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Emeritus Announces Operating Results For Fourth Quarter And Full Year 2012

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.

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

About Emeritus

Emeritus Senior Living is the nation’s largest assisted living and memory care provider, with the ability to serve nearly 50,000 residents. Over 30,000 employees support more than 480 communities throughout 45 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 without adversely affecting occupancy levels; successfully integrating home health agency services into our senior living communities; uncertainties regarding government-reimbursement programs for our services; 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, 2012 filed with the SEC. The Company undertakes no obligation to update the information provided herein.

 

EMERITUS CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share data)

 
 
ASSETS
     
December 31, December 31,
  2012     2011  
Current Assets:
Cash and cash equivalents $ 59,795 $ 43,670
Short-term investments 4,910 3,585
Trade accounts receivable, net of allowance of $7,179 and $2,294 53,138 26,195
Other receivables 38,607 16,117
Tax, insurance, and maintenance escrows 23,813 20,501
Prepaid insurance expense 51,742 36,020
Deferred tax asset 33,781 19,934
Other prepaid expenses and current assets   12,185     8,140  
Total current assets 277,971 174,162
Investments in unconsolidated joint ventures 2,513 15,428
Property and equipment, net of accumulated depreciation of $533,710 and $407,952 4,011,884 2,355,425
Restricted deposits 23,226 16,427
Goodwill 186,756 118,725
Other intangible assets, net of accumulated amortization of $47,547 and $48,722 131,971 100,873
Other assets, net   26,429     29,288  
Total assets $ 4,660,750   $ 2,810,328  
 
LIABILITIES, SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST
 
Current Liabilities:
Current portion of long-term debt $ 49,381 $ 74,175
Current portion of capital lease and financing obligations 25,736 17,004
Trade accounts payable 14,244 7,959
Accrued employee compensation and benefits 103,398 70,936
Accrued interest 8,467 9,061
Accrued real estate taxes 16,432 11,791
Accrued professional and general liability 50,752 24,525
Other accrued expenses 30,291 19,477
Deferred revenue 22,417 16,348
Unearned rental income   30,552     22,965  
Total current liabilities 351,670 274,241
Long-term debt obligations, less current portion 1,558,936 1,528,710
Capital lease and financing obligations, less current portion 2,384,857 619,088
Deferred gain on sale of communities 3,743 4,789
Deferred straight-line rent 63,920 61,481
Other long-term liabilities   72,795     39,283  
Total liabilities   4,435,921     2,527,592  
Redeemable noncontrolling interest 10,105
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 45,814,988 and 44,989,861 shares 5 4
Additional paid-in capital 839,511 822,345
Accumulated deficit   (628,093 )   (543,249 )
Total Emeritus Corporation shareholders' equity 211,423 279,100
Noncontrolling interest   3,301     3,636  
Total shareholders' equity   214,724     282,736  
Total liabilities, shareholders' equity, and noncontrolling interest $ 4,660,750   $ 2,810,328  
 
       

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

 
Three Months Ended Year Ended
December 31, December 31,
  2012         2011     2012         2011  
Revenues:
Community revenue $ 409,594 $ 318,986 $ 1,370,019 $ 1,233,665
Management fees   2,519     5,159     18,009     21,105  
Community and management fee revenue 412,113 324,145 1,388,028 1,254,770
Reimbursed costs incurred on behalf of managed communities   25,450     52,230     180,048     217,853  
Total operating revenues   437,563     376,375     1,568,076     1,472,623  
 
Expenses:
Community operations 275,648 219,356 919,635 847,167
General and administrative 26,133 22,163 95,625 88,767
Transaction costs 3,030 741 5,510 9,826
Impairments of long-lived assets 2,135
Depreciation and amortization 42,605 32,306 140,629 122,372
Community leases 33,614 31,738 126,761 124,951
Costs incurred on behalf of managed communities   25,450     52,230     180,048     217,853  
Total operating expenses   406,480     358,534     1,470,343     1,410,936  
Operating income from continuing operations   31,083     17,841     97,733     61,687  
 
