Assisted Living Concepts — Investor Presentation (December 2008)
32 slides from Assisted Living Concepts's investor presentation, Dec 9, 2008
Slide 1: Assisted Living Concepts
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Slide 2: Forward-Looking Statements & Non-GAAP Measures
Forward-Looking Statements & Non-GAAP Measures Forward-looking statements used in this presentation are based on our current expectations, involve risks and uncertainties, and are subject to change at any time. We undertake no obligation to update such statements to reflect new information. Actual r
Slide 3: ALC Corporate Information
ALC Corporate Information Spun-off from Extendicare on Nov.10, 2006 NYSE: ALC $305M Market Capitalization* $633M Adjusted Enterprise Value* * Based upon a share price of $5.00 and 61.0 million shares outstanding. Operating leases capitalized at 10%
Slide 4: Overview of ALC
Overview of ALC Leading provider of assisted living care services One of the largest in the U.S. 6th in unit size 3rd in market cap Comprised of 216 residences Over 9,000 units Located in mid-market suburban bedroom communities Population 10,000 - 40,000 Net worth of $100K to $500K
Slide 5: Recent Events
Recent Events Share Buyback Program Through December 5, 2008 repurchased over 9.1 million shares under $80 million program, 1.1 million shares since the completion of the third quarter of 2008 400 Unit Expansion Plan Approximately 185 units to be completed in the fourth quarter of 2008, 159 in the f
Slide 6: U.S. Assisted Living Industry
U.S. Assisted Living Industry 24 hour supervision and assistance Tailored personal services Activities, life enrichment and transportation Health related services An environment that maximizes resident's dignity, autonomy, privacy, independence and safety Services Provided
Slide 7: Typical Assisted Living Resident
Aged between 75 & 85 Female Mobile Needs assistance with 2.25 ADL's Assisted Living Residents 31% 69% Typical Resident Source: ALFA Male Female East 0.24 0.76
Slide 8: Family Dynamics - Current Economy
Family Dynamics - Current Economy Assisted living is still need driven Number of residents moving in still strong With fewer two-income families, the immediate family has become more of a primary source of care Residents returning to their homes has increased Family caregiver time has increased Fixe
Slide 9: Competitive Advantages/Opportunities
Competitive Advantages/Opportunities Relatively new portfolio constructed in mid to late 1990s Designed to appeal to the senior living community and their decision makers Small markets provide for less competition Tend to compete with local or regional providers lacking same level of expertise, sale
Slide 10: Competitive Advantages/Opportunities
Competitive Advantages/Opportunities 71% ownership of our residences provides us with increased flexibility to: Refurbish residences as required Expand residences with successful growth opportunities Exit markets if warranted Portfolio offers geographic diversity and clustering Leverage successful p
Slide 11: Assisted Living Concepts' Operations
21 19 11 23 41 Assisted Living Concepts' Operations 216 residences 9 9 7 4 8 4 9 9,076 ALC Units 12 5 1 Focused Business with Geographic Diversity 20 1 1 10 1
Slide 12: Competitive Advantages/Opportunities
Competitive Advantages/Opportunities Private/Medicaid Mix Ability to increase private versus Medicaid occupancy 92.0% of third quarter 2008 revenues from private pay 89.0% of third quarter occupancy is private pay Total Occupancy Percentage Ability to fill open units Adjusted EBITDAR* Margin 29.8% f
Slide 13: Growth Strategy
Growth Strategy Establish ourselves as the provider of choice for residents who value wellness, quality of care, and customer service Initiating programs on a corporate, regional and residence level to allow us to monitor and improve our delivery of services Sales campaigns targeted at resident refe
Slide 14: Growth Strategy
Growth Strategy 400 unit expansion of existing owned buildings Currently own land to add units to existing portfolio in markets with demand Including the current expansion program, approximately 40 properties in our owned portfolio have land available to add on new apartments Five vacant parcels of
Slide 15: Growth Strategy
Growth Strategy Improve occupancy and private pay mix Further develop life enrichment, dining and customer service programs to enhance value, support rate improvements, and attract private pay residents Continue training, mentoring and goal setting with sales team Manage market specific strategic pl
