4,055 4,599 17,179 10,535
Loss from discontinued
operations, net of taxes -- (28) -- (1,526)
--------- --------- --------- ---------
Net income $ 4,055 $ 4,571 $ 17,179 $ 9,009
========= ========= ========= =========
Weighted average common shares:
Basic 65,875 69,338 68,172 69,326
Diluted 66,532 70,205 68,863 70,205
Per share data:
Basic earnings per common
share:
Income from continuing
operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Loss from discontinued
operations -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.06 $ 0.07 $ 0.25 $ 0.13
========= ========= ========= =========
Diluted earnings per common
share:
Income from continuing
operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Loss from discontinued
operations -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.06 $ 0.07 $ 0.25 $ 0.13
========= ========= ========= =========
Adjusted EBITDA (1) $ 12,487 $ 13,811 $ 50,280 $ 53,021
========= ========= ========= =========
Adjusted EBITDAR (1) $ 16,043 $ 17,513 $ 64,590 $ 67,312
========= ========= ========= =========
(1) See attached tables for definitions of adjusted EBITDA and adjusted
EBITDAR and reconciliations of net income to adjusted EBITDA and
adjusted EBITDAR.
ASSISTED LIVING CONCEPTS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31,
--------------------
2007 2006
--------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,066 $ 19,951
Investments 4,596 5,332
Accounts receivable, less allowances of $992 and
$1,086, respectively 3,746 5,395
Supplies, prepaid expenses and other current assets 6,733 8,178
Income tax receivable -- 90
Deferred income taxes 4,080 1,552
--------- ----------
Total current assets 33,221 40,498
Property and equipment, net 395,141 374,612
Goodwill and other intangible assets, net 20,736 18,102
Restricted cash 8,943 10,947
Cash designated for acquisition 14,864 --
Other assets 3,336 3,181
--------- ----------
Total Assets $ 476,241 $ 447,340
========= ==========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 7,800 $ 5,134
Accrued liabilities 17,951 18,314
Deferred revenue 6,346 1,266
Accrued income taxes 198 --
Current maturities of long-term debt 26,543 2,732
Current portion of self-insured liabilities 300 300
--------- ----------
Total current liabilities 59,138 27,746
Accrual for self-insured liabilities 941 1,171
Long-term debt 103,176 87,904
Deferred income taxes 9,008 5,146
Other long-term liabilities 9,444 8,535
--------- ----------
Total Liabilities 181,707 130,502
--------- ----------
Preferred stock, par value $0.01 per share,
25,000,000 shares authorized, no shares issued and
outstanding, respectively -- --
Series A Common Stock, par value $0.01 per share,
400,000,000 authorized, 56,131,873 and 59,501,918
issued and outstanding, respectively 561 595
Series B Common Stock, par value $0.01 per share,
75,000,000 authorized, 8,727,458 and 9,956,337
issued and outstanding, respectively 87 100
Additional paid-in capital 313,548 313,474
Accumulated other comprehensive income 103 530
Retained earnings 19,318 2,139
Treasury stock at cost, 4,691,060 and 0 shares,
respectively (39,083) --
--------- ----------
Total Stockholders’ Equity 294,534 316,838
--------- ----------
Total Liabilities and Stockholders’ Equity $ 476,241 $ 447,340
========= ==========
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
2007 2006
-------- --------
OPERATING ACTIVITIES:
Net income $ 17,179 $ 9,009
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,642 16,699
Amortization of purchase accounting adjustments for:
Leases and debt (1,076) (527)
Below market resident leases (39) (1,187)
Provision for bad debts 94 214
Provision for self-insured liabilities 78 415
Payments of self-insured liabilities (308) (271)
Loss on impairment of long-lived assets, including
impairments in discontinued operations -- 5,018
Deferred income taxes 1,334 335
Changes in assets and liabilities:
Accounts receivable 1,555 (1,258)
Supplies, prepaid expenses and other current assets 1,445 (3,274)
Accounts payable 2,666 107
Accrued liabilities (363) (1,167)
Deferred revenue 5,080 480
Income taxes payable/ receivable 597 (999)
Changes in other non-current assets 1,849 (7,264)
Other long-term liabilities 1,379 2,649
Current due to Extendicare -- 76
-------- --------
Cash provided by operating activities 49,112 19,055
-------- --------
INVESTING ACTIVITIES:
Payment for acquisitions (24,444) (4,619)
Cash designated for acquisition (14,864) --
Payments for new construction projects (3,904) (3,338)
Payments for purchases of property and equipment (12,457) (12,832)
Proceeds from sales of property and equipment -- 79
-------- --------
Cash used in investing activities (55,669) (20,710)
-------- --------
FINANCING ACTIVITIES:
Capital contributions from Extendicare 74 43,678
Purchase of treasury stock (39,130) --
Proceeds on borrowings on revolving credit facility 42,000 --
Repayment of interest bearing advances to Extendicare -- (25,200)
Repayment of mortgage debt (6,573) (2,312)
Proceeds from mortgage debt 4,301 --
Payment of deferred financing fees -- (999)
-------- --------
Cash provided by financing activities 672 15,167
-------- --------
(Decrease) Increase in cash and cash equivalents (5,885) 13,512
Cash and cash equivalents, beginning of year 19,951 6,439
-------- --------
Cash and cash equivalents, end of year $ 14,066 $ 19,951
======== ========
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
All continuing residences* Three months ended
-------------------------------
December September December
31, 2007 30, 2007 31, 2006
--------- --------- ---------
Average Occupied Units by Payer Source
Private 5,316 5,359 5,201
Medicaid 1,032 1,221 1,967
--------- --------- ---------
Total 6,348 6,580 7,168
========= ========= =========
Occupancy Mix by Payer Source
Private 83.7% 81.4% 72.6%
Medicaid 16.3% 18.6% 27.4%
Percent of Revenue by Payer Source
Private 88.1% 86.2% 79.5%
Medicaid 11.9% 13.8% 20.5%
Average Revenue per Occupied Unit Day by
Payer Source
Private $ 101.75 $ 101.24 $ 95.87
Medicaid $ 70.97 $ 70.86 $ 65.36
Combined $ 96.75 $ 95.60 $ 87.48
Occupancy Percentage 74.4% 77.6% 86.4%
All continuing residences* Year ended
--------------------
December December
31, 2007 31, 2006
--------- ---------
Average Occupied Units by Payer Source
Private 5,297 5,058
Medicaid 1,357 1,991
--------- ---------
Total 6,654 7,049
========= =========
Occupancy Mix by Payer Source
Private 79.6% 71.8%
Medicaid 20.4% 28.2%
Percent of Revenue by Payer Source
Private 85.0% 78.8%
Medicaid 15.0% 21.2%
Average Revenue per Occupied Unit Day by Payer Source
Private $ 100.61 $ 96.01
Medicaid $ 69.11 $ 65.77
Combined $ 94.19 $ 87.47
Occupancy Percentage 79.1% 85.2%
* Continuing residences in 2006 include all residences except (i) two
freestanding residences and an additional 129 assisted living units
contained in skilled nursing facilities that were retained by Extendicare
and (ii) residences classified in the financial statements as discontinued
operations.
