##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _______ to _______
 Commission file number: 001-13498
 Assisted Living Concepts, Inc.
 (Exact name of registrant as specified in its charter)
 Nevada
    
    93-1148702(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)W140 N8981 Lilly RoadMenomonee Falls, Wisconsin
    
    53051(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (262) 257-8888
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ASSISTED LIVING CONCEPTS, INC.
 INDEX
 PageNumberPart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets  as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations  for the Three and Nine Month Periods Ended September 30, 2009 and 2008 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows  for the Nine Month Periods Ended September 30, 2009 and 2008 (unaudited)
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    45Part II. Other InformationItem 1A. Risk Factors
    
    
    46Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    48Signature
    
    
    S-1Exhibit Index
    
    EI-1Exhibit 31.1Exhibit 31.2Exhibit 32.1
  Explanatory Note:
   2




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 
 Part I. FINANCIAL INFORMATION
 
 Item 1.
    
    FINANCIAL STATEMENTS
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 September 30,
    
    
    December 31,2009
    
    
    2008(Reclassified)(unaudited)
    
    
    (see Note 11)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    5,895
    
    
    $
    19,905Investments
    
    
    3,265
    
    
    
    3,139Accounts receivable, less allowances of $623 and $689, respectively
    
    
    2,378
    
    
    
    2,679Prepaid expenses, supplies and other receivables
    
    
    3,926
    
    
    
    3,357Deposits in escrow
    
    
    2,172
    
    
    
    2,313Income tax receivable
    
    
    
    
    
    
    3,147Deferred income taxes
    
    
    4,179
    
    
    
    4,614Current assets of discontinued operations
    
    
    259
    
    
    
    153Total current assets
    
    
    22,074
    
    
    
    39,307Property and equipment, net
    
    
    415,874
    
    
    
    413,149Goodwill
    
    
    
    
    
    
    16,315Intangible assets, net
    
    
    12,220
    
    
    
    13,443Restricted cash
    
    
    3,263
    
    
    
    3,783Other assets
    
    
    2,086
    
    
    
    2,027Non-current assets of discontinued operations
    
    
    404
    
    
    
    10,597Total Assets
    
    $
    455,921
    
    
    $
    498,621LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    7,181
    
    
    $
    13,529Accrued liabilities
    
    
    19,167
    
    
    
    17,947Deferred revenue
    
    
    7,506
    
    
    
    6,687Income taxes payable
    
    
    145
    
    
    
    Current maturities of long-term debt
    
    
    1,794
    
    
    
    10,866Current portion of self-insured liabilities
    
    
    500
    
    
    
    300Current liabilities of discontinued operations
    
    
    134
    
    
    
    8,574Total current liabilities
    
    
    36,427
    
    
    
    57,903Accrual for self-insured liabilities
    
    
    1,281
    
    
    
    1,176Long-term debt
    
    
    125,382
    
    
    
    136,890Deferred income taxes
    
    
    11,348
    
    
    
    11,811Other long-term liabilities
    
    
    11,832
    
    
    
    11,088Non-current liabilities of discontinued operations
    
    
    
    
    
    
    14Commitments and contingenciesTotal Liabilities
    
    
    186,270
    
    
    
    218,882Preferred 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, 80,000,000 authorized at September 30, 2009 and December 31, 2008; 12,395,716 and
12,361,711 shares issued and 10,100,818 and 10,443,313 shares outstanding, respectively
    
    
    124
    
    
    
    124Class B Common Stock, $0.01 par value, 15,000,000 authorized at September 30, 2009 and December 31, 2008; 1,530,336 and
1,562,101 issued and outstanding, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    314,516
    
    
    
    314,202Accumulated other comprehensive loss
    
    
    (2,146
    )
    
    
    (1,989
    )Retained earnings
    
    
    29,159
    
    
    
    33,641Treasury stock at cost, 2,294,898 and 1,918,398 shares, respectively
    
    
    (72,018
    )
    
    
    (66,255
    )Total Stockholders Equity
    
    
    269,651
    
    
    
    279,739Total Liabilities and Stockholders Equity
    
    $
    455,921
    
    
    $
    498,621
   3




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)  In thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Reclassified)
    
    
    
    
    
    
    (Reclassified)(see Note 11)
    
    
    
    
    
    
    (see Note 11)Revenues
    
    $
    57,236
    
    
    $
    57,740
    
    
    $
    170,986
    
    
    $
    174,475Expenses:Residence operations (exclusive of depreciation and
amortization and residence lease expense shown below)
    
    
    35,059
    
    
    
    38,019
    
    
    
    107,493
    
    
    
    112,871General and administrative
    
    
    3,146
    
    
    
    3,458
    
    
    
    9,921
    
    
    
    9,538Residence lease expense
    
    
    5,053
    
    
    
    4,990
    
    
    
    14,976
    
    
    
    14,901Depreciation and amortization
    
    
    5,440
    
    
    
    4,595
    
    
    
    15,589
    
    
    
    13,655Loss due to property impairment
    
    
    148
    
    
    
    
    
    
    
    148
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    16,315
    
    
    
    Total operating expenses
    
    
    48,846
    
    
    
    51,062
    
    
    
    164,442
    
    
    
    150,965Income from operations
    
    
    8,390
    
    
    
    6,678
    
    
    
    6,544
    
    
    
    23,510Other expense:Interest income
    
    
    7
    
    
    
    14
    
    
    
    26
    
    
    
    473Interest expense
    
    
    (1,914
    )
    
    
    (1,741
    )
    
    
    (5,451
    )
    
    
    (5,412
    )Income from continuing operations before income taxes
    
    
    6,483
    
    
    
