----------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
---
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1998
___ TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____ to ____
Commission file number 0-27108
REGENT ASSISTED LIVING, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-1171049
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 1000
121 SW Morrison St.
Portland, Oregon 97204
(Address of principle executive offices)
503-227-4000
(Registrant's telephone number, including area code)
Indicated by check mark whether Registrant (1) has filed all reports 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 Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
--- ---
Shares of Registrant's Common Stock, No par value,
outstanding at May 1, 1998 - 4,633,000
----------------------------------------------------
REGENT ASSISTED LIVING, INC.
FORM 10-QSB
March 31, 1998
INDEX
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Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 . . . . . . . . . . . . . . . . . .. . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . 9
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
1998 December 31,
(Unaudited) 1998
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,508,628 $ 1,865,576
Accounts receivable 142,702 128,110
Prepaid expenses 438,787 249,708
Construction advances receivable 294,603 123,670
-------------- --------------
Total current assets 4,384,720 2,367,064
Property and equipment, net 58,474,243 69,820,324
Investment in joint venture 400,374 401,460
Restricted cash 2,347,856 2,361,993
Other assets 1,100,225 752,932
-------------- --------------
Total assets $ 66,707,418 $ 75,703,773
============== ==============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 237,252 $ 218,881
Short-term borrowings - 4,500,000
Construction accounts payable 489,153 583,043
Accounts payable and other accrued expenses 585,619 685,136
Accrued payroll 563,617 502,568
Accrued interest 111,128 179,963
-------------- --------------
Total current liabilities 1,986,769 6,669,591
Long-term debt 41,911,202 51,450,545
Convertible subordinated notes 4,500,000 -
Deferred development fees, net 4,281,348 898,802
Other liabilities 656,417 517,578
-------------- --------------
Total liabilities 53,335,736 59,536,516
-------------- --------------
Minority Interest - 250,000
-------------- --------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized;
1,666,667 shares issued and outstanding 9,349,841 9,349,841
Common stock, no par value, 25,000,000 shares authorized;
4,633,000 shares issued and outstanding 10,808,703 10,808,703
Accumulated deficit (6,786,862) (4,241,287)
-------------- --------------
Total shareholders' equity 13,371,682 15,917,257
-------------- --------------
Total liabilities and shareholders' equity $ 66,707,418 $ 75,703,773
============== ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------- ---------------
Revenues:
Rental and service $ 4,216,580 $ 3,336,347
Management fee 71,625 43,922
-------------- ---------------
Total revenues 4,288,205 3,380,269
-------------- ---------------
Operating expenses:
Residence operating expenses 4,190,136 2,136,277
General and administrative 967,621 712,204
Lease expense 1,414,718 706,200
Depreciation and amortization 114,083 68,785
-------------- ---------------
Total operating expenses 6,686,558 3,623,466
-------------- ---------------
Operating income (loss) (2,398,353) (243,197)
Interest income 75,989 148,779
Interest expense, net (64,415) (101,228)
Other income, net (8,796) 5,263
-------------- ---------------
Income (loss) before income taxes (2,395,575) (190,383)
Income tax benefit - 24,500
-------------- ---------------
Net income (loss) $ (2,395,575) ($165,883)
============== ===============
Basic earnings (loss) per common share $ (0.55) ($0.07)
============== ===============
Diluted earnings (loss) per common share $ (0.55) ($0.07)
============== ===============
Weighted average common shares outstanding:
Basic 4,633,000 4,633,000
============== ===============
Diluted 4,633,000 4,633,000
============== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
REGENT ASSISTED LIVING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (2,395,575) $ (165,883)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 114,083 68,785
Amortization of deferred gains and development fees (55,596) -
Changes in other assets and liabilities:
Accounts receivable (14,592) 17,315
Prepaid expenses (137,579) 3,961
Deferred income taxes - 33,100
Other assets (135,253) 51,301
Accounts payable and other accrued expenses (107,303) (152,928)
Other liabilities 138,839 (52,354)
-------------- --------------
Net cash used in operating activities (2,592,976) (196,703)
-------------- --------------
Cash flows from investing activities:
Maturity (purchases) of investments, net - 2,939,448
Purchases of property and equipment (12,626,575) (6,188,076)
Increase (decrease) in construction related accounts payable (93,890) 1,072,803
Investment in joint venture - (20,162)
Deposits to replacement reserve account, net (16,567) (16,200)
-------------- --------------
Net cash used in investing activities (12,737,032) (2,212,187)
-------------- --------------
Cash flows from financing activities:
