NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Raymond Brandstrom
March 25, 2003 Chief Financial Officer
(206) 298-2909
EMERITUS REPORTS FOURTH QUARTER AND YEAR 2002 RESULTS
SEATTLE, WA, MARCH 25, 2003 -- Emeritus Assisted Living (AMEX: ESC) (Emeritus
Corporation), a national provider of assisted living and related services to
senior citizens, today announced a fourth quarter 2002 net loss to common
shareholders of $121,000 compared to a net loss of $1.4 million for the fourth
quarter of 2001. Included in the fourth quarter 2002 results is a gain, net of
related costs, of $5.1 million related to discounts obtained in connection with
early retirement of debt associated with the refinance of 11 properties.
For 2002, Emeritus reported a loss to common shareholders of $13.6 million, or
$1.33 per share, compared to a $10.6 million loss for 2001, or $1.04 per share.
"We had many positive events during 2002 including extending our maturing debt,
opening Special Care units in various markets, and increasing the number of
managed units in our portfolio by 36%," stated Ray Brandstrom, CFO. "These
advances were largely offset by increases in insurance and related costs, which
outpaced our ability to raise rates in the short-term, increased staffing to
facilitate our growth, and increased costs related to our preferred stock."
Total Operating Revenues increased $11.3 million to $46.9 million for the fourth
quarter of 2002 as compared to the same period in 2001. The majority of this
increase came from the acquisition of 24 communities on October 1, 2002, which
reported $9.7 million in revenue for the quarter. Continued growth in revenue
per unit from existing operations contributed $1.8 million, partially offset by
a 58-unit decrease in the average number of occupied units. Management fees for
the quarter decreased by $400,000 due to the recognition of performance-based
management fees during the fourth quarter of 2001.
Operating expenses increased to $47.2 million for the three months ended
December 31, 2002, an increase of $14.8 million over the same quarter last year.
The 24-community acquisition increased operating costs by $9.7 million.
Insurance costs increased by $1.5 million, led by sharp increases in liability
and workers' compensation costs. The Company increased its direct-care staffing
costs by $530,000 for the fourth quarter compared to the same quarter last year
due to a combination of expansion into new Special Care units and efforts to
proactively deal with increasing insurance costs. General and Administrative
costs increased by $2.0 million primarily due to increased staffing and
associated costs to support portfolio growth and favorable year-end true ups to
overhead of approximately $365,000 in 2001. Overall, Income from Operations,
defined as Total Operating Revenues less Total Operating Expenses (exclusive of
Interest Income, Interest Expense, and Other, Net) decreased $3.6 million.
For the 12 months ended December 31, 2002, Total Operating Revenues increased
$12.6 million to $153.1 million from $140.6 million for the same period last
year. The 24-community acquisition increased revenue by $9.7 million.
Management Fee revenue received from our third-party contracts increased $2.2
million, primarily from the increase in the number of management contracts,
resulting in approximately 2,200 additional managed units.
Total Operating Expenses for the year ended December 31, 2002, increased by
$19.1 million to $152.1 million from $133.1 million for the same period last
year. The 24-community acquisition resulted in an increase in operating expense
of $9.7 million. Insurance costs increased by $4.5 million. A combination of
increased staffing to better manage risk and to expand Special Care services
resulted in increased direct-care staffing costs of $2.1 million for the current
year. In March 2002, Emeritus repurchased third-party interests in two joint
venture communities, which were subsequently combined with two already leased
facilities in a new lease structure. This resulted in an increase of $2.0
million in additional lease expense, with an offsetting decrease in Interest
Expense of $1.0 million.
Interest Expense for the 12 months ended December 31, 2002, decreased by $1.6
million to $11.7 million from $13.3 million. The above-mentioned refinance
involving four communities decreased interest expense by $1.0 million. The
remainder of the decrease was due to lower LIBOR rates on the Company's variable
rate debt and the retirement of debt on one community located in Scottsdale,
Arizona.
Other, Net for the year 2002 improved by $3.5 million. The debt holder for
seven of the 11 communities refinanced in December 2002 offered a discount for
the early repayment of its debt, which was recognized as a $5.1 million gain
upon closing of the transaction. In addition, the year 2002 includes loan fee
and lease acquisition cost write-offs of $720,000 associated with the
four-community refinance, previously discussed, and the conversion of one leased
community to a managed community. The year 2001 is primarily composed of a net
gain of $990,000 associated with the disposition of two communities.
For the year 2002, Preferred Stock Dividends increased $1.0 million due to the
compounding affect of accrued and unpaid dividends.
OTHER HIGHLIGHTS
- - The Company refinanced 11 communities in December 2002, extending the maturity
of the debt by 3 years. The refinance consists of a $58 million senior note
with a $7 million earnout clause combined with $16 million of mezzanine debt.
- - The Company refinanced a 98 unit community located in Issaquah, Washington,
extending the maturities of $7.5 million of debt to 2006.
- - The Company leased 24 communities in six states effective October 1, 2002. The
communities are comprised of 1,651 units, in which the Company intends to
offer both assisted living and memory loss services.
- - In October, the Company commenced managing a 72-unit community located in
Austin, Texas.
- - In May 2002 the Company commenced management of 8 communities in Texas and
Louisiana.
- - In January 2002 the Company began managing 18 facilities for Regent Assisted
Living.
SAME COMMUNITY RESULTS
Emeritus operated 59 "Same Store Communities" for the fourth quarter of both
2002 and 2001. Results of operations decreased $1.1 million to $1.1 million.
