ARV ASSISTED LIVING INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO ___________

COMMISSION FILE NUMBER: 0-26980

ARV ASSISTED LIVING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE		33-0160968
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

245 FISCHER AVENUE, D-1 COSTA MESA, CA		92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)		(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

The number of outstanding shares of the issuer’s Common Stock, no par value, as of October 20, 2002 was 17,459,689.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)

			SEPTEMBER 30, 2002			DECEMBER 31, 2001

ASSETS
Current assets:
	Cash and cash equivalents		$	16,227		$	13,234
	Accounts receivable and amounts due from affiliates, net			931			744
	Prepaids and other current assets			4,113			2,614
	Impounds			4,450			3,779
	Property held for sale, net			—			763

		Total current assets		25,721			21,134
Property, furniture and equipment, net				115,600			116,929
Goodwill, net				18,354			18,354
Operating lease security deposits				9,253			9,414
Other non-current assets, net				18,883			11,346

			$	187,811		$	177,177

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	1,613		$	2,212
	Accrued payroll costs			4,459			4,055
	Other accrued liabilities			8,450			6,659
	Notes payable, current portion			2,202			7,269
	Accrued interest payable			960			823

		Total current liabilities		17,684			21,018
Notes payable, less current portion				118,939			105,062
Lease liabilities				2,081			1,995
Other non-current liabilities				905			641

				139,609			128,716

Minority interest in majority owned entities				131			621
Shareholders’ equity:
	Series A Preferred stock, $0.01 par value, convertible and redeemable; 2,000 shares authorized, none issued or outstanding at September 30, 2002 and December 31, 2001			—			—
	Preferred stock, no par value; 8,000 shares authorized, none issued and outstanding			—			—
	Common stock, $0.01 par value; 100,000 shares authorized, 17,460 shares issued and outstanding at September 30, 2002 and December 31, 2001			175			175
	Additional paid in capital			145,337			145,337
	Accumulated deficit			(97,441	)		(97,672	)

		Total shareholders’ equity		48,071			47,840

Commitments and contingencies
			$	187,811		$	177,177

See accompanying notes to unaudited condensed consolidated financial statements.

ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

						THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,

						2002			2001			2002			2001

Revenue:
	Assisted living community revenue:
		Rental revenue				$	31,343		$	29,689		$	94,916		$	87,246
		Assisted living and other services					7,314			6,240			21,139			18,224
		Skilled nursing facility revenue					744			508			2,338			1,703
		Management fees					268			248			797			807

			Total revenue				39,669			36,685			119,190			107,980

Operating expenses:
	Assisted living community operating expense						23,758			22,245			71,114			65,333
	Skilled nursing facility expenses						814			667			2,313			1,851
	Community lease expense						8,007			7,784			24,032			23,163
	General and administrative						2,422			2,376			7,713			7,637
	Depreciation and amortization						1,909			1,889			5,737			5,877

				Total operating expenses			36,910			34,961			110,909			103,861

Income from operations							2,759			1,724			8,281			4,119
Other income (expense):
	Interest income						113			199			273			951
	Other income (expense), net						58			(83	)		60			(148	)
	Equity in loss of partnerships						(176	)		—			(802	)		—
	Gain on sale of properties and partnership interests						—			—			54			2,887
	Interest expense						(2,436	)		(2,236	)		(7,090	)		(6,853	)

					Total other expense		(2,441	)		(2,120	)		(7,505	)		(3,163	)

Income (loss) before income tax expense, minority interest in income of majority owned entities and extraordinary item							318			(396	)		776			956
Income tax (expense) benefit							(11	)		28			(31	)		(10	)
Minority interest in income of majority owned entities							(101	)		(371	)		(514	)		(773	)

Income (loss) before extraordinary item							206			(739	)		231			173
Extraordinary gain from early extinguishment of debt, net of income tax							—			—			—			1,550

Net income (loss)						$	206		$	(739	)	$	231		$	1,723

Basic and diluted income (loss) per common share:
	Income (loss) before extraordinary item					$	0.01		$	(0.04	)	$	0.01		$	0.01
	Extraordinary gain from early extinguishment of debt, net of income tax						—			—			—			0.09

Net income (loss)						$	0.01		$	(0.04	)	$	0.01		$	0.10

Weighted average common shares outstanding							17,460			17,460			17,460			17,460

See accompanying notes to unaudited condensed consolidated financial statements.

ARV ASSISTED LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS)

		NINE MONTHS ENDED SEPTEMBER 30,

		2002			2001

Net cash provided by operating activities:		$	4,238		$	1,471
Cash flows used in investing activities:
	Proceeds from sale of partnership, net of selling cost		—			2,887
Additional investment in unconsolidated limited liability companies			(694	)		—