Repayment of Short-term borrowings (4,500,000) -
Proceeds from issuance of long-term debt 8,836,356 784,018
Payments on long-term debt (18,607,328) (36,127)
Construction advances (170,933) 883,621
Prepayments and deposits for financing arrangements, net (266,880) -
Restricted cash for financing arrangements 30,704 (615,835)
Deferred fee from financing arrangements 190,000 -
Proceeds from financing arrangements 27,111,141 -
Proceeds from issuance of convertible subordinated notes 4,500,000 -
Preferred stock issuance costs - (600,159)
Preferred stock dividends (150,000) (176,230)
-------------- --------------
Net cash provided by financing activities 16,973,060 239,288
-------------- --------------
Net increase (decrease) in cash and cash equivalents 1,643,052 (2,169,602)
Cash and cash equivalents, beginning of period 1,865,576 8,650,817
-------------- --------------
Cash and cash equivalents, end of period $ 3,508,628 $ 6,481,215
============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,140,150 $ 92,216
============== ==============
Supplemental disclosure of non-cash investing and financing activities:
Long-term debt incurred to acquire minority interest $ 250,000 -
============== ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies:
The Company
Regent Assisted Living, Inc. ("the Company") is an owner, operator, and
developer of private-pay assisted living communities. Assisted living is
part of a spectrum of long-term care services that provide a combination of
housing, personal services and health care designed to respond to elderly
individuals who require assistance with activities of daily living in a
manner that promotes maximum independence.
On March 30, 1998, the Company completed a private placement pursuant to
which parties agreed to purchase up to $10.5 million of convertible
subordinated notes due 2008. The notes bear interest at 7.5 percent per
annum and are convertible into the Company's Common Stock at an effective
price of $7.50 per share.
The results of operations for the three months ended March 31, 1998 and
1997 reflect the operations of three assisted living communities and
property management services provided to one community. The results of
operations for the three months ended March 31, 1998, additionally reflect
the operations of nine new assisted living communities and property
management services provided to one additional community. As of May 14,
1998, the Company had also commenced operations at its new assisted living
communities in Tucson, Arizona, and Vacaville and Roseville, California and
had an additional 19 assisted living and Alzheimer's care communities in
various stages of development. The Company is also in the final stages of
completing a long-term lease-acquisition of Park Place which is currently
operated under a property management agreement.
The Company also provides management and administrative services for Bowen
Property Management Co., Bowen Financial Services Corp., Bowen Development
Company and Bowen Condominium Marketing, Inc. (collectively, the Bowen
Companies), all of which are Oregon corporations and are wholly owned by
Mr. Bowen. These services are provided pursuant to the terms of an
Administrative Services Agreement described in Note 3.
Basis of Presentation
The condensed consolidated financial statements include the accounts of the
Company and its majority owned subsidiary. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Page 6
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, Continued
1. Operations and Summary of Significant Accounting Policies, Continued:
The accompanying unaudited condensed consolidated financial statements as
of March 31, 1998, and for the three month periods ended March 31, 1998 and
1997 have been prepared in conformity with generally accepted accounting
principles. The financial information as of December 31, 1997, is derived
from the Company's Form 10-KSB for the year ended December 31, 1997.
Certain information or disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the accompanying condensed consolidated financial statements
include all adjustments necessary (which are of a normal and recurring
nature) for the fair presentation of the results of the interim periods
presented. The accompanying condensed consolidated financial statements
should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 1997, included in the
Company's Form 10-KSB for the year ended December 31, 1997.
Operating results for the three months ended March 31, 1998, are not
necessarily indicative of the results that may be expected for the entire
fiscal year ending December 31, 1998, or any portion thereof.
2. Property and Equipment:
Property and equipment are stated at cost and consist of the following:
March 31, December 31,
1998 1997
----------- -------------
Land $ 1,100,000 $ 1,730,810
Buildings and improvements 6,808,088 12,713,346
Furniture and equipment 1,323,624 1,512,868
Construction in progress 49,903,345 54,429,419
----------- -------------
59,135,057 70,386,443
Less accumulated depreciation 660,814 566,119
----------- -------------
Total property and equipment, net $58,474,243 $ 69,820,324
=========== =============
Land, buildings and certain furniture and equipment serve as collateral
for long-term debt.