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
Same residence basis** Three months ended
-------------------------------------
December September December
31, 2007 30, 2007 31, 2006
----------- ----------- -----------
Average Occupied Units by Payer
Source
Private 5,218 5,274 5,201
Medicaid 1,032 1,221 1,967
----------- ----------- -----------
Total 6,250 6,495 7,168
=========== =========== ===========
Occupancy Mix by Payer Source
Private 83.5% 81.2% 72.6%
Medicaid 16.5% 18.8% 27.4%
Percent of Revenue by Payer Source
Private 87.9% 86.1% 79.5%
Medicaid 12.1% 13.9% 20.5%
Average Revenue per Occupied Unit
Day by Payer Source
Private $ 102.06 $ 101.61 $ 95.87
Medicaid $ 70.97 $ 70.86 $ 65.36
Combined $ 96.93 $ 95.83 $ 87.48
Occupancy Percentage 75.0% 78.1% 86.4%
Same residence basis** Year ended
------------------------
December December
31, 2007 31, 2006
----------- -----------
Average Occupied Units by Payer Source
Private 5,225 5,058
Medicaid 1,357 1,991
----------- -----------
Total 6,582 7,049
=========== ===========
Occupancy Mix by Payer Source
Private 79.4% 71.8%
Medicaid 20.6% 28.2%
Percent of Revenue by Payer Source
Private 84.9% 78.8%
Medicaid 15.1% 21.2%
Average Revenue per Occupied Unit Day by Payer
Source
Private $ 100.77 $ 96.01
Medicaid $ 69.11 $ 65.77
Combined $ 94.24 $ 87.47
Occupancy Percentage 79.3% 85.2%
** Same residence basis excludes the quarterly and full year
impact of residents added from the acquisition of the 185
unit residence in Dubuque, Iowa purchased on July 20, 2007 and
where applicable, the 40 unit residence in Escanaba, Michigan purchased
on November 1, 2006.
Weighted Average Basic and Diluted Shares
The basic weighted average number of shares of common stock is 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. This resulted in an additional 0.7 million shares included in the fully diluted weighted average number of shares outstanding in both the quarter and year ended December 31, 2007. For the quarter and year ended December 31, 2006, 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 shares of Class A and Class B common stock of ALC distributed in conjunction with the separation. 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 resulted in an additional 0.9 million shares included in the diluted weighted average number of shares outstanding in both the quarter and year ended December 31, 2006.
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, equity based compensation expense, 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 EBITDA and 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 EBITDAR performance is 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:
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
(In thousands, unaudited)
Net income $ 4,055 $ 4,571 $ 17,179 $ 9,009
Loss from discontinued operations,
net of tax benefit - 28 - 1,526
Provision for income taxes 2,264 2,919 10,312 8,727
--------- -------- --------- ---------
Income from continuing operations
before income taxes 6,319 7,518 27,491 19,262
Add:
Depreciation and amortization 4,554 4,172 17,642 16,699
Interest expense, net 1,614 1,489 5,091 9,197
Transaction costs - 680 56 4,415
Loss on impairment of long-lived
assets - - - 3,080
Non-cash equity based
compensation - (48) - 368
--------- -------- --------- ---------
Adjusted EBITDA 12,487 13,811 50,280 53,021
Add: Lease expense 3,556 3,702 14,310 14,291
--------- -------- --------- ---------
Adjusted EBITDAR $ 16,043 $ 17,513 $ 64,590 $ 67,312
========= ======== ========= =========
The following table sets forth the calculations of adjusted EBITDA and adjusted EBITDAR as percentages of total revenue:
Three Months Ended Year Ended
December 31, December 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
(Dollars in thousands, unaudited)
Revenues $ 56,502 $ 58,554 $229,347 $231,148
-------- -------- -------- --------
Adjusted EBITDA $ 12,487 $ 13,811 $ 50,280 $ 53,021
-------- -------- -------- --------
Adjusted EBITDAR $ 16,043 $ 17,513 $ 64,590 $ 67,312
-------- -------- -------- --------
Adjusted EBITDA as percent of total
revenue 22.1% 23.6% 21.9% 22.9%
-------- -------- -------- --------
Adjusted EBITDAR as percent of
total revenue 28.4% 29.9% 28.2% 29.1%
-------- -------- -------- --------
Assisted Living Concepts, Inc.
