Emeritus Announces Operating Results for First Quarter 2013

  Emeritus Announces Operating Results for First Quarter 2013  Business Wire  SEATTLE -- May 02, 2013  Emeritus Corporation (NYSE: ESC), a national provider of senior living services, today announced its first quarter 2013 results.  Operating Summary for First Quarter 2013 Compared to First Quarter 2012    *Community and management fee revenue increased 43.5% to $463.5 million   *Adjusted EBITDAR increased $34.2 million, or 38.3% to $123.5 million   *Adjusted CFFO per share grew 10.3% to $0.43   *Total Portfolio Same Community (as defined below) average monthly revenue     per occupied unit increased 2.9% to $4,007   *Total Portfolio Same Community average occupancy improved 30 basis points     to 86.3%  Granger Cobb, President and Chief Executive Officer, commented, “We achieved solid growth in our total portfolio of communities in the first quarter, with improvements in occupancy and rate. We are very optimistic about the Emeritus growth profile as we expect to benefit from ongoing operating improvements and the embedded growth potential in our 482 communities, including the recently consolidated “HCP-133” communities. We are also pleased with the early integration of Nurse on Call home healthcare services into our Florida communities and the opportunity that it will provide in the coming years.”  2013 First Quarter Consolidated Results  Community and management fee revenues increased $140.5 million, or 43.5%, to $463.5 million in the first quarter of 2013, compared to $323.0 million in the first quarter of 2012. The increase in revenues resulted primarily from the Company’s lease and ownership acquisition of 142 communities in the fourth quarter of 2012 and first quarter of 2013 that we previously managed for a joint venture (the “Blackstone JV”). The increase in revenues was also attributable to the Company’s fourth quarter 2012 acquisition of Nurse on Call, Inc. Additionally, revenues for those consolidated communities that Emeritus has continuously operated since January 1, 2012 (“Consolidated Same Community”) increased $8.3 million in the first quarter of 2013, as a result of improved rate per unit. As of March 31, 2013, the consolidated Emeritus portfolio consisted of 466 communities, of which 323 communities are included in the Company’s definition of Consolidated Same Community.  Total average monthly revenue per occupied unit for the consolidated portfolio was $4,012 in the first quarter of 2013 compared to $4,115 in the first quarter of 2012. The consolidated rate decrease was attributable to the acquisition of the Blackstone JV communities, which have lower average rates than the legacy Emeritus communities. In the first quarter of 2013, total average occupancy for the consolidated portfolio was 86.4% compared to 86.6% in the first quarter of 2012. As a result of the Blackstone JV transaction, the Company added 133 leased communities and nine owned communities to its consolidated portfolio in the fourth quarter of 2012 and the first quarter of 2013; all but five of these communities have been managed by Emeritus since the second half of 2010. For all communities continuously under Emeritus management since January 1, 2012 (“Total Portfolio Same Community”), monthly revenue per occupied unit increased 2.9% from the first quarter of 2012 to 2013, and average occupancy improved by 30 basis points over the same period.  Community and ancillary operating expenses were $323.7 million in the first quarter of 2013 compared to $213.5 million in the 2012 period. The increase was due primarily to acquisition-related activities. Community operating expenses in the Consolidated Same Community portfolio increased $8.4 million, or 4.0%, due to increases in professional liability insurance, facility maintenance, salaries and benefits, taxes and licenses, supplies, and other expenses.  Community and ancillary operating income grew $34.5 million, or 33.1%, to $139.0 million in the first quarter of 2013, compared to the first quarter of 2012. Community and ancillary operating income margin was 30.0% in the 2013 first quarter compared to 32.9% in the 2012 period. Total Portfolio Same Community operating margin was 32.4% in the 2013 first quarter, compared to 32.7% in the 2012 period.  Excluding noncash stock-based compensation expenses, senior living general and administrative expenses as a percent of total operated senior living community revenue were 5.0% in the first quarter of 2013, compared to 4.8% in the first quarter of 2012. The increase primarily reflects increases in employee compensation and benefits as well as higher professional fees.  For the first quarter of 2013, Adjusted EBITDAR increased $34.2 million, or 38.3%, to $123.5 million, with the increase primarily driven by the increase in community operating income. Adjusted CFFO per share increased 10.3% to $0.43 per share, compared to $0.39 per share in the first quarter of 2012.  2013 First Quarter Financing Activities  In February 2013, Nurse On Call entered into a $50 million credit facility with a syndicate of banks. The loan has a four-year term with an initial interest rate equal to LIBOR plus 4.75%. Principal payments of $1.875 million are due quarterly.  In March 2013, pursuant to an underwritten secondary public offering, certain Emeritus shareholders completed the sale of 7,973,600 shares of the Company’s common stock held by them. In connection with the underwriter’s exercise of its over-allotment option, the Company sold 1,196,040 newly issued shares and received net cash proceeds of $31.3 million.  During the 2013 first quarter, the Company prepaid approximately $43 million of principal on notes payable to Health Care REIT, Inc. The weighted average interest rate on the principal reductions was 9.1%. During the second quarter of 2013, the Company intends to prepay $30 million of principal on notes payable to Ventas, Inc., which bears interest at 8.8%.  