Page 7
REGENT ASSISTED LIVING, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, Continued
3. Administrative Services Agreement:
The Company has entered into an agreement with the Bowen Companies, all of
which are Oregon corporations controlled by Mr. Bowen, whereby the Company
will provide each of the Bowen Companies executive assistance, accounting
and financial management services, legal and administrative assistance,
insurance, management information services, and other management services
as required by the Bowen Companies. Under the terms of the agreement, the
Company will be reimbursed at its cost on a monthly basis for all services
provided.
4. Earnings (Loss) Per Common Share:
Basic earnings per share (EPS) and diluted EPS are computed using the
methods prescribed by Statement of Financial Accounting Standard No. 128,
Earnings Per share (SFAS 128). Basic EPS is calculated using income (loss)
attributable to common shares (after deducting preferred dividends) divided
by the weighted average number of common shares outstanding for the period.
Diluted EPS is calculated using income (loss) attributable to common shares
(after deducting preferred dividends and considering the effects of
dilutive common equivalent shares) divided by the weighted average number
of common shares and dilutive common shares outstanding for the period.
Basic and Diluted earnings (loss) per common share includes a deduction of
preferred stock dividends declared, which totaled $150,000 for each three
month period ended March 31, 1998 and 1997.
5. Accounting Pronouncements:
On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-up Activities
(SOP 98-5). This statement requires that the costs of start-up activities,
including organization costs, be expensed as incurred. SOP 98-5 is
effective for financial statements for fiscal years beginning after
December 15, 1998. The adoption of this statement will have no impact on
the Company's current reporting practices as the Company expenses all
start-up costs.
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
Overview
The Company
The Company reported a net loss of $2,395,575, or $.55 per share, on revenue of
$4,288,205 for the quarter ended March 31, 1998.
Page 8
Current Communities. The table below sets forth certain information
regarding the Company's communities as at March 31, 1998.
Regent
Operations
Community Location Commenced Units(1) Beds(2) Interest
- --------- -------- --------- -------- ------- --------
Oregon
Park Place Portland 1986 112 112 Manage
Regency Park Portland 1987 122 142 Lease
Sheldon Park Eugene 1998 108 124 Lease
Washington
Sterling Park Redmond 1990 162 192 Lease
California
Laurel Springs Bakersfield 1998 113 130 Own
Orchard Park Clovis 1998 112 128 Lease
Sun Oak Citrus Heights 1997 40 50 Manage
Sunnyside Court Fremont 1998 40 80 Lease (3)
Sunshine Villa Santa Cruz 1990 106 126 Lease
Willow Creek Folsom 1997 104 119 Lease
Idaho
Willow Park Boise 1997 117 134 Lease
West Wind Boise 1997 48 52 Lease
New Mexico
Sandia Springs Rio Rancho 1998 109 126 Lease
Texas
Hamilton House San Antonio 1997 116 136 Lease
----- -----
Totals: 1,409 1,651
===== =====
Communities completed during the first quarter of 1998:
Community Location Units(1) Beds(2) Interest
- --------- -------- -------- ------- --------
California
Summerfield House Vacaville 109 126 Own
The Palms Roseville 93 108 Own
Arizona
Canyon Crest Tucson 117 137 Own
--- ---
Totals: 319 371
=== ===
(1) A "unit" is a single- or double-occupancy studio or one or two bedroom
apartment.
Page 9
(2) "Beds" reflects the actual number of beds used by the Company for census
purposes, which in no event is a number greater than the maximum number of
licensed beds permitted under the community's license.
(3) The Company began providing property management services to Sunnyside Court
in January 1998 and completed a lease-acquisition of the community in March
1998.