Pro Forma and Non-GAAP Reconciliation Information
(In thousands, except earnings per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, 2006 December 31, 2006
---------------------------- ------------------------------
Pro Pro
Actual Adjustments Forma Actual Adjustments Forma
Revenues $ 58,554 $(489)(A) $58,065 231,148 $(4,518)(A) $226,630
-------- -------- -------- -------- ---------- --------
Expenses:
Residence
operations
(exclusive
of
depreciation
and
amortization
and
residence
lease
expense
shown
below) 37,992 (436)(A) 37,556 153,347 (3,718)(A) 149,629
General and
administrative 3,001 -- 3,001 10,857 -- 10,857
Residence
lease
expense 3,702 -- 3,702 14,291 -- 14,291
Depreciation
and
amortization 4,172 (30)(A) 4,142 16,699 (576)(A) 16,123
Transaction
costs 680 -- 680 4,415 -- 4,415
Loss on
impairment
of
long-lived
assets -- -- -- 3,080 -- 3,080
-------- -------- -------- -------- ---------- --------
Total
operating
expenses 49,547 (466) 49,081 202,689 (4,294) 198,395
-------- -------- -------- -------- ---------- --------
Income from
operations 9,007 (23) 8,984 28,459 (224) 28,235
Other
expense:
Interest
expense, net (1,489) 1(A) (1,488) (9,197) 21(A) (9,176)
-------- -------- -------- -------- ---------- --------
Income from
continuing
operations
before
income taxes 7,518 (22) 7,496 19,262 (203) 19,059
Income tax
expense 2,919 (9)(B) 2,910 8,727 (81)(B) 8,646
-------- -------- -------- -------- ---------- --------
Income from
continuing
operations 4,599 (13) 4,586 10,535 (122) 10,413
Loss from
discontinued
operations
before
income taxes (28) 28 -- (1,526) 1,526 --
-------- -------- -------- -------- ---------- --------
Net income 4,571 15 4,586 9,009 1,404 10,413
Transaction
fees 680 -- 680 4,415 -- 4,415
Loss on
impairment
on
long-lived
assets -- -- -- 3,080 -- 3,080
Income tax
benefit on
transaction
fees and
impairment
of
long-lived
assets (281) -- (281) (1,630) -- (1,630)
-------- -------- -------- -------- ---------- --------
Net income
excluding
transaction
fees and
impairment
of
long-lived
assets 4,970 15 4,985 14,874 1,404 16,278
======== ======== ======== ======== ========== ========
Net income
from
continuing
operations
excluding
transaction
fees and
impairment
of
long-lived
assets 4,998 (13) 4,985 16,400 (122) 16,278
======== ======== ======== ======== ========== ========
Pro forma
basic
weighted
average
shares(C) 69,338 -- 69,338 69,326 -- 69,326
Pro forma
diluted
weighted
average
shares(C) 70,205 -- 70,205 70,205 -- 70,205
Adjusted
EBITDA $ 13,811 $ (53) $ 13,758 $ 53,021 $ (800) $ 52,221
======== ======== ======== ======== ========== ========
Adjusted
EBITDAR $ 17,513 $ (53) $ 17,460 $ 67,312 $ (800) $ 66,512
======== ======== ======== ======== ========== ========
Basic
earnings per
common
share(D) $ 0.07 -- $ 0.07 $ 0.24 $ (0.01) $ 0.23
======== ======== ======== ======== ========== ========
Diluted
earnings per
common share
(D) $ 0.07 -- $ 0.07 $ 0.23 $ -- 0.23
======== ======== ======== ======== ========== ========
See notes to unaudited pro forma consolidated financial statements below
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(A) To remove operations (including related depreciation and amortization) of three discontinued assisted living residences (168 units) and two free-standing Extendicare assisted living residences (141 units) and another 129 assisted living units contained within skilled nursing facilities that were not transferred to ALC. These assets and operations were included in the consolidated statements of income through November 10, 2006.
(B) To reflect the income tax effect of pro forma adjustments at applicable income tax rates.
(C) The basic weighted average shares of common stock for the three and twelve month periods ended December 31, 2006 were determined from the number of outstanding Subordinate Voting Shares of Extendicare on November 10, 2006, the separation date, which would have approximated the number of outstanding shares of Class A common stock, and the number of outstanding Multiple Voting Shares of Extendicare, 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 for both periods.
(D) Earnings per common share represent earnings and pro forma earnings from continuing operations before the net impact of transaction fees and impairment of long-lived assets.
Pro forma adjusted EBITDA and adjusted EBITDAR
The following tables sets forth a reconciliation of pro forma net income to pro forma adjusted EBITDA and pro forma adjusted EBITDAR (no adjustments were necessary in 2007):
Three
months
ended Year ended
December December 31,
31, 2006 2006
----------- ------------
(In thousands, unaudited)
Pro forma net income $ 4,586 $ 10,413
Pro forma income tax expense 2,910 8,646
----------- ------------
Pro forma income from continuing operations
before income taxes 7,496 19,059
Add:
Pro forma depreciation and amortization 4,142 16,123
Pro forma interest expense, net 1,488 9,176
Pro forma transaction costs 680 4,415
Pro forma loss on impairment of long-lived
assets 3,080
Non-cash equity based compensation (48) 368
----------- ------------
Pro forma adjusted EBITDA 13,758 52,221
Add: Pro forma lease expense 3,702 14,291
----------- ------------
Pro forma adjusted EBITDAR $ 17,460 $ 66,512
=========== ============
The following table sets forth the calculations of pro forma adjusted EBITDA and pro forma adjusted EBITDAR as a percentage of pro forma revenues (no adjustments were necessary in 2007):
Three months Year
Ended Ended
December 31, December 31,
2006 2006
----------- -----------
(Dollars in thousands,
unaudited)
----------- -----------
Pro forma revenues $ 58,065 $ 226,630
----------- -----------
Pro forma adjusted EBITDA $ 13,758 $ 52,221
----------- -----------
Pro Forma adjusted EBITDAR $ 17,460 $ 66,512
----------- -----------
Pro Forma adjusted EBITDA as percent of total pro
forma revenue 23.7% 23.0%
----------- -----------
Pro forma adjusted EBITDAR as percent of total
pro forma revenue 30.1% 29.3%
----------- -----------
Contact:
For further information, contact:
Assisted Living Concepts, Inc.
John Buono
Sr. Vice President, Chief Financial Officer and Treasurer
Phone: (262) 257-8999
Fax: (262) 251-7562
Email: Email Contact
Visit ALC's Website @ http://www.alcco.com
--------------------------------------------------------------------------------
Source: Assisted Living Concepts, Inc.
Wednesday February 27, 9:00 am ET
MENOMONEE FALLS, WI--(MARKET WIRE)--Feb 27, 2008 --
Highlights:
-- Completed the acquisition of the operations of Cara Vita on January 1,2008
-- Full year annual private pay census up 239 units or 4.7% over the proforma 2006 year
-- Fourth quarter private pay census up 115 units or 2.2% over the proforma fourth quarter of 2006
-- Achieved over 88% of fourth quarter revenue from private pay sources
Assisted Living Concepts, Inc. ("ALC") (NYSE:ALC - News) reported net income of $4.1 million in the 2007 fourth quarter as compared to net income of $4.6 million in the 2006 fourth quarter. Net income in the 2006 fourth quarter before one-time charges was $5.0 million.
ALC reported net income of $17.2 million for the year ended December 31, 2007 as compared to net income and net income from continuing operations of $9.0 million and $10.5 million, respectively, in the year ended December 31, 2006. Net income and net income from continuing operations in the year ended December 31, 2006 before one-time charges were $14.9 million and $16.4 million, respectively.
In 2006, one-time charges included transaction fees of $0.4 million and $3.9 million (net of income tax benefits of $0.3 million and $0.5 million in the fourth quarter and year, respectively) for the fourth quarter and year, respectively, and a non-cash charge of $1.9 million (net of an income tax benefit of $1.2 million) in the year. Transaction fees in 2006 related to legal, audit and other professional fees associated with the separation of ALC from Extendicare Inc., now known as Extendicare Real Estate Investment Trust (Toronto:EXE.TO - News), on November 10, 2006. The other 2006 non-cash charge related to the write-down of an impaired property identified prior to the separation.