    4,951
    
    
    
    1,119
    
    
    
    18,571Income tax expense
    
    
    (2,295
    )
    
    
    (1,880
    )
    
    
    (4,621
    )
    
    
    (7,054
    )Net income (loss) from continuing operations
    
    
    4,188
    
    
    
    3,071
    
    
    
    (3,502
    )
    
    
    11,517Loss from discontinued operations, net of tax
    
    
    (802
    )
    
    
    (105
    )
    
    
    (980
    )
    
    
    (224
    )Net income (loss)
    
    $
    3,386
    
    
    $
    2,966
    
    
    $
    (4,482
    )
    
    $
    11,293Weighted average common shares:Basic
    
    
    11,655
    
    
    
    12,271
    
    
    
    11,806
    
    
    
    12,593Diluted
    
    
    11,786
    
    
    
    12,401
    
    
    
    11,806
    
    
    
    12,723Per share data:Basic earnings per common shareEarnings (loss) from continuing operations
    
    $
    0.36
    
    
    $
    0.25
    
    
    $
    (0.30
    )
    
    $
    0.91Loss from discontinued operations
    
    
    (0.07
    )
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.02
    )Net income (loss)
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    (0.38
    )
    
    $
    0.89Diluted earnings per common shareEarnings (loss) from continuing operations
    
    $
    0.36
    
    
    $
    0.25
    
    
    $
    (0.30
    )
    
    $
    0.91Loss from discontinued operations
    
    
    (0.07
    )
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.02
    )Net income (loss)
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    (0.38
    )
    
    $
    0.89
   4




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine Months EndedSeptember 30,2009
    
    
    2008OPERATING ACTIVITIES:Net (loss) income
    
    $
    (4,482
    )
    
    $
    11,293Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    15,889
    
    
    
    13,935Goodwill impairment
    
    
    16,315
    
    
    
    Loss due to property and equipment impairment
    
    
    1,379
    
    
    
    Amortization of purchase accounting adjustments for leases and debt
    
    
    (296
    )
    
    
    (549
    )Provision for bad debts
    
    
    (66
    )
    
    
    27Provision for self-insured liabilities
    
    
    717
    
    
    
    673Loss on sale or disposal of fixed assets
    
    
    54
    
    
    
    160Equity-based compensation expense
    
    
    320
    
    
    
    104Deferred income taxes
    
    
    (28
    )
    
    
    3,328Changes in assets and liabilities:Accounts receivable
    
    
    367
    
    
    
    (145
    )Supplies, prepaid expenses and other current assets
    
    
    (569
    )
    
    
    835Current assets  discontinued operations
    
    
    (106
    )
    
    
    Deposits in escrow
    
    
    141
    
    
    
    (208
    )Accounts payable
    
    
    (738
    )
    
    
    (413
    )Accrued liabilities
    
    
    1,220
    
    
    
    854Current liabilities  discontinued operations
    
    
    87
    
    
    
    Deferred revenue
    
    
    819
    
    
    
    1,850Payments of self-insured liabilities
    
    
    (547
    )
    
    
    (185
    )Income taxes payable / receivable
    
    
    3,312
    
    
    
    96Changes in other non-current assets
    
    
    461
    
    
    
    7,906Non-current assets  discontinued operations
    
    
    534
    
    
    
    Other long-term liabilities
    
    
    1,049
    
    
    
    799Long-term liabilities  discontinued operations
    
    
    (14
    )
    
    
    Cash provided by operating activities
    
    
    35,818
    
    
    
    40,360INVESTING ACTIVITIES:Payment for executive retirement plan securities
    
    
    (156
    )
    
    
    (64
    )Payment for acquisitions
    
    
    
    
    
    
    (14,532
    )Cash designated for acquisition
    
    
    
    
    
    
    14,864Payments for new construction projects
    
    
    (12,888
    )
    
    
    (12,102
    )Payments for purchases of property and equipment
    
    
    (12,346
    )
    
    
    (12,283
    )Cash used in investing activities
    
    
    (25,390
    )
    
    
    (24,117
    )FINANCING ACTIVITIES:Purchase of treasury stock
    
    
    (5,763
    )
    
    
    (21,276
    )Proceeds on borrowings on revolving credit facility
    
    
    
    
    
    
    7,000Repayment of revolving credit facility
    
    
    (24,000
    )
    
    
    Proceeds from issuance of new mortgage debt
    
    
    14,000
    
    
    
    9,026Repayment of mortgage debt
    
    
    (8,675
    )
    
    
    (18,712
    )Cash used by financing activities
    
    
    (24,438
    )
    
    
    (23,962
    )Decrease in cash and cash equivalents
    
    
    (14,010
    )
    
    
    (7,719
    )Cash and cash equivalents, beginning of year
    
    
    19,905
    
    
    
    14,066Cash and cash equivalents, end of period
    
    $
    5,895
    
    
    $
    6,347Supplemental schedule of cash flow information:Cash paid during the period for:Interest
    
    $
    5,771
    
    
    $
    6,016Income tax payments, net of refunds
    
    
    715
    
    
    
    3,511
   5




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
       2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Principles of Presentation and Consolidation
   6




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (b) Accounts Receivable
    (c) Goodwill
       7




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Balance at December 31, 2008
    
    $
    16,315Additions
    
    
    Adjustments
    
    
    (16,315
    )Balance at September 30, 2009
    
    $
    
 (d) Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net income (loss)
    
    $
    3,386
    
    
    $
    2,966
    
    
    $
    (4,482
    )
    
    $
    11,293Unrealized gains (losses) on
investments, net of tax expense
(benefit) of $1, $(294), $(8)
and $(644), respectively
    
    
    122
    
    
    