As of May 14, 1998, the Company had also commenced operations of its new 137-bed
community in Tucson, Arizona, its new 126-bed community in Vacaville,
California, and its new 108-bed community in Roseville, California. The Company
is in the final stages of completing a long-term lease-acquisition of the
112-bed Park Place community in Portland, Oregon which previously had been
operated by Regent under a property management contract. The Company has three
pending long-term lease-acquisitions located in Cheyenne, Laramie and Casper,
Wyoming which will add 183 beds to the Company's operations. Also as of May 14,
1998, the Company has commenced construction on the following five new
communities:
Expected
Projected Quarter
Location No. of Beds Opening Interest
-------- ----------- ------- --------
Henderson, Nevada 133 3rd-98 Owned
Austin, Texas 137 3rd-98 Owned
Kenmore, Washington 98 3rd-98 Owned*
Scottsdale, Arizona 48 4th-98 Leased
Scottsdale, Arizona 115 2nd-99 Owned
* A limited liability company in which the Company owns a 50 percent
interest will own the Company's community in Kenmore. The Company will
manage the community.
Fourteen additional new communities were under varying stages of development as
of May 14, 1998. If all fourteen communities are developed and the Wyoming
communities are acquired, total operations of the Company will increase by
approximately 1,500 beds to a total of 4,000 beds. The Company continues to
pursue its primary strategy of developing new communities and is therefore
engaged in negotiations to acquire several additional sites and is pursuing
joint venture opportunities with parties who control parcels of land in
strategic markets. All costs associated with the development of these
communities have been capitalized as "Construction in Progress" as disclosed in
Note 2 to the condensed consolidated financial statements.
Operating results for the three month period ended March 31, 1998, are not
necessarily indicative of future financial performance as the Company intends to
continue expanding its operating base of communities.
Page 10
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues. For the three month period ended March 31, 1998, revenues were
$4,288,205 compared to $3,380,269 in the three month period ended March 31,
1997. The Company operated twelve and managed two communities in the first
quarter of 1998 and operated three communities and managed a fourth in the first
quarter of 1997. The increase in revenue of $907,936 or 26.9 percent includes
$1,049,160 of revenue from newly opened and acquired communities and a decrease
in revenue of $168,927 at the Company's three stabilized communities. Overall
average occupancy at the three stabilized communities declined to 89.9 percent
for the three month period ended March 31, 1998, whereas occupancy was 96.2
percent for the same period in 1997. However, this represents an increase in
occupancy from 89.4 percent reported for the previous quarter ended December 31,
1997. The Company continues to face increasing competition and this has had the
greatest impact in the market in which the Company operates its largest
community, thereby having a greater impact on the Company's overall occupancy
rate.
Residence Operating Expenses. Residence operating expenses were $4,190,136 for
the three month period ended March 31, 1998, and $2,136,277 for the same period
in 1997, an increase of $2,053,859. The current period includes $1,975,597 of
start-up and pre-opening costs related to thirteen of the Company's newly
developed communities. Residence operating expenses, excluding the effect of the
new communities, totaled 64.9 percent and 63.1 percent of rental and service
revenues for the three month periods ended March 31, 1998 and 1997,
respectively.
General and Administrative Expenses. General and administrative expenses were
$967,621 for the three month period ended March 31, 1998, compared to $712,204
for the three month period ended March 31, 1997. The increase of $255,417 is due
primarily to the increase in development activities by the Company, including
payroll and related costs primarily resulting from staffing increases related to
the implementation of the Company's strategy for rapid growth.
Lease Expense. Lease expense for the Company's leased communities was $1,414,718
for the three month period ended March 31, 1998, and was $706,200 for the same
period for 1997. This is due to the opening of seven and the acquisition of two
new communities since the end of the first quarter of 1997.
Depreciation and Amortization. Depreciation and amortization expense was
$114,083 for the three month period ended March 31, 1998, compared to $68,785
for the three month period ended March 31, 1997. The increase of $45,298 relates
primarily to the purchase of vans for the Company's newly developed communities
and the purchase of furniture and equipment for the Company's headquarters, both
in connection with the implementation of the Company's growth plan.
Interest Income. Interest income decreased in the three month period ended March
31, 1998, to $75,989, from $148,779 for the same period in 1997. The 1997 amount
reflects the interest earned from the investment of net proceeds from the sale
of Preferred Stock in December 1996. All investments of cash and cash
equivalents are in high quality, short term securities placed with institutions
with high credit ratings.
Page 11
Interest Expense. Interest expense decreased in the three month period ended
March 31, 1998, to $64,415, from $101,228 for the three month period ended March
31, 1997. The Company capitalized $309,683 and $113,421 of interest charges
incurred during the three months ended March 31, 1998 and 1997, respectively.