2013 Guidance Update  The Company provides guidance for the Company’s existing portfolio and excludes the impact from future acquisitions and dispositions.  The Company’s guidance for 2013 is as follows:    *Community and management fee revenue in the range of $1.85 billion to     $1.90 billion   *Routine capital expenditures in the range of $28.0 million to $30.0     million   *Senior living general and administrative expenses as a percent of total     senior living operated revenue of approximately 4.9%, excluding non-cash     stock-based compensation expenses   *Adjusted CFFO in the range of $2.10 to $2.20 per share  Webcast and Conference Call  The Company will host a webcast and conference call on Thursday, May 2, 2013, at 5:00 P.M. Eastern Time to discuss its financial results for the first quarter of 2013.  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 Thursday, May 2, 2013, until midnight Eastern Time on Thursday, May 9, 2013. 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 412664.  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 three months ended March 31, 2013, 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 months ended March 31, 2013 and 2012 (in thousands):                                                  Three Months Ended                                                  March 31,                                                  2013           2012 Net loss                                         $  (39,665 )   $  (19,395 ) Depreciation and amortization                        45,218          32,570 Interest income                                      (110    )       (104    ) Interest expense                                     72,199          39,045 Net equity losses for unconsolidated joint           12              392 ventures Income tax provision                                 1,106           272 Amortization of above/below market rents             1,246           1,754 Amortization of deferred gains                       (248    )       (269    ) Gain on early extinguishment of debt                 (493    )       – Stock-based compensation                             3,331           2,845 Change in fair value of derivative financial         (5      )       211 instruments Deferred revenue                                     2,088           (299    ) Deferred straight-line rent                          216             1,202 Impairment of long-lived assets                      –               2,135 Transaction costs                                    647             321 Self-insurance reserve adjustments                 7,482        397      Adjusted EBITDA                                      93,024          61,077 Community lease expense, net                       30,502       28,215   Adjusted EBITDAR                                 $  123,526    $  89,292     The following table shows the reconciliation of net cash provided by operating activities to CFFO, and CFFO as adjusted for transaction costs and self-insurance reserves related to prior years (in thousands):                                                    Three Months Ended                                                    March 31,                                                    2013          2012 Net cash provided by operating activities          $  27,761     $  26,192 Changes in operating assets and liabilities, net       (5,044 )       (1,264 ) Repayment of capital lease and financing               (6,001 )       (3,894 ) obligations Recurring capital expenditures                         (5,661 )       (4,455 ) Distributions from unconsolidated joint ventures     177         26      (1) Cash From Facility Operations                          11,232         16,605 Transaction costs                                      647            306 Self-insurance reserve adjustments, prior years      7,482       397     Adjusted Cash From Facility Operations             $  19,361    $  17,308                                                                     CFFO per share                                     $   0.25       $   0.37 Adjusted CFFO per share                                0.43           0.39  (1) Excludes distributions resulting from the Blackstone JV transaction, the sale of communities, and refinancing of debt.  Recurring capital expenditures are actual costs incurred to maintain the Company’s communities for their intended business purpose and exclude expenditures for community acquisitions, expenditures incurred in the months immediately following acquisition (and specifically excludes the $30.0 million capital commitment under the lease for the former Blackstone JV communities), new construction and expansions, ROI-designated projects, computer hardware and software, and vehicles.  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, 2013, 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 CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands, except share data)  ASSETS                                                                                                         March 31,          December 31,                                             2013               2012 Current Assets: Cash and cash equivalents                   $  113,524        $  59,795 Short-term investments                          5,898              4,910 Trade accounts receivable, net of               55,101             53,138 allowance of $7,871 and $7,179 Other receivables                               24,217             28,533 Tax, insurance, and maintenance escrows         23,470             23,813 Prepaid insurance expense                       23,314             24,297 Deferred tax asset                              