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Emeritus Announces Operating Results For Third 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 (877) 705-6003, or for international participants (201) 493-6725. A replay of the conference call will be available after 8:00 P.M. Eastern Time on Monday, November 5, 2012, until midnight Eastern Time on Monday, November 12, 2012. The dial-in numbers for the replay are (877) 870-5176 or, for international participants, (858) 384-5517. To access the telephonic replay, enter the conference ID 402797.

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 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 September 30, 2012, to be filed with the Securities and Exchange Commission.

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

    Three Months Ended     Nine Months Ended
September 30, September 30,
2012     2011 2012     2011
Net loss $ (16,402 ) $ (43,705 ) $ (57,550 ) $ (44,287 )
Depreciation and amortization 32,461 32,540 98,024 90,065
Interest income (101 ) (121 ) (303 ) (355 )
Interest expense 38,451 41,605 116,083 115,844
Net equity losses for unconsolidated joint ventures 28 817 500 1,252
Provision for income taxes 324 82 920 657
Loss from discontinued operations 2,698 17,258 7,705 17,655
Amortization of above/below market rents 1,612 1,845 4,990 5,778
Amortization of deferred gains (249 ) (279 ) (782 ) (851 )
Stock-based compensation 2,640 2,173 8,319 6,882
Change in fair value of derivative financial instruments 174 (1,527 ) 919 (2,036 )
Deferred revenue (305 ) 1,145 (755 ) 2,285
Deferred straight-line rent 923 2,197 3,221 7,129
Contract buyout costs 6,256
Impairment of long-lived assets 2,135
Gain on sale of investments (1,569 )
Acquisition gain (42,110 )
Acquisition, development, and financing expenses 1,339 828 2,772 3,298
Self-insurance reserve adjustments   190     8,605     2,436     11,778  
Adjusted EBITDA 63,783 63,463 188,634 177,671
Community lease expense, net   28,425     26,972     84,936     80,305  
Adjusted EBITDAR $ 92,208   $ 90,435   $ 273,570   $ 257,976  
 

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     Nine Months Ended
September 30, September 30,
2012     2011 2012     2011
Net cash provided by operating activities $ 42,105 $ 46,283 $ 110,621 $ 63,753
Changes in operating assets and liabilities, net (14,467 ) (30,025 ) (31,740 ) (10,232 )
Contract buyout costs 6,256
Repayment of capital lease and financing obligations (4,373 ) (3,558 ) (12,450 ) (10,456 )
Recurring capital expenditures (6,471 ) (5,000 ) (14,644 ) (13,632 )
Distributions from unconsolidated joint ventures   929     113     1,016     1,464  
Cash From Facility Operations 17,723 7,813 52,803 37,153
Self-insurance reserve adjustments, prior years   190     8,605     2,436     11,778  
Cash From Facility Operations, as adjusted $ 17,913   $ 16,418   $ 55,239   $ 48,931  
 
CFFO per share $ 0.40 $ 0.18 $ 1.18 $ 0.84
CFFO per share, as adjusted 0.40 0.37 1.24 1.11
 

Recurring capital expenditures are actual costs incurred to maintain the Company’s communities for their intended business purpose and exclude expenditures for acquisitions, development, expansions and general corporate purposes.

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