Attached files
Exhibit 99.2
Atria Senior Living
Group, Inc.
Condensed Consolidated Financial Statements as of
and for the Nine Months Ended September 30, 2010
and 2009 (unaudited)
ATRIA SENIOR LIVING GROUP, INC.
TABLE OF CONTENTS
| Page | ||||
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited): |
||||
| Statements of Operations |
1 | |||
| Balance Sheets as of September 30, 2010 and December 31, 2009 |
2 | |||
| Statement of Stockholder’s Equity |
3 | |||
| Statements of Cash Flows |
4–5 | |||
| Notes to Condensed Consolidated Financial Statements |
6–7 | |||
ATRIA SENIOR LIVING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (unaudited)
(In thousands)
| September 30, 2010 |
September 30, 2009 |
|||||||
| REVENUES: |
||||||||
| Assisted and independent living revenues |
$ | 349,058 | $ | 329,936 | ||||
| Managed facility reimbursements |
52,261 | 50,623 | ||||||
| Management fees |
6,731 | 6,571 | ||||||
| Total operating revenues |
408,050 | 387,130 | ||||||
| OPERATING EXPENSES: |
||||||||
| Assisted and independent living operating expenses |
229,463 | 218,731 | ||||||
| Managed facility reimbursed expenses |
52,261 | 50,623 | ||||||
| General and administrative expenses |
35,413 | 33,259 | ||||||
| Depreciation and amortization |
38,591 | 33,971 | ||||||
| Community rent expense |
14,625 | 14,440 | ||||||
| Development expenses |
1,824 | 476 | ||||||
| Loss on disposition of assets — net |
2,214 | 261 | ||||||
| Impairment and lease termination costs |
53 | 761 | ||||||
| Total operating expenses |
374,444 | 352,522 | ||||||
| OPERATING INCOME |
33,606 | 34,608 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest expense |
(52,122 | ) | (51,327 | ) | ||||
| Interest income |
147 | 694 | ||||||
| Loss on debt extinguishment |
(2 | ) | (462 | ) | ||||
| Other — net |
185 | 45 | ||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
(18,186 | ) | (16,442 | ) | ||||
| INCOME TAX BENEFIT |
5,165 | 3,182 | ||||||
| LOSS FROM CONTINUING OPERATIONS |
(13,021 | ) | (13,260 | ) | ||||
| LOSS FROM DISCONTINUED OPERATIONS — Net of tax |
— | (29 | ) | |||||
| NET LOSS |
$ | (13,021 | ) | $ | (13,289 | ) | ||
See notes to condensed consolidated financial statements.
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ATRIA SENIOR LIVING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2010 AND DECEMBER 31, 2009 (unaudited)
(In thousands, except share amounts)
| September 30, 2010 |
December 31, 2009 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 161,916 | $ | 174,235 | ||||
| Restricted cash — current |
13,096 | 9,247 | ||||||
| Resident accounts receivable — net |
3,894 | 3,961 | ||||||
| Due from affiliates |
10,126 | 11,876 | ||||||
| Assets held for sale |
— | 1,600 | ||||||
| Deferred income taxes |
2,047 | 2,047 | ||||||
| Other current assets |
8,641 | 6,534 | ||||||
| Total current assets |
199,720 | 209,500 | ||||||
| PROPERTY AND EQUIPMENT — Net |
1,040,195 | 1,036,590 | ||||||
| LEASEHOLD INTERESTS AND OTHER INTANGIBLES — Net |
17,137 | 19,044 | ||||||
| GOODWILL |
96,784 | 96,784 | ||||||
| DEFERRED FINANCING COSTS — Net |
12,191 | 13,674 | ||||||
| LEASEHOLD DEPOSITS |
5,127 | 5,127 | ||||||
| RESTRICTED CASH |
10,916 | 10,242 | ||||||
| TOTAL |
$ | 1,382,070 | $ | 1,390,961 | ||||
| LIABILITIES AND STOCKHOLDER’S EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 5,914 | $ | 6,443 | ||||
| Accrued liabilities |
64,220 | 55,105 | ||||||
| Due to affiliates |
176 | 95 | ||||||
| Liabilities associated with assets held for sale |
— | 82 | ||||||
| Capital lease obligations due within one year |
1,216 | 1,010 | ||||||
| Long-term debt due within one year |
19,524 | 17,138 | ||||||
| Total current liabilities |
91,050 | 79,873 | ||||||
| CAPITAL LEASE AND DEFERRED FINANCING OBLIGATIONS |
223,120 | 223,267 | ||||||
| LONG-TERM DEBT |
829,054 | 831,564 | ||||||
| DEFERRED INCOME TAXES |
29,409 | 34,601 | ||||||
| OTHER LONG-TERM LIABILITIES |
11,472 | 10,670 | ||||||
| Total liabilities |
1,184,105 | 1,179,975 | ||||||
| COMMITMENTS AND CONTINGENCIES |
— | — | ||||||
| STOCKHOLDER’S EQUITY: |
||||||||
| Common stock, $.001 par value — authorized 2,000 shares; 1,000 issued and outstanding |
— | — | ||||||
| Paid-in capital |
997,064 | 997,064 | ||||||
| Accumulated deficit |
(799,099 | ) | (786,078 | ) | ||||
| Total stockholder’s equity |
197,965 | 210,986 | ||||||
| TOTAL |
$ | 1,382,070 | $ | 1,390,961 | ||||
See notes to condensed consolidated financial statements.