28,299             33,781 Other prepaid expenses and current assets     12,794          12,185     Total current assets                            286,617            240,452 Investments in unconsolidated joint             2,372              2,513 ventures Property and equipment, net of accumulated depreciation of $577,386 and        4,016,169          4,011,884 $533,710 Restricted deposits and escrows                 54,131             50,671 Goodwill                                        186,224            186,756 Other intangible assets, net of accumulated amortization of $35,752 and         130,319            131,971 $47,547 Other assets, net                             33,839          36,503     Total assets                                $  4,709,671     $  4,660,750                                                                  LIABILITIES, SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST                                                                 Current Liabilities: Current portion of long-term debt           $   81,218         $   49,381 Current portion of capital lease and            27,369             25,736 financing obligations Trade accounts payable                          26,611             14,244 Accrued employee compensation and               47,835             53,606 benefits Accrued interest                                8,517              8,467 Accrued real estate taxes                       13,222             16,432 Accrued insurance liabilities                   44,715             44,867 Other accrued expenses                          32,083             30,291 Deferred revenue                                24,505             22,417 Unearned rental income                        26,808          30,552     Total current liabilities                       332,883            295,993 Long-term debt obligations, less current        1,527,131          1,558,936 portion Capital lease and financing obligations,        2,432,282          2,384,857 less current portion Deferred gain on sale of communities            3,495              3,743 Deferred straight-line rent                     64,136             63,920 Other long-term liabilities                   127,944         128,472    Total liabilities                             4,487,871       4,435,921  Redeemable noncontrolling interest              6,417              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       5                  5 outstanding 47,364,944 and 45,814,988 shares Additional paid-in capital                      879,874            839,511 Accumulated deficit                           (667,849  )      (628,093  ) Total Emeritus Corporation shareholders'        212,030            211,423 equity Noncontrolling interest                       3,353           3,301      Total shareholders' equity                    215,383         214,724    Total liabilities, shareholders' equity,    $  4,709,671     $  4,660,750  and noncontrolling interest   EMERITUS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data)                                                  Three Months Ended                                                  March 31,                                                  2013           2012 Revenues: Community and ancillary services revenue         $  462,719     $  317,923 Management fees                                    785          5,056    Community and management fee revenue                 463,504         322,979 Reimbursed costs incurred on behalf of managed     8,864        51,612   communities Total operating revenues                           472,368      374,591                                                                    Expenses: Community and ancillary operations                   323,741         213,473 General and administrative                           29,440          23,423 Transaction costs                                    647             306 Impairments of long-lived assets                     –               2,135 Depreciation and amortization                        45,218          32,570 Community leases                                     31,964          31,171 Costs incurred on behalf of managed                8,864        51,612   communities Total operating expenses                           439,874      354,690  Operating income from continuing operations        32,494       19,901                                                                     Other income (expense): Interest income                                      110             104 Interest expense                                     (72,199 )       (39,045 ) Change in fair value of derivative financial         5               (211    ) instruments Net equity losses for unconsolidated joint           (12     )       (392    ) ventures Other, net                                         1,043        520      Net other expense                                  (71,053 )     (39,024 )                                                                   Loss from operations before income taxes             (38,559 )       (19,123 ) Provision for income taxes                         (1,106  )     (272    ) Net loss                                             (39,665 )       (19,395 ) Net (income) loss attributable to the              (91     )     14       noncontrolling interests Net loss attributable to Emeritus Corporation    $  (39,756 )   $  (19,381 ) common shareholders                                                                   Basic and diluted loss per common share attributable to Emeritus Corporation common      $  (0.88   )   $  (0.43   ) shareholders                                                                   Weighted average common shares outstanding         45,417       44,582     EMERITUS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)                                                  