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Assisted Living Concepts, Inc. Announces Fourth Quarter Results

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MENOMONEE FALLS, WI -- (Marketwire) -- 03/14/13 -- Assisted Living Concepts, Inc. ("ALC") (NYSE: ALC) reported a net loss of $2.6 million in the fourth quarter of 2012 as compared to net income of $7.3 million in the fourth quarter of 2011.

During the fourth quarters of both 2012 and 2011, ALC recorded One-Time Items described below. Excluding the One-Time Items, our net loss in the fourth quarter of 2012 would have been $0.8 million as compared to net income of $6.3 million in the fourth quarter of 2011.

Revenues in the fourth quarter of 2012 were $57.0 million as compared to revenues of $58.9 million in the fourth quarter of 2011.

"In the fourth quarter of 2012, we increased our number of units rented by 131, a significant improvement from recent history," commented Dr. Charles "Chip" Roadman, our President and Chief Executive Officer. "Our continued progress in the regulatory arena combined with quality initiatives were instrumental measures in attaining this improvement."

For the year ended December 31, 2012, ALC reported a net loss of $26.1 million as compared to net income of $24.4 million in the year ended December 31, 2011.

Excluding the One-Time Items described below, net income for the years ended December 31, 2012 and 2011 would have been $7.7 million and $22.1 million, respectively.

Diluted earnings per common share for the fourth quarter and the year ended December 31, 2012 and 2011 were:


Quarter ended Year ended December 31, December 31, 2012 2011 2012 2011 --------- --------- --------- ---------Diluted earnings/(loss) per common share $ (0.11) $ 0.31 $ (1.14) $ 1.05Pro forma diluted earnings/(loss) per common share excluding One-Time Items $ (0.03) $ 0.27 $ 0.34 $ 0.95




One-Time Items (net of tax) in the quarter and year ended December 31, 2012 included:

1. Charges related to the purchase of 12 previously leased properties from Ventas Realty, Limited Partnership and MLD Delaware Trust relating to the write off of $0.2 million and $22.4 million related to a litigation settlement and a lease termination fee for the quarter and year ended December 31, 2012, respectively, a $5.2 million write-off of an operating lease intangible, and $0.6 million of transaction costs, partially offset by $0.6 million of rental savings for the year ended December 31, 2012.
2. The write-off of construction costs associated with expansion projects that management has determined will not be completed. ($0.0 million and $0.3 million for the quarter and year ended December 31, 2012).
3. Expenses incurred in connection with an internal investigation, litigation related to the Ventas transaction, public relations and quality committee projects. ($1.1 million and $3.1 million for the quarter and year ended December 31, 2012, respectively).
4. The write down of long-lived assets determined to be impaired ($2.1 million for the year ended December 31, 2012).
5. The write-off of deferred financing in connection with the amended U.S. Bank credit facility ($0.7 million in both the quarter and year ended December 31, 2012).
6. Income recorded in connection with the sale of investments ($0.1 million in both the quarter and year ended December 31, 2012).

One-Time Items in the year ended December 31, 2011 included:

1. A reduction in tax expense associated with the settlement of all issues associated with a tax allocation agreement with a subsidiary of our former parent Extendicare Inc. (now Extendicare Real Estate Investment Trust) and a reversal of tax reserves associated with the completion of certain state audits ($0.6 million and $1.3 million for the quarter and year ended December 31, 2011, respectively).
2. Income associated with a mark to market adjustment for interest rate swap agreements ($0.1 million and $0.0 million net of tax for the quarter and year ended December 31, 2011, respectively).
3. The write-off of deferred financing fees associated with our refinanced debt ($0.0 million and $0.2 million net of tax for the quarter and year ended December 31, 2011, respectively).
4. Gains on sales of equity investments ($0.0 million and $0.6 million net of tax for the quarter and year ended December 31, 2011, respectively).
5. Income associated with purchase accounting adjustments ($0.4 million and $0.5 million net of tax for the quarter and year ended December 31, 2011, respectively).

Certain non-GAAP financial measures are used in the discussions in this release in assessing the performance of the business. See the attached tables for definitions of Adjusted EBITDA and Adjusted EBITDAR, reconciliations of net income to Adjusted EBITDA and Adjusted EBITDAR, calculations of Adjusted EBITDA and Adjusted EBITDAR as a percentage of total revenues, and non-GAAP financial measure reconciliation information.