    (1,216
    )
    
    
    (10
    )
    
    
    (597
    )Unrealized losses on
derivatives, net of tax benefit
of $122, $0, $91 and $0,
respectively
    
    
    (199
    )
    
    
    
    
    
    
    (147
    )
    
    
    Total comprehensive income (loss)
    
    $
    3,309
    
    
    $
    1,750
    
    
    $
    (4,639
    )
    
    $
    10,696
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Unrealized losses on investments
    
    $
    (1,344
    )
    
    $
    (1,334
    )Net unrealized losses on derivatives
    
    
    (802
    )
    
    
    (655
    )Accumulated other comprehensive loss
    
    $
    (2,146
    )
    
    $
    (1,989
    )
 (e)
    
    Income Taxes   8




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (f) Recently Adopted Accounting Standards
      9




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     (g) Recently Issued Accounting Pronouncements
     10




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (h) Reclassifications
  3. LONG-TERM EQUITY-BASED COMPENSATION PROGRAM
      11




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted#
    
    
    Average
    
    
    #
    
    
    AverageOptions
    
    
    Exercise
    
    
    Options
    
    
    Exercise/ SARs
    
    
    Price
    
    
    / SARs
    
    
    PriceOutstanding at beginning of period
    
    
    129,500
    
    
    $
    30.10
    
    
    
    64,000
    
    
    $
    59.00Granted
    
    
    127,000
    
    
    $
    15.65
    
    
    
    129,500
    
    
    $
    30.10Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (97,500
    )
    
    $
    29.45
    
    
    
    (64,000
    )
    
    $
    59.00Outstanding at end of period
    
    
    159,000
    
    
    $
    18.96
    
    
    
    129,500
    
    
    $
    30.10Options Exercisable at September 30
    
    
    10,667
    
    
    $
    32.10
    
    
    
    
    
    
    $
    Weighted average fair value of options
    
    $
    9.89
    
    
    
    
    
    
    $
    13.21Aggregate intrinsic value of options
    
    $
    643,910
    
    
    
    
    
    
    $
    Weighted average contractual term
    
    4.5 years
    
    
    
    
    
    
    4.9 years
  12




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Apr 30,
    
    
    Feb 22,
    
    
    May 5,
    
    
    March 29,2009
    
    
    2009
    
    
    2008
    
    
    2008Expected life from grant date (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Risk-free interest rate
    
    
    2.02
    %
    
    
    2.06
    %
    
    
    3.15
    %
    
    
    2.50
    %Volatility
    
    
    68.9
    %
    
    
    66.9
    %
    
    
    45.8
    %
    
    
    46.9
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average fair value (per share)
    
    $
    9.62
    
    
    $
    8.55
    
    
    $
    14.15
    
    
    $
    12.90
  4. EARNINGS PER SHARE
   13




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per share data)Basic earnings per share calculationNumerator:Income (loss) from continuing operations
    
    $
    4,188
    
    
    $
    3,071
    
    
    $
    (3,502
    )
    
    $
    11,517Loss from discontinued operations, net of tax
    
    
    (802
    )
    
    
    (105
    )
    
    
    (980
    )
    
    
    (224
    )Net income (loss) to common stockholders
    
    $
    3,386
    
    
    $
    2,966
    
    
    $
    (4,482
    )
    
    $
    11,293Denominator:Weighted average of common shares outstanding
    
    
    11,655
    
    
    
    12,271
    
    
    
    11,806
    
    
    
    12,593Income (loss) from continuing operations
    
    $
    0.36
    
    
    $
    0.25
    
    
    $
    (0.30
    )
    
    $
    0.91Loss from discontinued operations, net of tax
    
    
    (0.07
    )
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.02
    )Basic earnings (loss) per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    (0.38
    )
    
    $
    0.89Diluted earnings per share calculationNumerator:Income (loss) from continuing operations
    
    $
    4,188
    
    
    $
    3,071
    
    
    $
    (3,502
    )
    
    $
    11,517Loss from discontinued operations, net of tax
    
    
    (802
    )
    
    
    (105
    )
    
    
    (980
    )
    
    
    (224
    )Net income (loss) to common stockholders
    
    $
    3,386
    
    
    $
    2,966
    
    
    $
    (4,482
    )
    
    $
    11,293Denominator:Weighted average of common shares outstanding
    
    
    11,655
    
    
    
    12,271
    
    
    
    11,806
    
    
    
    12,593Assumed conversion of Class B shares
    
    
    115
    
    
    
    130
    
    
    
    
    
    
    
    130Dilutive effect of stock options
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Diluted weighted average shares outstanding
    
    
    11,786
    
    
    
    12,401
    
    
    
    11,806
    
    
    
    12,723Income (loss) from continuing operations
    
    $
    0.36
    
    
    $
    0.25
    
    
    $
    (0.30
    )
    
    $
    0.91Loss from discontinued operations, net of tax
    
    
    (0.07
    )
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.02
    )Diluted earnings (loss) per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    (0.38
    )
    
    $
    0.89
 5. SHARE REPURCHASE
   14




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  2009Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars in thousands, except per share amounts)Ave.
    