Three Months Ended March 31,                                                  2013           2012 Cash flows from operating activities: Net loss                                         $  (39,665 )   $  (19,395 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization                        45,218          32,570 Amortization of above/below market rents             1,246           1,754 Amortization of deferred gains                       (248    )       (269    ) Gain on early extinguishment of debt                 (493    )       – Impairments of long-lived assets                     –               2,135 Amortization of loan fees                            790             845 Allowance for doubtful receivables                   2,172           2,308 Equity investment losses                             12              392 Stock-based compensation                             3,331           2,845 Change in fair value of derivative financial         (5      )       211 instruments Deferred straight-line rent                          216             1,202 Deferred revenue                                     2,088           (299    ) Other                                                8,055           629 Change in other operating assets and               5,044        1,264    liabilities Net cash provided by operating activities          27,761       26,192                                                                     Cash flows from investing activities: Acquisition of property and equipment                (15,907 )       (6,277  ) Other assets                                         (1,107  )       (11     ) Advances from (to) affiliates and other              1,273           (165    ) managed communities, net Distributions from unconsolidated joint            14,926       (678    ) ventures, net Net cash used in investing activities              (815    )     (7,131  )                                                                   Cash flows from financing activities: Sale of stock, net                                   37,826          412 Distribution to redeemable noncontrolling            (3,726  )       – interest Increase in restricted deposits                      (525    )       (1,095  ) Debt issuance and other financing costs              (819    )       (180    ) Proceeds from long-term borrowings and               50,000          – financings Repayment of long-term borrowings and                (49,972 )       (7,969  ) financings Repayment of capital lease and financing           (6,001  )     (3,894  ) obligations Net cash provided by (used in) financing           26,783       (12,726 ) activities                                                                   Net increase in cash and cash equivalents            53,729          6,335 Cash and cash equivalents at the beginning of      59,795       43,670   the period Cash and cash equivalents at the end of the      $  113,524    $  50,005   period   Emeritus Corporation Cash Lease and Interest Expense Three Months Ended March 31, 2013 (In thousands)                                             Projected                              Actual          Range                              Q1-13           Q2-2013 Facility lease expense -     $  31,964      $  32,000     —  $  33,000 GAAP Less: Straight-line rents              (216    )       (200    )   —       (300    ) Above/below market rents         (1,246  )       (1,200  )   —       (1,300  ) Plus: Capital lease interest           46,741          46,500      —       47,500 Capital lease interest -         (7,845  )       (8,000  )   —       (8,500  ) noncash Capital lease principal        6,001        6,500      —     7,000    Facility lease expense -     $  75,399     $  75,600     —   $  77,400   CASH                                                                   Interest expense - GAAP      $   72,199      $   72,000      —   $   73,500 Less: Capital lease interest           (46,741 )       (47,500 )   —       (47,500 ) Loan fee amortization and      (852    )     (500    )   —     (700    ) other Interest expense - CASH      $  24,606     $  24,000     —   $  25,300                                                                                                                                       Depreciation - owned         $   19,930      $   19,000      —   $   19,500 assets Depreciation - capital           24,267          25,000      —       25,500 leases Amortization - intangible      1,021        1,500      —     2,000    assets Total depreciation and       $  45,218     $  45,500     —   $  47,000   amortization   EMERITUS CORPORATION Consolidated Supplemental Financial Information For the Quarters Ended (unaudited)  (Dollars in thousands, except non-financial and per-unit data)  Non-Financial   Q1 2012        Q2 2012        Q3 2012        Q4 2012        Q1 2013 Data: Average consolidated        328.0         327.3         325.3         414.3         462.7 communities Average available            29,667          29,629          29,513          36,672          40,524 units Average              25,694          25,603          25,719          31,842          35,007 occupied units Average              86.6    %       86.4    %       87.1    %       86.8    %       86.4    % occupancy Average monthly          $   4,115       $   4,140       $   4,189       $   4,077       $   4,012 revenue per occupied unit Calendar days        91              91              92              92              90                                                                                   Community and ancillary revenues: Community        $   312,025     $   313,555     $   318,915     $   385,888     $   417,581 revenues Move-in fees         5,816           5,816           5,753           