Assisted Living Concepts, Inc. Announces Third Quarter Results

MENOMONEE FALLS, WI, Nov 02 (Marketwire) --
Assisted Living Concepts, Inc. ("ALC") (NYSE: ALC) reported a net loss of
$4.0 million in the third quarter of 2012 as compared to net income of
$5.8 million in the third quarter of 2011.

During the third quarters of both 2012 and 2011, ALC recorded One-Time
Items described below. Excluding the One-Time Items, net loss in the
third quarter of 2012 would have been $0.9 million as compared to net
income of $5.6 million in the third quarter of 2011.

Revenues in the third quarter of 2012 were $55.6 million as compared to
revenues of $58.6 million in the third quarter of 2011. Occupancy
declined from 5,628 units in the third quarter of 2011 to 5,251 units in
the third quarter of 2012.

"I am pleased to report significant progress in the regulatory arena,"
commented Dr. Charles "Chip" Roadman, President and Chief Executive
Officer. "The Company has rehired a number of key former and experienced
new employees which has resulted in enhanced services to our residents
positioning the Company for future operating growth. These operating
changes at the residence levels have resulted in a positive upward trend
in occupancy levels starting in mid-September."

The Company announced today that as part of an operational review of
certain of its residences and taking into account the recommendation of
its Facility Review Committee, it will be commencing a process to divest
its seven owned residences in New Jersey. If the New Jersey residences
are divested, it is intended that the proceeds will be used primarily to
pay down debt. The Board of Directors expects the process to be completed
in the first quarter of 2013. The Board of Directors anticipates such a
transaction will be accretive to earnings. In the first three quarters of
2012, the owned New Jersey residences had revenues of $2.7 million and a
pre-tax loss of $1.1 million. Although the Company has received
expressions of interest in respect of the New Jersey residences and will
be conducting a divesture process, no assurance can be given that such a
divestiture will be completed, the timing or the amount of proceeds from
the divestiture of such residences. In addition, the Board is considering
divestiture of certain closed and other underperforming residences.

The Company also announced today that a Special Committee of the Board
would continue its strategic review process to explore corporate
alternatives with a view to enhancing shareholder value. No assurance can
be given that the process will result in a transaction or, if a
transaction is undertaken, the timing or the terms of any such
transaction.

For the first nine months of 2012, ALC reported a net loss of $23.5
million as compared to net income of $17.1 million in the first nine
months of 2011.

Excluding the One-Time Items described below, net income in the first
nine months of 2012 and 2011 would have been $11.0 million and $15.9
million, respectively.

Diluted earnings per common share for the third quarter and the first
nine months ended September 30, 2012 and 2011 were:

Quarter ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
------- -------- ------- --------
Diluted earnings (loss) per common share $ (0.18) $ 0.25 $ (1.02) $ 0.73
Pro forma diluted earnings (loss) per
common share excluding One-Time Items $ (0.04) $ 0.24 $0.38 $ 0.68

One-Time Items (net of tax) in the quarter and nine months ended
September 30, 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 $22.7 million related to litigation settlement and a
lease termination fee, $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 the nine months ended September 30, 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 three and nine months ended September 30, 2012.)

3. Expenses incurred in connection with an internal investigation,
litigation related to the Ventas transaction, public relations and
quality committee projects. ($1.0 million and $2.0 million for the three
and nine months ended September 30, 2012).

4. The write down of long-lived assets determined to be impaired ($2.1
million for the three and nine months ended September 30, 2012.)

One-Time Items in the nine months ended September 30, 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. ($0.0 million and $0.8 million for the
quarter and nine months ended September 30, 2011, respectively)

2. Income/expense associated with a mark to market adjustment for
interest rate swap agreements ($0.1 million income and $0.1 million
expense net of tax for the quarter and nine months ended September 30,
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 nine months ended September 30, 2011, respectively)

4. Gains on sales of equity investments ($0.0 million and $0.6 million
net of tax for the quarter and nine months ended September 30, 2011,
respectively)

5. Income associated with purchase accounting adjustments on repaid debt
($0.1 million and $0.1 million net of tax for the both the quarter and
nine months ended September 30, 2011)

Certain non-GAAP financial measures are used in the discussions in this
release in assessing the performance of the business. See 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 September 30, 2012, ALC operated 211 senior living residences
comprising 9,325 units.