"We have achieved an important milestone of almost 90% of our revenues being derived from private pay sources," commented Laurie Bebo, President and Chief Executive Officer of Assisted Living Concepts, Inc. "We continue to be optimistic with the amount of new acquisition deal flow and are pleased with the progress of integrating the operations of Cara Vita into the ALC portfolio."
Diluted earnings per common share for the 2007 and 2006 fourth quarters and 2007 and 2006 years were as follows:
Quarter ended Year ended
December 31, December 31,
2007 2006 2007 2006
------- ------- ------- -------
Diluted earnings per common share from
continuing operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Diluted earnings per common share $ 0.06 $ 0.07 $ 0.25 $ 0.13
Pro forma diluted earnings per common share
excluding one-time charges* $ 0.06 $ 0.07 $ 0.25 $ 0.23
*Includes pro forma adjustments for 2006. See attached tables for 2006 pro
forma and non-GAAP reconciliations and calculations of weighted average
basic and diluted shares.
Prior to November 10, 2006, ALC was a wholly owned subsidiary of Extendicare. The financial results reported until that time reflect the consolidated historical financial statements of the assisted living operations of Extendicare in the United States.
Certain pro forma adjustments in the quarter and year ended December 31, 2006 are necessary to reflect the ongoing operations of ALC following the November 10, 2006 separation of ALC from Extendicare Inc. These adjustments 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 fourth quarter of 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.
Pro forma income statement information for the quarter and year ended December 31, 2006 are included for informational purposes and do not purport to reflect the results of operations ALC would have achieved had ALC operated as a separate independent company in that period. The pro forma financial statements do not reflect the additional cost of being a publicly listed company nor do they remove interest expense related to the capital structure prior to the separation.
Certain non-GAAP financial measures are used in the discussions in this release in evaluating the performance of the business. See tables below for definitions of adjusted EBITDA and adjusted EBITDAR, reconciliations of net income to adjusted EBITDA and adjusted EBITDAR, calculations of adjusted EBITDA and adjusted EBITDAR as a percentage of total revenues, and pro forma and non-GAAP reconciliation information.
As of December 31, 2007, ALC operated 208 assisted living residences representing 8,535 units. Upon completion of the acquisition of the operations of Cara Vita on January 1, 2008, ALC operates 216 assisted living residences consisting of 9,076 units.
Quarters ended December 31, 2007, September 30, 2007, December 31, 2006 and pro forma quarter ended December 31, 2006
Revenues of $56.5 million in the fourth quarter ended December 31, 2007,
-- decreased $1.4 million or 2.4% from $57.9 million in the third quarter
ended September 30, 2007,
-- decreased $2.1 million or 3.5% from $58.6 million in the fourth
quarter ended December 31, 2006, and
-- decreased $1.6 million or 2.7% from $58.1 million in the pro forma
fourth quarter ended December 31, 2006.
Adjusted EBITDA for the fourth quarter of 2007 was $12.5 million, 22.1% of revenues and
-- decreased $0.1 million or 1.0% from $12.6 million and increased from
21.8% of revenues in the third quarter of 2007,
-- decreased $1.3 million or 9.6% from $13.8 million and 23.6% of
revenues in the fourth quarter of 2006, and
-- decreased $1.3 million or 9.2% from $13.8 million and 23.7% of
revenues in the pro forma fourth quarter of 2006.
Adjusted EBITDAR for the fourth quarter of 2007 was $16.0 million, 28.4% of revenues and
-- decreased $0.2 million or 1.0% from $16.2 million and increased from
28.0% of revenues in the third quarter of 2007,
-- decreased $1.5 million or 8.4% from $17.5 million and 29.9% of
revenues in the fourth quarter of 2006, and
-- decreased $1.4 million or 8.1% from $17.4 million and 30.1% of
revenues in the pro forma fourth quarter of 2006.
Pro forma adjustments to the fourth quarter of 2006 remove the revenue, adjusted EBITDA, and adjusted EBITDAR through November 10, 2006 associated with properties retained by Extendicare ($0.5 million, $0.1 million and $0.1 million, respectively). No pro forma adjustments were necessary in the 2007 financial information.
Fourth quarter ended December 31, 2007 compared to the third quarter ended September 30, 2007
Revenues in the fourth quarter of 2007 decreased from the third quarter of 2007 primarily due to the planned reduction in the number of units occupied by Medicaid residents ($1.2 million) and a decrease in the number of units occupied by private pay residents ($0.4 million), partially offset by higher average daily revenue as a result of rate increases ($0.2 million).
Decreased adjusted EBITDA and adjusted EBITDAR in the fourth quarter of 2007 as compared to the third quarter of 2007 resulted primarily from lower revenues as discussed above ($1.4 million) and increases in general and administrative expenses ($0.7 million), partially offset by a decrease in residence operations expenses ($1.9 million) and for EBITDA, a decrease in resident lease expense ($0.1 million). Increased general and administrative expenses primarily related to increased salaries and benefits and professional services associated with the completion of work related to compliance with Sarbanes Oxley Section 404. Decreased residence operations expenses resulted primarily from decreased payroll and benefits expense, other variable expenses associated with reduced census and favorable experience in self-insured liabilities.
Fourth quarter ended December 31, 2007 compared to the fourth quarter ended December 31, 2006
Revenues in the fourth quarter of 2007 decreased primarily due to a decrease of 935 units occupied by Medicaid residents ($5.6 million) and the absence of revenues from properties retained by Extendicare (270 units) that were included through November 10, 2006 ($0.5 million) and from the prior tenant of ALC's corporate office ($0.4 million), partially offset by private pay rate increases ($2.9 million), higher average daily revenue as a result of an increase of 115 units occupied by private pay residents ($1.0 million), and Medicaid rate increases ($0.5 million).
Adjusted EBITDA and adjusted EBITDAR decreased in the fourth quarter of 2007 primarily due to decreased revenues discussed above ($2.1 million) and an increase in general and administrative expenses ($0.5 million) (excludes the impact of non-cash stock compensation), partially offset by a reduction in residence operations expenses ($1.1 million) and, for adjusted EBITDA, a decrease in rental expense ($0.2 million). Increased general and administrative expenses primarily related to a full quarter of public company expenses in 2007, including expenses associated with the implementation of work related to compliance with Sarbanes Oxley Section 404. Residence operations expense decreased primarily as a result of reduced census, the absence of expenses associated with properties retained by Extendicare and favorable experience in our self-insurance programs partially offset by inflationary factors.