As of December 31, 2012, ALC operated 211 senior living residences comprising 9,348 units.

The following discussions include the impact of the One-Time Items.

Quarters ended December 31, 2012, December 31, 2011 and September 30, 2012

Revenues of $57.0 million in the fourth quarter ended December 31, 2012 decreased $1.9 million or 3.2% as compared to $58.9 million in the fourth quarter of 2011 and increased $1.4 million or 2.5% from $55.6 million in the third quarter of 2012.

Adjusted EBITDAR for the fourth quarter of 2012 was $9.0 million or 15.8% of revenues and

•decreased $13.8 million or 60.5% from $22.7 million and 38.6% of revenues in the fourth quarter of 2011; and •increased $0.8 million or 9.2% from $8.2 million and 14.8% of revenues in the third quarter of 2012.

Adjusted EBITDA for the fourth quarter of 2012 was $6.3 million or 11.0% of revenues and

•decreased $12.0 million or 65.6% from $18.3 million and 31.1% of revenues in the fourth quarter of 2011; and •increased $0.9 million or 16.8% from $5.4 million and 9.7% of revenues in the third quarter of 2012.

Fourth quarter 2012 compared to fourth quarter 2011

Revenues in the fourth quarter of 2012 decreased by $1.9 million from the fourth quarter of 2011 primarily due to a decrease in rented private pay units ($2.4 million), and the planned reduction in the number of units rented by Medicaid residents ($0.2 million), partially offset by rate increases ($0.7 million). Average private pay rates increased in the fourth quarter of 2012 by 1.2% from average private pay rates for the fourth quarter of 2011. Average overall rates, including the impact of improved payer mix, increased in the fourth quarter of 2012 by 1.5% from comparable rates for the fourth quarter of 2011.

Both Adjusted EBITDAR and Adjusted EBITDA decreased in the fourth quarter of 2012 primarily due to an increase in residence operations expenses ($8.5 million) (this excludes the gain on disposal of fixed assets), an increase in general and administrative expenses ($3.4 million) (this excludes non-cash equity based compensation) and a decrease in revenue ($1.9 million) partially offset, for Adjusted EBITDA only, a decrease in residence lease expense ($1.8 million) resulting from the June 15, 2012, purchase of twelve previously leased properties. Residence operations expenses increased primarily from an increases in labor expenses ($5.8 million), reserves associated with self-insured liabilities ($1.0 million), maintenance expense ($0.6 million), food expense ($0.5 million), legal and consulting expenses ($0.4 million) and other administrative expenses ($0.4 million), partially offset by an improvement in bad debt expense ($0.3 million). General and administrative expenses increased as a result of the SEC investigation, litigation, and expenses incurred in connection with public relations and quality improvement initiatives.

Fourth quarter 2012 compared to the third quarter 2012

Revenues in the fourth quarter of 2012 increased by $1.4 million from the third quarter of 2012 primarily due to an increase in the number of rented units ($1.4 million), insurance proceeds from business interruption at a residence ($0.4 million), partially offset by lower average daily revenue as a result of promotional discounts ($0.4 million). Average private pay rates (excluding revenue related to the business interruption proceeds) declined in the fourth quarter of 2012 by 0.6% from average private pay rates for the third quarter of 2012.

Adjusted EBITDA and Adjusted EBITDAR increased in the fourth quarter of 2012 as compared to the third quarter of 2012 primarily from an increase in revenues discussed above ($1.4 million), a reduction in residence operations expenses ($0.7 million) (this excludes the gain on disposal of fixed assets), partially offset by an increase in general and administrative expenses ($1.3 million) (this excludes non-cash equity-based compensation) and, for Adjusted EBITDA only, a decrease in residence lease expense ($0.1 million) resulting from the June 15, 2012, purchase of twelve previously leased properties. Residence operations expenses decreased primarily from a decrease in utilities expense ($0.6 million), a reduction in legal and consulting fees ($0.6 million), an improvement in bad debt expense ($0.3 million), a reduction in maintenance expense ($0.1 million), and an improvement in other administrative expenses ($0.2 million), partially offset by an increases in reserves associated with self-insured liabilities ($0.7 million), labor expenses ($0.2 million), and food expense ($0.2 million). General and administrative expenses increased as a result of the SEC investigation, litigation and expenses incurred in connection with public relations and quality improvement initiatives.

