NASHVILLE, Tenn.--(BUSINESS WIRE)--Aug. 6, 2003--American
Retirement Corporation (NYSE: ACR), a leading national provider of
senior living housing and care, today reported second quarter 2003
results. Highlights of the quarter were:

-- Revenue increased by $8.8 million - an 11% increase - over the
prior year period.

-- The Company produced its second consecutive quarter of
positive operating income with a $14.7 million improvement
over the second quarter of 2002.

-- On a same community basis (communities that have been held for
five or more quarters), revenue increased by 10%, community
operating contribution increased by 29%, and occupancy by 3%.

-- Occupancy in the Free-standing assisted living portfolio
increased from 74% to 81% over the last year, while the
Company's portfolio of large retirement communities
("Retirement Centers") remained at 93%.

-- The Company's free-standing assisted living communities
("Free-standing AL's") increased community revenue by $3.6
million and community operating contribution (resident and
healthcare revenues minus community operating expenses) by
$2.6 million for the second quarter of 2003 over the same
period of 2002 - driven by a 9% increase in occupancy and a
6.5% increase in revenue per unit.

-- The Company's five consolidated entry fee communities
benefited from 55 apartment sales, resulting in $8.4 million
of gross entry fee receipts, or $5.2 million net of refunds
paid to prior residents.

-- Management services achieved $1.3 million in operating
contribution versus $.6 million for the prior year comparable
period.

"The Company continues to make significant progress even in the
face of difficult market conditions. We improved our bottom line by
$1.5 million from last quarter. We have an unabated record of growing
the Company's revenue and are showing the results of filling the
capacity that was added over the last three years. This incremental
revenue continues to produce higher contribution margins. We also saw
the free-standing assisted living business becoming more stabilized in
many of our markets, which allows for reduced use of price incentives
and higher rates," Chairman, President and CEO Bill Sheriff said.

OPERATING RESULTS

The Company operates principally in three business segments: (1)
large retirement centers (Retirement Centers), (2) Free-standing
assisted living residences (Free-standing AL's), and (3) Management
services. The Company currently operates 26 Retirement Centers (with
an aggregate capacity of 7,844 units), which provide a continuum of
care services including independent living, assisted living and
skilled nursing care. The Company currently operates 31 Free-standing
AL's with an aggregate capacity of 2,838 units. Free-standing AL's are
comprised of stand-alone assisted living communities that are not
located on a Retirement Center campus, most of which also provide some
specialized care such as Alzheimer's and memory enhancement programs.
Free-standing AL's are much smaller than Retirement Centers. The
Management services segment includes fees from management agreements
for communities owned by third parties, and reimbursed expense
revenues together with associated expenses. Of the eight management
agreements, the Company managed six Retirement Centers and two
Free-standing AL's for third parties.

Revenue

The Company's total revenue increased for the second quarter,
growing by $8.8 million to $90.6 million, an increase of 11% when
compared to second quarter 2002. The most significant drivers for the
quarter's revenue increase were increased occupancy in the Company's
Free-standing AL's, increased billed revenue per unit, increased
revenues from ancillary services such as therapy and increased revenue
from management services. Following is a summary of the Company's
total revenue by operating segment for the three months ended June 30,
2003 and 2002 (in thousands):


Three Months Ended
---------------------------------
June 30, June 30, $ %
2003 2002 Change Change
-------- -------- ------- ------
Revenues:
Retirement Centers $68,652 $64,140 $4,512 7.0%
Free-standing AL's 19,378 15,812 3,566 22.6%
Management Services 2,594 1,856 738 39.8%
-------- -------- ------- ------
Total $90,624 $81,808 $8,816 10.8%
======== ======== ======= ======


Segment Operating Contribution

The Company evaluates the performance of its business segments,
primarily, based upon their operating contributions, which the Company
defines as revenue for the segment less operating expenses associated
with that segment. By achieving a higher occupancy, increasing rates,
improving the performance of the managed communities and increasing
ancillary revenue, the Company's three business segments achieved an
aggregate of $5.7 million improvement over the same prior period as
shown below:


Operating Contribution by Segment Three Months Ended
--------------------------------
June 30, June 30, $ %
2003 2002 Change Change
-------- -------- ------- ------
Community Operating Contribution:
Retirement Centers $23,106 $20,650 $2,456 12%
Free-standing AL's 3,785 1,186 2,599 219%
Management Services Operating
Contribution 1,314 620 694 112%