Fourth quarter ended December 31, 2007 compared to the pro forma fourth quarter ended December 31, 2006
Revenue decreased in the fourth quarter of 2007 for the reasons discussed above in the comparison of the fourth quarter of 2007 to the fourth quarter of 2006 and because of the pro forma adjustment to revenues of $0.5 million associated with properties retained by Extendicare.
Adjusted EBITDA and adjusted EBITDAR for the fourth quarter of 2007 decreased for the reasons discussed above in the comparison of the fourth quarter of 2007 to the fourth quarter of 2006, offset by the pro forma adjustment to both adjusted EBITDA and adjusted EBITDAR of $0.1 million associated with properties retained by Extendicare.
Years ended December 31, 2007 and 2006 and pro forma year ended December 31, 2006
Revenues in the year ended December 31, 2007 were $229.3 million and:
-- decreased $1.8 million or 0.8% from $231.1 in the year ended December
31, 2006 and
-- increased $2.7 million or 1.2% from $226.6 million in the pro forma
year ended December 31, 2006.
Adjusted EBITDA for the year ended December 31, 2007 was $50.3 million and 21.9% of revenues and:
-- decreased $2.7 million or 5.2% from $53.0 million and 22.9% of
revenues in the year ended December 31, 2006, and
-- decreased $1.9 million or 3.7% from $52.2 million and 23.0% of revenue
in the pro forma year ended December 31, 2006.
Adjusted EBITDAR for the year ended December 31, 2007 was $64.6 million and 28.2% of revenues and:
-- decreased $2.7 million or 4.0% from $67.3 million and 29.1% of
revenues in the year ended December 31, 2006, and
-- decreased $1.9 million or 2.9% from $66.5 million and 29.3% of
revenues in the pro forma year ended December 31, 2006.
Pro forma adjustments to the year ended December 31, 2006 remove the revenue, adjusted EBITDA, and adjusted EBITDAR associated with properties retained by Extendicare ($4.5 million, $0.8 million and $0.8 million, respectively). No pro forma adjustments were necessary in the 2007 financial information.
Year ended December 31, 2007 compared to the year ended December 31, 2006
Revenues decreased in 2007 primarily from a decrease in the number of units occupied by Medicaid residents ($15.2 million), the absence of revenues associated with properties retained by Extendicare (270 units) that were included only in the 2006 period ($4.5 million), and the elimination of non-recurring revenues associated with the amortization of below market leases from Extendicare's 2005 acquisition of ALC which ended in January 2007 ($1.0 million), partially offset by private pay rate increases ($8.8 million), an increase of units occupied by private pay residents ($8.4 million), and Medicaid rate increases ($1.7 million).
Adjusted EBITDA and adjusted EBITDAR decreased primarily because of the increase in general and administrative expenses ($2.6 million) and the decline in revenues ($1.8 million) discussed above, partially offset by decreased residence operations expenses ($1.7 million). Increased general and administrative expenses were primarily associated with additional expenses from being a public company in 2007. Decreased residence operations expenses resulted from the inclusion of properties retained by Extendicare in the 2006 residence operations expense and reduced expenses associated with lower census, partially offset by inflationary factors.
Year ended December 31, 2007 compared to the pro forma year ended December 31, 2006
Revenues increased in the year ended December 31, 2007 compared to the pro forma year ended December 31, 2006 because the revenue decreases discussed above in the comparison of the year ended December 31, 2007 to the year ended December 31, 2006 were more than offset by the pro forma adjustments in 2006 to revenues of $4.5 million associated with properties retained by Extendicare.
Adjusted EBITDA and adjusted EBITDAR decreased because the revenue decreases discussed above in the comparison of the year ended December 31, 2007 to the year ended December 31, 2006 were only partially offset by pro forma adjustments in 2006 to both adjusted EBITDA and adjusted EBITDAR of $0.8 million associated with properties retained by Extendicare.
Share repurchase program
On December 14, 2006, ALC announced a share repurchase program for up to $20 million of its Class A common stock. On August 20, 2007 and December 18, 2007, ALC announced that its Board of Directors authorized increases to the stock repurchase program of $20 million and $25 million, respectively, bringing the total authorization to $65 million. In the fourth quarter of 2007, ALC repurchased 1.7 million shares of its Class A common stock at an aggregate cost of $11.5 and an average price of $6.85 per share. During 2007, ALC repurchased 4.7 million shares of its Class A common stock at an aggregate cost of $39.1 and an average price of $8.34 per share.
Acquisitions
Effective January 1, 2008, ALC completed its previously announced acquisition of the operations of BBLRG, LLC doing business as Cara Vita, consisting of eight assisted living residences and a total of 541 leased units for a purchase price of $14.4 million. The residences, five of which are located in Georgia, and one in each of South Carolina, Alabama and Florida, were 92% occupied with all private pay residents as of December 31, 2007. The lease has an initial term expiring in March 2015 with three five-year renewal options.
Expansion Plan Update
As of December 31, 2007, ALC had finished the design phase for most of the expansion units in its program to add 400 units onto existing ALC residences and is currently receiving construction bids on the additions. To date, bids have been consistent with our original guidance of $125,000 per unit. Construction is expected to be completed during the second half of 2008.
Financing Activities
As of December 31, 2007 ALC had availability of $58.0 million under its revolving credit facility.
Investor Call
ALC has scheduled a conference call for today, February 27, 2008 at 10:00 a.m. (Eastern Time) to discuss its financial results for the fourth quarter. The toll-free number for the live call is 877-764-2008, or international 612-332-1020. A taped rebroadcast will be available approximately one hour following the live call until midnight on March 27, 2008. To access the rebroadcast of the call, dial 800-475-6701, or international 320-365-3844: the access code is 909438.
About Us
Assisted Living Concepts, Inc. and its subsidiaries operate 216 assisted living residences with capacity for over 9,000 residents in 20 states. ALC's assisted living facilities typically consist of 40 to 60 units and offer residents a supportive, home-like setting and assistance with the activities of daily living. ALC employs approximately 4,800 people.
The attached statements reflect certain reclassifications to the prior period figures to conform to the 2007 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 improving private payer mix, are forward-looking statements. These forward-looking statements generally include words such as "expect," "intend," "will," "anticipate," "believe," "estimate," "plan," "strategy" or "objective." Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. In addition to the risks and uncertainties referred to in the release in connection with forward-looking 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 senior 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. ALC assumes no obligation to update any forward-looking statement.