Year ended December 31, 2012 and December 31, 2011

Revenues of $228.4 million in the year ended December 31, 2012 decreased $6.1 million or 2.6% from $234.5 million in the year ended December 31, 2011.

Adjusted EBITDAR for the year ended December 31, 2012 was $55.4 million, or 24.3% of revenues and

•decreased $30.1 million or 35.2% from $85.5 million and 36.5% of revenues in the year ended December 31, 2011.

Adjusted EBITDA for the year ended December 31, 2012 was $42.0 million, or 18.4% of revenues and

•decreased $25.8 million or 38.0% from $67.8 million and 28.9% of revenues in the year ended December 31, 2011.

Year ended December 31, 2012 compared to the year ended December 31, 2011

Revenues in the year ended December 31, 2012 decreased by $6.1 million from the year ended December 31, 2011 primarily due to a decrease in rented private pay units ($7.5 million), and the planned reduction in the number of units rented to by Medicaid residents ($1.6 million), partially offset by higher average daily revenue from rate increases ($2.4 million) and one additional day in the 2012 period due to leap year ($0.6 million). Average rates increased in the year ended December 31, 2012 by 1.5% over average rates for the year ended December 31, 2011.

Both Adjusted EBITDA and Adjusted EBITDAR decreased in the year ended December 31, 2012 primarily from an increase in residence operations expenses ($17.2 million) (this excludes the gain on disposal of fixed assets and write-off of construction costs), a decrease in revenues discussed above ($6.1 million), and an increase in general and administrative expenses ($6.8 million) (this excludes non-cash equity based compensation) and, for Adjusted EBITDA only, a decrease in residence lease expense ($4.3 million). Residence operations expenses increased as a result of increased salaries and wages associated with quality restoration efforts initiated in June 2012 and an increase in professional fees from litigation and regulatory issues primarily in the southeast. General and administrative expenses increased as a result of an internal investigation, the SEC investigation, litigation and expenses incurred in connection with public relations, and quality improvement initiatives.

Liquidity

At December 31, 2012 ALC had cash of $10.2 million and availability of $8.0 million under its credit agreement. At December 31, 2012, ALC owned 94 unencumbered residences that may be used to secure future capital.

Other Information

As previously announced, on February 25, 2013, ALC entered into an Agreement and Plan of Merger (the "Merger Agreement") with affiliates of TPG Capital, L.P. At the effective time of the merger, each share of ALC Class A and Class B common stock issued and outstanding immediately prior to the effective time of the merger will be converted automatically into the right to receive $12.00 and $12.90 in cash, respectively.

About Us

Assisted Living Concepts, Inc. and its subsidiaries operated 211 senior living residences comprising 9,348 resident units in 20 states at December 31, 2012. ALC's senior living facilities typically consist of 40 to 60 units and offer residents a supportive, home-like setting and assistance with the activities of daily living. ALC employed approximately 4,600 people at December 31, 2012.

Forward-looking Statements

Statements contained in this release other than statements of historical fact, including statements regarding anticipated financial performance, business strategy and management's plans and objectives for future operations, including management's expectations about improving occupancy and private pay mix, are forward-looking statements. Forward-looking statements generally include words such as "expect," "point toward," "intend," "will," "indicate," "anticipate," "believe," "estimate," "target," "plan," "foresee," "strategy" or "objective." Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. In addition to the risks and uncertainties referred to in the release, other risks and uncertainties are contained in ALC's filings with United States Securities and Exchange Commission and include, but are not limited to, the following: any conditions imposed on the parties in connection with consummation of the transactions contemplated by the Merger Agreement; the ability to obtain regulatory approvals of the transactions contemplated by the Merger Agreement on the proposed terms and schedule; the failure of ALC's stockholders to approve the transactions contemplated by the Merger Agreement; ALC's ability to maintain relationships with customers, employees or suppliers following the announcement of the Merger Agreement; the ability of the parties to satisfy the conditions to closing of the transactions contemplated by the Merger Agreement; the risk that the transactions contemplated by the Merger Agreement may not be completed in the time frame expected by the parties or at all; the risk that ALC is unable to comply with covenants under its credit agreement or ALC cannot obtain waivers of or amendments to the covenants; changes in the health care industry in general and the senior housing industry in particular because of governmental and economic influences; changes in general economic conditions, including changes in housing markets, unemployment rates and the availability of credit at reasonable rates; changes in regulations governing the industry and ALC's compliance with such regulations; changes in government funding levels for health care services; resident care litigation, including exposure for punitive damage claims and increased insurance costs, and other claims asserted against ALC; ALC's ability to maintain and increase census levels; ALC's ability to attract and retain qualified personnel; the availability and terms of capital to fund acquisitions and ALC's capital expenditures; changes in competition; and demographic changes. Given these risks and uncertainties, readers are cautioned not to place undue reliance on ALC's forward-looking statements. All forward-looking statements contained in this report are necessarily estimates reflecting the best judgment of the party making such statements based upon current information. ALC assumes no obligation to update any forward-looking statement.