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

Quarters ended September 30, 2012, September 30, 2011, June 30, 2012

Revenues of $55.6 million in the third quarter ended September 30, 2012
decreased $3.0 million or 5.1 % as compared to $58.6 million in the third
quarter of 2011 and decreased $1.3 million or 2.3% from $56.9 million in
the second quarter of 2012.

Adjusted EBITDAR for the third quarter of 2012 was $8.2 million or 14.8%
of revenues and

-- decreased $13.1 million or 61.5% from $21.3 million and 36.4% of
revenues in the third quarter of 2011; and
-- decreased $8.8 million or 51.6% from $17.0 million and 29.8% of
revenues in the second quarter of 2012.

Adjusted EBITDA for the third quarter of 2012 was $5.4 million or
9.7% of revenues and

-- decreased $11.5 million or 68.1% from $16.9 million and 28.9% of
revenues in the third quarter of 2011; and
-- decreased $8.3 million or 60.6% from $13.7 million and 24.0% of
revenues in the second quarter of 2012.

Third quarter 2012 compared to third quarter 2011

Revenues in the third quarter of 2012 decreased by $3.0 million from the
third quarter of 2011 primarily due to a decrease in private pay
occupancy ($3.3 million), and the planned reduction in the number of
units occupied by Medicaid residents ($0.4 million), partially offset by
rate increases ($0.7 million). Average private pay rates increased in the
third quarter of 2012 by 1.2% from average private pay rates for the
third quarter of 2011. Average overall rates, including the impact of
improved payer mix, increased in the third quarter of 2012 by 1.7% from
comparable rates for the third quarter of 2011.

Both Adjusted EBITDAR and Adjusted EBITDA decreased in the third quarter
of 2012 primarily due to an increase in residence operations expenses
($8.1 million) (this excludes the gain on disposal of fixed assets), an
increase in general and administrative expenses ($2.0 million) (this
excludes non-cash equity based compensation) and a decrease in revenue
($3.0 million) partially offset, for Adjusted EBITDA only, a decrease in
residence lease expense ($1.6 million) resulting from the June 15, 2012,
purchase of twelve previously leased properties. Residence operations
expenses increased primarily from an increases in labor expenses ($4.9
million), maintenance expense ($1.0 million), legal and consulting fees
($1.0 million), bad debt expense ($0.3 million), travel and conference
fees ($0.2 million), food expense ($0.2 million) and other expenses ($0.5
million). General and administrative expenses increased as a result of an
internal investigation, litigation and expenses incurred in connection
with public relations and quality improvement initiatives.

Third quarter 2012 compared to the second quarter 2012

Revenues in the third quarter of 2012 declined by $1.3 million from the
second quarter of 2012 primarily due to lower occupancy ($1.2 million)
and lower average daily revenue as a result of promotional discounts
($0.7 million), partially offset by one additional day in the third
quarter ($0.6 million). Average private pay rates declined in the third
quarter of 2012 by 1.2% from average private pay rates for the second
quarter of 2012.

Decreased Adjusted EBITDA and Adjusted EBITDAR in the third quarter of
2012 as compared to the second quarter of 2012 resulted primarily from an
increase in residence operations expenses ($7.5 million) (this excludes
the gain on disposal of fixed assets), a decrease in revenue discussed
above ($1.3 million), and an increase in general and administrative
expenses ($0.1 million) (this excludes non-cash equity-based
compensation) partially offset for Adjusted EBITDA only, a decrease in
residence lease expense ($0.5 million) resulting from the June 15, 2012,
purchase of twelve previously leased properties. Residence operations
expenses increased primarily from an increase in labor expenses ($4.7
million), utilities expense ($0.8 million), maintenance expense ($0.7
million), legal and consulting fees ($0.7 million, travel and conference
fees ($0.4 million), and food expense ($0.2 million). General and
administrative expenses increased as a result of an increase in payroll
expense ($0.4 million) partially offset by a reduction in legal and
consulting expenses ($0.5 million.).

