Assisted Living Concepts, Inc. (NYSE: ALC)
Highlights:
-- Adjusted EBITDAR as a percent of revenues increased to 33.8%, up from
32.3% in the first quarter of 2010
-- Increased average private pay occupancy by 2 and 29 units over the
fourth quarter of 2010 and the first quarter of 2010, respectively
-- Increased private pay rates by 2.4% over the fourth quarter of 2010
-- Board of Directors declared 2 for 1 stock split and post split dividend
of 10 cents per share
Assisted Living Concepts, Inc. ("ALC") (NYSE: ALC) reported net
income of $5.0 million in the first quarter of 2011, compared to a
net income of $3.6 million in the first quarter of 2010. During the
first quarter of 2011, ALC recorded "One-Time Items" described
below that resulted in an additional $0.4 million of net income.
Excluding the One-Time Items, net income in the first quarter of
2011 would have been $4.6 million.
"We continue to strengthen our portfolio of properties by making
positive strides in both private pay occupancy and earnings,"
commented Laurie Bebo, President and Chief Executive Officer. "The
first quarter of the year has historically been our most
challenging quarter from both an occupancy and expense perspective.
We are encouraged that the market has recognized our consistent
positive results and driven up our share price. We feel that a two
for one stock split will benefit our shareholders by adding
liquidity to our stock. We are pleased to report that confidence in
our balance sheet and our ability to continue to generate
significant amounts of cash has resulted in rewarding our
shareholders with an initial quarterly dividend of 10 cents per
post split share."
One Time Items recorded in the first quarter of 2011 included a
reduction in tax expense associated with the settlement of all
issues associated with a tax allocation agreement with a subsidiary
of our former parent Extendicare Inc. (now Extendicare Real Estate
Investment Trust) ($0.8 million), partially offset by charges
associated with a mark to market adjustment for interest rate swap
agreements ($0.2 million net of tax) and the write-off of deferred
financing fees associated with our refinanced debt ($0.2 million
net of tax).
Diluted earnings per common share for the quarters ended March
31, 2011 and 2010 were $0.43 and $0.31, respectively. Excluding One
Time Items, diluted earnings per common share for the quarter ended
March 31, 2011 was $0.39.
In addition, to these One Time Items, ALC's Company Conference
was held in our first quarter of 2011 as compared the second
quarter in 2010. This timing difference resulted in an increase in
General and Administrative expense in the first quarter of 2011 of
$0.3 million ($0.2 million net of tax) over the first quarter of
2010 or approximately $.02 per share.
Certain non-GAAP financial measures are used in the discussions
in this release in assessing the performance of the business. See
attached tables for definitions of Adjusted EBITDA and Adjusted
EBITDAR, reconciliations of net income (loss) to Adjusted EBITDA
and Adjusted EBITDAR, calculations of Adjusted EBITDA and Adjusted
EBITDAR as a percentage of total revenues (Adjusted EBITDAR and
Adjusted EBITDA margins), and non-GAAP financial measure
reconciliation information.
As of March 31, 2011, ALC operated 211 senior living residences
comprising 9,325 units.
The following discussions exclude the impact of discontinued
operations unless otherwise specified.
Quarters ended March 31, 2011, March 31, 2010, December 31,
2010
Revenues of $58.4 million in the first quarter ended March 31,
2011 increased $0.5 million or 1.0% from $57.9 million in the first
quarter of 2010 and were unchanged from the fourth quarter of
2010.
Adjusted EBITDAR for the first quarter of 2011 was $19.7
million, or 33.8% of revenues and
-- increased $1.0 million or 5.6% from $18.7 million and 32.3% of revenues
in the first quarter of 2010; and
-- decreased $1.2 million or 5.5% from $20.9 million and 35.7% of revenues
in the fourth quarter of 2010.
Adjusted EBITDA for the first quarter of 2011 was $15.4 million,
or 26.3% of revenues and
-- increased $1.8 million or 13.0% from $13.6 million and 23.5% of
revenues in the first quarter of 2010; and
-- decreased $1.0 million or 6.3% from $16.4 million and 28.0% of revenues
in the fourth quarter of 2010.