SEGMENT RESULTS

Retirement Centers

The 26 Retirement Centers produced a 7% increase in community
revenue for the second quarter of 2003 when compared to the second
quarter of 2002. The increase in revenue was the result of increased
occupancy, rate increases, and increased ancillary services provided
by the Company.
Continuing its quarterly trend, the Retirement Centers achieved a
$1.4 million revenue increase, or 2% better than the first quarter of
2003. Over the last three years, revenue from this segment has grown
by a compounded 14% per year. The operating contribution of the
Retirement Centers increased by $.8 million from the first quarter of
2003, a 4% increase. Over the last three years, Retirement Center
operating contribution also grew by a compounded 14% per year.
In spite of a difficult selling environment during the second
quarter, the Retirement Centers maintained their historically high
occupancy levels. At June 30, 2003, occupancy at the Retirement
Centers was at 93%, with 95% occupancy in independent living, 93% in
assisted living and 91% in skilled nursing.
Five of the Company's consolidated Retirement Centers charge entry
fees to new independent living residents. The five entry fee
communities contain over 1,700 independent living apartments with
entrance fees that have a current aggregate market value (based on
current sales prices) of approximately $269 million (for sold and
unsold units), or an average of $158,000 per unit. With the success of
our marketing program, the current unsold apartments available for
sale at the end of June dropped to an aggregate potential entrance fee
sale value of $21.6 million from $24.2 million a year ago.
In the second quarter, the Company sold 55 entry-fee apartments in
its consolidated Retirement Centers, producing $8.4 million of
proceeds or $5.2 million after refunds to previous residents. The
second quarter was a challenging period for entrance fee sales given
the many uncertainties associated with the general economic conditions
in the United States. Nonetheless, the Company achieved one of its
highest entry-fee sales quarters.

Free-standing AL's

The Company currently operates 31 Free-standing AL's, including
three communities which have been segregated as being held for sale
and as discontinued operations. Occupancy for the Free-standing AL
portfolio reached 81% at the end of the second quarter, up from 74% a
year ago. Currently, 19 of the 31 Free-standing AL's are at greater
than 80% occupancy and 9 are at greater than 90% occupancy.
The following table presents quarterly Free-standing AL operating
results for the three months ended June 30, 2003 and 2002 (in
thousands):


Three Months Ended
------------------------------------
June 30, June 30, $ %
-------- -------- ----------- ------
Free-standing AL's: 2003 2002 Change Change
-------- -------- ----------- ------
Revenues $19,378 $15,812 $3,566 22.6%
Community Operating
Contribution $3,785 $1,186 $2,599 219.1%
% Occupancy 82% 75% 7pts 9%

Note: Excludes three Free-standing AL's held for sale and as
discontinued operations

Compared to the prior quarter, revenue from the Free-standing AL's
(excluding the three communities held for sale) achieved a $.6 million
revenue increase, a 3% rise. Over the last three years, the community
revenue for this segment has grown from $1.7 million to $19.4 million.
This improvement was driven primarily by occupancy and higher revenue
per unit. Average revenue per unit increased from $2,946 per month to
$3,030 per month during the quarter as rate increases were implemented
and fewer discounts were given.
The operating contribution of the Free-standing AL portfolio
increased by $.8 million from the first quarter of 2003, a 26%
increase. Over the last three years, the consolidated operating
contribution for this segment has grown from a loss of $.4 million to
a positive operating contribution of $3.8 million.

Management Services

The Company manages six additional Retirement Centers, with an
aggregate capacity of 2,098 units, under various forms of management
agreements, which are included in the management services segment. The
Company also manages two unconsolidated joint-venture Free-standing
AL's that are included in this segment. The management service revenue
from these eight communities was $1.3 million in the second quarter of
2003. This represents an increase of $854,000 from the first quarter
of 2003 resulting mainly from improvements in operating results at the
managed communities.
In addition to the five owned and leased entry-fee communities
described above, the Company receives the cash flow benefit, including
the net resale from entry-fee sales, through its management agreement,
of a sixth entry-fee Retirement Center. That community has 362
apartments with 14 apartments currently available. For the second
quarter, this community sold 18 apartments for a net cash flow of
approximately $1.4 million.