ASSISTED LIVING CONCEPTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011Revenues $ 56,980 $ 58,863 $ 228,397 $ 234,452Expenses: Residence operations (exclusive of depreciation and amortization and residence lease expense shown below) 42,329 33,515 154,194 136,659 General and administrative 6,173 2,803 19,822 13,361 Residence lease expense 2,686 4,461 13,369 17,686 Lease termination and settlement 300 - 37,430 - Depreciation and amortization 6,827 5,843 24,915 23,103 Intangible impairment - - 8,650 - Asset impairment - - 3,500 - Transaction costs - - 1,046 - Total operating expenses 58,315 46,622 262,926 190,809(Loss)/income from operations (1,335) 12,241 (34,529) 43,643Other (expense) income: Interest expense: Debt (2,483) (1,826) (8,143) (7,872) Change in fair value of derivatives and amortization - 94 - - Write-off of deferred financing costs (1,137) - (1,137) (279) Interest income 1 4 9 12 Gain on sale of securities 257 46 257 956(Loss)/income before income taxes (4,697) 10,559 (43,543) 36,460Income tax benefit/(expense) 2,074 (3,249) 17,418 (12,100)Net (loss)/income $ (2,623) $ 7,310 $ (26,125) $ 24,360Weighted average common shares: Basic 22,970 22,967 22,970 22,955 Diluted 22,970 23,239 22,970 23,256Per share data:Basic (loss)/earnings per common share $ (0.11) $ 0.32 $ (1.14) $ 1.06 ========= ========= ========= =========Diluted (loss)/earnings per common share: $ (0.11) $ 0.31 $ (1.14) $ 1.05 ========= ========= ========= =========Dividends declared and paid per common share $ - $ 0.10 $ 0.20 $ 0.30 ========= ========= ========= =========Adjusted EBITDA (1) $ 6,292 $ 18,286 $ 42,040 $ 67,824 ========= ========= ========= =========Adjusted EBITDAR (1) $ 8,978 $ 22,747 $ 55,409 $ 85,510 ========= ========= ========= =========




(1) See attached tables for definitions of Adjusted EBITDA and Adjusted EBITDAR and reconciliations of net income to Adjusted EBITDA and Adjusted EBITDAR