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Income
(In thousands, except earnings per share)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Revenues $ 56,502 $ 58,554 $ 229,347 $ 231,148
--------- --------- --------- ---------
Expenses:
Residence operations
(exclusive of depreciation
and amortization and
residence lease expense
shown below) 36,875 37,992 151,684 153,347
General and
administrative 3,584 3,001 13,073 10,857
Residence lease
expense 3,556 3,702 14,310 14,291
Depreciation and
amortization 4,554 4,172 17,642 16,699
Transaction costs -- 680 56 4,415
Loss on impairment of
long-lived assets -- -- -- 3,080
--------- --------- --------- ---------
Total operating
expenses 48,569 49,547 196,765 202,689
--------- --------- --------- ---------
Income from operations 7,933 9,007 32,582 28,459
Other expense:
Interest expense, net (1,614) (1,489) (5,091) (9,197)
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 6,319 7,518 27,491 19,262
Income tax expense (2,264) (2,919) (10,312) (8,727)
--------- --------- --------- ---------
Net income from continuing
operations 4,055 4,599 17,179 10,535
Loss from discontinued
operations, net of taxes -- (28) -- (1,526)
--------- --------- --------- ---------
Net income $ 4,055 $ 4,571 $ 17,179 $ 9,009
========= ========= ========= =========
Weighted average common shares:
Basic 65,875 69,338 68,172 69,326
Diluted 66,532 70,205 68,863 70,205
Per share data:
Basic earnings per common
share:
Income from continuing
operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Loss from discontinued
operations -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.06 $ 0.07 $ 0.25 $ 0.13
========= ========= ========= =========
Diluted earnings per common
share:
Income from continuing
operations $ 0.06 $ 0.07 $ 0.25 $ 0.15
Loss from discontinued
operations -- -- -- (0.02)
--------- --------- --------- ---------
Net income $ 0.06 $ 0.07 $ 0.25 $ 0.13
========= ========= ========= =========
Adjusted EBITDA (1) $ 12,487 $ 13,811 $ 50,280 $ 53,021
========= ========= ========= =========
Adjusted EBITDAR (1) $ 16,043 $ 17,513 $ 64,590 $ 67,312
========= ========= ========= =========
(1) See attached tables for definitions of adjusted EBITDA and adjusted
EBITDAR and reconciliations of net income to adjusted EBITDA and
adjusted EBITDAR.
ASSISTED LIVING CONCEPTS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31,
--------------------
2007 2006
--------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,066 $ 19,951
Investments 4,596 5,332
Accounts receivable, less allowances of $992 and
$1,086, respectively 3,746 5,395
Supplies, prepaid expenses and other current assets 6,733 8,178
Income tax receivable -- 90
Deferred income taxes 4,080 1,552
--------- ----------
Total current assets 33,221 40,498
Property and equipment, net 395,141 374,612
Goodwill and other intangible assets, net 20,736 18,102
Restricted cash 8,943 10,947
Cash designated for acquisition 14,864 --
Other assets 3,336 3,181
--------- ----------
Total Assets $ 476,241 $ 447,340
========= ==========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 7,800 $ 5,134
Accrued liabilities 17,951 18,314
Deferred revenue 6,346 1,266
Accrued income taxes 198 --
Current maturities of long-term debt 26,543 2,732
Current portion of self-insured liabilities 300 300
--------- ----------
Total current liabilities 59,138 27,746
Accrual for self-insured liabilities 941 1,171
Long-term debt 103,176 87,904
Deferred income taxes 9,008 5,146
Other long-term liabilities 9,444 8,535
--------- ----------
Total Liabilities 181,707 130,502
--------- ----------
Preferred stock, par value $0.01 per share,
25,000,000 shares authorized, no shares issued and
outstanding, respectively -- --
Series A Common Stock, par value $0.01 per share,
400,000,000 authorized, 56,131,873 and 59,501,918
issued and outstanding, respectively 561 595
Series B Common Stock, par value $0.01 per share,
75,000,000 authorized, 8,727,458 and 9,956,337
issued and outstanding, respectively 87 100
Additional paid-in capital 313,548 313,474
Accumulated other comprehensive income 103 530
Retained earnings 19,318 2,139
Treasury stock at cost, 4,691,060 and 0 shares,
respectively (39,083) --
--------- ----------
Total Stockholders’ Equity 294,534 316,838
--------- ----------
Total Liabilities and Stockholders’ Equity $ 476,241 $ 447,340
========= ==========
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
2007 2006
-------- --------
OPERATING ACTIVITIES:
Net income $ 17,179 $ 9,009
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,642 16,699
Amortization of purchase accounting adjustments for:
Leases and debt (1,076) (527)
Below market resident leases (39) (1,187)
Provision for bad debts 94 214
Provision for self-insured liabilities 78 415
Payments of self-insured liabilities (308) (271)
Loss on impairment of long-lived assets, including
impairments in discontinued operations -- 5,018
Deferred income taxes 1,334 335
Changes in assets and liabilities:
Accounts receivable 1,555 (1,258)
Supplies, prepaid expenses and other current assets 1,445 (3,274)
Accounts payable 2,666 107
Accrued liabilities (363) (1,167)
Deferred revenue 5,080 480
Income taxes payable/ receivable 597 (999)
Changes in other non-current assets 1,849 (7,264)
Other long-term liabilities 1,379 2,649
Current due to Extendicare -- 76
-------- --------
Cash provided by operating activities 49,112 19,055
-------- --------
INVESTING ACTIVITIES:
Payment for acquisitions (24,444) (4,619)
Cash designated for acquisition (14,864) --
Payments for new construction projects (3,904) (3,338)
Payments for purchases of property and equipment (12,457) (12,832)
Proceeds from sales of property and equipment -- 79
-------- --------
Cash used in investing activities (55,669) (20,710)
-------- --------
FINANCING ACTIVITIES:
Capital contributions from Extendicare 74 43,678
Purchase of treasury stock (39,130) --
Proceeds on borrowings on revolving credit facility 42,000 --
Repayment of interest bearing advances to Extendicare -- (25,200)
Repayment of mortgage debt (6,573) (2,312)
Proceeds from mortgage debt 4,301 --
Payment of deferred financing fees -- (999)
-------- --------
