Emeritus Announces Operating Results For Second Quarter 2012

The conference call will be webcast live over the internet from the Company’s web site at www.emeritus.com under the “Investors” section. The conference call can also be accessed by dialing [phone], or for international participants [phone]. A replay of the conference call will be available after 8:00 P.M. Eastern Time on Thursday, August 2, 2012, until midnight Eastern Time on Thursday, August 9, 2012. The dial-in numbers for the replay are [phone] or, for international participants, [phone]. To access the telephonic replay, enter the conference ID 397336.

Non-GAAP Financial Measures

Adjusted EBITDA/EBITDAR and CFFO are financial measures of operating performance that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). The Company believes that these non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In addition, these measures are used by many research analysts and investors to evaluate the performance and the value of companies in the senior living industry. The Company strongly urges you to review the reconciliation of net income (loss) to Adjusted EBITDA/EBITDAR and the reconciliation of net cash provided by operating activities to CFFO, provided below, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows. The Company defines Adjusted EBITDA/EBITDAR and CFFO and provides other information about these non-GAAP measures in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, to be filed with the Securities and Exchange Commission.

The table below shows the reconciliation of net income (loss) to Adjusted EBITDA/EBITDAR for the three and six months ended June 30, 2012 and 2011 (in thousands):

		Three Months Ended										Six Months Ended
		June 30,										June 30,
		2012					2011					2012					2011
Net income (loss)		$	(21,753	)			$	22,096				$	(41,148	)			$	(582	)
Depreciation and amortization			32,993					29,438					65,563					57,525
Interest income			(98	)				(123	)				(202	)				(234	)
Interest expense			38,587					37,975					77,632					74,239
Net equity losses for unconsolidated joint ventures			80					61					472					435
Provision for income taxes			324					294					596					575
Loss from discontinued operations			5,007					397					5,007					397
Amortization of above/below market rents			1,624					1,966					3,378					3,933
Amortization of deferred gains			(264	)				(284	)				(533	)				(572	)
Stock-based compensation			2,834					2,366					5,679					4,709
Change in fair value of derivative financial instruments			534					(509	)				745					(509	)
Deferred revenue			(151	)				654					(450	)				1,140
Deferred straight-line rent			1,096					2,440					2,298					4,932
Contract buyout costs			–					–					–					6,256
Impairment of long-lived assets			–					–					2,135					–
Gain on sale of investments			–					–					–					(1,569	)
Acquisition gain			–					(42,110	)				–					(42,110	)
Acquisition, development, and financing expenses			1,112					1,957					1,433					2,470
Self-insurance reserve adjustments			1,849					3,141					2,246					3,173
Adjusted EBITDA			63,774					59,759					124,851					114,208
Community lease expense, net			28,296					26,796					56,511					53,333
Adjusted EBITDAR		$	92,070				$	86,555				$	181,362				$	167,541

The following table shows the reconciliation of net cash provided by operating activities to CFFO and CFFO as adjusted for self-insurance reserves relating to prior years (in thousands):

				Three Months Ended										Six Months Ended
				June 30,										June 30,
				2012					2011					2012					2011
Net cash provided by operating activities				$	42,324				$	17,736				$	68,516				$	17,470
Changes in operating assets and liabilities, net					(16,009	)				4,025					(17,273	)				19,793
Contract buyout costs					–					–					–					6,256
Repayment of capital lease and financing obligations					(4,183	)				(3,503	)				(8,077	)				(6,898	)
Recurring capital expenditures					(3,718	)				(4,310	)				(8,173	)				(8,632	)
Distributions from unconsolidated joint ventures, net					61					801					87					1,351
Cash From Facility Operations					18,475					14,749					35,080					29,340
Self-insurance reserve adjustments, prior years					1,849					3,141					2,246					3,173
Cash From Facility Operations, as adjusted				$	20,324				$	17,890				$	37,326				$	32,513
CFFO per share				$	0.41				$	0.33				$	0.79				$	0.66
CFFO per share, as adjusted				$	0.46				$	0.40				$	0.84				$	0.73

The Company defines recurring capital expenditures as actual costs incurred to maintain our communities for their intended business purpose and exclude expenditures for acquisitions, development, expansions and general corporate purposes.

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