ASSISTED LIVING CONCEPTS, INC CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, ------------------------- 2012 2011 ----------- ----------- ASSETSCurrent Assets: Cash and cash equivalents $ 10,182 $ 2,652 Cash and escrow deposits - restricted 2,714 3,150 Investments 900 1,840 Accounts receivable, less allowances of $3,461 and $2,903, respectively 4,294 4,609 Prepaid expenses, supplies and other receivables 4,604 3,387 Income tax receivable 4,089 606 Deferred income taxes 4,640 4,027 ----------- ----------- Total current assets 31,423 20,271Property and equipment, net 481,913 430,733Intangible assets, net - 9,028Restricted cash 2,035 1,996Other assets 398 2,025 ----------- ----------- Total Assets $ 515,769 $ 464,053 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities: Accounts payable $ 9,909 $ 7,086 Accrued liabilities 21,034 17,877 Deferred revenue 8,266 8,004 Current maturities of long-term debt 114,575 2,538 Current portion of self-insured liabilities 500 500 ----------- ----------- Total current liabilities 154,284 36,005Accrual for self-insured liabilities 1,700 1,557Long-term debt 67,140 85,703Deferred income taxes 8,701 23,961Other long-term liabilities 6,301 9,107 ----------- ----------- Total liabilities 238,126 156,333 ----------- -----------Preferred Stock, par value $0.01 per share, 25,000,000 shares authorized, no shares issued and outstanding, respectively - -Class A Common Stock, $0.01 par value, 160,000,000 authorized at December 31, 2012 and December 31, 2011; 25,004,381 and 24,980,958 shares issued and 20,072,509 and 20,049,086 shares outstanding, respectively 250 250Class B Common Stock, $0.01 par value, 30,000,000 authorized at December 31, 2012 and December 31, 2011; 2,897,996 and 2,919,790 issued and outstanding, respectively 29 29Additional paid-in capital 317,473 316,694Accumulated other comprehensive income 19 156Retained earnings 36,717 67,436Treasury stock at cost, 4,931,872 and 4,931,872 shares, respectively (76,845) (76,845) ----------- ----------- Total stockholders' equity 277,643 307,720 ----------- -----------Total Liabilities and Stockholders' Equity $ 515,769 $ 464,053 =========== =========== ASSISTED LIVING CONCEPTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Year Ended December 31, ------------------------------------ 2012 2011 2010 ---------- ---------- ----------OPERATING ACTIVITIES:Net (loss)/income $ (26,125) $ 24,360 $ 16,484 Adjustments to reconcile net (loss)/income to net cash provided by operating activities: Depreciation and amortization 24,915 23,103 22,807 Other-than-temporary investments impairment - - 2,026 Deferred financing write off and amortization 1,674 782 455 Loss due to property and equipment impairment 3,500 - - Intangible impairment 8,650 - - Amortization of purchase accounting adjustments for leases and debt (402) (647) (645) Provision for bad debts 559 1,489 676 Provision for self-insured liabilities 1,638 554 639 Loss on sale or disposal of fixed assets 249 (121) 401 Equity-based compensation expense 779 1,199 659 Deferred income taxes (15,888) 4,447 5,599 Gain on investments (195) (956) (78) Changes in assets and liabilities: Accounts receivable (244) (2,897) (1,209) Prepaid expenses, supplies and other receivables 760 (199) 517 Deposits in escrow 436 290 (378) Current assets - discontinued operations - - (132) Accounts payable 2,873 1,268 (1,170) Accrued liabilities 2,995 (1,376) 25 Deferred revenue 262 3,220 (1,584) Current liabilities - discontinued operations - - (34) Payments of self-insured liabilities (1,495) (592) (458) Income taxes payable/receivable (3,483) (250) 367 Changes in other non-current assets (43) 1,456 758 Other non-current assets - discontinued operations - - 399 Other long-term liabilities (2,342) (455) 48 ---------- ---------- ---------- Cash (used in)/provided by operating activities (927) 54,675 46,172 INVESTING ACTIVITIES: Payment for securities (218) (208) (818) Proceeds on sales of securities 1,231 3,406 515 Payment for acquisitions (62,570) - (27,500) Proceeds on sale of fixed assets 1,486 168 - Payments for new construction projects (2,327) (684) (5,619) Payments for purchases of property and equipment (16,572) (15,067) (11,000) ---------- ---------- ---------- Cash used in investing activities (78,970) (12,385) (44,422) FINANCING ACTIVITIES: Payments of financing costs (1,391) (1,907) (310) Purchase of treasury stock - (798) (2,803) Proceeds from issuance of shares for employee stock options - 283 31 Repayment of borrowings on revolving credit facility (99,000) (137,500) - Proceeds on borrowings on revolving credit facility 195,000 99,500 - Repayment of mortgage debt (2,588) (5,686) (1,914) Proceeds from mortgage debt - - 12,250 Payment of dividends (4,594) (6,894) - ---------- ---------- ---------- Cash provided by/(used in) financing activities 87,427 (53,002) 7,254 ---------- ---------- ---------- Increase/(decrease) in cash and cash equivalents 7,530 (10,712) 9,004 Cash and cash equivalents, beginning of year 2,652 13,364 4,360 ---------- ---------- ---------- Cash and cash equivalents, end of year $ 10,182 $ 2,652 $ 13,364 ========== ========== ========== ASSISTED LIVING CONCEPTS, INC. Financial and Operating StatisticsContinuing residences* Three Months Ended ----------------------------------------------- December 31, September 30, December 31, 2012 2012 2011Average Occupied Units by Payer Source 5,382 5,251 5,642 ============== ============= ==============Average Revenue per Occupied Unit Day $ 115.09 115.05 $ 113.41 ============== ============= ==============Occupancy Percentage* 60.9% 59.5% 62.7% ============== ============= ==============




* Depending on the timing of new additions and temporary closures of our residences, we may increase or reduce the number of units we actively operate. For the three months ended December 31, 2012, September 30, 2012 and December 31, 2011 we actively operated 8,837, 8,822 and 8,995 units, respectively.


