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Emeritus Announces Operating Results For First Quarter 2012

For a more detailed understanding of Emeritus, please refer to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2012, to be filed with the SEC, or visit the Company’s web site at www.emeritus.com to obtain copies.

About Emeritus Corporation

Emeritus Corporation is the nation’s largest assisted living and memory care provider with capacity to serve approximately 49,700 residents. More than 28,000 employees serve residents at 478 communities throughout 44 states coast to coast. Emeritus offers the spectrum of senior residential choices, care options and life enrichment programs that fulfill individual needs and promote purposeful living throughout the aging process. Its experts provide insights on senior living, care, wellness, brain health, caregiving and family topics at www.emeritus.com, which also offers details on the organization’s services. Emeritus’ common stock is traded on the New York Stock Exchange under the symbol ESC.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: A number of the matters and subject areas discussed in this report that are not historical or current facts deal with potential future circumstances, operations, and prospects. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from our actual future experience as a result of such factors as: the effects of competition and economic conditions on the occupancy levels in our communities; our ability under current market conditions to maintain and increase our resident charges in accordance with our rate enhancement programs without adversely affecting occupancy levels; increases in interest costs as a result of refinancings; our ability to control community operation expenses without adversely affecting the level of occupancy and the level of resident charges; our ability to generate cash flow sufficient to service our debt and other fixed payment requirements; our ability to find sources of financing and capital on satisfactory terms to meet our cash requirements to the extent that they are not met by operations, and uncertainties related to professional liability and workers’ compensation claims. We have attempted to identify, in context, certain of the factors that we currently believe may cause actual future experience and results to differ from our current expectations regarding the relevant matter or subject area. These and other risks and uncertainties are detailed in our reports filed with the Securities and Exchange Commission, including “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC. The Company undertakes no obligation to update the information provided herein.

 

EMERITUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share data)

 
 
ASSETS
     
March 31, December 31,
2012 2011
Current Assets:
Cash and cash equivalents $ 50,005 $ 43,670
Short-term investments 4,336 3,585
Trade accounts receivable, net of allowance of $2,956 and $2,294 25,306 26,195
Other receivables 19,111 16,117
Tax, insurance, and maintenance escrows 20,351 20,501
Prepaid insurance expense 35,605 36,020
Deferred tax asset 24,043 19,934
Other prepaid expenses and current assets 7,666 8,140
Property held for sale   3,377      
Total current assets 189,800 174,162
Investments in unconsolidated joint ventures 15,772 15,428
Property and equipment, net of accumulated depreciation of $437,106 and $407,952 2,329,419 2,355,425
Restricted deposits 17,564 16,427
Goodwill 118,725 118,725
Other intangible assets, net of accumulated amortization of $53,343 and $48,722 96,252 100,873
Other assets, net   28,189     29,288  
Total assets $ 2,795,721   $ 2,810,328  
 
 
LIABILITIES, SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTEREST
 
Current Liabilities:
Current portion of long-term debt $ 75,668 $ 74,175
Current portion of capital lease and financing obligations 18,773 17,004
Trade accounts payable 8,177 7,959
Accrued employee compensation and benefits 70,647 70,936
Accrued interest 8,639 9,061
Accrued real estate taxes 10,112 11,791
Accrued professional and general liability 27,718 24,525
Other accrued expenses 19,997 19,477
Deferred revenue 15,939 16,348
Unearned rental income   24,382     22,965  
Total current liabilities 280,052 274,241
Long-term debt obligations, less current portion 1,519,248 1,528,710
Capital lease and financing obligations, less current portion 617,404 619,088
Deferred gain on sale of communities 4,520 4,789
Deferred straight-line rent 63,672 61,481
Other long-term liabilities   44,209     39,283  
Total liabilities   2,529,105     2,527,592  
Commitments and contingencies
Shareholders' Equity and Noncontrolling Interest:
Preferred stock, $0.0001 par value. Authorized 20,000,000 shares, none issued
Common stock, $0.0001 par value. Authorized 100,000,000 shares, issued and
outstanding 45,046,503 and 44,989,861 shares 4 4
Additional paid-in capital 825,620 822,345
Accumulated deficit   (562,630 )   (543,249 )
Total Emeritus Corporation shareholders’ equity 262,994 279,100
Noncontrolling interest-related party   3,622     3,636  
Total shareholders' equity   266,616     282,736  
Total liabilities, shareholders' equity, and noncontrolling interest $ 2,795,721   $ 2,810,328  
 