Nine months ended September 30, 2012 and September 30, 2011

Revenues of $171.4 million in the nine months ended September 30, 2012
decreased $4.2 million or 2.4% from $175.6 million in the nine months
ended September 30, 2011.

Adjusted EBITDAR for the nine months ended September 30, 2012 was $46.4
million, or 27.1% of revenues and

-- decreased $16.3 million or 26.0% from $62.8 million and 35.7% of
revenues in the nine months ended September 30, 2011.

Adjusted EBITDA for the nine months ended September 30, 2012 was
$35.7 million, or 20.9% of revenues and

-- decreased $13.8 million or 27.8% from $49.5 million and 28.2% of
revenues in the nine months ended September 30, 2011.

Nine months ended September 30, 2012 compared to nine months ended
September 30, 2011

Revenues in the nine months ended September 30, 2012 decreased by $4.2
million from the nine months ended September 30, 2011 primarily due to a
decrease in private pay occupancy ($5.2 million), and the planned
reduction in the number of units occupied by Medicaid residents ($1.3
million), partially offset by higher average daily revenue from rate
increases ($1.7 million) and one additional day in the 2012 period due to
leap year ($0.6 million). Average rates increased in the nine months
ended September 30, 2012 by 1.6% over average rates for the nine months
ended September 30, 2011.

Both Adjusted EBITDA and Adjusted EBITDAR decreased in the nine months
ended September 30, 2012 primarily from an increase in residence
operations expenses ($8.6 million) (this excludes the gain on disposal of
fixed assets and write-off of construction costs), a decrease in revenues
discussed above ($4.2 million) and an increase in general and
administrative expenses ($3.5 million) (this excludes non-cash equity
based compensation) and, for Adjusted EBITDA only, a decrease in
residence lease expense ($2.5 million). Residence operations expenses
increased primarily from an increase in bad debts. General and
administrative expenses increased as a result of an internal
investigation, an all-company conference, litigation and expenses
incurred in connection with public relations and quality improvement
initiatives. 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.

Liquidity

At September 30, 2012 ALC had availability of $13.3 million under its
credit agreement. ALC owns 101 unencumbered residences that may be used
to secure future capital needs.

Investor Call

ALC has scheduled a conference call for today November 2, 2012 at 10:00
a.m. (ET) to discuss its financial results for the third quarter. This
earnings release will be posted on ALC's website at www.alcco.com. The
toll-free number for the live call is 866-238-1422 or International
703-639-1159. A taped rebroadcast of the conference call will be
available approximately three hours following the live call until
midnight on December 2, 2012, by dialing toll free 800-475-6701, or
international 320-365-3844; and using access code 270618.

About Us

Assisted Living Concepts, Inc. and its subsidiaries operate 211 senior
living residences comprising 9,325 residents in 20 states. 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 employs approximately 4,600 people.

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,"
"plan," "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: 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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------

Revenues $ 55,576 $ 58,553 $ 171,417 $ 175,589
Expenses:
Residence operations
(exclusive of depreciation
and amortization and
residence lease expense shown
below) 42,314 34,545 111,865 103,144
General and administrative 4,792 2,928 13,649 10,558
Residence lease expense 2,834 4,430 10,683 13,225
Lease termination and
settlement (25) -- 37,130 --
Depreciation and amortization 6,526 5,807 18,088 17,260
Intangible impairment -- -- 8,650 --
Asset impairment 3,500 -- 3,500 --
Transaction costs -- -- 1,046 --
--------- --------- --------- ---------
Total operating expenses 59,941 47,710 204,611 144,187
--------- --------- --------- ---------
(Loss)/income from operations (4,365) 10,843 (33,194) 31,402
Other (expense) income:
Interest expense:
Debt (2,321) (1,858) (5,660) (6,046)
Change in fair value of
derivatives and
amortization -- 164 -- (94)
Write-off of deferred
financing costs -- -- -- (279)
Interest income 3 2 8 8
Gain on sale of securities -- -- -- 910
--------- --------- --------- ---------
(Loss)/income before income
taxes (6,683) 9,151 (38,846) 25,901
Income tax benefit/(expense) 2,641 (3,388) 15,344 (8,851)
--------- --------- --------- ---------
Net (loss)/income $ (4,042) $ 5,763 $ (23,502) $ 17,050
========= ========= ========= =========
Weighted average common shares:
Basic 22,970 22,962 22,970 22,951
Diluted 22,970 23,236 22,970 23,261
Per share data:
Basic earnings per common
share $ (0.18) $ 0.25 $ (1.02) $ 0.74
Diluted earnings per common
share $ (0.18) $ 0.25 $ (1.02) $ 0.73

