NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Raymond Brandstrom
August 7, 2003 Chief Financial Officer
(206) 298-2909
EMERITUS REPORTS $4 MILLION IMPROVEMENT FOR SECOND QUARTER RESULTS
SEATTLE, WA, AUGUST 7, 2003 -- Emeritus Assisted Living (AMEX: ESC) (Emeritus
Corporation), a national provider of assisted living and related services to
senior citizens, today announced second quarter 2003 net loss to common
shareholders of $932,000 compared to a net loss of $5.7 million for the second
quarter 2002. Second quarter results include a gain of $1.4 million related to
the Company's sale of ARV Assisted Living stock, previously announced.
Total revenue for the quarter increased $15.4 million to $49.4 million for the
second quarter of 2003. The majority of this increase came from our
acquisitions of a total of 32 communities in October 1, 2002 and May 1, 2003.
Operating expenses increased to $46.8 million for the second quarter 2003, an
increase of $11.7 million from the same quarter last year, also primarily from
acquisitions. Overall, Income from operations, defined as Total Operating
Revenues less Total Operating Expenses (exclusive of Interest Income, Interest
Expense, and Other, Net) increased $3.7 million from a loss of $1.0 million in
the second quarter of 2002 to an income of $2.6 million in the current year
quarter. This increase in Income from operations was attributable to same store
rate and occupancy increases, the beneficial effect of acquisitions, and an
increase in third-party management fees. Increased General and Administrative
costs to accommodate growth in capacity were partially offsetting.
For the six months ended June 30, 2003, the Company increased revenue by $26.4
million to $96.6 million, primarily from the acquisition of 24 communities in
October 2002. Operating Expense increased by $22.2 million to $91.3 million
principally from the 24-community acquisition. Overall, Income from operations,
defined as Total Operating Revenues less Total Operating Expenses (exclusive of
Interest Income, Interest Expense, and Other, Net) increased $4.2 million from
income of $1.1 million in the six months ended June 30, 2002 to an income of
$5.3 million in the current year. Interest expense increased by $724,000 to $6.5
million primarily related to refinancings in 2002 and 2003. Net loss to common
shareholders decreased $5.8 million to a loss of $3.2 million for the six
months.
SAME COMMUNITY RESULTS
Emeritus operated 59 Same Store Communities for the first quarter of both 2003
and 2002. Community Operating Income improved $1.6 million to $13.3 million
from $11.7 million for the same quarter last year. This increase in Income from
operations was primarily attributable to rate and occupancy increases, with
operating expenses remaining flat year over year. Operating income after
interest expense for the second quarter was $2.3 million compared to $924,000
for the same quarter last year.
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 174 communities
representing capacity for approximately 18,000 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 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 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; our ability to control community operation expenses,
including insurance and utility costs, 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 making
satisfactory arrangements for the continued operation of the Emeritrust
communities beyond June 30, 2003, when our management agreements for those
communities expire. On July 2, 2003, we executed an initial extension of
management agreement with respect to the Emeritrust II communities. The
management and the purchase option agreement related to the Emeritrust II
communities was amended to expire October 1, 2003, which will allow us, the
owners of the communities, and their lenders to consider a longer-term
agreement. We continue to operate under the existing operating structure of
the Emeritrust I communities on a day-to-day basis pending resolution of the
terms of financing, management, and purchase option agreements. While we
believe that these arrangements will be extended, we cannot guarantee that these
discussions will be successful or, if the arrangements are extended, what the
terms will be. If we are unsuccessful, we could lose the management fee revenue
from these communities and future rights with respect to them. 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 (SEC), including our Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q.
EMERITUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
Three Months Six Months
ended June 30, ended June 30,
--------------- ---------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues:
Community revenue. . . . . . . . . . . . $45,160 $30,294 $88,246 $62,414
Other service fees . . . . . . . . . . . 1,041 1,095 2,035 2,095
Management fees. . . . . . . . . . . . . 3,197 2,626 6,294 5,651
-------- -------- -------- --------
Total operating revenues . . . . 49,398 34,015 96,575 70,160
-------- -------- -------- --------
Expenses:
Community operations . . . . . . . . . . 29,785 21,084 58,430 41,646
General and administrative . . . . . . . 5,811 4,867 11,215 9,790
Depreciation and amortization. . . . . . 1,840 1,675 3,687 3,526
Facility lease expense . . . . . . . . . 9,325 7,410 17,929 14,138
-------- -------- -------- --------
Total operating expenses . . . . 46,761 35,036 91,261 69,100
-------- -------- -------- --------
Income (loss) from operations. . 2,637 (1,021) 5,314 1,060
Other income (expense):
Interest income. . . . . . . . . . . . . 173 113 328 222
Interest expense . . . . . . . . . . . . (3,229) (2,852) (6,502) (5,778)
Other, net . . . . . . . . . . . . . . . 1,392 (174) 1,440 (741)
-------- -------- -------- --------
Net other expense. . . . . . . . (1,664) (2,913) (4,734) (6,297)
-------- -------- -------- --------
Net income (loss). . . . . . . . 973 (3,934) 580 (5,237)
Preferred stock dividends. . . . . . . . . 1,905 1,732 3,776 3,729
-------- -------- -------- --------
Net loss to common shareholders. $ (932) $(5,666) $(3,196) $(8,966)
======== ======== ======== ========
Loss per common share - basic and diluted. $ (0.09) $ (0.56) $ (0.31) $ (0.88)
======== ======== ======== ========
Weighted average number of common shares
outstanding - basic and diluted. . . . 10,249 10,200 10,248 10,198
======== ======== ======== ========
Emeritus Assisted Living
Same Community Statements of Operations (1)
(In thousands)
Quarter Ended
June 30,
--------------------
2003 2002
--------- ---------
Revenue . . . . . . . . . . . . . . . . . . $ 33,734 $ 32,204
Community operating expenses. . . . . . . . (20,416) (20,518)
--------- ---------
Community operating income. . . . . . . 13,318 11,686
Depreciation & amortization . . . . . . . . (1,521) (1,465)
Facility lease expense. . . . . . . . . . . (6,979) (7,125)
--------- ---------
Operating income. . . . . . . . . . . . 4,818 3,096
Interest expense, net . . . . . . . . . . . (2,476) (2,172)
--------- ---------
Operating income after interest expense $ 2,342 $ 924
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(1) Same Communities represent those communities that have been and are
expected to continue to be operated by the Company on a comparable basis
since January of 2002. Results exclude corporate general and administrative
costs.