The capitalized interest offset substantially higher interest costs incurred by
the Company in the current period arising from increased borrowing for
construction purposes.
Net Income (loss). Net operating results decreased to a loss of $2,395,575
during the three month period ended March 31, 1998, from a loss of $165,883 for
the same period in 1997. The decrease in net results is primarily due to an
increase in general and administrative expenses (as discussed above), an
increase in lease expense (as discussed above), and a decrease in residence
operating profits (rental and service revenue less residence operating expenses)
of $1,173,779, offset by a decrease in interest expense of $36,813.
Liquidity and Capital Resources
At March 31, 1998, the Company had approximately $2.4 million of working capital
compared to a working capital deficit of approximately $4.3 million at December
31, 1997, an increase of $6.7 million, of which $4.5 million resulted from the
utilization of proceeds from the issuance by the Company of convertible
subordinated notes, as described below, to repay short-term borrowings. The
balance was due primarily to the excess cash provided by financing activities.
Net cash used in operating activities totaled $2,592,976 for the three month
period ended March 31, 1998, which resulted primarily from a net loss of
$2,395,575.
Net cash used in investing activities totaled $12,737,032 for the three month
period ended March 31, 1998, comprised primarily of $12,720,465 used for land
acquisition, development, and construction costs. At March 31, 1998, the
aggregate purchase price for the Company's options related to ten parcels of
land was approximately $8,483,000. The Company has paid initial deposits
relating to these sites and has also completed the demographic analysis and
other preliminary due diligence for purposes of developing assisted living
communities at these sites.
Net cash provided by financing activities totaled $16,973,060 during the three
month period ended March 31, 1998, consisting of construction and equipment
financing proceeds totaling $8,836,356, net proceeds from three sale/leaseback
financings totaled $27,111,141, proceeds from issuance of convertible
subordinated notes of $4,500,000, offset by repayment of short-term borrowings
of $4,500,000, repayment of long-term debt of $18,607,328, prepayments and
deposits for financing arrangements of $266,880, and payment of preferred stock
dividends of $150,000.
In the first quarter of 1998, the Company completed two additional transactions
with two real estate investment trusts ("REIT") in the amounts of $4.3 million
for construction of the Company's Scottsdale, Arizona Regent Court community and
$3.2 million for the lease-acquisition of the Sunnyside Court community in
Fremont, California.
Page 12
On March 30, 1998, the Company completed a private placement pursuant to which
parties purchased an aggregate of $4.5 million of convertible subordinated notes
of the Company and agreed to purchase up to an additional aggregate amount of
$6.0 million of convertible subordinated notes. The notes bear interest at 7.5
percent per annum and are convertible into the Company's common stock at an
effective price of $7.50 per share. Interest on the notes is payable quarterly
and all principal and unpaid interest under the notes is due March 31, 2008. The
Company intends to utilize the proceeds to finance the Company's continued rapid
expansion of internally developed communities, to repay short-term borrowings,
and for general working capital purposes.
As of March 31, 1998, the Company had the following construction loans in place:
Amount Community Lender
- ------ --------- ------
$ 6,480,000 Kenmore, Washington US National Bank of Oregon
$ 7,600,000 Vacaville, California US National Bank of Oregon
$ 7,200,000 Bakersfield, California Guaranty Federal Bank, FSB
$ 7,700,000 Austin, Texas Guaranty Federal Bank, FSB
$ 6,450,000 Roseville, California Key Bank
$ 7,115,000 Tucson, Arizona Bank United of Texas, FSB
$ 7,000,000 Henderson, Nevada Bank United of Texas, FSB
The Company has also received an expression of intent from a commercial lending
institution to provide $15,000,000 of construction financing with which to build
up to five Regent Court stand-alone Alzheimer's care communities.
As of May 14, 1998, the Company has a commitment from a REIT to provide
approximately $46.2 million in lease financing with which to acquire the three
Wyoming communities and enter into sale/leaseback transactions on four newly
completed communities.
Page 13
Each of the pending financing transactions is subject to a number of conditions,
including the negotiation and execution of definitive documents and the
satisfactory completion of due diligence on the related properties, and there is
no assurance that any of these financing transactions will be completed on the
terms proposed, or at all.