Dividends declared and paid per
common share $ 0.00 $ 0.10 $ 0.20 $ 0.20

Adjusted EBITDA (1) $ 5,385 $ 16,895 $ 35,749 $ 49,540
========= ========= ========= =========
Adjusted EBITDAR (1) $ 8,219 $ 21,325 $ 46,432 $ 62,765
========= ========= ========= =========

(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)

September 30, December 31,
2012 2011
------------- -------------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 2,653 $ 2,652
Cash and escrow deposits - restricted 2,688 3,150
Investments 1,967 1,840
Accounts receivable, less allowances of
$3,534 and $2,903 respectively 4,679 4,609
Prepaid expenses, supplies and other
receivables 3,438 3,387
Income tax receivable 12,210 606
Deferred income taxes 4,173 4,027
------------- -------------
Total current assets 31,808 20,271
Property and equipment, net 486,385 430,733
Intangible assets, net 17 9,028
Restricted cash 2,036 1,996
Other assets 2,030 2,025
------------- -------------
Total Assets $ 522,276 $ 464,053
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,908 $ 7,086
Accrued liabilities 21,597 17,877
Deferred revenue 5,401 8,004
Current maturities of long-term debt 6,401 2,538
Current portion of self-insured liabilities 500 500
------------- -------------
Total current liabilities 40,807 36,005
Accrual for self-insured liabilities 1,465 1,557
Long-term debt 173,858 85,703
Deferred income taxes 18,509 23,961
Other long-term liabilities 7,456 9,107
Commitments and contingencies
------------- -------------
Total Liabilities 242,095 156,333
Preferred Stock, par value $0.01 per share,
25,000,000 shares authorized; no shares
issued and outstanding -- --
Class A Common Stock, $0.01 par value,
160,000,000 shares authorized at September
30, 2012 and December 31, 2011; 25,003,822
and 24,980,958 shares issued and 20,071,950
and 20,049,086 shares outstanding,
respectively 250 250
Class B Common Stock, $0.01 par value,
30,000,000 shares authorized at September 30,
2012 and December 31, 2011; 2,898,516 and
2,919,790 shares issued and outstanding,
respectively 29 29
Additional paid-in capital 317,236 316,694
Accumulated other comprehensive income 171 156
Retained earnings 39,340 67,436
Treasury stock at cost, 4,931,872 and
4,931,872 shares, respectively (76,845) (76,845)
------------- -------------
Total Stockholders' Equity 280,181 307,720
------------- -------------
Total Liabilities and Stockholders' Equity $ 522,276 $ 464,053
============= =============