First quarter 2011 compared to first quarter 2010
Revenues in the first quarter of 2011 increased from the first
quarter of 2010 primarily due to higher average daily revenue as a
result of rate increases ($1.1 million) and an increase in private
pay occupancy ($0.3 million), partially offset by the planned
reduction in the number of units occupied by Medicaid residents
($0.9 million). Private pay rates increased in the first quarter of
2011 by an average of 2.0% over the first quarter of 2010. Overall
rates, including the impact of improved payer mix, increased in the
first quarter of 2011 by an average of 2.6% over the first quarter
of 2010.
Both Adjusted EBITDAR and Adjusted EBITDA increased in the first
quarter of 2011 primarily due to a decrease in residence operations
expenses ($0.5 million) (this excludes gains and losses on the
disposals of fixed assets) and an increase in revenues discussed
above ($0.5 million). Additionally, for Adjusted EBITDA only, a
decrease in residence lease expense ($0.7 million). Residence
operation expenses decreased primarily due to reduced salary
expense and property taxes. Staffing needs in the first quarter of
2011 as compared to the first quarter of 2010 decreased primarily
because of a decline in the number of units occupied by Medicaid
residents who tend to have higher care needs than private pay
residents. In addition, general economic conditions enabled us to
hire new employees at lower wage rates. Property tax expenses were
lower due to successful appeals of assessments in a variety of
states. General and administrative expenses were unchanged as
savings associated with upfront costs associated with transitioning
payroll and benefits from a third party vendor to in-house in the
first quarter of 2010 were offset by expenses associated with our
2011 Company Conference. In 2010, the Conference took place in the
second quarter.
First quarter 2011 compared to the fourth quarter 2010
Revenues in the first quarter of 2011 were consistent with
revenues in the fourth quarter of 2010. Higher average daily
revenue as a result of rate increases ($1.3 million) was offset by
two less days in the 2011 quarter ($1.2 million) and the reduction
in the number of units occupied by Medicaid residents ($0.1
million). Private pay and overall rates increased in the first
quarter of 2011 by an average of 2.4% over the fourth quarter of
2010.
Decreased Adjusted EBITDA and Adjusted EBITDAR in the first
quarter of 2011 as compared to the fourth quarter of 2010 resulted
primarily from an increase in residence operations expenses ($0.7
million) (this excludes gains and losses on the disposals of fixed
assets) and an increase in general and administrative expenses
($0.3 million) (this excludes non-cash equity-based compensation).
Additionally, for Adjusted EBITDA only, a decrease in residence
lease expense ($0.2 million). Residence operations expenses
increased primarily from increases in utility expenses resulting
from normal seasonal fluctuations partially offset by other
administrative expenses. General and administrative expenses
increased primarily as a result of expenses associated with our
Company Conference held in the first quarter of 2011. In 2010 the
Conference was held in the second quarter.
Stock Split
On May 2, 2011, the Board of Directors approved a stock split of
its Class A and Class B Common Stock at a ratio of 2 to 1, with a
planned effective date of May 20, 2011. Accordingly, as of the
effective date, each share of issued and outstanding Class A and
Class B Common Stock will be converted into two shares of Class A
and Class B Common Stock, respectively. The stock split will be
effected by filing a Certificate of Change to ALC s Amended and
Restated Articles of Incorporation with the Secretary of State of
Nevada.
Dividend
On May 2, 2011, the Board of Directors declared a post-stock
split cash dividend of 10 cents per share payable to shareholders
of record at the close of business on May 20, 2011 and will be paid
on June 15, 2011.
Liquidity
At March 31, 2011 ALC maintained a strong liquidity position
with availability under its credit agreement of $87.1 million.
Share Repurchase Program
In the first quarter of 2011, ALC repurchased 24,600 shares of
its Class A Common Stock at a cost of $0.8 million and an average
price of $32.42 per share (excluding fees). At May 2, 2011, $13.3
million remained under a previously authorized plan to purchase ALC
Class A common stock. On May 2, 2011, the Board of Directors
extended the stock repurchase plan by resetting the authorized
amount of repurchases to $15 million and removing the expiration
date. The plan will no longer be subject to an annual expiration
date and will only expire upon completion of stock repurchases
totaling $15 million or by action of the Board. Since becoming a
separately traded public company on November 11, 2006, ALC has
repurchased 2,465,936 shares of its Class A Common Stock at a cost
of $76.6 million and an average price of $31.04 per share
(excluding fees).