Same residence basis** Three Months Ended ------------------------------------------------ December 31, September 30, December 31, 2012 2012 2011 -------------- -------------- --------------Average Occupied Units by Payer Source 5,379 5,251 5,607 ============== ============== ==============Average Revenue per Occupied Unit Day $ 115.04 $ 115.05 $ 113.47 ============== ============== ==============Occupancy Percentage* 61.0% 59.5% 63.6% ============== ============== ==============




** Excludes quarterly impact of 23 completed expansion and 194 units temporarily closed for renovation in each of the December 31, 2012, September 30, 2012 and December 31, 2011 three month periods.


Continuing residences* Year Ended ------------------------------- December 31, December 31, 2012 2011Average Occupied Units 5,369 5,612 ============== ==============Average Revenue per Occupied Unit Day $ 116.22 $ 114.16 ============== ==============Occupancy Percentage* 60.5% 62.4% ============== ==============




* Depending on the timing of new additions and temporary closures of our residences, we may increase or reduce the number of units we actively operate. For the year ended December 31, 2012 and December 31, 2011 we actively operated 8,872 and 8,992 units, respectively.


Same residence basis** Year Ended --------------------------- December 31, December 31, 2012 2011 ------------ ------------Average Occupied Units 5,319 5,536 ============ ============Average Revenue per Occupied Unit Day $ 116.03 $ 114.38 ============ ============Occupancy Percentage* 60.9% 63.4% ============ ============




** Excludes impact of 43 completed expansion units, 72 re-opened units and 217 units temporarily closed for renovation in the 2012 year and units temporarily closed for renovation in the 2011 year.

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDAR

Adjusted EBITDA is defined as net loss/income from continuing operations before income taxes, interest expense net of interest income, depreciation and amortization, equity based compensation expense, transaction costs and certain non-cash, gains and losses, including disposal of assets, impairment of goodwill and other long-lived assets, impairment of investments, impairment of intangibles and non-recurring lease termination and settlement fees. Adjusted EBITDAR is defined as Adjusted EBITDA before rent expenses incurred for leased assisted living properties. Adjusted EBITDA and Adjusted EBITDAR are not measures of performance under accounting principles generally accepted in the United States of America, or GAAP. We use Adjusted EBITDA and Adjusted EBITDAR as key performance indicators and Adjusted EBITDA and Adjusted EBITDAR expressed as a percentage of total revenues as a measurement of margin.

We understand that EBITDA and EBITDAR, or derivatives thereof, are customarily used by lenders, financial and credit analysts, and many investors as a performance measure in evaluating a company's ability to service debt and meet other payment obligations or as a common valuation measurement in the long-term care industry. Moreover, ALC's revolving credit facility contains covenants in which a form of EBITDA is used as a measure of compliance, and we anticipate EBITDA will be used in covenants in any new financing arrangements that we may establish. We believe Adjusted EBITDA and Adjusted EBITDAR provide meaningful supplemental information regarding our core results because these measures exclude the effects of non-operating factors related to our capital assets, such as the historical cost of the assets.

We report specific line items separately, and exclude them from Adjusted EBITDA and Adjusted EBITDAR because such items are transitional in nature and would otherwise distort historical trends. In addition, we use Adjusted EBITDA and Adjusted EBITDAR to assess our operating performance and in making financing decisions. In particular, we use Adjusted EBITDA and Adjusted EBITDAR in analyzing potential acquisitions and internal expansion possibilities. Adjusted EBITDAR performance is also used in determining compensation levels for our senior executives. Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for net income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity. We present Adjusted EBITDA and Adjusted EBITDAR on a consistent basis from period to period, thereby allowing for comparability of operating performance.