SAME COMMUNITY RESULTS

Another measure of the Company's operating performance is its Same
Community Results - which represent the results of communities that
have been held for five or more quarters. The Company's Same Community
Results showed a revenue increase of 10%, a community operating
contribution increase of 29%, and an increase in occupancy from 88% to
91%, during the second quarter of 2003 versus the second quarter of
2002. While average monthly revenue per unit increased by 6%, average
expense per unit was unchanged. The Company's Same Community Results,
which exclude the effects of expansions and acquisitions within the
past year, included 53 communities for both periods.

OPERATING INCOME (LOSS) and NET LOSS

The Company produced its second consecutive quarter of positive
operating income and the largest since the first quarter of 2000 when
many of the Free-standing AL's were first opened.

The components of operating income are as follows:


Operating Income (Loss): Three Months Ended
-----------------------------------
June 30, June 30, $ %
2003 2002 Change Change
-------- ---------- -------- ------
Community Operating Contribution
-Retirement Centers $23,106 $20,650 $2,456 12%
Community Operating Contribution
- Free-standing AL's 3,785 1,186 2,599 219%
Management Services Operating
Contribution 1,314 620 694 112%
G&A (6,837) (6,554) 283 4%
Lease expense(1) (10,207) (17,865) (7,658) (43%)
Depreciation and amortization(2) (6,866) (8,419) (1,553) (18%)
-------- ---------- -------- ------
Operating (loss) income $4,295 $( 10,382) $14,677 141%
======== ========== ======== ======

(1) Lease expense for the three months ended June 30, 2002 includes
$7.0 million of additional lease expense related to terminated
synthetic leases prior to the sale lease-back transactions as part
of the Company's refinancing activities.

(2) Depreciation and amortization expense for the three months ended
June 30, 2002 includes $2.3 million of additional amortization
expense related to terminated synthetic leases prior to sale
lease-back transactions as part of the Company's refinancing
activities.

While the Company produced increased operating income during the
second quarter, the Company experienced a net loss for the quarter of
$9.5 million or $.53 per diluted share, compared to a loss of $19.4
million or $1.12 per diluted share for the same prior year period.

CASH FLOW

Net cash and cash equivalents provided by continuing operations
were $1.1 million for the second quarter of 2003. As shown below, the
free cash flow of the Company was a negative $5.4 million. Excluding
debt principal payments, the Company's cash flow was a positive
$710,000 in the second quarter versus a negative $2.6 million in the
first quarter. Free cash flow is defined as net cash and cash
equivalents provided or used by continuing operations, adjusted by
working capital changes, certain noncash accruals, capital
expenditures, and payments of principal and minority interest
distributions.
"The Company achieved a positive cash flow in the quarter before
the repayment of $6.2 million of debt for the first time in several
years. As we have stated, improving cash flow and reducing our debt
level is one of our main focus areas currently. In fact, the $6.2
million of debt repayment included $3.4 million of pay-downs beyond
standard principal amortization," said Bryan Richardson, Chief
Financial Officer.

FURTHER INFORMATION

Conference Call Information

American Retirement Corporation will hold a conference call with
Bill Sheriff, Chairman, President and Chief Executive Officer, and
Bryan Richardson, Chief Financial Officer, to discuss the Company's
second quarter financial results. The call will be held on Thursday,
August 7, 2003 at 11:00 a.m. ET and parties may participate by either
calling 877-252-6354 or through the Company's website at
www.arclp.com. Click on the broadcast icon to listen to the earnings
call - Windows Media Player(TM) is required to listen to this web
cast. In addition, the call will be archived on the Company's website
(click on the broadcast icon). Any material information disclosed on
the conference call that has not been previously disclosed publicly
will also be available at the Investor Relations portion of the
Company's web site.

Additional Filings

The Company's results are described in greater detail in the
Company's Form 10-Q, which will be filed with the Securities and
Exchange Commission on or about August 8th, 2003. The Company also
will file on or about August 6th a Form 8-K with the Securities and
Exchange Commission, which includes supplemental information relating
to the second quarter 2003 results. These filings will be available
through the Investor Relations section of the Company's website -
www.arclp.com.