Operating Revenue increased approximately $1.7 million primarily from the growth
in revenue per unit of $139 per month. Operating Expense increased $2.4 million
to $21.7 million for the fourth quarter of 2002 from $19.3 million for the same
quarter last year. This increase is primarily related to increases in staffing
related costs and sharp increases in liability and workers' compensation
insurance. The refinance of four communities, two previously held as joint
ventures in which third-party interests were repurchased and two that were
previously leased, was the primary cause of the lease expense increase of
$327,000 to $6.8 million for the fourth quarter of 2002. Interest expense
increased $119,000 primarily from the purchase of a real estate interest in a
previously leased facility located in Auburn, Massachusetts.
ABOUT THE COMPANY
Emeritus Assisted Living is a national provider of assisted living and related
services to seniors. Emeritus is one of the largest developers and operators of
freestanding assisted living communities throughout the United States. These
communities provide a residential housing alternative for senior citizens who
need help with the activities of daily living with an emphasis on assistance
with personal care services to provide residents with an opportunity for support
in the aging process. Emeritus currently holds interests in 180 communities
representing capacity for approximately 19,000 residents in 33 states.
Emeritus's common stock is traded on the American Stock Exchange under the
symbol ESC, and its home page can be found on the Internet at www.emeritus.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: A number of the matters and subject areas discussed in this press release
that are not historical or current facts deal with the 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 Emeritus's
actual future experience as a result of such factors as: the effects of
competition and economic conditions on the occupancy levels in Emeritus's
communities; Emeritus's ability under current market conditions to maintain and
increase its resident charges in accordance with rate enhancement programs
without adversely affecting occupancy levels; increases in interest rates that
would increase costs as a result of variable rate debt; ability of Emeritus to
control community operation expenses, including insurance and utility costs,
without adversely affecting the level of occupancy and the level of resident
charges; the ability of Emeritus to generate cash flow sufficient to service its
debt and other fixed payment requirements; Emeritus's ability to find sources
of financing and capital on satisfactory terms to meet its cash requirements to
the extent that they are not met by operations; and making satisfactory
arrangements for the continued operation of the Emeritrust communities beyond
June 30, 2003, when our management agreements for those communities expires.
Emeritus has attempted to identify, in context, certain of the factors that they
currently believe may cause actual future experience and results to differ from
Emeritus's current expectations regarding the relevant matter or subject area.
These and other risks and uncertainties are detailed in the Company's reports
filed with the Securities and Exchange Commission (SEC), including Emeritus's
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q
EMERITUS ASSISTED LIVING
Consolidated Statements of Operations
(In thousands, except per share information)
Quarter Ended Year Ended
December 31, December 31,
------------------------------- --------------------
2002 2001 2002 2001
--------------- -------------- --------- ---------
Operating revenue
Community revenue . . . . . . . . . . . . $ 44,353 $ 30,673 $142,237 $131,852
Management fees . . . . . . . . . . . . . 2,579 2,982 10,892 8,725
--------------- -------------- --------- ---------
Total operating revenues . . . . 46,932 35,655 153,129 140,577
--------------- -------------- --------- ---------
Community operations. . . . . . . . . . . 30,702 19,957 93,822 80,829
General and administrative. . . . . . . . 5,937 3,959 21,112 17,864
Depreciation and amortization . . . . . . 2,044 1,727 7,223 7,260
Facility lease expense. . . . . . . . . . 8,555 6,762 29,975 27,123
--------------- -------------- --------- ---------
Total operating expenses . . . . 47,238 32,405 152,132 133,076
--------------- -------------- --------- ---------
Income (loss) from operations . . (306) 3,250 997 7,501
Interest income . . . . . . . . . . . . . 135 202 403 980
Interest expense. . . . . . . . . . . . . (3,112) (2,922) (11,728) (13,296)
Other, net. . . . . . . . . . . . . . . . 4,999 (379) 4,105 581
--------------- -------------- --------- ---------
Net other income (expense) . . . 2,022 (3,099) (7,220) (11,735)
--------------- -------------- --------- ---------
Net income (loss). . . . . . . . 1,716 151 (6,223) (4,234)
Preferred stock dividends . . . . . . . . . 1,837 1,572 7,343 6,368
--------------- -------------- --------- ---------
Net loss to common shareholders. $ (121) $ (1,421) $(13,566) $(10,602)
=============== ============== ========= =========
Loss per common share - basic and diluted. $ (0.01) $ (0.14) $ (1.33) $ (1.04)
=============== ============== ========= =========
Weighted average number of common shares
outstanding - basic and diluted. . . . 10,217 10,196 10,207 10,162
=============== ============== ========= =========
EMERITUS ASSISTED LIVING
Same Community Statements of Operations (1)
(In thousands)
Quarter Ended
December 31,
--------------------------
2002 2001
--------------- ---------
Operating revenue. . . . . . . . $ 33,516 $ 31,806
Community operating expenses . . (21,674) (19,289)
--------------- ---------
Community operating income 11,842 12,517
Depreciation and amortization. . (1,572) (1,617)
Facility lease expense . . . . . (6,806) (6,479)
--------------- ---------
Operating Income. . . . . . . 3,464 4,421
Interest expense, net. . . . . . (2,363) (2,244)
--------------- ---------
Results of operations. . . . . . $ 1,101 $ 2,177
=============== =========
(1) Same Communities represent those communities that have been and are
expected to continue to be operated by the Company on a comp-
arable basis since January of 2001. Results exclude corporate general
and administrative costs, and other income and expense.