Adjusted EBITDA and Adjusted EBITDAR Reconciliation Information

The following table sets forth a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR:


Three Months Ended Year Ended -------------------------------- -------------------- December December September December December 31, 31, 30, 31, 31, 2012 2011 2012 2012 2011 --------- --------- ---------- --------- --------- (in thousands)Net income $ (2,623) $ 7,310 $ (4,042) $ (26,125) $ 24,360Add provision for income taxes (2,074) 3,249 (2,941) (17,418) 12,100 --------- --------- ---------- --------- ---------Income before income taxes $ (4,697) $ 10,559 $ (6,683) $ (43,543) $ 36,460Add: Depreciation and amortization 6,827 5,843 6,526 24,915 23,103 Interest expense, net 2,482 1,822 2,318 8,134 8,028 Non-cash equity based compensation 237 227 182 779 1,199 (Gain)/loss on disposal of fixed assets 263 (25) (433) (255) (121) Write-down of cost associated with expansion projects not completed - - - 504 - Gain on sale of equity investments (257) (46) - (257) (956) Recovery of purchase accounting associated with early termination of debt - - (168) Write-off of operating lease intangible, lease termination fee and settlement 300 - (25) 46,080 - Change in value of derivative and amortization - (94) - Write-off of deferred financing fees 1,137 - - 1,137 279 Asset impairment 3,500 3,500 Transaction costs - - - 1,046 - --------- --------- ---------- --------- ---------Adjusted EBITDA $ 6,292 $ 18,286 $ 5,385 $ 42,040 $ 67,824Add: Lease expense 2,686 4,461 2,834 13,369 17,686 --------- --------- ---------- --------- ---------Adjusted EBITDAR $ 8,978 $ 22,747 $ 8,219 $ 55,409 $ 85,510 ========= ========= ========== ========= =========




The following table sets forth the calculations of Adjusted EBITDA, Adjusted EBITDAR, Adjusted EBITDA and Adjusted EBITDAR as percentages of total revenue:


Three Months Ended Year Ended ------------------------------- -------------------- December December September December December 31, 31, 30, 31, 31, 2012 2011 2012 2012 2011 -------- --------- ---------- --------- --------- (dollars in thousands)Revenues 56,980 $ 58,863 $ 55,576 228,397 $ 234,452 ======== ========= ========== ========= =========Adjusted EBITDA 6,292 $ 18,286 $ 5,385 $ 42,040 $ 67,824 ======== ========= ========== ========= =========Adjusted EBITDAR 8,978 $ 22,747 $ 8,219 $ 55,409 $ 85,510 ======== ========= ========== ========= =========Adjusted EBITDA as percent of total revenues 11.0% 31.1% 9.7% 18.4% 28.9% ======== ========= ========== ========= =========Adjusted EBITDAR as percent of total revenues 15.8% 38.6% 14.8% 24.3% 36.5% ======== ========= ========== ========= ========= ASSISTED LIVING CONCEPTS, INC. Reconciliation of Non-GAAP Measure (unaudited) Three Three Months months Ended Ended Year Ended Year Ended December December December December 31, 2012 31, 2011 31, 2012 31, 2011 (dollars in thousands except per share data)Net income $ (2,623) $ 7,310 $ (26,125) $ 24,360Add one time charges:Expenses incurred in connection with internal investigation, public relations and Ventas litigation 2,118 - 5,393 -Write-off of deferred financing costs 1,137 - 1,137 279Change in value of derivative net of amortization - - - -Asset Impairment - - 3,500 -Loss on disposal of fixed assets related to expansion project - - 504 -Loss on write off of lease intangible, termination and settlement fee and transaction costs 300 - 47,126 -Less one time credits:Rent - - 906 -Settlements relating to tax allocation agreement and state audits - 570 - 1,320Change in value of derivative net of amortization - 94 -Gain on sale of equity investments 257 46 257 956Recovery of purchase accounting associated with early termination of debt - 583 - 751Net tax benefit/ (expense) from charges and credits 1,457 (262) 22,655 (526) ----------- ----------- ----------- -----------Pro forma net (loss)/ income excluding one- time charges and credits $ (782) $ 6,279 $ 7,717 $ 22,138 =========== =========== =========== ===========Weighted average common shares: Basic 22,970 22,967 22,970 22,955 Diluted 22,970 23,239 22,970 23,256Diluted earnings per common share* Net loss $ (0.11) $ 0.31 $ (1.14) $ 1.05 Less: gain/(loss) from one time charges and credits (0.08) 0.04 (1.47) 0.10 ----------- ----------- ----------- ----------- Pro forma net income/loss excluding one-time charges and credits $ (0.03) $ 0.27 $ 0.34 $ 0.95 =========== =========== =========== ===========




* Per share numbers may not add due to rounding



For further information, contact:
Assisted Living Concepts, Inc.
John Buono
Sr. Vice President, Chief Financial Officer and Treasurer
Phone: (262) 257-8999
Fax: (262) 251-7562
Email: Email Contact
Visit ALC's Website @ www.alcco.com



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