COMPANY PROFILE

American Retirement Corporation is a national senior living and
health care services provider offering a broad range of care and
services to seniors, including independent living, assisted living,
skilled nursing and Alzheimer's care. Established in 1978, the Company
believes that it is a leader in the operations and management of
senior living communities, including independent living communities,
continuing care retirement communities, free-standing assisted living
communities, and the development of specialized care programs for
residents with Alzheimer's and other forms of dementia. The Company's
operating philosophy was inspired by the vision of its founders, Dr.
Thomas F. Frist, Sr. and Jack C. Massey, to enhance the lives of
seniors by providing the highest quality of care and services in
well-operated communities designed to improve and protect the quality
of life, independence, personal freedom, privacy, spirit, and dignity
of its residents. The Company currently operates 65 senior living
communities in 14 states, with an aggregate unit capacity of
approximately 12,900 units and resident capacity of approximately
14,500. The Company owns 21 communities, leases 36 communities, and
manages eight communities pursuant to management agreements.
Approximately 90 percent of the Company's revenues come from private
pay sources.

SAFE HARBOR STATEMENT

Statements contained in this press release and statements made by
or on behalf of American Retirement Corporation relating hereto may be
deemed to constitute forward-looking information made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Those forward-looking statements include all statements that
are not historical statements of fact and those regarding the intent,
belief or expectations of the Company or its management, including,
without limitation, all statements regarding the Company's future
operating and financial expectations and its strategy to improve
financial and operating results. These forward-looking statements may
be affected by certain risks and uncertainties, including without
limitation the following: (i) the risk associated with the Company's
financial condition and significant leverage, including the fact that
its cash flow does not currently cover its obligations, (ii) the
possibility of future defaults under the Company's debt or lease
agreements, (iii) the Company's ability to sell its entry-fee units
and to increase occupancy at the Company's communities (especially its
Free-standing AL's), (iv) the Company's ability to improve the
Company's results of operations, increase cash flow and reduce
expenses, (v) the Company's ability to sell the assets that it
currently has for sale, (vi) the risks associated with the adverse
market conditions of the senior housing industry and the United States
economy in general, (vii) the risk that the Company is unable to
obtain liability insurance in the future or that the costs thereof
(including deductibles) will be prohibitive, (viii) the Company's
ability to obtain new financing or extend and/or modify existing
debt,(ix) the risk that the Company's equity deficit may adversely
effect the Company's business and/or prospects and (x) the risk
factors described in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002 under the caption "Risk Factors" and in
the Company's other filings with the Securities and Exchange
Commission. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the Company's actual
results could differ materially from such forward-looking statements.
The Company does not undertake any obligation to publicly release any
revisions to any forward-looking statements contained herein to
reflect events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.


AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

Three months ended Increase
June 30, (Decrease)
------------------ --------------
2003 2002 $ %
-------- --------- ------- ------
Revenues:
Resident and health care $88,030 $79,952 $8,078 10.1%
Management services 1,314 620 694 111.9%
Reimbursed expenses 1,280 1,236 44 3.6%
-------- --------- ------- ------
Total revenues 90,624 81,808 8,816 10.8%

Operating expenses:
Community operating expenses 61,139 58,116 3,023 5.2%
General and administrative 6,837 6,554 283 4.3%
Lease expense 10,207 17,865 (7,658) -42.9%
Depreciation and amortization 6,336 5,381 955 17.7%
Amortization of leasehold
acquisition costs 530 3,038 (2,508) -82.6%
Reimbursed expenses 1,280 1,236 44 3.6%
-------- --------- ------- ------
Total operating expenses 86,329 92,190 (5,861) -6.4%
-------- --------- ------- ------

Operating income (loss) 4,295 (10,382) 14,677 141.4%

Other income (expense):
Interest expense (13,977) (9,767) 4,210 -43.1%
Interest income 868 1,268 (400) -31.5%
Gain (loss) on sale of assets 79 (27) (106) 392.6%
Other 281 233 48 20.6%
-------- --------- ------- ------
Other expense, net (12,749) (8,293) 4,456 -53.7%
-------- --------- ------- ------

Loss from continuing
operations before income
taxes, minority interest (8,454) (18,675) 10,221 54.7%

Income tax expense 64 122 (58) -47.5%
-------- --------- ------- ------

Loss from continuing
operations before minority
interest (8,518) (18,797) 10,279 54.7%

Minority interest in earnings of
consolidated subsidiaries, net of
tax (629) - (629) -
-------- --------- ------- ------

Loss from continuing
operations (9,147) (18,797) 9,650 51.3%

Discontinued operations, net of tax (337) (621) 284 -45.7%
-------- --------- ------- ------