Investor Call
ALC has scheduled a conference call for tomorrow, May 3, 2011 at
10:00 a.m. (ET) to discuss its financial results for the first
quarter. The release will be posted on ALC's website at
www.alcco.com. The toll-free number for the live call is
877-209-9920 or international 612-332-0634. A taped rebroadcast of
the conference call will be available approximately three hours
following the live call until midnight on June 3, 2011, by dialing
toll free 800-475-6701, or international 320-365-3844, and using
access code 196057.
About Us
Assisted Living Concepts, Inc. and its subsidiaries operate 211
senior living residences comprising 9,325 units in 20 states. ALC's
senior living residences typically consist of 40 to 60 units and
offer a supportive, home-like setting. Residents may receive
assistance with the activities of daily living either directly from
ALC employees or through our wholly owned home health subsidiaries.
ALC employs approximately 4,100 people.
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 management's
expectations about improving occupancy and private pay mix, are
forward-looking statements. Forward-looking statements generally
include words such as "expect," "project," "point toward,"
"intend," "will," "indicate," "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, other
risks and uncertainties are contained in ALC's filings with United
States Securities and Exchange Commission and include, but are not
limited to, the following: changes in the health care industry in
general and the senior housing industry in particular because of
governmental and economic influences; changes in general economic
conditions, including changes in housing markets, unemployment
rates and the availability of credit at reasonable rates; 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
acquisitions, dividends, debt obligations and 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)
(unaudited)
Three Months Ended
March 31,
------------------
2011 2010
-------- --------
Revenues $ 58,409 $ 57,859
-------- --------
Expenses:
Residence operations (exclusive of depreciation and
amortization and residence lease expense shown
below) 35,069 35,712
General and administrative (including non-cash
stock-based compensation expense of $280 and $137,
respectively) 3,889 3,774
Residence lease expense 4,368 5,083
Depreciation and amortization 5,741 5,670
-------- --------
Total operating expenses 49,067 50,239
-------- --------
Income from operations 9,342 7,620
Other (expense) income
Interest expense:
Debt (2,082) (1,888)
Change in value of derivative and amortization (287) --
Write off of deferred financing costs (279) --
Interest income 2 4
Other 56 --
-------- --------
Income before income taxes 6,752 5,736
Income tax expense (1,741) (2,123)
-------- --------
Net income $ 5,011 $ 3,613
======== ========
Weighted average common shares:
Basic 11,472 11,578
Diluted 11,640 11,744
Per share data:
Basic earnings per common share $ 0.44 $ 0.31
Diluted earnings per common share $ 0.43 $ 0.31
Adjusted EBITDA (1) $ 15,363 $ 13,597
Adjusted EBITDAR (1) $ 19,731 $ 18,680
(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)
March 31, December 31,
2011 2010
----------- -----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 2,908 $ 13,364
Investments 4,583 4,599
Accounts receivable, less allowances of $1,819
and $1,414, respectively 3,550 3,201
Prepaid expenses, supplies and other
receivables 5,465 3,020
Deposits in escrow 3,055 3,472
Income tax receivable -- 356
Deferred income taxes 4,784 5,108
Current assets of discontinued operations 168 168
----------- -----------
Total current assets 24,513 33,288
Property and equipment, net 435,584 437,303
Intangible assets, net 9,883 10,193
Restricted cash 3,448 3,448
Other assets 2,367 872
----------- -----------
Total Assets $ 475,795 $ 485,104
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,233 $ 6,154
Accrued liabilities 19,368 20,173
Deferred revenue 8,386 4,784
Income tax payable 1,519 --
Current maturities of long-term debt 2,460 2,449
Current portion of self-insured liabilities 500 500
----------- -----------
Total current liabilities 38,466 34,060
Accrual for self-insured liabilities 1,768 1,597
Long-term debt 110,501 129,661