    
    
    
    
    
    
    
    
    
    Ave.Cost Per
    
    
    
    
    
    
    
    
    
    
    Cost PerShares
    
    
    Cost
    
    
    Share
    
    
    Shares
    
    
    Cost
    
    
    Share$80 Million Plan
    
    
    25,300
    
    
    $
    337
    
    
    $
    13.33
    
    
    
    349,651
    
    
    $
    5,172
    
    
    $
    14.79$15 Million Plan
    
    
    26,849
    
    
    
    564
    
    
    
    21.00
    
    
    
    26,849
    
    
    
    564
    
    
    
    21.00Total
    
    
    52,149
    
    
    $
    901
    
    
    $
    17.28
    
    
    
    376,500
    
    
    $
    5,736
    
    
    $
    15.23
  6. DEBT
  Interest
    
    
    September 30,
    
    
    December 31,Rate
    
    
    2009
    
    
    2008(In thousands)Mortgage note, bearing interest at 6.24%, due 2014 (1)
    
    
    6.35
    %
    
    $
    33,737
    
    
    $
    34,352Mortgage note, bearing interest at 6.5%, due 2014
    
    
    6.70
    %
    
    
    13,917
    
    
    
    Mortgage note, bearing interest at 8.65%, due 2009
    
    
    
    
    
    
    
    
    
    
    7,140Capital lease obligations, interest rates ranging from 2.84% to 13.54%, maturing through 2009
    
    
    6.47
    %
    
    
    
    
    
    
    2,356Mortgage note, bearing interest at 7.07%, due 2018
    
    
    7.18
    %
    
    
    8,879
    
    
    
    8,966Oregon Trust Deed Notes, interest rates ranging from 0% to 9.0%, maturing from 2021 through 2026 (1)
    
    
    7.15
    %
    
    
    8,512
    
    
    
    8,726HUD Insured Mortgages, interest rates ranging from 5.66% to 5.85%, due 2032
    
    
    5.79
    %
    
    
    4,144
    
    
    
    4,201HUD Insured Mortgage, bearing interest at 7.55%, due 2036 (1)
    
    
    7.12
    %
    
    
    2,987
    
    
    
    3,015$120 million credit facility bearing interest at floating rates, due November 2011
    
    
    (2
    )
    
    
    55,000
    
    
    
    79,000Total debt
    
    
    
    
    
    
    127,176
    
    
    
    147,756Less current maturities
    
    
    
    
    
    
    (1,794
    )
    
    
    (10,866
    )Total long-term debt
    
    
    
    
    
    $
    125,382
    
    
    $
    136,890
 
 (1)
    
    Interest rate is effective interest rate for the nine months ended September 30, 2009.
The effective interest rate is determined as the interest expense for the year divided by
the recorded fair value of the debt instrument as of January 1, 2005.(2)
    
    Borrowings under this facility bear interest at a floating rate at ALCs option equal
to LIBOR plus a margin of 150 basis points or prime. At September 30, 2009, prime was
3.25% and LIBOR was 0.25%. 6.24% Mortgage Note due 2014
   15




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 6.50% Mortgage Note due 2014
    Mortgage Note due 2009
   Capital Lease Obligations
     16




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Mortgage Note due 2018
  Oregon Trust Deed Notes
   HUD Insured Mortgages
  $120 Million Credit Facility
     17




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Unfavorable Market Value of Debt Adjustment
  Letters of credit
  Expansion program
  7. PROPERTY AND EQUIPMENT
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Land and land improvements
    
    $
    27,052
    
    
    $
    26,722Buildings and improvements
    
    
    437,912
    
    
    
    401,986Furniture and equipment
    
    
    29,915
    
    
    
    26,428Leasehold improvements
    
    
    7,379
    
    
    
    5,336Construction in progress
    
    
    2,879
    
    
    
    27,934505,137
    
    
    
    488,406Less accumulated depreciation and amortization
    
    
    (89,264
    )
    
    
    (75,257
    )$
    415,873
    
    
    $
    413,149
  18




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
  SignificantTotal carrying
    
    
    Quoted prices
    
    
    other
    
    
    Significantvalue at
    
    
    in active
    
    
    observable
    
    
    unobservableSeptember  30,
    
    
    markets
    
    
    inputs
    
    
    inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsInvestment securities 
available-for-sale
    
    $
    3,265
    
    
    $
    3,265
    
    
    $
    
    
    
    $
    LiabilitiesDerivative financial instruments
    
    
    (1,294
    )
    
    
    
    
    
    
    (1,294
    )
    
    
    
         19




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Fixed
    
    
    Notional
    
    
    Effective
    
    
    Expiration
    
    
    EstimatedInterest Rate
    
    
    Amount
    
    
    Date
    
    
    Date
    
    
    Fair ValueInterest rate swap  November 2008
    
    
    2.83
    %
    
    $
    30,000
    
    
    
    11/13/2008
    
    
    
    11/14/2011
    
    
    $
    (1,022
    )Interest rate swap  March 2009
    
    
    1.98
    %
    
    $
    20,000
    
    
    
    3/11/2009
    
    
    
    11/14/2011
    
    
    $
    (272
    )
 9. DERIVATIVE FINANCIAL INSTRUMENTS
     Fair Values of Derivative Instruments
Liability Derivatives
(In thousands)
 September 30, 2009
    
    
    December 31, 2008Derivatives Designated as Hedging
    
    Balance Sheet
    
    
    
    
    
    Balance SheetInstruments
    
    Location
    
    Fair Value
    
    
    Location
    
    Fair ValueInterest rate contracts
    
    Other long-term liabilities
    
    $
    1,294
    
    
    Other long-term liabilities
    
    $
    1,056
 The Effect of Derivative Instruments on the Statement of Operations
(In thousands)
 Amount of Gain Recognized in OCI on Derivatives(Effective Portion)Derivatives in Cash
    
    Three Months Ended September 30,
    
    
    Nine months ended September 30,Flow Hedging Relationships
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Interest rate contracts
    
    $
    (321
    )
    
    $
    
    
    
    $
    (238
    )
    
    $
    
  20




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 10. COMMITMENTS AND CONTINGENCIES
     21