Other income (expense):
Interest income 105 74 408 429
Interest expense (60,862 ) (41,418 ) (176,945 ) (157,262 )
Change in fair value of derivative financial instruments (29 ) 1,045 (948 ) 3,081
Net equity losses for unconsolidated joint ventures (76 ) (1,829 ) (576 ) (3,081 )
Acquisition gain 42,110
Other, net   176     588     1,800     3,362  
Net other expense   (60,686 )   (41,540 )   (176,261 )   (111,361 )
 
Loss from continuing operations before income taxes (29,603 ) (23,699 ) (78,528 ) (49,674 )
Benefit of (provision for) income taxes   2,078     (362 )   1,158     (1,019 )
Loss from continuing operations (27,525 ) (24,061 ) (77,370 ) (50,693 )
Loss from discontinued operations       (3,915 )   (7,705 )   (21,570 )
Net loss (27,525 ) (27,976 ) (85,075 ) (72,263 )
Net loss attributable to the noncontrolling interests   33     39     231     354  
Net loss attributable to Emeritus Corporation
common shareholders $ (27,492 ) $ (27,937 ) $ (84,844 ) $ (71,909 )
 
Basic and diluted loss per common share attributable to
Emeritus Corporation common shareholders:
Continuing operations $ (0.61 ) $ (0.54 ) $ (1.73 ) $ (1.14 )
Discontinued operations   -     (0.09 )   (0.17 )   (0.49 )
$ (0.61 ) $ (0.63 ) $ (1.90 ) $ (1.63 )
 
Weighted average common shares outstanding: basic and diluted   44,888     44,437     44,680     44,312  
 
   

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

 
Year Ended December 31,
  2012         2011  
Cash flows from operating activities:
Net loss $ (85,075 ) $ (72,263 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 140,629 122,372
Amortization of above/below market rents 6,299 7,532
Amortization of deferred gains (1,046 ) (1,125 )
Acquisition gain (42,110 )
Net loss on sale of assets 527 902
Impairment of long-lived assets 8,430 17,947
Loss on early extinguishment of debt 866 1,978
Gain on sale of investments (1,569 )
Amortization of loan fees 3,219 3,283
Allowance for doubtful receivables 9,346 8,090
Equity investment losses 576 3,081
Stock-based compensation 11,046 8,106
Change in fair value of derivative financial instruments 948 (3,081 )
Deferred straight-line rent 6,080 8,792
Deferred revenue (1,375 ) 2,601
Other 1,353 5,754
Changes in operating assets and liabilities:
Trade accounts receivable and other receivables (13,704 ) (14,406 )
Prepaid expenses (14,625 ) (5,106 )
Other assets (1,281 ) (3,592 )
Trade accounts payable 2,149 (793 )
Other accrued expenses and current liabilities 41,878 25,140
Security deposits and other long-term liabilities   318     2,569  
Net cash provided by operating activities   116,558     74,102  
Cash flows from investing activities:
Purchase of property and equipment (37,212 ) (33,340 )
Acquisitions, net of cash acquired (103,784 ) (180,228 )
Deposits (409 ) 525
Proceeds from the sale of assets 15,599 40,947
Lease acquisition costs (711 ) (368 )
Advances to affiliates and other managed communities, net (1,108 ) (2,224 )
Distributions from unconsolidated joint ventures, net   90,064     2,028  
Net cash used in investing activities   (37,561 )   (172,660 )
Cash flows from financing activities:
Sale of stock, net 5,331 2,804
Contribution from (distribution to) non-controlling interest (6,668 )
Decrease (increase) in restricted deposits (180 ) (2,092 )
Purchase of interest rate cap contract (1,590 )
Debt issuance and other financing costs (1,424 ) (10,063 )
Proceeds from long-term borrowings and financings 21,783 297,991
Repayment of long-term borrowings and financings (70,500 ) (234,029 )
Repayment of capital lease and financing obligations   (17,882 )   (14,249 )
Net cash provided by (used in) financing activities   (62,872 )   32,104  
Net increase (decrease) in cash and cash equivalents 16,125 (66,454 )
Cash and cash equivalents at the beginning of the year   43,670     110,124  
Cash and cash equivalents at the end of the year $ 59,795   $ 43,670  
 