Deferred income taxes 20,961 20,503
Other long-term liabilities 9,900 10,024
Commitments and contingencies ----------- -----------
Total Liabilities 181,596 195,845
Preferred Stock, par value $0.01 per share,
25,000,000 shares authorized; no shares issued
and outstanding -- --
Class A Common Stock, $0.01 par value, 80,000,000
shares authorized at March 31, 2011 and December
31, 2010; 12,464,070 and 12,408,369 shares issued
and 9,998,134 and 9,967,033 shares outstanding,
respectively 125 124
Class B Common Stock, $0.01 par value, 15,000,000
shares authorized at March 31, 2011 and December
31, 2010; 1,468,493 and 1,520,310 shares issued
and outstanding, respectively 15 15
Additional paid-in capital 315,571 315,292
Accumulated other comprehensive income / (loss) 352 (95)
Retained earnings 54,981 49,970
Treasury stock at cost, 2,465,936 and 2,441,336
shares, respectively (76,845) (76,047)
----------- -----------
Total Stockholders' Equity 294,199 289,259
----------- -----------
Total Liabilities and Stockholders' Equity $ 475,795 $ 485,104
=========== ===========
ASSISTED LIVING CONCEPTS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Three Months Ended
March 31,
------------------
2011 2010
-------- --------
OPERATING ACTIVITIES:
Net income $ 5,011 $ 3,613
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,741 5,670
Amortization of purchase accounting adjustments for
leases (167) (99)
Provision for bad debts 405 104
Provision for self-insured liabilities 255 170
Loss on disposal of fixed assets -- 170
Unrealized gain on investments (56) (27)
Equity-based compensation expense 280 137
Change in fair value of derivatives 287 --
Deferred income taxes 503 1,045
Changes in assets and liabilities:
Accounts receivable (754) (30)
Supplies, prepaid expenses and other receivables (2,445) (1,349)
Deposits in escrow 417 302
Current assets - discontinued operations -- (132)
Accounts payable 267 (904)
Accrued liabilities (559) (2,891)
Deferred revenue 3,602 1,505
Current liabilities - discontinued operations -- (34)
Payments of self-insured liabilities (83) (77)
Income taxes payable / receivable 1,875 927
Changes in other non-current assets 407 1,385
Other non-current assets - discontinued operations -- 399
Other long-term liabilities (9) 225
-------- --------
Cash provided by operating activities 14,977 10,109
INVESTING ACTIVITIES:
Payment for securities (46) (56)
Proceeds on sales of securities 311 --
Payments for new construction projects (463.3) (1,371)
Payments for purchases of property and equipment (3,437) (2,432)
-------- --------
Cash used in investing activities (3,635) (3,859)
FINANCING ACTIVITIES:
Payments of financing costs (1,902) --
Purchase of treasury stock (798) (20)
Repayment of borrowings on revolving credit facility (68,000) --
Proceeds on borrowings from revolving credit facility 50,000 --
Repayment of mortgage debt (1,098) (459)
-------- --------
Cash used by financing activities (21,798) (479)
-------- --------
(Decrease)/Increase in cash and cash equivalents (10,456) 5,771
Cash and cash equivalents, beginning of year 13,364 4,360
-------- --------
Cash and cash equivalents, end of period $ 2,908 $ 10,131
======== ========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ 2,047 $ 1,782
Income tax payments, net of refunds 114 86
ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics
Continuing residences* Three months ended
----------------------------
March 31, December March 31,
2011 31, 2010 2010
-------- -------- --------
Average Occupied Units by Payer Source
Private 5,497 5,495 5,468
Medicaid 93 106 214
-------- -------- --------
Total 5,590 5,601 5,682
======== ======== ========
Occupancy Mix by Payer Source
Private 98.3% 98.1% 96.2%
Medicaid 1.7% 1.9% 3.8%
Percent of Revenue by Payer Source
Private 99.0% 98.8% 97.5%
Medicaid 1.0% 1.2% 2.5%
Average Revenue per Occupied Unit Day $ 116.09 $ 113.40 $ 113.13
Occupancy Percentage* 62.4% 62.1% 63.0%
* Depending on the timing of new additions and temporary closures of our
residences, we may increase or reduce the number of units we actively
operate. For the three months ended March 31, 2011, December 31, 2010 and
March 31, 2010 we actively operated 8,959, 9,026 and 9,016 units,
respectively.