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ASSISTED LIVING CONCEPTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 11. DISCONTINUED OPERATIONS
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    743
    
    
    $
    627
    
    
    $
    2,008
    
    
    $
    1,993Expenses:Residence operations (exclusive of depreciation
and amortization and residence lease expense
shown below)
    
    
    516
    
    
    
    558
    
    
    
    1,600
    
    
    
    1,651Residence lease income
    
    
    (5
    )
    
    
    (3
    )
    
    
    (11
    )
    
    
    (7
    )Depreciation and amortization
    
    
    105
    
    
    
    96
    
    
    
    300
    
    
    
    280Loss on impairment*
    
    
    1,231
    
    
    
    
    
    
    
    1,231
    
    
    
    Total operating expenses
    
    
    1,847
    
    
    
    651
    
    
    
    3,120
    
    
    
    1,924(Loss) income from operations
    
    
    (1,104
    )
    
    
    (24
    )
    
    
    (1,112
    )
    
    
    69Other expense:Interest income
    
    
    1
    
    
    
    3
    
    
    
    3
    
    
    
    14Interest expense
    
    
    (137
    )
    
    
    (145
    )
    
    
    (416
    )
    
    
    (439
    )Loss from discontinued operations before income taxes
    
    
    (1,240
    )
    
    
    (166
    )
    
    
    (1,525
    )
    
    
    (356
    )Income tax benefit
    
    
    438
    
    
    
    61
    
    
    
    545
    
    
    
    132Net loss from discontinued operations
    
    $
    (802
    )
    
    $
    (105
    )
    
    $
    (980
    )
    
    $
    (224
    )Weighted average common shares:Basic
    
    
    11,655
    
    
    
    12,271
    
    
    
    11,806
    
    
    
    12,593Diluted
    
    
    11,786
    
    
    
    12,401
    
    
    
    11,806
    
    
    
    12,723Revenue per share data:Basic discontinued revenue per share
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.17
    
    
    $
    0.16Diluted discontinued revenue per share
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.17
    
    
    $
    0.16
 *
    
    Includes $0.5 million impairment loss on write off of capital lease assets and obligations and
$0.7 million impairment of furniture and equipment remaining with the lessor at the termination of
the lease on December 31, 2009.  22




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Managements Discussion and Analysis of Financial Condition and Results of Operations contains
forward-looking statements. Forward-looking statements are subject to risks, uncertainties and
assumptions which could cause actual results to differ materially from those projected, including
those risks, uncertainties and assumptions described or referred to in Item 1A  Risk Factors in
Part I of ALCs Annual Report on Form 10-K for the year ended December 31, 2008, and in Part II,
Item 5  Other Information  Forward-Looking Statements and Cautionary Factors in this report.
 The following discussion should be read in conjunction with our condensed consolidated financial
statements and the related notes to the condensed consolidated financial statements in Part I, Item
1 of this report.
 Executive Overview
  
    
    residents have insufficient investment income or are unable to obtain necessary
funds from the sale of their homes or other investments;
 
    
    family members are more willing and able to provide care at home; and
 
    
    independent living facilities are accepting traditional assisted living residents.
      Unit expansions
   23




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Temporary closings
  Discontinued Operations
  Business Strategies
  
    
    increasing the overall size of our portfolio by building additional capacity and
making acquisitions;
 
    
    increasing our occupancy rate and the percentage of revenue derived from private pay
sources;
 
    
    applying operating efficiencies achievable from owning a large number of assisted
living residences; and
 
    
    increasing the attractiveness and operating results of our portfolio by refurbishing
and repositioning residences or eliminating residences that do not meet our internal
goals.
 Increasing the overall size of our portfolio by building additional capacity and making
acquisitions
      24




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
  Increasing our occupancy rate and the percentage of revenue derived from private pay sources
     Applying efficiencies achievable from operating a large number of assisted living residences
  Increasing the attractiveness and operating results of our portfolio by refurbishing and
repositioning residences or eliminating residences that do not meet our internal goals
   25




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
       
    
    Business Overview.This section provides a general financial description of our
business, including the sources and composition of our revenues and operating expenses.
In addition, this section outlines the key performance indicators that we use to monitor
and manage our business and to anticipate future trends.
 
    
    Consolidated Results of Operations.This section provides an analysis of our results
of operations for the quarter and nine months ended September 30, 2009 compared to the
quarter and nine months ended September 30, 2008.
 
    
    Liquidity and Capital Resources.This section provides a discussion of our liquidity
and capital resources as of September 30, 2009, and our expected future cash needs.
 
    
    Critical Accounting Policies.This section discusses accounting policies which we
consider to be critical to obtain an understanding of our consolidated financial
statements because their application on the part of management requires significant
judgment and reliance on estimations of matters that are inherently uncertain.
   26




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Business Overview
 Revenues
    Residence Operations Expenses
  Three Months Ended
    
    
    Nine Months Ended2009
    
    
    2008
    
    
    2009
    
    
    2008Wage and benefit costs
    
    
    62
    %
    
    
    60
    %
    
    
    61
    %
    
    
    61
    %Property related costs
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    21Other operating costs
    
    
    16
    
    
    
    18
    
    
    
    17
    
    
    
    18Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Key Performance Indicators
  Census
   27




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Average Daily Census
  Occupancy Percentage or Occupancy Rate
  Private Pay Mix
  Average Revenue Rate
  Adjusted EBITDA and Adjusted EBITDAR
    Review of Key Performance Indicators
   28




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 ADC
 All Continuing Residences
  Average Daily Census
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Private pay
    
    
    5,381
    
    
    
    5,454
    
    
    
    5,373
    
    
    
    5,490Medicaid
    
    
    371
    
    
    