 
Emeritus Corporation
Cash Lease and Interest Expense
Three Months Ended December 31, 2012
(unaudited)
(In thousands)
           
Projected
Actual Range
Q4-12 Q1-2013
Facility lease expense - GAAP $ 33,614 $ 31,000 $ 32,000
Less:
Straight-line rents (1) (2,859 ) (300 ) (400 )
Above/below market rents (1,309 ) (1,200 ) (1,300 )
Plus:
Capital lease interest - cash 34,994 46,000 47,000
Capital lease interest - noncash (4,674 ) (7,000 ) (8,000 )
Capital lease principal   5,432     5,500     6,500  
Facility lease expense - CASH $ 65,198   $ 74,000   $ 75,800  
 
 
Interest expense - GAAP $ 60,861 $ 74,000 $ 75,000
Less:
Capital lease interest (34,994 ) (46,500 ) (47,000 )
Loan fee amortization and other   (784 )   (700 )   (800 )
Interest expense - CASH $ 25,083   $ 26,800   $ 27,200  
 
 
Depreciation - owned assets $ 20,119 $ 18,000 $ 19,000
Depreciation - capital leases 19,832 27,000 28,500
Amortization - intangible assets   2,654     1,500     2,000  
Total depreciation and amortization $ 42,605   $ 46,500   $ 49,500  
 

(1) Fourth quarter 2012 expense includes a $2.3 million noncash charge related to a residual value guarantee in a lease.

                   

EMERITUS CORPORATION

Consolidated Supplemental Financial Information

For the Quarters Ended

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

 

Non-Financial Data:

Q4 2011    

Q1 2012

   

Q2 2012

   

Q3 2012

   

Q4 2012

Average consolidated communities 332.8 328.0 327.3 325.3 414.3
Average available units 30,096 29,667 29,629 29,513 36,672
Average occupied units 26,059 25,694 25,603 25,719 31,482
Average occupancy 86.6 % 86.6 % 86.4 % 87.1 % 86.8 %
Average monthly revenue per occupied unit $ 4,073 $ 4,115 $ 4,140 $ 4,189 $ 4,077
Calendar days 92 91 91 92 92
 

Community revenues:

Community revenues $ 313,613 $ 312,724 $ 314,170 $ 319,556 $ 406,044
Move-in fees 5,751 5,816 5,816 5,753 5,503
Move-in incentives   (378 )       (617 )       (1,358 )       (1,434 )       (1,953 )
Total community revenues $ 318,986       $ 317,923       $ 318,628       $ 323,874       $ 409,594  
 

Community operating expenses:

Salaries and wages - regular and overtime $ 100,884 $ 98,277 $ 98,030 $ 99,456 $ 130,116
Average daily salary and wages $ 1,097 $ 1,080 $ 1,077 $ 1,081 $ 1,414
Average daily wages per occupied unit $ 42.08 $ 42.03 $ 42.08 $ 42.03 $ 44.42
 
Payroll taxes and employee benefits $ 32,347 $ 34,839 $ 33,203 $ 32,145 $ 38,376
Percent of salaries and wages 32.1 % 35.4 % 33.9 % 32.3 % 29.5 %
 
Prior year self-insurance reserve adjustments $ 4,133 $ 397 $ 1,849 $ 190 $ 3,560
 
Utilities $ 12,586 $ 13,532 $ 12,141 $ 14,805 $ 15,337
Average monthly cost per occupied unit $ 161 $ 176 $ 158 $ 192 $ 161
 
Facility maintenance and repairs $ 8,178 $ 7,877 $ 8,427 $ 8,644 $ 9,835
Average monthly cost per occupied unit $ 105 $ 102 $ 110 $ 112 $ 103
 
All other community operating expenses $ 61,227 $ 58,551 $ 59,921 $ 61,703 $ 78,424
Average monthly cost per occupied unit $ 783 $ 760 $ 780 $ 780 $ 821
                         
Total community operating expenses $ 219,355       $ 213,473       $ 213,571       $ 216,943       $ 275,648  
 