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ATRIA SENIOR LIVING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (unaudited)
(In thousands, except share amounts)
| Total | ||||||||||||||||||||
| Common Stock | Accumulated | Stockholder’s | ||||||||||||||||||
| Shares | Amount | Paid-In Capital | Deficit | Equity | ||||||||||||||||
| BALANCE — January 1, 2010 |
1,000 | $ | — | $ | 997,064 | $ | (786,078 | ) | $ | 210,986 | ||||||||||
| Net loss |
— | — | — | (13,021 | ) | (13,021 | ) | |||||||||||||
| BALANCE — September 30, 2010 |
1,000 | $ | — | $ | 997,064 | $ | (799,099 | ) | $ | 197,965 | ||||||||||
See notes to condensed consolidated financial statements.
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ATRIA SENIOR LIVING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (unaudited)
(In thousands)
| September 30, 2010 |
September 30, 2009 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS: |
||||||||
| Loss from continuing operations |
$ | (13,021 | ) | $ | (13,260 | ) | ||
| Adjustments to reconcile loss from continuing operations to net cash provided by operating activities of continuing operations: |
||||||||
| Depreciation and amortization |
38,591 | 33,971 | ||||||
| Deferred taxes |
(5,190 | ) | (3,212 | ) | ||||
| Loss on disposition of assets |
2,214 | 261 | ||||||
| Deferred financing costs amortization |
2,174 | 1,906 | ||||||
| Amortization of leasehold interests |
1,548 | 1,548 | ||||||
| Provision for doubtful accounts |
532 | 970 | ||||||
| Loss on debt extinguishment |
2 | 462 | ||||||
| Other |
(115 | ) | (93 | ) | ||||
| Change in operating assets and liabilities: |
||||||||
| Resident accounts receivable — net |
(645 | ) | (1,622 | ) | ||||
| Other current assets |
(2,106 | ) | 7,099 | |||||
| Accounts payable and other accrued liabilities |
9,055 | (9,457 | ) | |||||
| Due to/from affiliates |
1,831 | 46 | ||||||
| Net cash provided by operating activities |
34,870 | 18,619 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS: |
||||||||
| Purchase of property and equipment |
(42,124 | ) | (49,840 | ) | ||||
| Proceeds from sale of property and equipment |
45 | 30 | ||||||
| Acquisitions |
— | (19,737 | ) | |||||
| Proceeds from sale of notes |
— | 1,971 | ||||||
| Change in restricted cash and leasehold deposits |
(4,332 | ) | (5,149 | ) | ||||
| Net cash used in investing activities |
(46,411 | ) | (72,725 | ) | ||||
(Continued)
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ATRIA SENIOR LIVING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (unaudited)
(In thousands)
| September 30, 2010 |
September 30, 2009 |
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS: |
||||||||
| Issuance of long-term debt |
$ | 22,022 | $ | 54,533 | ||||
| Repayment of principal on long-term debt and bonds |
(22,012 | ) | (35,871 | ) | ||||
| Debt issuance costs |
(788 | ) | (2,341 | ) | ||||
| Net cash (used in) provided by financing activities |
(778 | ) | 16,321 | |||||
| NET CASH USED IN CONTINUING OPERATIONS |
(12,319 | ) | (37,785 | ) | ||||
| NET CASH USED IN DISCONTINUED OPERATIONS: |
||||||||
| Net cash used in operating activities |
— | (52 | ) | |||||
| CHANGE IN CASH AND CASH EQUIVALENTS |
(12,319 | ) | (37,837 | ) | ||||
| CASH AND CASH EQUIVALENTS — Beginning of period |
174,235 | 211,514 | ||||||
| CASH AND CASH EQUIVALENTS — End of period |
$ | 161,916 | $ | 173,677 | ||||
| SUPPLEMENTAL INFORMATION: |
||||||||
| Cash paid during the year for interest payments |
$ | 55,129 | $ | 49,466 | ||||
| Purchase of property and equipment included in accrued liabilities |
$ | 9,398 | $ | 10,692 | ||||
| Noncash increase to property and equipment and capital lease obligations due to lease restructuring |
$ | — | $ | 4,211 | ||||
| Increase in debt issuance costs included in accrued liabilities |
$ | — | $ | 483 | ||||
| See notes to condensed consolidated financial statements. | (Concluded) |
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ATRIA SENIOR LIVING GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (unaudited)
| 1. | THE COMPANY AND BACKGROUND |
Organization — Atria Senior Living Group, Inc. (“Atria”) and subsidiaries (the “Company”), an indirect wholly-owned subsidiary of LF Strategic Realty Investors II L.P., LFSRI II-CADIM Alternative Partnership L.P., and LFSRI II Alternative Partnership L.P. (collectively known as “LFSRI II”), is a national provider of assisted and independent living services for seniors.