    661
    
    
    
    446
    
    
    
    748Total ADC
    
    
    5,752
    
    
    
    6,115
    
    
    
    5,819
    
    
    
    6,238Private pay occupancy percentage
    
    
    93.5
    %
    
    
    89.2
    %
    
    
    92.3
    %
    
    
    88.0
    %Private pay revenue percentage
    
    
    95.7
    %
    
    
    92.2
    %
    
    
    94.8
    %
    
    
    91.5
    %
  Same Residence Basis
  Average Daily Census
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Private pay
    
    
    5,323
    
    
    
    5,430
    
    
    
    5,333
    
    
    
    5,456Medicaid
    
    
    371
    
    
    
    645
    
    
    
    443
    
    
    
    723Total ADC
    
    
    5,694
    
    
    
    6,075
    
    
    
    5,776
    
    
    
    6,179Private pay occupancy percentage
    
    
    93.5
    %
    
    
    89.4
    %
    
    
    92.3
    %
    
    
    88.3
    %Private pay revenue percentage
    
    
    95.6
    %
    
    
    92.3
    %
    
    
    94.8
    %
    
    
    91.7
    %
   29




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Occupancy Percentage
   All Continuing Residences
  Occupancy Percentage
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Mature
    
    
    64.7
    %
    
    
    68.7
    %
    
    
    65.5
    %
    
    
    70.3
    %Developmental
    
    
    19.6
    %
    
    
    48.7
    %
    
    
    18.0
    %
    
    
    44.3
    %Total residences
    
    
    63.2
    %
    
    
    68.3
    %
    
    
    64.4
    %
    
    
    69.6
    %
     30




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Same Residence Basis
  Occupancy Percentage
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Mature
    
    
    64.7
    %
    
    
    69.5
    %
    
    
    65.6
    %
    
    
    70.9
    %Developmental
    
    
    0.0
    %
    
    
    48.7
    %
    
    
    0.0
    %
    
    
    44.3
    %Total residences
    
    
    64.7
    %
    
    
    69.1
    %
    
    
    65.6
    %
    
    
    70.2
    %
   Average Revenue Rate
 All Continuing Residences
  Average Daily Revenue Rate
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Average daily revenue rate
    
    $
    108.15
    
    
    $
    102.64
    
    
    $
    107.64
    
    
    $
    102.08
   31




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Number of Residences Under Continuing Operations
  2009
    
    
    2008Owned*
    
    
    153
    
    
    
    153Under capital lease
    
    
    
    
    
    
    5Under operating leases
    
    
    59
    
    
    
    58Total under operation
    
    
    212
    
    
    
    216Percent of residences:Owned
    
    
    72.2
    %
    
    
    70.8
    %Under capital leases
    
    
    
    
    
    
    2.3Under operating leases
    
    
    27.8
    
    
    
    26.9100.0
    %
    
    
    100.0
    %
 *
    
    Includes four residences temporarily closed for refurbishment in 2009 and one
residence temporarily closed for refurbishment in 2008. ADJUSTED EBITDA and ADJUSTED EBITDAR
  Three Months Ended 
September 30,
    
    
    Nine Months Ended 
September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net income (loss)
    
    $
    3,386
    
    
    $
    2,966
    
    
    $
    (4,482
    )
    
    $
    11,293Loss from discontinued operations, net of tax
    
    
    802
    
    
    
    105
    
    
    
    980
    
    
    
    224Provision for income taxes
    
    
    2,295
    
    
    
    1,880
    
    
    
    4,621
    
    
    
    7,054Income from continuing operations before income taxes
    
    
    6,483
    
    
    
    4,951
    
    
    
    1,119
    
    
    
    18,571Add:Depreciation and amortization
    
    
    5,440
    
    
    
    4,595
    
    
    
    15,589
    
    
    
    13,655Interest income
    
    
    (7
    )
    
    
    (14
    )
    
    
    (26
    )
    
    
    (473
    )Interest expense
    
    
    1,914
    
    
    
    1,741
    
    
    
    5,451
    
    
    
    5,412Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    16,315
    
    
    
    Loss on impairment
    
    
    148
    
    
    
    
    
    
    
    148
    
    
    
    Loss on sale of disposal of fixed assets
    
    
    54
    
    
    
    160
    
    
    
    54
    
    
    
    160Non-cash equity based compensation
    
    
    132
    
    
    
    60
    
    
    
    320
    
    
    
    104Adjusted EBITDA
    
    
    14,164
    
    
    
    11,493
    
    
    
    38,970
    
    
    
    37,429Add: Residence lease expense
    
    
    5,053
    
    
    
    4,990
    
    
    
    14,976
    
    
    
    14,901Adjusted EBITDAR
    
    $
    19,217
    
    
    $
    16,483
    
    
    $
    53,946
    
    
    $
    52,330
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008($ In thousands)Revenues
    
    $
    57,236
    
    
    $
    57,740
    
    
    $
    170,986
    
    
    $
    174,475Adjusted EBITDA
    
    $
    14,164
    
    
    $
    11,493
    
    
    $
    38,970
    
    
    $
    37,429Adjusted EBITDAR
    
    $
    19,217
    
    
    $
    16,483
    
    
    $
    53,946
    
    
    $
    52,330Adjusted EBITDA as percent of total revenue
    
    
    24.7
    %
    
    
    19.9
    %
    
    
    22.8
    %
    
    
    21.5
    %Adjusted EBITDAR as percent of total revenue
    
    
    33.6
    %
    
    
    28.5
    %
    
    
    31.5
    %
    
    
    30.0
    %
  32




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
    Consolidated Results of Operations
 Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008
  2009
    