Cash provided by financing activities 672 15,167
-------- --------
(Decrease) Increase in cash and cash equivalents (5,885) 13,512
Cash and cash equivalents, beginning of year 19,951 6,439
-------- --------
Cash and cash equivalents, end of year $ 14,066 $ 19,951
======== ========
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
All continuing residences* Three months ended
-------------------------------
December September December
31, 2007 30, 2007 31, 2006
--------- --------- ---------
Average Occupied Units by Payer Source
Private 5,316 5,359 5,201
Medicaid 1,032 1,221 1,967
--------- --------- ---------
Total 6,348 6,580 7,168
========= ========= =========
Occupancy Mix by Payer Source
Private 83.7% 81.4% 72.6%
Medicaid 16.3% 18.6% 27.4%
Percent of Revenue by Payer Source
Private 88.1% 86.2% 79.5%
Medicaid 11.9% 13.8% 20.5%
Average Revenue per Occupied Unit Day by
Payer Source
Private $ 101.75 $ 101.24 $ 95.87
Medicaid $ 70.97 $ 70.86 $ 65.36
Combined $ 96.75 $ 95.60 $ 87.48
Occupancy Percentage 74.4% 77.6% 86.4%
All continuing residences* Year ended
--------------------
December December
31, 2007 31, 2006
--------- ---------
Average Occupied Units by Payer Source
Private 5,297 5,058
Medicaid 1,357 1,991
--------- ---------
Total 6,654 7,049
========= =========
Occupancy Mix by Payer Source
Private 79.6% 71.8%
Medicaid 20.4% 28.2%
Percent of Revenue by Payer Source
Private 85.0% 78.8%
Medicaid 15.0% 21.2%
Average Revenue per Occupied Unit Day by Payer Source
Private $ 100.61 $ 96.01
Medicaid $ 69.11 $ 65.77
Combined $ 94.19 $ 87.47
Occupancy Percentage 79.1% 85.2%
* Continuing residences in 2006 include all residences except (i) two
freestanding residences and an additional 129 assisted living units
contained in skilled nursing facilities that were retained by Extendicare
and (ii) residences classified in the financial statements as discontinued
operations.
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
Same residence basis** Three months ended
-------------------------------------
December September December
31, 2007 30, 2007 31, 2006
----------- ----------- -----------
Average Occupied Units by Payer
Source
Private 5,218 5,274 5,201
Medicaid 1,032 1,221 1,967
----------- ----------- -----------
Total 6,250 6,495 7,168
=========== =========== ===========
Occupancy Mix by Payer Source
Private 83.5% 81.2% 72.6%
Medicaid 16.5% 18.8% 27.4%
Percent of Revenue by Payer Source
Private 87.9% 86.1% 79.5%
Medicaid 12.1% 13.9% 20.5%
Average Revenue per Occupied Unit
Day by Payer Source
Private $ 102.06 $ 101.61 $ 95.87
Medicaid $ 70.97 $ 70.86 $ 65.36
Combined $ 96.93 $ 95.83 $ 87.48
Occupancy Percentage 75.0% 78.1% 86.4%
Same residence basis** Year ended
------------------------
December December
31, 2007 31, 2006
----------- -----------
Average Occupied Units by Payer Source
Private 5,225 5,058
Medicaid 1,357 1,991
----------- -----------
Total 6,582 7,049
=========== ===========
Occupancy Mix by Payer Source
Private 79.4% 71.8%
Medicaid 20.6% 28.2%
Percent of Revenue by Payer Source
Private 84.9% 78.8%
Medicaid 15.1% 21.2%
Average Revenue per Occupied Unit Day by Payer
Source
Private $ 100.77 $ 96.01
Medicaid $ 69.11 $ 65.77
Combined $ 94.24 $ 87.47
Occupancy Percentage 79.3% 85.2%
** Same residence basis excludes the quarterly and full year
impact of residents added from the acquisition of the 185
unit residence in Dubuque, Iowa purchased on July 20, 2007 and
where applicable, the 40 unit residence in Escanaba, Michigan purchased
on November 1, 2006.
Weighted Average Basic and Diluted Shares
The basic weighted average number of shares of common stock is 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. This resulted in an additional 0.7 million shares included in the fully diluted weighted average number of shares outstanding in both the quarter and year ended December 31, 2007. For the quarter and year ended December 31, 2006, 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 shares of Class A and Class B common stock of ALC distributed in conjunction with the separation. 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 resulted in an additional 0.9 million shares included in the diluted weighted average number of shares outstanding in both the quarter and year ended December 31, 2006.
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, equity based compensation expense, 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 EBITDA and 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 EBITDAR performance is 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:
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
(In thousands, unaudited)
Net income $ 4,055 $ 4,571 $ 17,179 $ 9,009
Loss from discontinued operations,
net of tax benefit - 28 - 1,526
Provision for income taxes 2,264 2,919 10,312 8,727
--------- -------- --------- ---------
Income from continuing operations
before income taxes 6,319 7,518 27,491 19,262
Add:
Depreciation and amortization 4,554 4,172 17,642 16,699
Interest expense, net 1,614 1,489 5,091 9,197
Transaction costs - 680 56 4,415
Loss on impairment of long-lived
assets - - - 3,080
Non-cash equity based
compensation - (48) - 368
--------- -------- --------- ---------
Adjusted EBITDA 12,487 13,811 50,280 53,021
Add: Lease expense 3,556 3,702 14,310 14,291
--------- -------- --------- ---------
Adjusted EBITDAR $ 16,043 $ 17,513 $ 64,590 $ 67,312
========= ======== ========= =========
The following table sets forth the calculations of adjusted EBITDA and adjusted EBITDAR as percentages of total revenue:
Three Months Ended Year Ended
December 31, December 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
(Dollars in thousands, unaudited)
Revenues $ 56,502 $ 58,554 $229,347 $231,148
-------- -------- -------- --------
Adjusted EBITDA $ 12,487 $ 13,811 $ 50,280 $ 53,021
-------- -------- -------- --------
Adjusted EBITDAR $ 16,043 $ 17,513 $ 64,590 $ 67,312
-------- -------- -------- --------
Adjusted EBITDA as percent of total
revenue 22.1% 23.6% 21.9% 22.9%
-------- -------- -------- --------
Adjusted EBITDAR as percent of
total revenue 28.4% 29.9% 28.2% 29.1%
-------- -------- -------- --------
Assisted Living Concepts, Inc.
