EX-99.1
2
a4834888ex991.txt
AMERICAN RETIREMENT EXHIBIT 99.1

                                                                    Exhibit 99.1


                  American Retirement Reports Fourth
              Quarter Profit and Full Year 2004 Results


    NASHVILLE, Tenn.--(BUSINESS WIRE)--March 3, 2005--American
Retirement Corporation (NYSE: ACR), a leading national provider of
senior living housing and care, today reported its financial results
for the quarter ended December 31, 2004. Highlights of the quarter
were:

    --  The Company produced $116 million of revenue for the fourth
        quarter of 2004, a 12% increase over the prior year's quarter
        and $448 million of revenue for the full 2004 year, a 12%
        increase over 2003.

    --  The Company produced a profit of $1.8 million ($.07 per share)
        for the fourth quarter of 2004 versus a loss of $6.7 million
        for the prior year's fourth quarter.

    --  Free cash flow for the fourth quarter, positive for the fifth
        consecutive quarter, was $2.6 million after principal payments
        on long-term debt of $4.9 million. For the full year, free
        cash flow was $9.7 million.

    --  The operating contribution from the Company's three business
        segments increased 22% over the fourth quarter of 2003 to $39
        million. For the full year, the total segment operating
        contribution increased by 24% to $145 million.

    --  Average overall occupancy rose to 94% from 90% for last year's
        fourth quarter, with the Company's large retirement
        communities' ("Retirement Centers") ending the quarter at 96%.

    --  Retirement Centers' fourth quarter results were driven by a
        10% increase in average monthly revenue per occupied unit and
        a 1% average occupancy growth.

    --  The Free-standing assisted living communities' ("Free-standing
        AL's") results were driven by a 7% occupancy growth and a 10%
        increase in average monthly revenue per occupied unit.

    Bill Sheriff, Chairman, President and CEO of American Retirement,
commented, "The results for the fourth quarter show the continued
improvement in our operating results and the benefit from our
refinancing activities. We continue to produce revenue growth in
excess of 10% and we were profitable in this quarter. Strong growth in
revenue per unit, driven by our ancillary services, strength in
assisted living pricing and the ability to pass on expense increases,
as well as pushing occupancies to higher levels, continue the trend of
increasing revenue performance. At the same time, we are controlling
operating expenses and producing record levels of operating
contribution per unit - well above the industry average. The
significant reduction in debt service costs that have resulted from
our refinancing activities in 2004 also helped achieve solid
profitability. "
    "We are excited about the future growth plans of the Company,
which the equity offering that we successfully completed in January
will help support. This Company has a base of experience, talent,
systems and market position to capitalize on the opportunities the
future will present," Mr. Sheriff continued.

    OPERATIONAL HIGHLIGHTS

    The Company operates in three business segments: Retirement
Centers, Free-standing AL's and Management Services. The Retirement
Centers include CCRCs (continuing care retirement centers),
Entrance-Fee Communities ("EF Communities") and congregate living
residences. The Retirement Centers are established communities with
strong reputations within their respective markets. Free-standing AL's
are smaller than Retirement Centers and provide assisted living and
specialized care such as Alzheimer's and memory enhancement programs.
The Management Services segment includes fees from management
agreements for communities owned by others and reimbursed expenses.
    The Company's three operating segments produced the following
results in total:


                                     Three months ended
                                         December 31,
                                     -------------------    $     %
                                         2004      2003  Change Change
                                      --------  ----------------------
Resident & Healthcare revenue        $115,293  $103,087  12,206  11.8%
Community operating expense            77,055    71,661   5,394   7.5%
                                      --------  -------- -------------
Community operating contribution     $ 38,238  $ 31,426   6,812  21.7%
Community operating margin               33.2%     30.5%
Management Services op. contribution $    443  $    351      92  26.2%

Consolidated Communities:
# Locations                                59        59
Avg. Occupancy                           93.6%     89.9%
Avg. Occupied Units                    10,959    10,529     430   4.1%
Avg. Mo. Revenue/unit                $  3,507  $  3,264 $   243   7.5%
Avg. Mo. Op Contribution/unit        $  1,163  $    995 $   168  16.9%


    Retirement Centers

    The Company's 28 Retirement Centers produced strong increases in
revenue and operating contribution for the fourth quarter of 2004 as
follows:

    Retirement Centers ($ in 000's):




                                     Three months ended
                                        December 31,
                                      -----------------   $        %
                                        2004   2003    Change   Change
                                      --------------------------------
Community Revenue                     89,787 81,390       8,397  10.3%
Community Operating Contribution(1)   30,702 26,294       4,408  16.8%
Operating contribution margin           34.2%  32.3%      1.9pts  5.9%

(1) The Company evaluates the performance of its business segments,
    primarily, based upon their operating contributions, which the
    Company defines as revenue from the segment less operating
    expenses associated with that segment.