ASSISTED LIVING CONCEPTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Nine Months Ended
September 30,
----------------------
2012 2011
---------- ----------
OPERATING ACTIVITIES:
Net (loss)/income $ (23,502) $ 17,050
Adjustments to reconcile net (loss)/income to net
cash (used in)/provided by operating activities:
Depreciation and amortization 18,088 17,260
Impairment of fixed assets 3,500 --
Impairment of operating lease intangible 8,650 --
Amortization of purchase accounting adjustments
for leases (309) (544)
Provision for bad debts 641 1,019
Provision for self-insured liabilities 765 765
(Gain)/loss on disposal of fixed assets (14) (95)
Unrealized gain on investments (31) (910)
Equity-based compensation expense 542 973
Change in fair value of derivatives and
amortization -- 94
Deferred income taxes (5,600) 2,344
Changes in assets and liabilities:
Accounts receivable (711) (2,126)
Supplies, prepaid expenses and other receivables (51) (1,109)
Deposits in escrow 462 (483)
Accounts payable 182 (265)
Accrued liabilities 3,720 749
Deferred revenue (2,603) 4,223
Payments of self-insured liabilities (845) (287)
Income taxes payable / receivable (11,604) 856
Changes in other non-current assets 317 2,049
Other long-term liabilities (1,315) (273)
---------- ----------
Cash (used in)/provided by operating activities (9,718) 41,290
INVESTING ACTIVITIES:
Payment for securities (163) (156)
Proceeds on sales of securities 84 3,274
Payments for acquisition of 12 previously leased
residences (62,870) --
Proceeds on sales of fixed assets 1,427 146
Payments for new construction projects (1,959) (523)
Payments for purchases of property and equipment (13,823) (10,702)
---------- ----------
Cash used in investing activities (77,304) (7,961)
FINANCING ACTIVITIES:
Payments of financing costs (362) (1,903)
Purchase of treasury stock -- (798)
Repayment of borrowings on revolving credit
facility (79,100) (63,000)
Proceeds on borrowings from revolving credit
facility 173,000 81,000
Repayment of GE credit facility -- (50,000)
Repayment of mortgage debt (1,921) (5,061)
Issuance of Class A common stock for stock options -- 262
Payment of dividends (4,594) (4,594)
---------- ----------
Cash provided by/(used in) financing activities 87,023 (44,094)
---------- ----------
Increase/(decrease) in cash and cash equivalents 1 (10,765)
---------- ----------
Cash and cash equivalents, beginning of year 2,652 13,364
---------- ----------
Cash and cash equivalents, end of period $ 2,653 $ 2,599
========== ==========

Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ 5,662 $ 5,915
Income tax payments, net of refunds 1,860 6,287

ASSISTED LIVING CONCEPTS, INC.
Financial and Operating Statistics

Continuing residences* Three Months Ended
---------------------------------------
September 30, June 30, September 30,
2012 2012 2011
Average Occupied Units by Payer
Source 5,251 5,365 5,628
============= ========= =============
Average Revenue per Occupied Unit
Day $ 115.05 $ 116.47 $ 113.09
============= ========= =============
Occupancy Percentage* 59.5% 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 three months ended September 30, 2012, June 30, 2012 and
September 30, 2011 we actively operated 8,822, 8,873 and 9,015 units,
respectively.

Same residence basis** Three Months Ended
--------------------------------------
September 30, June 30, September 30,
2012 2012 2011
------------- --------- -------------
Average Occupied Units by Payer
Source 5,251 5,362 5,578
============= ========= =============
Average Revenue per Occupied Unit
Day $ 115.05 $ 115.38 $ 113.09
============= ========= =============
Occupancy Percentage* 59.5% 60.8% 63.2%
============= ========= =============

** Excludes quarterly impact of 0, 78 and 194 units temporarily
closed for renovation in the September 30, 2012, June 30, 2012 and
September 30, 2011 three month periods, respectively.

Continuing residences* Nine Months Ended
----------------------------
September 30, September 30,
2012 2011
Average Occupied Units 5,365 5,602
============= =============

Average Revenue per Occupied Unit Day $ 116.60 $ 114.81
============= =============

Occupancy Percentage* 60.4% 62.3%
============= =============

* 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 nine months ended September 30, 2012 and September 30,
2011 we actively operated 8,883 and 8,991 units, respectively.

Same residence basis** Nine Months Ended
----------------------------
September 30, September 30,
2012 2011
------------- -------------
Average Occupied Units 5,313 5,536
============= =============

Average Revenue per Occupied Unit Day $ 116.43 $ 115.01
============= =============

Occupancy Percentage* 60.9% 63.4%
============= =============

** Excludes impact of 20 completed expansion units, 72 re-opened and
134 units temporarily closed for renovation in the 2012 year to date
period and 217 units temporarily closed for renovation in the 2011 year
to date period.