    
    2008Revenues
    
    
    100.0
    %
    
    
    100.0
    %Residence operations (exclusive of depreciation and
amortization and residence lease
expense shown below)
    
    
    61.3
    
    
    
    65.8General and administrative
    
    
    5.5
    
    
    
    6.0Residence lease expense
    
    
    8.8
    
    
    
    8.6Loss on impairment  Fixed assets
    
    
    0.3
    
    
    
    Depreciation and amortization
    
    
    9.5
    
    
    
    8.0Total operating expenses
    
    
    85.4
    
    
    
    88.4Income from operations
    
    
    14.6
    
    
    
    11.6Interest expense
    
    
    (3.3
    )
    
    
    (3.0
    )Income from continuing operations before income taxes
    
    
    11.3
    
    
    
    8.6Income tax expense
    
    
    (4.0
    )
    
    
    (3.3
    )Loss from discontinued operations, net of tax
    
    
    (1.4
    )
    
    
    (0.2
    )Net income
    
    
    5.9
    %
    
    
    5.1
    %
  33




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ASSISTED LIVING CONCEPTS, INC.
 Revenues
  Residence Operations (exclusive of depreciation and amortization and residence lease expense shown
below)
  General and Administrative
  Residence Lease Expense
  Depreciation and Amortization
  Loss due to impairment of fixed assets
  Income from Operations
  Interest Income
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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 Interest Expense
  Income from Continuing Operations before Income Taxes
  Income Tax Expense
  Net Income from Continuing Operations
  Loss from Discontinued Operations, net of tax
  Net Income
   35




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ASSISTED LIVING CONCEPTS, INC.
 Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008
  2009
    
    
    2008Revenues
    
    
    100.0
    %
    
    
    100.0
    %Residence operations (exclusive of depreciation and
amortization and residence lease
expense shown below)
    
    
    62.9
    
    
    
    64.7General and administrative
    
    
    5.8
    
    
    
    5.5Residence lease expense
    
    
    8.8
    
    
    
    8.5Depreciation and amortization
    
    
    9.1
    
    
    
    7.8Goodwill impairment
    
    
    9.5
    
    
    
    Total operating expenses
    
    
    96.1
    
    
    
    86.5Income from operations
    
    
    3.9
    
    
    
    13.5Interest income
    
    
    
    
    
    
    0.2Interest expense
    
    
    (3.2
    )
    
    
    (3.1
    )Income from continuing operations before income taxes
    
    
    0.7
    
    
    
    10.6Income tax expense
    
    
    (2.7
    )
    
    
    (4.0
    )Loss from discontinued operations, net of tax
    
    
    (0.6
    )
    
    
    (0.1
    )Net (loss) income
    
    
    (2.6
    )%
    
    
    6.5
    %
 Revenues
  Residence Operations (exclusive of depreciation and amortization and residence lease expense shown
below)
  General and Administrative
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ASSISTED LIVING CONCEPTS, INC.
 Residence Lease Expense
  Depreciation and Amortization
  Loss due to Impairment of Fixed Assets
  Goodwill Impairment
 Goodwill
and Other Intangible Assets
 Income from Operations
  Interest Income
  Interest Expense
  Income from Continuing Operations before Income Taxes
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ASSISTED LIVING CONCEPTS, INC.
 Income Tax Expense
  Net Income (Loss) From Continuing Operations
  Loss from Discontinued Operations, net of tax
  Net (Loss) Income
  Liquidity and Capital Resources
 Sources and Uses of Cash
  2009
    
    
    2008(In thousands)Cash provided by operating activities
    
    $
    35,818
    
    
    $
    40,360Cash used in investing activities
    
    
    (25,390
    )
    
    
    (24,117
    )Cash used in financing activities
    
    
    (24,438
    )
    
    
    (23,962
    )(Decrease) increase in cash and cash equivalents
    
    $
    (14,010
    )
    
    $
    (7,719
    )
     38




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
      Discontinued Operations
  Nine Months EndedSeptember 30,2009Net loss
    
    $
    (980
    )Adjustments to net lossDepreciation
    
    
    300Loss on impairment
    
    
    1,231Changes in assets and liabilities
    
    
    501Cash flows from operating activities
    
    
    1,052Cash provided by investing activities
    
    
    (64
    )Cash provided by financing activities
    
    
    (335
    )Net change in cash
    
    $
    653
   39




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
 $120 Million Revolving Credit Facility
      Debt Instruments
   40




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
    Principal Repayment Schedule
  Letters of Credit
  Restricted Cash
  Off Balance Sheet Arrangements
  Cash Management
  Future Liquidity and Capital Resources
   41




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ASSISTED LIVING CONCEPTS, INC.
   Expansion Program
  Share Repurchase
  Accrual for Self-Insured Liabilities
    42




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ASSISTED LIVING CONCEPTS, INC.
  Unfunded Deferred Compensation Plan
  $120 Million Revolving Credit Facility
  Contractual Obligations
      43




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ASSISTED LIVING CONCEPTS, INC.
  Critical Accounting Policies
 
 
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Qualitative Disclosures
    Fair ValueContract Date
    
    Notional Amount
    
    
    Fixed Rate
    
    
    Maturity

    
    at September 30, 2009November 13, 2008
    
    $
    30 million
    
    
    
    2.83
    %
    
    November 2011
    
    $
    (1,021,974
    )March 10, 2009
    
    $
    20 million
    
    
    
    1.98
    %
    
    November 2011
    
    $
    (272,193
    )
   44




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##### Table of Contents



ASSISTED LIVING CONCEPTS, INC.
    Quantitative Disclosures
  
 Item 4.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 Internal Control Over Financial Reporting
  45




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##### Table of Contents



Part II. OTHER INFORMATION
 
 Item 1A.
    