    The Retirement Centers continued to produce strong revenue per
unit gains while increasing occupancy from the solid levels at which
they ended the third quarter. Average monthly revenue per occupied
unit increased 10% during the quarter to $3,547 versus prior year due
to increases in monthly service fees and per diem rates in skilled
nursing, turnover of residents (the "mark to market" effect of
reselling or reletting units at higher current rates) and increased
ancillary services, such as therapy. The number of occupied units
increased 1%, with ending occupancy increasing from 95% to 96% versus
the fourth quarter of 2003. The Retirement Centers ended the quarter
with 97% occupancy in independent living, 96% in assisted living and
90% in skilled nursing.
    In the fourth quarter of 2004, the operating contribution for
Retirement Centers exceeded $30 million for the first time, producing
a 34% margin. This represented a $4.4 million increase or 17% increase
over the prior year's fourth quarter. The incremental operating margin
on the fourth quarter's revenue increase was 52%. The Retirement
Centers continue to increase the monthly operating contribution per
occupied unit hitting $1,213 per unit in the fourth quarter of 2004, a
16% improvement from the prior year's fourth quarter.
    The fourth quarter was in line with the full year results with
Retirement Center revenue increasing by $34 million or 11% and
operating contribution increasing by $18 million or 18% versus 2003.
The full year results for the segment were driven by a 7% increase in
average monthly revenue per occupied unit and a 3% average occupancy
growth.

    Free-standing AL's

    Revenue from the Free-standing AL segment increased 18% to $25.5
million in 2004's fourth quarter compared with last year's fourth
quarter revenue of $21.7 million. Occupancy for the Free-standing AL
portfolio reached 89% at the end of the 2004 fourth quarter, up from
83% a year ago.



Free-standing AL ($ in 000's):       Three Months Ended
------------------------------         December 31,
                                      --------------      $        %
                                        2004   2003    Change   Change
                                      --------------------------------
  Revenues                            25,506 21,697       3,809  17.6%
  Community Operating Contribution(1)  7,536  5,132       2,404  46.8%
  Operating contribution margin         29.5%  23.7%      5.8pts 24.5%
  % Occupancy                             89%    83%      6.0pts  7.2%

Note: Includes results of 31 Free-standing AL's and excludes two
non-consolidated Free-standing AL's held in joint ventures


    The Free-standing AL portfolio produced a solid year-over-year
increase in average monthly revenue per occupied unit of 10%, while
continuing to make progress on occupancy levels. The quarter over
quarter average occupied units grew by 7%, while the average monthly
revenue per unit increased to $3,372. The monthly revenue per occupied
unit in December 2004 was $3,417 per month, a 10% increase from $3,101
per month in December 2003. The revenue per occupied unit increase was
due to rate increases, reduced discounts and promotional allowances,
increased care services and turnover of residents (the "mark to
market" effect of reletting units at higher current rates). The
increased use of ancillary services, particularly therapy services,
also contributed significantly to the revenue and operating
contribution increase for this segment.
    The operating contribution from the Free-standing AL segment
increased 47%, or $2.4 million, in the fourth quarter of 2004 from the
fourth quarter of 2003. As in prior periods, the Free-standing AL's
added revenue without proportionally increasing expenses and resulting
in an incremental operating margin of 63% on incremental revenue. As
such, the Free-standing AL segment continues to demonstrate the high
incremental margin that results from increasing revenue in a portfolio
that is currently 89% occupied.
    The fourth quarter performance for the segment was in line with
the full year results, with revenue increasing by $13 million or 15%
and operating contribution increasing by $9 million or 56% versus
2003. The full year results were driven by a 9% increase in average
monthly revenue per occupied unit and a 6% average occupancy growth.

    Management Services

    The Company's management services business segment included
management contracts on five Retirement Centers and two Free-standing
AL's, with an aggregate capacity of 1,351 units. Management Services
segment had an operating contribution of $.4 million in fourth-quarter
2004, a 26% increase versus the same prior-year period.

