UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------------------
FORM 8-K/A
-------------------------------------------------------------
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 1, 1997
(Date of earliest event reported)
EMERITUS CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 1-14012 91-1605464
(State or other (Commission file (I.R.S Employer
jurisdiction of number) Identification No.)
incorporation or
organization)
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
(Address of principal executive offices)
(206) 298-2909
(Registrant's telephone number, including area code)
Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On May 1, 1997, Emeritus Corporation (the "Company")
completed the acquisition of three assisted-living
communities (the "La Casa Communities") located in
Florida, containing an aggregate of approximately 473
units for a purchase price of $33.0 million. The La Casa
Communities were acquired from Englewood Retirement
Center, Inc., Stanford Center, Inc. and NPR Retirement
Center, Inc.
The $33.0 million acquisition was financed through a first
mortgage and subordinated debt. Fleet National Bank
("Fleet") financed $26.0 million through a two year first
mortgage, interest at LIBOR plus 2.50%, payable interest
only during the first year. Hanseatic Corporation
("Hanseatic") financed $7.0 million through 18% three year
subordinated debt, 10% payable monthly and 8% accrued and
due at maturity. The subordinated debt is secured by a
pledge of the stock of Emeritus Properties V, Inc., a
wholly owned subsidiary of the Company and is fully
subordinated to the Fleet mortgage.
The La Casa Communities are comprised of three communities
under common ownership, La Casa Grande in New Port Richey,
Florida, Stanford Centre in Altamonte Spring, Florida and
River Oaks in Englewood, Florida, which operate
residential-style congregate care, assisted-living and
Alzheimer care communities for seniors. The Company's
growth strategy has focused, and will continue to focus,
on the acquisition of existing long-term-care facilities
that either are currently operated as assisted-living
communities or can be efficiently repositioned by the
Company as assisted-living communities, and the
development of assisted-living facilities.
The Company reported the acquisition on its Current Report
on Form 8-K dated May 1, 1997 (the "Form 8-K"). Item 7 of
the Form 8-K is hereby revised and supplemented to include
Financial Statements of Business Acquired, certain pro
forma financial information and additional exhibits with
respect to the La Casa Communities.
Items 3-6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The La Casa Communities combined balance sheet as of
December 31, 1996, and the combined statements of
income, shareholders' deficit and cash flows for the
year ended December 31, 1996, along with the notes
thereto and the report of KPMG Peat Marwick LLP dated
May 9, 1997 relating to such financial statements.
(b) Pro Forma Financial Information
(1) Emeritus Corporation Pro Forma Consolidated
Balance Sheet (unaudited) December 31, 1996.
(2) Emeritus Corporation Pro Forma Consolidated
Statements of Operations (unaudited) For the
Year Ended December 31, 1996 and the Three
Months Ended March 31, 1997.
(3) Notes to Pro Forma Consolidated Financial
Statements (unaudited).
(c) Exhibits
1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Emeritus Corporation
We have audited the accompanying combined balance sheet of the La Casa
Communities as of December 31, 1996, and the related combined
statements of income, shareholders' deficit and cash flows for the year
then ended. These combined financial statements are the responsibility
of the La Casa Communities' management. Our responsibility is to
express an opinion on the combined financial statements based on our
audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the combined financial statements. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of the
La Casa Communities as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick
Seattle, Washington
May 9, 1997
2
(a) Financial Statements of Business Acquired.
LA CASA COMMUNITIES
COMBINED BALANCE SHEETS
ASSETS
March 31,
December 31, 1997
1996 (unaudited)
------------ ------------
Current assets:
Cash ............................................. $ 24,228 $ 26,097
Trade accounts receivable......................... 22,132 89,008
Prepaid expenses and other current assets......... 65,761 112,763
------------ ------------
Total current assets...................... 112,121 227,868
Property and equipment, net......................... 17,676,480 17,496,649
Other assets, net................................... 179,220 171,994
------------ ------------
Total assets.............................. $17,967,821 $17,896,511
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Short-term borrowings............................. $ 236,409 $ 187,500
Related party notes payable....................... 305,000 305,000
Current portion of long-term debt................. 399,339 401,338
Accounts payable.................................. 213,252 174,210
Accrued expenses.................................. 285,241 252,321
Deferred revenue.................................. 88,903 56,175
------------ ------------
Total current liabilities................. 1,528,144 1,376,544
------------ ------------
Related party note payable.......................... 557,539 553,126
Long-term debt, less current portion................ 16,476,627 16,408,221
------------ ------------
Total liabilities......................... 18,562,310 18,337,891
------------ ------------
Shareholders' deficit:
Common stock, $1 par value. Authorized 20,000
shares; issued and outstanding 2,200 shares... 2,200 2,200
Common stock, $10 par value. Authorized 4,500
shares; issued and outstanding 4,400 shares... 44,000 44,000
Additional paid-in capital......................... 1,138,421 1,138,421
Accumulated deficit................................ (1,779,110) (1,626,001)
------------ ------------
Total shareholders' deficit............... (594,489) (441,380)
Commitments and contingencies.......................