    RISK FACTORS.
  
 Item 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  (d)Maximum Number(b)
    
    
    (c)
    
    
    (or ApproximateAverage
    
    
    Total Number of
    
    
    Dollar Value) of(a)
    
    
    Price Paid
    
    
    Shares Purchased
    
    
    Shares that MayTotal Number
    
    
    Per Share
    
    
    as Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    (excluding
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Purchased (1)
    
    
    fees)
    
    
    or Programs
    
    
    Programs (1)July 1, 2009 to July 31, 2009
    
    
    25,300
    
    
    $
    13.33
    
    
    
    25,300
    
    
    $
    8,833,558
    (2)August 1, 2009 to August 31, 2009
    
    
    900
    
    
    $
    19.96
    
    
    
    900
    
    
    $
    14,982,036September 1, 2009 to September 30, 2009
    
    
    25,949
    
    
    $
    21.04
    
    
    
    25,949
    
    
    $
    14,436,129Total
    
    
    52,149
    
    
    $
    17.28
    
    
    
    52,149
    
    
    $
    14,436,129
 (1)
    
    Consists of purchases in July 2009 made through the share purchase program initiated
in December 2006 under which ALC was authorized to repurchase up to $80 million of its
outstanding shares of Class A Common Stock through August 6, 2009 (exclusive of fees), and
purchases in August and September 2009 made under the new repurchase program approved by
the Board of Directors on August 9, 2009, which authorizes the repurchase of up to $15
million of shares of Class A Common Stock (exclusive of fees) over the twelve-month period
ending August 9, 2010.(2)
    
    This authorization expired, unused, when the first program discussed in note (1)
above expired on August 6, 2009. 
 Item 5.
    
    OTHER INFORMATION.
 Forward-Looking Statements and Cautionary Factors
   46




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##### Table of Contents




    
    unfavorable economic conditions, such as recessions, high unemployment levels, and
declining housing and financial markets, could adversely affect the assisted living
industry in general and cause us to lose revenue;
 
    
    our strategy to reduce our reliance on Medicaid customers could cause overall occupancy
and revenues to decline;
 
    
    events which adversely affect the ability of seniors to afford our monthly resident
fees including sustained economic downturns, difficult housing markets and losses on
investments designated for retirement could cause our occupancy rates, revenues and
results of operations to decline;
 
    
    national, regional and local competition could cause us to lose market share and
revenue;
 
    
    our ability to cultivate new or maintain existing relationships with physicians and
others in the communities in which we operate who provide referrals for new residents
could affect occupancy rates;
 
    
    changes in the numbers of our residents who are private pay residents may significantly
affect our profitability;
 
    
    reductions in Medicaid rates may decrease our revenues;
 
    
    termination of our resident agreements and vacancies in the living spaces we lease
could adversely affect our revenues, earnings and occupancy levels;
 
    
    increases in labor costs, as a result of a shortage of qualified personnel, regulatory
requirements or otherwise, could substantially increase our operating costs;
 
    
    we may not be able to increase residents fees to cover energy, food and other costs
which could reduce operating margins;
 
    
    markets where overbuilding exists and future overbuilding in other markets where we
operate our residences may adversely affect our operations;
 
    
    personal injury claims, if successfully made against us, could materially and adversely
affect our financial condition and results of operations;
 
    
    failure to comply with laws and government regulation could lead to fines, penalties or
operating restrictions;
 
    
    compliance with regulations may require us to make unanticipated expenditures which
could increase our costs and adversely affect our earnings and financial condition;
 
    
    new regulations could increase our costs or negatively impact our business;
 
    
    audits and investigations under our contracts with federal and state government
agencies could have adverse findings that may negatively impact our business;
 
    
    failure to comply with environmental laws, including laws regarding the management of
infectious medical waste, could materially and adversely affect our financial condition
and results of operations;
 
    
    failure to comply with laws governing the transmission and privacy of health
information could materially and adversely affect our financial condition and results of
operations;
 
    
    efforts to regulate the construction or expansion of healthcare providers could impair
our ability to expand through construction of new residences or additions to existing
residences;
 
    
    we may make acquisitions that could subject us to a number of operating risks; and
 
    
    costs associated with capital improvements could adversely affect our profitability.
  47




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##### Table of Contents




    
    loan and lease covenants could restrict our operations and any default could result in
the acceleration of indebtedness or cross-defaults, any of which would negatively impact
our liquidity and our ability to grow our business and revenues;
 
    
    if we do not comply with the requirements in leases or debt agreements we would be subject to lost revenues and financial penalties;
 
    
    restrictions in our indebtedness and long-term leases could adversely affect our
liquidity, our ability to operate our business, and our ability to execute our growth
strategy; and
 
    
    increases in interest rates could significantly increase the costs of our unhedged debt
and lease obligations, which could adversely affect our liquidity and earnings.
  
 Item 6.
    
    EXHIBITS.
   48




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SIGNATURE
  ASSISTED LIVING CONCEPTS, INC.By:
    /s/ John BuonoJohn BuonoSenior Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)   S-1




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ASSISTED LIVING CONCEPTS, INC.
 
 EXHIBIT INDEX TO SEPTEMBER 30, 2009 QUARTERLY REPORT ON FORM 10-Q
 ExhibitNumber
    
    Description31.1
    
    
    Certification of Chief
Executive Officer pursuant
to Exchange Act Rule
13a-14(a) or Rule 15d-
14(a) as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief
Financial Officer pursuant
to Exchange Act Rule
13a-14(a) or Rule 15d-
14(a) as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Chief Executive
Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  EI-1