The Company anticipates capital expenditures for 1998 will include additional
land acquisition costs, architectural fees, and other development costs related
to at least fourteen assisted living communities and construction costs related
to at least five new assisted living communities. The Company's current growth
plan anticipates the completion of construction and opening of three new
internally developed Regent communities and one new Regent Court community by
the end of 1998, the lease-acquisition of three additional communities by the
end of 1998, and the completion of an additional nine Regent and five Regent
Court communities by the end of 1999. The Company has obtained all financing
necessary to complete its development plan for 1998 and has obtained a $12.8
million commitment from a REIT to provide all financing necessary to acquire the
three identified communities during 1998. The total cost to develop and
construct the fourteen communities planned for 1999, including the estimated
initial operating deficits, will likely be between $80-90 million. A substantial
portion of these costs will be incurred during 1998. The Company anticipates
that it will be able to obtain the financing, upon acceptable terms, necessary
to complete the fourteen communities planned for 1999 although it has not
obtained any commitments in that regard at this time. Provided that the Company
can obtain financing upon acceptable terms, the Company estimates that it has
the necessary equity capital to complete construction and to fund the initial
operating deficits of the fourteen communities planned for 1999.
The Company may enter into additional arrangements with one or more unrelated
parties regarding the joint development and ownership of one or more of the
Company's communities currently under construction or development in order to
further leverage the Company's growth. Furthermore, the Company may utilize
various forms of financing that would permit a community to be sold to or
initially be developed by a third party who would incur the initial operating
deficits and permit the Company to manage the community for a customary fee. The
Company, under such financing methods, would likely have the option to either
purchase the community or enter into a long-term lease at such time as the
Company deems appropriate. The Company has not obtained any commitments for this
form of financing.
If the Company were unable to obtain additional required financing, or if such
financing is not available on acceptable terms, the Company expects that its
plan to develop an additional nine Regent Communities and five Regent Court
communities by the end of 1999 would likely be delayed or curtailed.
Furthermore, if the Company expands its growth plan, development activities do
not result in the construction of a community on the site, the Company
experiences a decline in the operations of its current communities or the
Company does not achieve and sustain anticipated occupancy levels at its new
communities, then the Company may require additional financing to complete its
growth plan.
Page 14
Forward-Looking Statements
The information set forth in this report in the sections entitled "Overview" and
"Liquidity and Capital Resources" regarding the Company's acquisition of sites
for development, the Company's development, construction, financing and opening
of new assisted living communities, and the Company's plans to develop,
construct and operate new Regent Court communities constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
is subject to the safe harbor created by that section. The development of
additional assisted living communities will involve a number of risks including,
without limitation, the risk that the Company will be unable to locate suitable
sites, risks relating to the inability to obtain, or delays in obtaining,
necessary zoning, land use, building, occupancy and other required governmental
permits and authorizations, risks that financing may not be available on
satisfactory terms, environmental risks, risks that construction costs may
exceed original estimates, risks that construction and lease-up may not be
completed on schedule, and risks relating to the competitive environment for
development. The foregoing risks could cause the Company to significantly delay
or curtail its planned growth and could cause one or more of the Company's new
communities to not be profitable. Additional factors that could cause results to
differ materially from those projected in the forward-looking statements
include, without limitation, the ability of the Company to raise additional
financing upon terms acceptable to the Company, increases in the costs
associated with new construction, competition, and acceptance of the Company's
prototype community in new geographic markets. The Company's growth strategy is
subject to the risk that occupancy rates at newly-developed communities may not
be achieved or sustained at expected levels, in which case, the Company will
experience greater than anticipated operating losses in connection with the
opening of new communities and the Company's need for additional financing to
meet its growth plans will likely increase. Furthermore, the Company's growth
will place increasing pressure on the Company's management controls and require
the Company to locate, train, assimilate, and retain additional community
managers and support staff. There is no assurance that the Company will be able
to manage this growth successfully.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
4.1 Letter of Commitment, dated March 30, 1998, by and among LTC Properties,
Inc., LTC West, Inc. and the Registrant relating to the agreement to
purchase and lease assisted living residences.
4.2 Convertible Subordinated Note Purchase Agreement, dated as of March 30,
1998, by and between the Registrant and LTC Equity Holding Company, Inc.
4.3 Note No. 1998-1 issued to LTC Equity Holding Company, Inc. in the principal
amount of $4,000,000, due March 31, 2008.