Same residence basis** Three months ended
----------------------------
March 31, December March 31,
2011 31, 2010 2010
-------- -------- --------
Average Occupied Units by Payer Source
Private 5,470 5,475 5,432
Medicaid 93 104 197
-------- -------- --------
Total 5,563 5,579 5,629
======== ======== ========
Occupancy Mix by Payer Source
Private 98.3% 98.1% 96.5%
Medicaid 1.7% 1.9% 3.5%
Percent of Revenue by Payer Source
Private 99.0% 98.7% 97.6%
Medicaid 1.0% 1.3% 2.4%
Average Revenue per Occupied Unit Day $ 115.76 $ 111.71 $ 113.29
Occupancy Percentage 62.4% 62.6% 63.1%
** Excludes quarterly impact of 45 completed expansion units and 113 units
temporarily closed for renovation.
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 (including goodwill) 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:
The following table sets forth a reconciliation of net income to Adjusted
EBITDA and Adjusted EBITDAR:
Three Months Ended
----------------------------
March 31, March 31, December
2011 2010 31, 2010
-------- --------- --------
(In thousands, unaudited)
Net income $ 5,011 $ 3,613 $ 5,408
Add: Provision for income taxes 1,741 2,123 3,109
-------- --------- --------
Income before income taxes 6,752 5,736 8,517
Add:
Depreciation and amortization 5,741 5,670 5,693
Interest expense, net 2,080 1,884 2,101
Non-cash equity based compensation 280 137 45
Loss (gain) on disposal of fixed assets -- 170 (55)
Transaction expenses associated with property
acquisition -- -- 110
Gain on sale of equity investments (56) -- (23)
Change in value of derivative and amortization 287 -- --
Write-off of deferred financing costs 279 -- --
-------- --------- --------
Adjusted EBITDA $ 15,363 $ 13,597 $ 16,388
Add: Lease expense 4,368 5,083 4,491
-------- --------- --------
Adjusted EBITDAR $ 19,731 $ 18,680 $ 20,879
======== ========= ========
The following table sets forth the calculations of Adjusted EBITDA and
Adjusted EBITDAR as percentages of total revenue:
Three Months Ended
----------------------------
March 31, March 31, December
2011 2010 31, 2010
-------- --------- --------
(Dollar amounts in
thousands, unaudited)
Revenues $ 58,409 $ 57,859 $ 58,435
======== ======== ========
Adjusted EBITDA $ 15,363 $ 13,597 $ 16,388
======== ======== ========
Adjusted EBITDAR $ 19,731 $ 18,680 $ 20,879
======== ======== ========
Adjusted EBITDA as percent of total revenues 26.3% 23.5% 28.0%
======== ======== ========
Adjusted EBITDAR as percent of total revenues 33.8% 32.3% 35.7%
======== ======== ========
ASSISTED LIVING CONCEPTS, INC.
Reconciliation of Non-GAAP Measures
Three Months
Ended
March 31,
2010
(unaudited)
Net income $ 5,011
Add one time charges:
Change in value of derivative and amortization 287
Write-off of deferred financing costs 279
Less one time credits:
Settlement relating to tax allocation agreement 750
Gain on sale of equity investment 56
Net tax benefit from charges and credits (1) 186
------------
Pro forma net income excluding one time charges and credits $ 4,585
============
Weighted average common shares:
Basic 11,472
============
Diluted 11,640
============
Pro forma basic earnings per common share excluding one-time
charges and credits $ 0.40
============
Pro forma diluted earnings per common share excluding one-time
charges and credits $ 0.39
============
(1) Net tax benefit represents 36.5% of taxable addbacks excluding the
settlement relating to the tax allocation agreement. The settlement
relating to the tax allocation agreement is an adjustment to tax expense
and therefore non taxable.
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 @ www.alcco.com
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