5,503           5,503 Move-in            (617    )    (1,358  )    (1,434  )    (1,953  )    (1,722  ) incentives Total community            317,224         318,013         323,234         389,438         421,362 revenues Ancillary          699         615         640         20,156      41,357   revenues Total community and      317,923     318,628     323,874     409,594     462,719  ancillary revenues                                                                                   Community operating expenses: Salaries and wages -              98,236          97,850          99,334          119,305         127,713 regular and overtime Average daily salary and       $   1,080       $   1,075       $   1,080       $   1,297       $   1,419 wages Average daily wages per        $   42.01       $   42.00       $   41.98       $   40.73       $   40.54 occupied unit                                                                                   Payroll taxes and employee         34,813          33,185          32,132          36,854          45,523 benefits Percent of salaries and         35.4    %       33.9    %       32.3    %       30.9    %       35.6    % wages                                                                                   Prior year self-insurance       397             1,849           190             3,560           7,482 reserve adjustments                                                                                   Utilities            13,532          12,141          14,805          15,328          18,595 Average monthly cost         176             158             192             160             177 per occupied unit                                                                                   Facility maintenance          7,877           8,427           8,643           9,787           11,830 and repairs Average monthly cost         102             110             112             102             113 per occupied unit                                                                                   All other community            58,333          59,762          61,277          75,365          81,140 operating expenses Average monthly cost         757             778             794             789             773 per occupied unit                                                                           Community operating            213,188         213,214         216,381         260,199         292,283 expenses Ancillary operating          285         357         562         15,449      31,458   expenses Total community and ancillary          213,473     213,571     216,943     275,648     323,741  operating expenses                                                                                   Community operating        $  104,036   $  104,799   $  106,853   $  129,239   $  129,079  income Consolidated operating        $  104,450   $  105,057   $  106,931   $  133,946   $  138,978  income                                                                                   Operating income margin        32.8    %       33.0    %       33.1    %       33.2    %       30.6    % - Communities Operating income margin        32.9    %       33.0    %       33.0    %       32.7    %       30.0    % - Consolidated   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        Q1 2013 Consolidated:                                                               Average consolidated       328.0          327.3          325.3          414.3          462.7 communities Community and ancillary       $   317,923     $   318,628     $   323,874     $   409,594     $   462,719 revenue Community and ancillary           213,473         213,571         216,943         275,648         323,741 operating expense Average             86.6    %       86.4    %       87.1    %       86.8    %       86.4    % occupancy Average monthly         $   4,115       $   4,140       $   4,189       $   4,077       $   4,012 revenue per unit Operating           32.9    %       33.0    %       33.0    %       32.7    %       30.0    % income margin                                                                                  Consolidated Same Community: Average consolidated        323.0           323.0           323.0           323.0           323.0 communities Community       $   314,369     $   315,682     $   321,625     $   323,289     $   322,713 revenue Community operating           210,304         208,989         215,118         211,869         218,657 expense Average             86.8    %       86.5    %       87.2    %       87.0    %       86.5    % occupancy Average monthly         $   4,116       $   4,144       $   4,188       $   4,218       $   4,236 revenue per unit Operating           33.1    %       33.8    %       33.1    %       34.5    %       32.2    % income margin                                                                                  Total Portfolio Same Community: Average consolidated        477.0           477.0           477.0           477.0           477.0 communities Community       $   420,603     $   422,685     $   430,674     $   433,681     $   434,225 revenue Community operating           282,953         282,302         290,055         285,705         293,589 expense Average             86.0    %       86.0    %       86.7    %       86.6    %       86.3    % occupancy Average monthly         $   3,895       $   3,915       $   3,958       $   3,987       $   4,007 revenue per unit Operating           32.7    %       33.2    %       32.7    %       34.1    %       32.4    % income margin  Contact:  For Emeritus Corporation Investor Relations 206-298-2909 or Media: Liz Brady, 646-277-1226 Liz.brady@icrinc.com or Sari Martin, 203-682-8345 Sari.martin@icrinc.com  
Press spacebar to pause and continue. Press esc to stop.