Slide 16: Growth Strategy
Growth Strategy Will look to expand portfolio in markets where we already operate Will consider new markets with low risk of litigation Completed acquisition of 541 leased units in the southeast on January 1, 2008 Strong balance sheet enabling growth through acquisition and construction Industry rem
Slide 17: Financial Results
Financial Results
Slide 18: Rates and Percent of Revenue Derived From Private Pay Trend
Assisted Living Concepts, Inc. Rates and Percent of Revenue Derived From Private Pay Trend Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Private Pay Rate 96.83 95.86 95.52 95.87 99.18 100.21 101.24 101.75 106.51 105.99 106.19 Medicaid Rate 65.7 64.77 67.09 65.36 67.98 67.62 70.86
Slide 19: ALC Private Pay Revenue
ALC Private Pay Revenue ($'s in millions) Q1 Q2 Q3 2007 46.6 48.3 49.9 2008 (same store) 49.5 48 48.9 2008 54.5 52.9 53.8
Slide 20: ALC Medicaid Revenue
ALC Medicaid Revenue ($'s in millions) Q1 Q2 Q3 2007 10.7 8.9 8 2008 5.7 5 4.6
Slide 21: ALC Adjusted EBITDAR
* See definition and reconciliation to GAAP measures attached ALC Adjusted EBITDAR* Quarter 1 Quarter 2 Quarter 3 2007 16.8 15.6 16.2 2008 18.2 17.9 16.6 ($'s In millions) $18.2 2007 2008 2007 2008 2007 2008
Slide 22: ALC Adjusted EBITDAR Margins
ALC Adjusted EBITDAR* Margins Q1 Q2 Q3 2007 0.292 0.271 0.28 2008 0.303 0.309 0.284 * See definition and reconciliation to GAAP measures attached
Slide 23: ALC Property Value
ALC Property Value Currently own 6,586 units including 157 under capital lease Current estimated cost for expansion project $125K per unit Currently trading at approximately $65K per owned unit Significant owned property value Significant owned property value
Slide 24: Economic Conditions
Economic Conditions Economic pressure - Industry Industry - National Investment Center for the Seniors Housing and Care Industry data and commentary indicate: Continued pressure on Sr. housing occupancy levels through Q1 '09 Continued rate growth but continued concessions to maintain occupancy Poten
Slide 25: Credit Considerations
Credit Considerations Industry - Credit markets continue to be in disarray Extreme caution demonstrated by lenders Despite government bailout, banks continue to be reluctant to lend Credit spreads at record levels ALC Specific $76 million available under our Revolving Credit Facility as of September
Slide 26: Growth Strategy: Expansion Opportunity Target Economics
Growth Strategy Cost $50 million or $125,000 per unit, 400 units Expected completion of 185, 159 and 56 units in Q4 '08,Q1 '09 and Q2 '09, respectively Revenue at 95% occupancy, $16.0 million EBITDA at 50% margin, $8.0 million (16% return) Annual interest at 7.0%, $3.5 million Annual depreciation $1
Slide 27: Growth Strategy: Acquisition Opportunity Target Economics
Growth Strategy Owned residences Price based on EBITDA Cap rates greater than 10% Fully integrated target cap rates 12% - 15% on owned buildings Expansion opportunities Located in desirable regions Leased buildings cap rates >15% Long term leases Expansion opportunities Acquisition Opportunity Targe
Slide 28: Growth Strategy: Share Buyback Opportunity
Growth Strategy $80 million program Through December 5, 2008 repurchased 9.1 million shares at a cost of $65.0 million Continue to find share buyback attractive at current valuation Share Buyback Opportunity:
Slide 29: ALC Debt Summary
ALC Debt Summary Only $7.2 million of debt maturing prior to 2011 Lender Red Mortgage Capital DMG ALF Capital Lease Oregon Trust Notes HUD Insured Mortgages Total Amount Sept 30, 2008 $34.6 $7.2 $11.0* $ 8.8 $ 3.0 $126.8 Maturity Current Rate 6.51% 6.06% 7.32% 6.72% 6.89% 2014 2009 2009 2021-2026 20
Slide 30: Adjusted EBITDA and EBITDAR
Adjusted EBITDA and EBITDAR Adjusted EBITDA is defined as net income from continuing operations before income taxes, interest expense net of interest income, depreciation and amortization, equity based compensation expense, transaction costs and non-cash, non- recurring gains and losses, including d
Slide 31: Reconciliation of Net Income to Adjusted EBITDAR
Reconciliation of Net Income to Adjusted EBITDAR
Slide 32: Investment Highlights
High Percentage of Direct Ownership Focused On Suburban and Rural Centers New Portfolio of Assets Prudent Internal/ External Growth Strategy Investment Highlights Strong Financial Position
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