Community operating income $ 99,631       $ 104,450       $ 105,057       $ 106,931       $ 133,946  
 
Operating income margin 31.2 % 32.9 % 33.0 % 33.0 % 32.7 %
 
                   

EMERITUS CORPORATION

Selected Consolidated and Same Community Information

For the Quarters Ended

(unaudited)

(Community revenue and operating expense in thousands)

 
Q1 2012     Q2 2012     Q3 2012     Q4 2012     YTD 2012

Consolidated:

Average consolidated communities 328.0 327.3 325.3 414.3 348.8
Community revenue $ 317,923 $ 318,628 $ 323,874 $ 409,594 $ 1,370,019
Community operating expense 213,473 213,571 216,943 275,648 919,635
Average occupancy 86.6 % 86.4 % 87.1 % 86.8 % 86.8 %
Average monthly revenue per unit $ 4,115 $ 4,140 $ 4,189 $ 4,077 $ 4,127
Operating income margin 32.9 % 33.0 % 33.0 % 32.7 % 32.9 %
 

Consolidated Same Community:

Average consolidated communities 293.0 293.0 293.0 293.0 293.0
Community revenue $ 288,043 $ 289,454 $ 294,766 $ 296,893 $ 1,169,156
Community operating expense 192,130 191,016 196,432 192,993 772,571
Average occupancy 86.9 % 86.6 % 87.4 % 87.3 % 87.1 %
Average monthly revenue per unit $ 4,106 $ 4,139 $ 4,179 $ 4,212 $ 4,159
Operating income margin 33.3 % 34.0 % 33.4 % 35.0 % 33.9 %
 

Total Portfolio Same Community:

Average consolidated communities 467.0 467.0 467.0 467.0 467.0
Community revenue $ 410,028 $ 412,031 $ 419,471 $ 422,587 $ 1,664,117
Community operating expense 280,312 279,854 287,387 279,993 1,127,546
Average occupancy 86.1 % 86.0 % 86.7 % 86.7 % 86.4 %
Average monthly revenue per unit $ 3,880 $ 3,902 $ 3,941 $ 3,972 $ 3,924
Operating income margin 31.6 % 32.1 % 31.5 % 33.7 % 32.2 %
 
Q1 2011     Q2 2011     Q3 2011     Q4 2011     YTD 2011

Consolidated:

Average consolidated communities 306.7 316.0 333.3 332.8 322.3
Community revenue $ 294,720 $ 301,722 $ 318,237 $ 318,986 $ 1,233,665
Community operating expense 199,031 205,358 223,423 219,355 847,167
Average occupancy 86.0 % 86.0 % 86.5 % 86.6 % 86.3 %
Average monthly revenue per unit $ 4,059 $ 4,057 $ 4,065 $ 4,073 $ 4,063
Operating income margin 32.5 % 31.9 % 29.8 % 31.2 % 31.3 %
 

Consolidated Same Community:

Average consolidated communities 293.0 293.0 293.0 293.0 293.0
Community revenue $ 287,499 $ 286,609 $ 287,997 $ 287,514 $ 1,149,620
Community operating expense 192,307 190,296 191,582 191,974 766,159
Average occupancy 86.7 % 86.6 % 87.1 % 87.2 % 86.9 %
Average monthly revenue per unit $ 4,107 $ 4,103 $ 4,100 $ 4,085 $ 4,099
Operating income margin 33.1 % 33.6 % 33.5 % 33.2 % 33.4 %
 

Total Portfolio Same Community:

Average consolidated communities 467.0 467.0 467.0 467.0 467.0
Community revenue $ 401,653 $ 403,903 $ 408,128 $ 407,823 $ 1,621,507
Community operating expense 278,740 276,664 279,979 280,228 1,115,611
Average occupancy 84.5 % 85.1 % 85.8 % 86.1 % 85.4 %
Average monthly revenue per unit $ 3,869 $ 3,867 $ 3,873 $ 3,857 $ 3,866
Operating income margin 30.6 % 31.5 % 31.4 % 31.3 % 31.2 %
 




Stock quotes in this article: ESC 

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