THE ARMY RESIDENCE CO:MMUNITY SAN ANTONIO

Transcription

1 THE ARMY RESIDENCE CO:MMUNITY SAN ANTONIO February 9, 2018 Unaudited Financial Results, Second Quarter FY 2018, ended December 31, 2017 Management's Discussion and Analysis Results from Operations- Six-Month Period Ended December 31, 2017 Army Residence Community (ARC) revenue from operations, excluding investment and contribution income, totaled $13,411,344 and $12,949,499 in the six month periods ended December 31, 2017 and 2016, respectively, a 3.6% increase. Additions to operating revenues can be chiefly attributed to independent living Monthly Maintenance Fee and healthcare daily room rate increases of 3.5% in both 2017 and Improved policies and procedures to capture ancillary revenue also were important. Resident Cash Operating Expenses from operations totaled $11,789,089 and $12,175,227 in the six month periods ended December 31, 2017 and 2016, respectively, a decrease of 3.2% year over year. In August 2017, previously accrued deferred compensation was reversed, in an amount of $538,329 after a pending matter regarding a potential deferred compensation payable was dismissed in the Bexar County District Court. This reversal reduced the general and administrative expense reported in the above 2017 total by $538,329. Other factors evident in 2017 were operating efficiencies in staffing, food costs, and other supplies. The Community saw the benefit of slight staffing reductions and improved purchasing procedures in Dining Services. Total assets declined to $141,516,870 from $142,640,767 between the December 31st balance sheet dates for 2017 and 2016, respectively. This $1.1 million decline is attributed to expected depreciation and amortization. Total liabilities decreased by $2.9 million between 2017 and 2016, primarily due to long term debt retirement. 1

2 Analysis: 1) Operating Ratio: Calculation of the Operating Ratio considers only the monthly and daily resident service fees {Operating Revenue) and excludes the cash entrance fees received from new contracts and contributions. Operating Ratio (operating expenses to operating revenues) decreased from 107.1% for the six months ended December 31, 2016 to 99.1% for the six months ended December 31, ) Debt Service Coverage {DSC) Ratio: The Debt Service Coverage Ratio is calculated using the 2018 Maximum Annual Debt Service {MADS) of $5,606,192. ARC's DSC ratio is calculated as follows (for the six months ended December 31, 2017): Service Net Income {Loss) $ 1,622,255 Add Interest & Dividend Income 400,085 Add Realized Gains/Less Realized (Losses) 129,214 Net Entrance Fees Received 2,871,195 Net Cash Available for Debt Service $ 5,022,749 Full Year MADS: $5,606,192 Reporting Period MADS: $2,826,135 {184 days/365 days X $5,606,192) Net Cash Available for Debt Service/Reporting Period MADS= DSC Ratio $5,022,749 I $2,826,135 = 1.78 DSC Ratio The ratio above, 1.78, exceeds the Debt Service Coverage requirement of 1.2 times MADS. 3) Days Cash on Hand: The ARC had 422 days of operating expenses in the form of unrestricted cash and investments as of December 31, This measurement exceeds the Liquidity Covenant requirement of 120 Days Cash on Hand. 4) Community Occupancy: For the six month period ended December 31, Independent Assisted Living Percent Occupied Skilled Nursing Skilled Nursing based Living (percent and Number of Available Beds based on licensed on paid beds Occupied). 91%.. beds 93.3% (on78rooms/apts) 53% %. 2

3 5) Sources of Revenue: The table below sets forth the total revenues by payor source for the sixmonth periods ended December 31, 2017 and Payor Source Medicaid - - Private-Pay $12,811,423 $12,179,840 Medicare/Insurance 599, ,659 Total Revenues: $13,411,344 $12,949,499 6) Marketing Sales Data: ARC received $3,106,820 on 15 unit sales for the period July 1, 2017 through December 31, Thank you for this opportunity to provide financial and other information on behalf of the Army Residence Community. Sincerely, Gordon Shoger CPA Chief Financial Officer The Army Residence Community 3

