EX-99.2 5 dex992.htm UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF ATRIA Unaudited consolidated financial statements of Atria

 

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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