    Conference Call Information

    American Retirement Corporation will hold a conference call with
Bill Sheriff, Chairman, President and Chief Executive Officer, and
Bryan Richardson, Chief Financial Officer, to discuss the Company's
2004 fourth-quarter financial results. The call will be held on
Thursday, March 3, 2005 at 11:00 a.m. ET and parties may participate
by either calling (877) 252-6354 or through the Company's website at
-www.arclp.com. Click on the broadcast icon to listen to the earnings
call - Windows Media Player(TM) is required to listen to this webcast.
In addition, the call will be archived on the Company's website until
the next regularly scheduled earnings conference call. If any material
information is disclosed on the conference call that has not been
previously disclosed publicly, that information will also be available
at the Investor Relations portion of the Company's web site.

    Additional Filings

    The Company's results are to be described in greater detail in the
Company's Form 10-K, which will be filed with the Securities and
Exchange Commission. The Company also will file on or about March 3rd
a Form 8-K with the Securities and Exchange Commission, which includes
supplemental information relating to the Company's fourth quarter 2004
results. These filings will also be available through the Investor
Relations section of the Company's website - www.arclp.com.

    COMPANY PROFILE

    American Retirement Corporation is a national senior living and
health care services provider offering a broad range of care and
services to seniors, including independent living, assisted living,
skilled nursing and Alzheimer's care. Established in 1978, the Company
believes that it is a leader in the operations and management of
senior living communities, including independent living communities,
continuing care retirement communities, Free-standing AL's, and the
development of specialized care programs for residents with
Alzheimer's and other forms of dementia. The Company's operating
philosophy is to enhance the lives of seniors by striving to provide
the highest quality of care and services in well-operated communities
designed to improve and protect the quality of life, independence,
personal freedom, privacy, spirit, and dignity of its residents. The
Company currently operates 67 senior living communities in 14 states,
with an aggregate unit capacity of approximately 13,200 units and
resident capacity of approximately 14,900. The Company owns 17
communities, leases 44 communities, and manages six communities
pursuant to management agreements. Approximately 85% of the Company's
revenues come from private pay sources.

    SAFE HARBOR STATEMENT

    Statements contained in this press release and statements made by
or on behalf of American Retirement Corporation relating hereto may be
deemed to constitute forward-looking information made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Those forward-looking statements include all statements that
are not historical statements of fact and those regarding the intent,
belief or expectations of the Company or its management, including,
without limitation, all statements regarding the Company's future
operating and financial expectations and its strategy to improve
financial and operating results. These forward-looking statements may
be affected by certain risks and uncertainties, including without
limitation the following: (i) the risk associated with the Company's
significant leverage, (ii) the Company's ability to sell its entry-fee
units and to increase occupancy at the Company's communities
(especially its Free-standing AL's), (iii) the risk that the Company
will be unable to improve the Company's results of operations,
increase cash flow and reduce expenses, (iv) the risks associated with
adverse market conditions of the senior housing industry and the
United States economy in general, (v) the risk that the Company is
unable to obtain liability insurance in the future or that the costs
thereof (including deductibles) will be prohibitive, (vi) the
Company's ability to obtain new financing or extend and/or modify
existing debt and (vii) the risk factors described in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 under
the caption "Risk Factors" and in the Company's other filings with the
Securities and Exchange Commission. In light of the significant
uncertainties inherent in the forward-looking statements included
herein, the Company's actual results could differ materially from such
forward-looking statements. The Company does not undertake any
obligation to publicly release any revisions to any forward-looking
statements contained herein to reflect events and circumstances
occurring after the date hereof or to reflect the occurrence of
unanticipated events.


AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

                                  Three months ended
                                  December 31, 2004 Increase(Decrease)
                                  ------------------- ----------------
                                      2004      2003         $       %
                                  --------- --------- -------- -------
Revenues:
    Resident and health care      $115,293  $103,087  $12,206    11.8%
    Management services                443       351       92    26.2%
    Reimbursed expenses                532       318      214    67.3%
                                  --------- --------- -------- -------
      Total revenues               116,268   103,756   12,512    12.1%

Operating expenses:
    Community operating expenses    77,055    71,661    5,394     7.5%
    General and administrative       7,569     6,241    1,328    21.3%
    Lease expense                   15,590    15,106      484     3.2%
    Depreciation and amortization    9,200     6,149    3,051    49.6%
    Amortization of leasehold
     acquisition costs                 736       776      (40)   -5.2%
    Reimbursed expenses                532       318      214    67.3%
                                  --------- --------- -------- -------
      Total operating expenses     110,682   100,251   10,431    10.4%
                                  --------- --------- -------- -------