4 THE ARMY RESIDENCE COMMUNITY AND AFFILIATE UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, ASSETS Cash and cash equivalents $ 7,504,240 $ 5,313,579 Accounts receivable, net of allowance for doubtful accounts 1,324,598 1,803,840 Prepaid expenses and other cuttent assets 703, ,198 Assets whose use is limited and require for current liabilities 439, ,453 Total cmtent assets 9,971,003 8,151,070 Assets whose use is limited: Cash and cash equivalents 2,522,617 2,543,513 Investments, at fair value 1,522,386 4,004,634 4,045,003 6,548,147 Less p01iion required for current liabilities (439,061) (389,453) Total noncurrent assets whose use is limited 3,605,942 6,158,694 Investments, at fair value 23,912,185 23,395,993 Property, plant, and equipment, net 104,027, ,935,010 TOTAL ASSETS 141,516,870 $ 142,640,767 LIABILITIES AND NET ASSETS Accounts payable and other liabilities $ 657,734 $ 407,114 Accrued payroll and related items 1,366,081 1,343,348 Accrued interest expense 1,673,475 1,125,558 Current p01iion of long-term debt 1,630,000 1,415,000 Total current liabilities 5,327,290 4,291,020 Long-te1m debt, less current p01iion 87,770,000 94,017,544 Bond issue costs and premium (discount), net of accumulated amo1iization 1,577,782 (2,051,988) Long-term debt, net of costs, less current po1iion 89,347,782 91,965,556 Deferred compensation 216, ,795 Unearned deposits and down payments 510, ,245 Refundable entrance fees 3,279,328 3,550,358 Deferred entrance fees subject to refund period 10,891,675 12,292,027 Deferred entrance fees - non refundable 36,998,390 36,039,630 Total liabilities 146,570, ,506,631 Net Assets Unrestricted: Designated 3,070,017 2,810,303 Undesignated (9,353,895) (10,821,245) Total unrestricted net assets (6,283,878) (8,010,942) Temporarily restricted 1,230,031 1,145,078 Total net assets (5,053,847) (6,865,864) TOTAL LIABILITIES AND NET ASSETS $ 141,516,870 $ 142,640,767 4

5 THE ARMY RESIDENCE COMMUNITY AND AFFILIATE UNAUDITED CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS For the 6 months ended December 31, UNRESTRICTED NET ASSETS Services revenue: Residence center $ 7,927,408 $ 7,587,269 Health care center 3,710,076 3,646,488 Dining service 1,773,860 1,715,742 Services revenue 13,411,344 12,949,499 Services expenses: Residence center 4,328,419 4,415,026 Health care center 2,585,455 2,527,338 Dining service 3,201,055 3,189,313 General and administrative 1,674,160 2,043,550 Services expense 11,789,089 12,175,227 Services income over expenses 1,622, ,272 Other operating income: Earned entrance fees 3,172,049 2,642,023 Contributions 8, ,229 Investment income 400, ,116 Net assets released from restriction 11,739 31,616 Total other operating income 3,592,813 3,403,984 Other operating expenses: Depreciation and amortization 3,000,035 3,056,803 Interest expense and bond fees 1,901,836 2,316,701 Amortization of bond issuance costs 79, ,598 Total other operating expenses 4,981,044 5,490,102 Total operating gain (loss) 234,024 (1,311,846) Loss on advanced refunding of debt (10,214,944) Gain (loss) on disposal of assets Unrealized gain (loss) on investments 794,376 97,621 Realized gain (loss) on investments 129, ,094 Increase (decrease) in unrestricted net assets 1,157,614 (10,838,075) TEMPORARILY RESTRICTED NET ASSETS Contributions 1,500 Investment income 31,240 Net assets released from restriction (11,739) (31,616) Increase (decrease) in temporarily restricted net assets 21,001 (31,616) INCREASE (DECREASE) IN NET ASSETS 1,178,615 (10,869,691) NET ASSETS AT BEGINNING OF YEAR (6,232,462) 4,003,827 NET ASSETS AT END OF YEAR $ (5,053,847) $ (6,865,864) 5

6 THE ARMY RESIDENCE COMMUNITY AND AFFILIATE UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the 6 months ended December 31, OPERATING ACTIVITIES Change in net assets $ 1,178,615 $ (10,869,691) Adjustments to reconcile change in net assets to net cash used by operating activities: Ammiization of entrance fees (3,176,609) (2,642,023) Net realized investment losses (gains) (133,367) (591,094) Net unrealized investment losses (gains) (811,900) (97,621) Loss on advanced refunding of debt 10,214,944 Depreciation and ammiization 3,000,035 3,056,803 Bond premium amortization, net (112,575) (101,397) Ammiization of bond issuance cost 79, ,598 Provision for doubtful accounts 64,729 20,866 Changes in: Accounts receivable (110,002) (1,288,628) Prepaid expenses and other cmtent assets (40,502) (88,775) Accounts payable and other liabilities (243,556) (383,772) Accrued payroll and related items 67,333 75,985 Accrued interest expense (17,832) (43,014) Defet1'ed compensation and severance payable (538,329) Net cash used by operating activities (794,787) (2,620,819) INVESTING ACTIVITIES Purchases of investments (5,772,233) (71,819,372) Sales and maturities of investments 3,929,389 78,605,717 Purchases ofprope1iy, plant and equipment (3,487,013) (1,748,016) Insurance proceeds from involuntary conversion of property, plant, and equipment 43,747 1,245,250 Net cash provided (used) by investing activities (5,286,110) 6,283,579 FINANCING ACTIVITIES Proceeds from entrance fees, unearned deposits, and down payments 3,106,820 3,202,122 Refunds of entrance fees, unearned deposits, and down payments (235,625) (356,148) Payment for bond issue costs (1,108,737) Payments to retire long-term debt (62,804,465) Proceeds from long-term debt 59,050,297 Principal payments on long-te1m debt (2,225,000) (1,350,000) Net cash provided (used) by financing activities 646,195 (3,366,931) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,434,702) 295,829 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,461,559 7,561,263 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,026,857 $ 7,857,092 6