4.4 Convertible Subordinated Note Purchase Agreement, dated as of March 30,
1998, by and between the Registrant and Andre C. Dimitriadis.
4.5 Note No. 1998-2 issued to Andre C. Dimitriadis in the principal amount of
$160,000, due March 31, 2008.
Page 15
4.6 Convertible Subordinated Note Purchase Agreement, dated as of March 30,
1998, by and between the Registrant and James J. Pieczynski.
4.7 Note No. 1998-3 issued to James J. Pieczynski in the principal amount of
$160,000, due March 31, 2008.
4.8 Convertible Subordinated Note Purchase Agreement, dated as of March 30,
1998, by and between the Registrant and Christopher T. Ishikawa.
4.9 Note No. 1998-4 issued to Christopher T. Ishikawa in the principal amount
of $90,000, due March 31, 2008.
4.10 Convertible Subordinated Note Purchase Agreement, dated as of March 30,
1998, by and between the Registrant and Pamela J. Privett.
4.11 Note No. 1998-5 issued to Pamela J. Privett in the principal amount of
$90,000, due March 31, 2008.
4.12 Registration Rights Agreement, dated as of March 30, 1998, by and between
LTC Equity Holding Company, Inc. and the Registrant.
4.13 Registration Rights Agreement, dated as of March 30, 1998, by and between
Andre C. Dimitriadis and the Registrant.
4.14 Registration Rights Agreement, dated as of March 30, 1998, by and between
James J. Pieczynski and the Registrant.
4.15 Registration Rights Agreement, dated as of March 30, 1998, by and between
Christopher T. Ishikawa and the Registrant.
4.16 Registration Rights Agreement, dated as of March 30, 1998, by and between
Pamela J. Privett and the Registrant.
27 Financial Data Schedule.
Reports on Form 8-K
None
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGENT ASSISTED LIVING, INC.
By: STEVEN L. GISH Date: May 14, 1998
--------------------------------
Steven L. Gish
Chief Financial Officer
Page 16
EXHIBIT INDEX
Exhibits
No. Description Page
- -------- ----------- ----
4.1 Letter of Commitment, dated March 30, 1998, by and among LTC
Properties, Inc., LTC West, Inc. and the Registrant relating
to the agreement to purchase and lease assisted living
residences.
4.2 Convertible Subordinated Note Purchase Agreement, dated as
of March 30, 1998, by and between the Registrant and LTC
Equity Holding Company, Inc.
4.3 Note No. 1998-1 issued to LTC Equity Holding Company, Inc.
in the principal amount of $4,000,000, due March 31, 2008.
4.4 Convertible Subordinated Note Purchase Agreement, dated as
of March 30, 1998, by and between the Registrant and Andre
C. Dimitriadis.
4.5 Note No. 1998-2 issued to Andre C. Dimitriadis in the
principal amount of $160,000, due March 31, 2008. Page 15
4.6 Convertible Subordinated Note Purchase Agreement, dated as
of March 30, 1998, by and between the Registrant and James
J. Pieczynski.
4.7 Note No. 1998-3 issued to James J. Pieczynski in the principal
amount of $160,000, due March 31, 2008.
4.8 Convertible Subordinated Note Purchase Agreement, dated as
of March 30, 1998, by and between the Registrant and
Christopher T. Ishikawa.
4.9 Note No. 1998-4 issued to Christopher T. Ishikawa in the
principal amount of $90,000, due March 31, 2008.
4.10 Convertible Subordinated Note Purchase Agreement, dated as
of March 30, 1998, by and between the Registrant and Pamela
J. Privett.
4.11 Note No. 1998-5 issued to Pamela J. Privett in the principal
amount of $90,000, due March 31, 2008.
4.12 Registration Rights Agreement, dated as of March 30, 1998,
by and between LTC Equity Holding Company, Inc. and the
Registrant.
4.13 Registration Rights Agreement, dated as of March 30, 1998,
by and between Andre C. Dimitriadis and the Registrant.
4.14 Registration Rights Agreement, dated as of March 30, 1998,
by and between James J. Pieczynski and the Registrant.
4.15 Registration Rights Agreement, dated as of March 30, 1998,
by and between Christopher T. Ishikawa and the Registrant.
4.16 Registration Rights Agreement, dated as of March 30, 1998,
by and between Pamela J. Privett and the Registrant.
27 Financial Data Schedule.