Background — As of September 30, 2010, the Company owned or operated 95 communities located in 27 states with a total of 11,294 units. Of the 95 communities, 71 are owned by the Company and 24 are operated by the Company pursuant to long-term leases. The company also managed 31 communities for Lazard Senior Housing Partners LP, a related investment fund.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation — The accompanying condensed consolidated financial statements include the Company’s subsidiaries and all variable interest entities where the Company is considered the primary beneficiary. Intercompany transactions have been eliminated.
In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company as of September 30, 2010, and for all periods presented. Those adjustments are of a normal and recurring nature.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2009.
Recently Issued Accounting Standards — In June 2009, the FASB issued guidance under ASC Topic 810 (previously SFAS No. 167, Amendments to FASB Interpretation No. 46(R)), which amended the consolidation guidance for variable interest entities (“VIE”). The new guidance requires a company to perform an analysis to determine whether its variable interest gives it a controlling financial interest in a VIE. The amendment, which requires ongoing reassessments, redefines the primary beneficiary as the party that (1) has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) has the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. The guidance includes enhanced disclosures about a company’s involvement in a VIE and also eliminates the exemption for qualifying special purpose entities. The Company adopted this guidance as of January 1, 2010. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, and cash flows as of and for the nine months ended September 30, 2010.
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In January 2010, the FASB issued guidance under ASC Topic 820, Improving Disclosure about Fair Value Measurements, which requires additional disclosures to recurring and non-recurring fair value measurements. A reporting entity is to disclose significant transfers in and out of Level 1 and Level 2, and describe the reason for those transfers. Additionally, an entity is to present separately, on a gross basis, information about purchases, sales, issuances, and settlements pertaining to the activity in Level 3. The guidance also clarifies the level of disaggregation and disclosures about input and valuation techniques used to determine Level 2 and Level 3 measurements. The ASC Topic 820 update is effective for reporting periods beginning after December 15, 2009 (except for the requirement to separately disclose purchases, sales, issuances and settlements relating to Level 3 measurements, which becomes effective for fiscal periods beginning after December 15, 2010). The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows as of and for the nine months ended September 30, 2010.
| 3. | LONG-TERM DEBT |
In February 2010, the Company refinanced one community and entered into a new mortgage agreement totaling $15.0 million. An initial advance of $8.5 million was used to pay off existing mortgage debt on the community with the remainder of the proceeds available at future dates. The mortgage note matures in 2015. Interest and principal are payable monthly at LIBOR plus 5.80% (with a LIBOR floor of 1.50%), based on a 25 year amortization schedule.
| 4. | INCOME TAXES |
The Company’s effective tax rate for the nine months ended September 30, 2010 and 2009 reflected an income tax benefit of 28.5% and 19.3%, respectively. The Company has a valuation allowance reducing its deferred tax assets to an amount that is more likely than not to be realized. The difference between the Company’s effective tax rate and the federal statutory rate is primarily due to increases in the valuation allowance.
| 5. | CONTINGENCIES AND GUARANTEES |
The Company is subject to claims and legal actions in the ordinary course of its business. The Company believes that any liability resulting from these matters, after taking into consideration its insurance coverages and amounts recorded in the consolidated financial statements, will not have a material adverse effect on its consolidated financial position, results of operations, and cash flows.
The Company has made certain guarantees to third parties, particularly related to communities that have been sold. These guarantees may survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments to be made under these guarantees, as the triggering events are not subject to predictability. The Company believes the likelihood of any losses resulting from these guarantees, including the effect of insurance coverages that would mitigate any potential payments, is remote, and historically the Company has not been required to make payments under these guarantees.
| 6. | SUBSEQUENT EVENTS |
The Company’s financial statements are available for issue as of October 28, 2010. Any subsequent events have been evaluated through this date.
On October 21, 2010, the Company announced that it has signed a definitive agreement to merge its real estate with Ventas, Inc., a healthcare real estate investment trust. As part of this transaction, Ventas will acquire the majority of the Company’s senior living communities. Subject to certain approvals, the transaction is expected to close in the first half of 2011.
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