Net loss $(9,484) $(19,418) $9,934 51.2%
======== ========= ======= ======

Diluted loss per share $(0.53) $(1.12)
======== =========

Weighted average shares used for
diluted loss per share data 18,051 17,277
======== =========

----------------------------------------------------------------------

June 30, Dec. 31,
2003 2002
-------- ---------
Selected Balance Sheet Data:
Cash and cash equivalents $12,369 $18,244
Working capital 6,407 15,725
Land, buildings and
equipment, net 562,143 578,804
Total assets 804,054 839,998
Long-term debt, including
current portion 524,752 540,651
Refundable portion of
entrance fees 61,547 60,066
Shareholders' equity (4,471) 12,907



AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

Six months ended Increase
June 30, (Decrease)
------------------- ---------------
2003 2002 $ %
--------- --------- -------- ------
Revenues:
Resident and health care $174,082 $154,482 $19,600 12.7%
Management services 1,774 685 1,089 159.0%
Reimbursed expenses 2,972 2,687 285 10.6%
--------- --------- -------- ------
Total revenues 178,828 157,854 20,974 13.3%

Operating expenses:
Community operating expenses 121,876 111,191 10,685 9.6%
General and administrative 12,818 12,474 344 2.8%
Lease expense 20,290 50,463 (30,173) -59.8%
Depreciation and amortization 12,490 10,365 2,125 20.5%
Amortization of leasehold
acquisition costs 1,048 10,124 (9,076) -89.6%
Reimbursed expenses 2,972 2,687 285 10.6%
--------- --------- -------- ------
Total operating expenses 171,494 197,304 (25,810) -13.1%
--------- --------- -------- ------

Operating income (loss) 7,334 (39,450) 46,784 118.6%

Other income (expense):
Interest expense (26,776) (20,165) 6,611 -32.8%
Interest income 1,564 2,928 (1,364) -46.6%
Gain (loss) on sale of assets 21 (53) (74) 139.6%
Other 455 830 (375) -45.2%
--------- --------- -------- ------
Other expense, net (24,736) (16,460) 8,276 -50.3%
--------- --------- -------- ------

Loss from continuing operations
before income taxes,
minority interest (17,402) (55,910) 38,508 68.9%

Income tax expense 194 219 (25) -11.4%
--------- --------- -------- ------

Loss from continuing
operations before
minority interest (17,596) (56,129) 38,533 68.7%

Minority interest in earnings of
consolidated subsidiaries, net of
tax (1,241) - (1,241) -
--------- --------- -------- ------

Loss from continuing
operations (18,837) (56,129) 37,292 66.4%

Discontinued operations, net of tax (1,617) (1,360) (257) 18.9%
--------- --------- -------- ------

Net loss $(20,454) $(57,489) $37,035 64.4%
========= ========= ======== ======

Diluted loss per share $(1.16) $(3.33)
========= =========

Weighted average shares used for
diluted loss per share data 17,697 17,277
========= =========



AMERICAN RETIREMENT CORPORATION AND SUBSIDIARIES
FREE CASH FLOW
(UNAUDITED)
(in thousands)
Incremental
Six Three Three
Months Months Months
Ended Ended Ended
June 30, March 31, June 30,
2003 2003 2003

Net cash and cash equivalents (used)
/provided by continuing operations $(2,203) $(3,346) $1,143

Adjustments for Free Cash Flow:
Changes in assets and liabilities,
exclusive of acquisitions
and sale leaseback transactions (798) 586 (1,384)
Accrued but unpaid HCPI interest
due at loan maturity 6,378 3,120 3,258
Adjustments for lease and
derivative accruals 1,230 476 754
Additions to land, building and
equipment (4,614) (2,200) (2,414)
Distributions to minority interest
holders (613) (312) (301)
Principal reductions in master
trust liability (703) (357) (346)
Accrual of contingent earnouts (594) (594) -
--------- --------- ------------

Free cash flow before principal
payments (1,917) (2,627) 710

Principal payments on long-term
debt (9,020) (2,866) (6,154)
--------- --------- ------------

Free cash flow $(10,937) $(5,493) $(5,444)
========= ========= ============

Given the Company's high leverage and reported operating losses,
the Company believes that Free Cash Flow is a useful liquidity
measurement for investors in analyzing the Company's progress.