Assisted Living Concepts Hit by $25.1 Million Q2 Net Loss, Will Not Pay Dividends

Assisted Living Concepts (NYSE:ALC) reported a net loss of $25.1 million in the second quarter ended June 30, 2012, a dramatic fall from its $6.3 million net income reported one year ago that’s due to charges related to purchasing a 12-property portfolio from Ventas Realty, among other factors listed as “One-Time Items.” 

The operating company reported a diluted earnings per common share loss of $1.09, compared to a net income per diluted common share of $0.27 during the same period in 2011. The company announced that it would not be paying dividends to its shareholders this quarter. 

“After taking into account the relevant circumstances and factors of the Company’s current developments, the Board of Directors has determined not to pay a dividend this quarter,” said the earnings report. “The Board of Directors has confirmed that future dividends will be dependent on a number of factors including the Company’s financial condition, operating results, current and anticipated cash needs, plans for expansion, contractual restrictions, and other factors deemed relevant by the Board of Directors.”

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ALC reported revenues of $56.9 million in the second quarter, a 3% decrease from last year’s $58.6 million and a 3.6% decrease from the first quarter of 2012. Revenues decreased primarily due to lower private pay occupancy, the company reported, along with planned reduction in the number of units occupied by Medicaid residents, but partially offset by rate increases. 

Operating expenses more than doubled from $47.4 million in Q211 to $96.2 million in 2012, resulting in a $39.4 million loss from operations. 

Occupancy as of June 30, 2012 was at 60.5%, down from the previous quarter’s 61.2% and the second quarter of 2011’s 62.1%.

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One Time Items Impacting Earnings

Ventas Realty, a subsidiary of real estate investment trust Ventas Inc. (NYSE:VTR), filed a lawsuit against ALC earlier in the year for lease violation, as several ALC-managed communities were coming under fire for inadequate resident care. ALC ultimately purchased the portfolio from Ventas and continued to manage them, effectively settling the litigation. 

The purchase resulted in the write-off of $22.7 million related to litigation settlement and a lease termination fee, a $5.3 million write-off of operating lease intangible, and $0.6 million of deal costs, partially offset by $0.6 million of rental savings for both the quarter and six months ended June 30. 

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Other One-Time Items include the $0.3 million write-off of construction costs associated with expansion projects that management has decided not to complete. 

Additionally, ALC incurred expenses in connection with an ongoing internal investigation, litigation related to the Ventas transaction, and public relations and quality committee projects of $1 million for both the quarter and the six months ended June 30. 

New Leadership

Earlier in 2012, Bloomberg reported that Assisted Living Concepts had fired its former president and CEO, Laurie Bebo, and had hired Lt. General USAF (Ret.) Charles Roadman II, M.D., as interim president and CEO.

Since then, Roadman has announced his intentions to get the troubled senior living operator back on track.

“I recognize that we have areas that need attention, and those matters are my top priority,” Dr. Roadman said at the time. “We will take the necessary steps to enhance care and the quality of our services to meet the expectations of the Board and our residents.”

Shortly after, the interim CEO spoke out about the company’s various issues, naming occupancy something to improve, whether through repositioning communities, expanding them, or selling them. 

“Everything at ALC is eminently fixable,” Roadman had said during an interview with company stakeholders. “Where we have problems, we will fix them.”

View the Q2 earnings report

Written by Alyssa Gerace

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