Pro Forma and Non-GAAP Reconciliation Information
(In thousands, except earnings per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, 2006 December 31, 2006
---------------------------- ------------------------------
Pro Pro
Actual Adjustments Forma Actual Adjustments Forma
Revenues $ 58,554 $(489)(A) $58,065 231,148 $(4,518)(A) $226,630
-------- -------- -------- -------- ---------- --------
Expenses:
Residence
operations
(exclusive
of
depreciation
and
amortization
and
residence
lease
expense
shown
below) 37,992 (436)(A) 37,556 153,347 (3,718)(A) 149,629
General and
administrative 3,001 -- 3,001 10,857 -- 10,857
Residence
lease
expense 3,702 -- 3,702 14,291 -- 14,291
Depreciation
and
amortization 4,172 (30)(A) 4,142 16,699 (576)(A) 16,123
Transaction
costs 680 -- 680 4,415 -- 4,415
Loss on
impairment
of
long-lived
assets -- -- -- 3,080 -- 3,080
-------- -------- -------- -------- ---------- --------
Total
operating
expenses 49,547 (466) 49,081 202,689 (4,294) 198,395
-------- -------- -------- -------- ---------- --------
Income from
operations 9,007 (23) 8,984 28,459 (224) 28,235
Other
expense:
Interest
expense, net (1,489) 1(A) (1,488) (9,197) 21(A) (9,176)
-------- -------- -------- -------- ---------- --------
Income from
continuing
operations
before
income taxes 7,518 (22) 7,496 19,262 (203) 19,059
Income tax
expense 2,919 (9)(B) 2,910 8,727 (81)(B) 8,646
-------- -------- -------- -------- ---------- --------
Income from
continuing
operations 4,599 (13) 4,586 10,535 (122) 10,413
Loss from
discontinued
operations
before
income taxes (28) 28 -- (1,526) 1,526 --
-------- -------- -------- -------- ---------- --------
Net income 4,571 15 4,586 9,009 1,404 10,413
Transaction
fees 680 -- 680 4,415 -- 4,415
Loss on
impairment
on
long-lived
assets -- -- -- 3,080 -- 3,080
Income tax
benefit on
transaction
fees and
impairment
of
long-lived
assets (281) -- (281) (1,630) -- (1,630)
-------- -------- -------- -------- ---------- --------
Net income
excluding
transaction
fees and
impairment
of
long-lived
assets 4,970 15 4,985 14,874 1,404 16,278
======== ======== ======== ======== ========== ========
Net income
from
continuing
operations
excluding
transaction
fees and
impairment
of
long-lived
assets 4,998 (13) 4,985 16,400 (122) 16,278
======== ======== ======== ======== ========== ========
Pro forma
basic
weighted
average
shares(C) 69,338 -- 69,338 69,326 -- 69,326
Pro forma
diluted
weighted
average
shares(C) 70,205 -- 70,205 70,205 -- 70,205
Adjusted
EBITDA $ 13,811 $ (53) $ 13,758 $ 53,021 $ (800) $ 52,221
======== ======== ======== ======== ========== ========
Adjusted
EBITDAR $ 17,513 $ (53) $ 17,460 $ 67,312 $ (800) $ 66,512
======== ======== ======== ======== ========== ========
Basic
earnings per
common
share(D) $ 0.07 -- $ 0.07 $ 0.24 $ (0.01) $ 0.23
======== ======== ======== ======== ========== ========
Diluted
earnings per
common share
(D) $ 0.07 -- $ 0.07 $ 0.23 $ -- 0.23
======== ======== ======== ======== ========== ========
See notes to unaudited pro forma consolidated financial statements below
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(A) To remove operations (including related depreciation and amortization) of three discontinued assisted living residences (168 units) and two free-standing Extendicare assisted living residences (141 units) and another 129 assisted living units contained within skilled nursing facilities that were not transferred to ALC. These assets and operations were included in the consolidated statements of income through November 10, 2006.
(B) To reflect the income tax effect of pro forma adjustments at applicable income tax rates.
(C) The basic weighted average shares of common stock for the three and twelve month periods ended December 31, 2006 were determined from the number of outstanding Subordinate Voting Shares of Extendicare on November 10, 2006, the separation date, which would have approximated the number of outstanding shares of Class A common stock, and the number of outstanding Multiple Voting Shares of Extendicare, 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 for both periods.
(D) Earnings per common share represent earnings and pro forma earnings from continuing operations before the net impact of transaction fees and impairment of long-lived assets.
Pro forma adjusted EBITDA and adjusted EBITDAR
The following tables sets forth a reconciliation of pro forma net income to pro forma adjusted EBITDA and pro forma adjusted EBITDAR (no adjustments were necessary in 2007):
Three
months
ended Year ended
December December 31,
31, 2006 2006
----------- ------------
(In thousands, unaudited)
Pro forma net income $ 4,586 $ 10,413
Pro forma income tax expense 2,910 8,646
----------- ------------
Pro forma income from continuing operations
before income taxes 7,496 19,059
Add:
Pro forma depreciation and amortization 4,142 16,123
Pro forma interest expense, net 1,488 9,176
Pro forma transaction costs 680 4,415
Pro forma loss on impairment of long-lived
assets 3,080
Non-cash equity based compensation (48) 368
----------- ------------
Pro forma adjusted EBITDA 13,758 52,221
Add: Pro forma lease expense 3,702 14,291
----------- ------------
Pro forma adjusted EBITDAR $ 17,460 $ 66,512
=========== ============
The following table sets forth the calculations of pro forma adjusted EBITDA and pro forma adjusted EBITDAR as a percentage of pro forma revenues (no adjustments were necessary in 2007):
Three months Year
Ended Ended
December 31, December 31,
2006 2006
----------- -----------
(Dollars in thousands,
unaudited)
----------- -----------
Pro forma revenues $ 58,065 $ 226,630
----------- -----------
Pro forma adjusted EBITDA $ 13,758 $ 52,221
----------- -----------
Pro Forma adjusted EBITDAR $ 17,460 $ 66,512
----------- -----------
Pro Forma adjusted EBITDA as percent of total pro
forma revenue 23.7% 23.0%
----------- -----------
Pro forma adjusted EBITDAR as percent of total
pro forma revenue 30.1% 29.3%
----------- -----------
Contact:
For further information, contact:
Assisted Living Concepts, Inc.
John Buono
Sr. Vice President, Chief Financial Officer and Treasurer
Phone: (262) 257-8999
Fax: (262) 251-7562
Email: Email Contact
Visit ALC's Website @ http://www.alcco.com
--------------------------------------------------------------------------------
Source: Assisted Living Concepts, Inc.
"Where Liberty Dwells; There Is My Country" Dr. Benjamin Franklin
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