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 Nine Months Ended
------------------------------- --------------------
September September June 30, September September
30, 2012 30, 2011 2012 30, 2012 30, 2011
--------- --------- --------- --------- ---------
(in thousands)
Net income (4,042) $ 5,763 $ (25,109) $ (23,502) $ 17,050
Add provision for
income taxes (2,641) 3,388 (16,014) (15,344) 8,851
--------- --------- --------- --------- ---------

Income before income
taxes (6,683) $ 9,151 $ (41,123) $ (38,846) $ 25,901
Add:
Depreciation and
amortization 6,526 5,807 5,793 18,088 17,260
Interest expense,
net 2,318 2,024 1,747 5,652 6,206
Non-cash equity
based compensation 182 299 7 542 973
(Gain)/loss on
disposal of
fixed assets (433) (54) (112) (517) (95)
Write-down of cost
associated with
expansion projects
not completed - - 504 504 -
Gain on sale of
equity investments - - - (910)
Recovery of
purchase
accounting
associated with
early termination
of debt - (168) - (168)
Write-off of
operating lease
intangible, lease
termination fee
and settlement (25) - 45,805 45,780 -
Change in value of
derivative and
amortization - (164) - 94
Write-off of
deferred financing
fees - - 279
Asset impairment 3,500 3,500
Transaction costs 1,046 1,046
--------- --------- --------- --------- ---------

Adjusted EBITDA 5,385 16,895 13,667 35,749 49,540
Add: Lease expense 2,834 4,430 3,306 10,683 13,225
--------- --------- --------- --------- ---------
Adjusted EBITDAR 8,219 $ 21,325 $ 16,973 46,432 $ 62,765
========= ========= ========= ========= =========

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 Nine Months Ended
------------------------------- --------------------
September September June 30, September September
30, 2012 30, 2011 2012 30, 2012 30, 2011
--------- --------- --------- --------- ---------
(dollars in thousands)
Revenues 55,576 $ 58,553 $ 56,863 171,417 $ 175,589
========= ========= ========= ========= =========

Adjusted EBITDA 5,385 $ 16,895 $ 13,667 35,749 $ 49,540
========= ========= ========= ========= =========

Adjusted EBITDAR 8,219 $ 21,325 $ 16,973 46,432 $ 62,765
========= ========= ========= ========= =========

Adjusted EBITDA as
percent of total
revenues 9.7% 28.9% 24.0% 20.9% 28.2%
========= ========= ========= ========= =========

Adjusted EBITDAR as
percent of total
revenues 14.8% 36.4% 29.8% 27.1% 35.7%
========= ========= ========= ========= =========

ASSISTED LIVING CONCEPTS, INC.
Reconciliation of Non-GAAP Measures
(unaudited)

Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2012 30, 2011 30, 2012 30, 2011

(dollars in thousands except per share
data)
Net income $ (4,042) $ 5,763 $ (23,502) $ 17,050
Add one time charges:
Expenses incurred in
connection with internal
investigation, public
relations and Ventas
litigation 1,685 3,275
Write-off of deferred
financing costs - 279
Change in value of
derivative net of
amortization - 94
Asset Impairment 3,500 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 (25) - 46,826 -
Less one time credits: 906
Rent
Settlement relating to tax
allocation agreement - 750
Change in value of
derivative net of
amortization 164 -
Gain on sale of equity
investments - 910
Recovery of purchase
accounting associated with
early termination of debt 168 168
Net tax (expense) / benefit
from charges and credits 2,038 (123) 21,014 (262)
Pro forma net income
excluding one-time charges
and credits $ (920) $ 5,554 $ 8,683 $ 15,857

Weighted average common shares:
Basic 22,970 22,962 22,970 22,951
Diluted 22,970 23,236 22,970 23,261

Per share data:
Basic earnings per common
share
Net income $ (0.18) $ 0.25 $ (1.02) $ 0.74
Less: gain/ (loss) from
one time charges and
credits (0.14) .01 (1.40) 0.05
Pro forma net income
excluding one-time
charges and credits $ (0.04) $ 0.24 $ 0.38 $ 0.69

Diluted earnings per
common share*
Net income (0.18) $ 0.25 $ (1.02) $ 0.73
Less: gain/ (loss) from
one time charges and
credits (0.14) .01 (1.40) 0.05
Pro forma net income
excluding one-time
charges and credits (0.04) $ 0.24 $ 0.38 $ 0.68

* 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: jbuono@alcco.com
Visit ALC's Website @ www.alcco.com

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