   

EMERITUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

 
Three Months Ended
March 31,
2012     2011
Revenues:
Community revenue $ 317,923 $ 294,720
Management fees 5,056 5,461
Total operating revenues 322,979 300,181
 
Expenses:
Community operations (exclusive of depreciation and amortization
and community leases shown separately below) 213,473 199,031
General and administrative 23,423 23,213
Transaction costs 306 6,749
Impairments of long-lived assets 2,135
Depreciation and amortization 32,570 28,087
Community leases 31,171 30,996
Total operating expenses 303,078 288,076
Operating income 19,901 12,105
 
Other income (expense):
Interest income 104 111
Interest expense (39,045) (36,264)
Change in fair value of derivative financial instruments (211)
Net equity losses for unconsolidated joint ventures (392) (374)
Other, net 520 2,025
Net other expense (39,024) (34,502)
 
Loss from operations before income taxes (19,123) (22,397)
Provision for income taxes (272) (281)
Net loss (19,395) (22,678)
Net loss attributable to the noncontrolling interests 14 117
Net loss attributable to Emeritus Corporation
common shareholders $ (19,381) $ (22,561)
 
Basic and diluted loss per common share attributable to
Emeritus Corporation common shareholders: $ (0.43) $ (0.51)
 
Weighted average common shares outstanding 44,582 44,210
 

   

EMERITUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

 
Three Months Ended March 31,
2012     2011
Cash flows from operating activities:
Net loss $ (19,395 ) $ (22,678 )
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 32,570 28,087
Amortization of above/below market rents 1,754 1,967
Amortization of deferred gains (269 ) (288 )
Impairment of long-lived assets 2,135
Gain on sale of investments (1,569 )
Amortization of loan fees 845 734
Allowance for doubtful receivables 2,308 2,034
Equity investment losses 392 374
Stock-based compensation 2,845 2,343
Change in fair value of derivative financial instruments 211
Deferred straight-line rent 1,202 2,492
Deferred revenue (299 ) 486
Other 629 1,520
Change in other operating assets and liabilities   1,264     (15,768 )
Net cash provided by (used in) operating activities   26,192     (266 )
 
Cash flows from investing activities:
Acquisition of property and equipment (6,277 ) (7,220 )
Community acquisitions, net of cash acquired (23,273 )
Proceeds from the sale of assets 2,805
Other assets (11 ) (675 )
Advances to affiliates and other managed communities, net (165 ) (2,050 )
Distributions from (contributions to) unconsolidated joint ventures, net   (678 )   550  
Net cash used in investing activities   (7,131 )   (29,863 )
 
Cash flows from financing activities:
Sale of stock, net 412 397
Distribution to noncontrolling interest (4,077 )
Increase in restricted deposits (1,095 ) (318 )
Debt issuance and other financing costs (180 ) (1,197 )
Proceeds from long-term borrowings and financings 35,650
Repayment of long-term borrowings and financings (7,969 ) (27,114 )
Repayment of capital lease and financing obligations   (3,894 )   (3,395 )
Net cash used in financing activities   (12,726 )   (54 )
 
Net increase (decrease) in cash and cash equivalents 6,335 (30,183 )
Cash and cash equivalents at the beginning of the period   43,670     110,124  
Cash and cash equivalents at the end of the period $ 50,005   $ 79,941  
 
 
Emeritus Corporation
Cash lease and interest expense
Three months ended March 31, 2012
       
 
Projected
Actual Range
Q1-2012 Q2-2012
Facility lease expense - GAAP $ 31,171 $31,000 - $31,300
Less:
Straight-line rents (1,202) (1,100) - (1,200)
Above/below market rents (1,754) (1,700) - (1,800)
Plus:
Capital lease interest 13,139 13,100 -13,300
Capital lease principal 2,641 2,600 – 2,900
Facility lease expense - CASH $ 43,995 $43,900 - $44,500
 
 
Interest expense - GAAP $ 39,045 $38,900 - $39,400
Less:
Capital lease interest (13,139) (13,100) - (13,300)
Loan fee amortization and other (864) (860) - (960)
Interest expense - CASH $ 25,042 $24,940 - $25,140
 
 
Depreciation - owned assets $ 18,657 $18,700 - 19,000
Depreciation - capital leases 11,230 11,200 - 11,400
Amortization - intangible assets 2,683 2,700 - 2,800
Total depreciation and amortization $ 32,570 $32,600 - 33,200
 