      Operating income               5,586     3,505    2,081    59.4%

Other income (expense):
    Interest expense                (4,444)   (9,685)  (5,241)  -54.1%
    Interest income                    794       537      257    47.9%
    Gain (loss) on sale of assets      (22)      (17)       5    29.4%
    Other                              442       112      330   294.6%
                                  --------- --------- -------- -------
      Other expense, net            (3,230)   (9,053)  (5,823)  -64.3%
                                  --------- --------- -------- -------

      Earnings (loss) from
       continuing operations
       before income taxes,
       and minority interest         2,356    (5,548)   7,904   142.5%

Income tax expense                    (300)    1,106   (1,406) -127.1%
                                  --------- --------- -------- -------

      Earnings (loss) from
       continuing operations
       before minority interest      2,656    (6,654)   9,310   139.9%

Minority interest in earnings of
 consolidated subsidiaries, net of
 tax                                  (851)      (85)     766   901.2%
                                  --------- --------- -------- -------

      Net income (loss)             $1,805   $(6,739)  $8,544   126.8%
                                  ========= ========= ======== =======

 Basic earnings (loss) per share     $0.07    $(0.36)
                                  ========= =========
 Diluted earnings (loss) per share   $0.07    $(0.36)
                                  ========= =========

Weighted average shares used for
 basic earnings (loss) per share
 data                               24,977    18,962
Weighted average shares used for
 diluted earnings (loss) per share
 data                               26,606    18,962



----------------------------------------------------------------------

                                 December 31, December 31,
                                      2004       2003
                                 ------------ ------------
Selected Balance Sheet Data:
      Cash and cash equivalents       $28,454      $17,192
      Restricted cash, including
       current portion                 50,134       43,601
      Working capital                  14,864        8,603
      Land, buildings and
       equipment, net                 496,297      533,145
      Total assets                    745,991      774,283
      Long-term debt, capital and
       lease financing obligation,
        including current portion     335,082      371,535
      Refundable portion of
       entrance fees                   79,148       72,980
      Shareholders' equity              3,355          807


AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

                                   Twelve months ended
                                     December 31,   Increase(Decrease)
                                   ---------------- ------------------
                                     2004       2003      $       %
                                   --------- --------- -------- ------
Revenues:
   Resident and health care        $443,443  $396,307  $47,136   11.9%
   Management services                1,882     1,522      360   23.7%
   Reimbursed expenses                2,284     2,148      136    6.3%
                                   --------- --------- -------- ------
     Total revenues                 447,609   399,977   47,632   11.9%

Operating expenses:
   Community operating expenses     300,797   280,808   19,989    7.1%
   General and administrative        28,671    25,410    3,261   12.8%
   Lease expense                     61,244    47,664   13,580   28.5%
   Depreciation and amortization     31,148    26,867    4,281   15.9%
   Amortization of leasehold
    acquisition costs                 2,917     2,421      496   20.5%
   Reimbursed expenses                2,284     2,148      136    6.3%
                                   --------- --------- -------- ------
     Total operating expenses       427,061   385,318   41,743   10.8%
                                   --------- --------- -------- ------

     Operating income                20,548    14,659    5,889   40.2%

Other income (expense):
   Interest expense                 (31,477)  (53,570) (22,093) -41.2%
   Interest income                    2,783     2,762       21    0.8%
   Gain (loss) on sale of assets         41    23,153  (23,112) -99.8%
   Other                                447       132      315  238.6%
                                   --------- --------- -------- ------
     Other expense, net             (28,206)  (27,523)     683    2.5%
                                   --------- --------- -------- ------

     Loss from continuing
      operations before income
      taxes and minority interest    (7,658)  (12,864)   5,206   40.5%

Income tax expense                    2,421     2,661     (240)  -9.0%
                                   --------- --------- -------- ------

     Loss from continuing
      operations before minority
      interest                      (10,079)  (15,525)   5,446   35.1%

Minority interest in earnings of
 consolidated subsidiaries,
 net of tax                          (2,406)   (1,789)     617   34.5%
                                   --------- --------- -------- ------

     Net loss                      $(12,485) $(17,314)  $4,829   27.9%
                                   ========= ========= ======== ======

 Basic and diluted loss per share    $(0.52)   $(0.95)
                                   ========= =========

Weighted average shares used for
 basic and diluted loss per share
 data                                23,798    18,278
                                   ========= =========


    CONTACT: American Retirement Corporation
             Ross C. Roadman, 615-376-2412



The following information was filed by American Retirement Corp on Thursday, March 3, 2005 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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