Community operating expenses decreased $6.5 million to $216.9 million in the third quarter of 2012 compared to $223.4 million in the 2011 period. The improvement was primarily due to an $8.5 million expense recorded in the 2011 period to increase the Company’s self-insurance reserves for prior years’ claims exposure, as well as reductions resulting from community dispositions. The overall expense decrease was partially offset by community operating expenses in the same community portfolio, which increased 2.5%, or $4.9 million.

Community operating income increased $12.1 million, or 12.8%, to $106.9 million in the third quarter of 2012 from $94.8 million in the third quarter of 2011. Community operating margin was 33.0% in the third quarter, compared to 29.8% in the prior-year period. Excluding the 2011 self-insurance adjustment referred to above, community operating income increased $3.5 million, or 3.4%, and community operating margin improved to 33.0%, compared to 32.5% in the third quarter of 2011. These increases are the result of improved occupancy and rate, combined with effective expense controls.

Excluding noncash stock-based compensation expenses, general and administrative expenses as a percent of total operated community revenue (which includes revenues of managed communities but excludes reimbursed costs of managed communities) was 4.7% in the third quarter of 2012, compared to 4.6% in the third quarter of 2011.

For the third quarter of 2012, Adjusted EBITDAR increased $1.8 million, or 2.0%, to $92.2 million, with the increase primarily driven by the increase in community operating income. Cash from facility operations (CFFO), as adjusted, increased to $17.9 million, or $0.40 per share, compared to $16.4 million, or $0.37 per share, in the third quarter of 2011.

2012 Third Quarter Same Community Results

As of September 30, 2012, the consolidated Emeritus portfolio consisted of 323 communities, of which 293 communities are included in the Company’s definition of same communities. Total same community revenue increased $6.8 million to $294.8 million in the third quarter of 2012, due to rate and occupancy improvements. Average monthly revenue per occupied unit increased 1.9% to $4,179 in the third quarter of 2012 compared to $4,100 in the corresponding period in 2011. Average occupancy trended up throughout the quarter and increased 80 basis points sequentially from the second quarter of 2012. Average occupancy increased 30 basis points to 87.4% in the third quarter of 2012 from 87.1% in the prior-year period.

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