                   

EMERITUS CORPORATION

Consolidated Supplemental Financial Information

For the Quarters Ended

(unaudited) (Dollars in thousands, except non-financial and per-unit data)

 

Non-Financial Data

Q1 2011     Q2 2011     Q3 2011     Q4 2011    

Q1 2012

Average consolidated communities 306.7 316.0 333.3 332.8 328.0
Average available units 28,134 28,843 30,173 30,096 29,667
Average occupied units 24,205 24,793 26,095 26,059 25,694
Average occupancy 86.0 % 86.0 % 86.5 % 86.6 % 86.6 %
Average monthly revenue per occupied unit $ 4,059 $ 4,057 $ 4,065 $ 4,080 $ 4,124
Calendar days 90 91 92 92 91
 

Community revenues:

Community revenues $ 290,489 $ 297,501 $ 313,711 $ 313,613 $ 312,724
Move-in fees 4,960 5,135 5,456 5,751 5,816
Move-in incentives   (729 )       (914 )       (930 )       (378 )       (617 )
Total community revenues $ 294,720       $ 301,722       $ 318,237       $ 318,986       $ 317,923  
 

Community operating expenses:

Salaries and wages - regular and overtime $ 91,549 $ 94,607 $ 100,223 $ 100,884 $ 98,277
Average daily salary and wages $ 1,017 $ 1,040 $ 1,089 $ 1,097 $ 1,080
Average daily wages per occupied unit $ 42.02 $ 41.93 $ 41.75 $ 42.08 $ 42.03
 
Payroll taxes and employee benefits $ 33,425 $ 31,588 $ 33,366 $ 32,347 $ 34,839
Percent of salaries and wages 36.5 % 33.4 % 33.3 % 32.1 % 35.4 %
 
Prior year self-insurance reserve adjustments $ 32 $ 3,141 $ 8,605 $ 4,133 $ 397
 
Utilities $ 13,492 $ 12,073 $ 15,351 $ 12,586 $ 13,532
Average monthly cost per occupied unit $ 186 $ 162 $ 196 $ 161 $ 176
 
Facility maintenance and repairs $ 7,420 $ 7,687 $ 8,498 $ 8,178 $ 7,877
Average monthly cost per occupied unit $ 102 $ 103 $ 109 $ 105 $ 102
 
All other community operating expenses $ 53,113 $ 56,262 $ 57,380 $ 61,227 $ 58,551
Average monthly cost per occupied unit $ 731 $ 756 $ 733 $ 783 $ 760
                         
Total community operating expenses $ 199,031       $ 205,358       $ 223,423       $ 219,355       $ 213,473  
 
Community operating income $ 95,689       $ 96,364       $ 94,814       $ 99,631       $ 104,450  
 
Operating income margin   32.5 %       31.9 %       29.8 %       31.2 %       32.9 %
 
                   

EMERITUS CORPORATION

Selected Consolidated and Same Community Information

For the Quarters Ended

(unaudited)

(Community revenue and operating expense in thousands)

 

 

Q1 2011     Q2 2011     Q3 2011     Q4 2011     Q1 2012

Consolidated:

Average consolidated communities 306.7 316.0 333.3 332.8 328.0
Community revenue $ 294,720 $ 301,722 $ 318,237 $ 318,986 $ 317,923
Community operating expense $ 199,031 $ 205,358 $ 223,423 $ 219,355 $ 213,473
Average occupancy 86.0 % 86.0 % 86.5 % 86.6 % 86.6 %
Average monthly revenue per unit $ 4,059 $ 4,057 $ 4,065 $ 4,080 $ 4,124
Operating income margin 32.5 % 31.9 % 29.8 % 31.2 % 32.9 %
 

Same Community:

Average consolidated communities 296.0 296.0 296.0 296.0 296.0
Community revenue $ 289,179 $ 288,305 $ 289,686 $ 289,079 $ 289,591
Community operating expense $ 193,633 $ 191,682 $ 192,923 $ 193,350 $ 193,521
Average occupancy 86.5 % 86.4 % 86.9 % 87.1 % 86.7 %
Average monthly revenue per unit $ 4,105 $ 4,100 $ 4,097 $ 4,083 $ 4,104
Operating income margin 33.0 % 33.5 % 33.4 % 33.1 % 33.2 %
 




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