NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Raymond Brandstrom
November 6, 2003 Chief Financial Officer
(206) 298-2909
EMERITUS REPORTS THIRD QUARTER RESULTS
SEATTLE, WA, NOVEMBER 6, 2003 -- Emeritus Assisted Living (AMEX: ESC) (Emeritus
Corporation), a national provider of assisted living and related services to
senior citizens, today announced third quarter 2003 net income to common
shareholders of $9.8 million compared to a net loss of $4.5 million for the
third quarter 2002. Third quarter results include gains of $14.5 million
related to the early retirement of the Company's Series A Preferred stock.
Total Operating Revenue increased $14.2 million to $50.2 million for the third
quarter. The majority of this increase came from the acquisitions of 32
communities on October 1, 2002 and May 1, 2003. Total Operating Expenses
increased $14.0 million to $49.8 million for the third quarter 2003, primarily
from acquisitions and an impairment loss on a single community of $950,000.
Excluding the impairment loss, Income from operations, defined as Total
Operating Revenues less Total Operating Expenses (exclusive of Interest Income,
Interest Expense, and Other, Net) increased $1.1 million to an income of $1.4
million for the current quarter, from income of $243,000 in the third quarter of
2002. Interest Expense increased by $473,000 to $3.3 million primarily from
additional debt secured by the leasehold interest on communities related to
previously reported transactions in December 2002, July 2003, and August 2003.
During the third quarter, the Company entered into a sequence of transactions
that resulted in the early retirement of its Series A Preferred stock. The
Company used proceeds from the transfer of leases on four communities, the
sale/leaseback of 3 communities, and an increase in debt on the leasehold
interests related to the aforementioned seven communities to repurchase the
Company's Series A stock. The Company repurchased the Series A Preferred Stock
and all accrued and unpaid dividends for $20 million. As part of the purchase
agreement, the holder of the Series A Preferred Stock agreed to forego accrued
and unpaid dividends of approximately $10.1 million. The entire sequence of
transactions resulted in recording gains in the current quarter of $14.5
million. The Company recorded income tax expense of $576,000 for the quarter,
primarily related to alternative minimum tax requirements from the
sale/leaseback of communities during the quarter. Net income to common
shareholders improved by $14.3 million to an income of $9.8 million for the
quarter, inclusive of the gains and impairment loss discussed above.
For the nine months ended September 30, 2003, the Company increased revenue by
$40.6 million to $146.8 million, primarily from the acquisition of 32
communities in October 2002 and May 2003. Operating Expense increased by $36.1
million to $141.0 million principally from the same acquisitions. Excluding the
Impairment loss of $950,000 discussed above, Income from Operations (defined as
Total Operating Revenue less Total Operating Expense) improved $5.4 million to
an income of $6.7 million. Interest expense increased $1.2 million to $9.8
million primarily from an increase in property associated debt on leasehold
interests from the refinance of 11 communities in December 2002 partially offset
by lower mortgage interest expense on the same communities. The category
"Other, net" expense, decreased $2.4 million to an income of $1.5 million
primarily from a $1.4 million gain on redemption of ARV stock in the second
quarter of 2003 compared to transaction related write-offs of $564,000 in the
first quarter of 2002, and $173,000 in the second quarter of 2002.
SAME COMMUNITY RESULTS
Emeritus operated 59 Same Store Communities for the third quarter of both 2003
and 2002. Community Operating Income improved $2.0 million to $13.7 million
from $11.7 million for the same quarter last year, primarily the result of
strong average revenue per occupied unit growth of $149 (5.8%) and decreased
Community Operating Expenses of $540,000 from last year, principally from cost
containment programs, revised insurance programs, and lower bad debt expense.
Net income for the third quarter was $2.6 million compared to $953,000 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 169 communities
representing capacity for approximately 17,600 residents in 32 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 our
continued management of the Emeritrust I communities beyond January 2, 2004,
when our management agreements for those communities could be terminated on
short-term notice. 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. 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 Nine Months
ended September 30, ended September 30,
------------------ --------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Revenues:
Community revenue. . . . . . . . . . . . . . . . $46,702 $32,226 $134,949 $ 94,640
Other service fees . . . . . . . . . . . . . . . 1,131 1,149 3,165 3,244
Management fees. . . . . . . . . . . . . . . . . 2,376 2,662 8,671 8,313
-------- -------- --------- ---------
Total operating revenues . . . . . . . . 50,209 36,037 146,785 106,197
-------- -------- --------- ---------
Expenses:
Community operations . . . . . . . . . . . . . . 32,056 21,474 90,486 63,120
General and administrative . . . . . . . . . . . 6,151 5,385 17,366 15,175
Depreciation and amortization. . . . . . . . . . 1,799 1,653 5,486 5,179
Facility lease expense . . . . . . . . . . . . . 9,767 7,282 27,697 21,420
-------- -------- --------- ---------
Total operating expenses . . . . . . . . 49,773 35,794 141,035 104,894
-------- -------- --------- ---------
Income from operations . . . . . . . . . 436 243 5,750 1,303
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . 172 46 500 268
Interest expense . . . . . . . . . . . . . . . . (3,311) (2,838) (9,813) (8,616)
Other, net . . . . . . . . . . . . . . . . . . . 97 (153) 1,537 (894)
-------- -------- --------- ---------
Net other expense. . . . . . . . . . . . (3,042) (2,945) (7,776) (9,242)
-------- -------- --------- ---------
Net loss before income taxes. . . . . . (2,606) (2,702) (2,026) (7,939)
Provision for income taxes . . . . . . . (576) - (576) -
-------- -------- --------- ---------
Net loss . . . . . . . . . . . . . . . . (3,182) (2,702) (2,602) (7,939)
Preferred stock dividends. . . . . . . . . . . . . (1,464) (1,777) (5,240) (5,506)
Gain on repurchase of Series A preferred stock . . 14,465 - 14,465 -
-------- -------- --------- ---------
Net income (loss) to common shareholders $ 9,819 $(4,479) $ 6,623 $(13,445)
======== ======== ========= =========
Income (loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . $ 0.96 $ (0.44) $ 0.65 $ (1.32)
======== ======== ========= =========
Diluted. . . . . . . . . . . . . . . . . . . . $ 0.63 $ (0.44) $ 0.59 $ (1.32)
======== ======== ========= =========
Weighted average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . 10,252 10,215 10,249 10,204
======== ======== ========= =========
Diluted. . . . . . . . . . . . . . . . . . . . 18,687 10,215 11,311 10,204
======== ======== ========= =========
Emeritus Assisted Living
Same Community Statements of Operations (1)
(In thousands)
Quarter Ended
September 30,
--------------------
2003 2002
--------- ---------
Revenue . . . . . . . . . . . . . . . . . . $ 34,369 $ 32,918
Community operating expenses. . . . . . . . (20,674) (21,214)
--------- ---------
Community operating income. . . . . . . 13,695 11,704
Depreciation & amortization . . . . . . . . (1,527) (1,462)
Facility lease expense. . . . . . . . . . . (6,998) (7,029)
--------- ---------
Operating income. . . . . . . . . . . . 5,170 3,213
Interest expense, net . . . . . . . . . . . (2,574) (2,260)
--------- ---------
Operating income after interest expense $ 2,596 $ 953
========= =========
(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.