------------ ------------
Total liabilities and shareholders'
deficit............................... $17,967,821 $17,896,511
============ ============
See accompanying Notes to Combined Financial Statements.
3
LA CASA COMMUNITIES
COMBINED STATEMENTS OF INCOME
Three months ended
Year ended March 31,
December 31, 1997
1996 (unaudited)
------------ ------------------
Revenues:
Rent........................................ $ 9,173,146 $2,380,933
Service fees................................ 452,195 113,109
------------ ------------------
Total revenues...................... 9,625,341 2,494,042
------------ ------------------
Expenses:
Community operations........................ 6,112,858 1,471,516
General and administrative.................. 1,128,153 292,945
Depreciation and amortization............... 790,685 196,100
------------ ------------------
Total operating expenses............ 8,031,696 1,960,561
------------ ------------------
Income from operations............. 1,593,645 533,481
------------ ------------------
Other income (expense):
Interest expense on notes payable to related
parties.................................. (76,950) (20,280)
Other interest expense...................... (1,491,189) (359,903)
Other, net.................................. 14,964 (189)
------------ ------------------
Net other expense................... (1,553,175) (380,372)
------------ ------------------
Net income.......................... $ 40,470 $ 153,109
============ ==================
See accompanying Notes to Combined Financial Statements.
4
LA CASA COMMUNITIES
COMBINED STATEMENT OF SHAREHOLDERS' DEFICIT
Common stock
---------------------------------------- Additional Total
Number of Number of paid-in Partners' Accumulated shareholders'
shares(1) Amount shares(2) Amount capital deficit deficit equity/(deficit)
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
Balances at December
31, 1995.......... 2,000 $2,000 4,000 $43,600 $1,460,821 $(1,074,424) $ (632,834) $(200,837)
Partnership buyout... 200 200 400 400 (322,400) 1,074,424 (752,624) -
Distributions........ - - - - - - (434,122) (434,122)
Net income for the
year ended
December 31,
1996.............. - - - - - - 40,470 40,470
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
Balances at December
31, 1996.......... 2,200 2,200 4,400 44,000 1,138,421 - (1,779,110) (594,489)
Net income for the
three months ended
March 31, 1997.... - - - - - - 153,109 153,109
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
Balances at March 31,
1997............ 2,200 $2,200 4,400 $44,000 $1,138,421 $ - $(1,626,001) $(441,380)
========= ====== ========= ======= =========== ============ ============ ================
(1) NPR Retirement Center, Inc.
(2) Stanford Center, Inc.
See accompanying Notes to Combined Financial Statements.
5
LA CASA COMMUNITIES
COMBINED STATEMENTS OF CASH FLOWS
Three months ended
Year ended March 31,
December 31, 1997
1996 (unaudited)
------------ ------------------
Cash flows from operating activities:
Net income..................................... $ 40,470 $153,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............... 790,685 196,100
Changes in operating assets and liabilities:
Trade accounts receivable.............. 10,642 (66,876)
Prepaid expenses and other current
assets.............................. (13,189) (47,002)
Other assets........................... 595 (3,483)
Accounts payable....................... (6,428) (39,042)
Accrued expenses....................... 48,452 (32,920)
Deferred revenue....................... 61,818 (32,728)
------------ ------------------
Net cash provided by operating
activities................... 933,045 127,158
------------ ------------------
Cash flows from investing activities:
Cash transferred in from partnership........... 136 -
Notes with related parties..................... (57,675) (4,413)
Construction of building and purchase of
equipment.................................... (185,955) (5,560)
------------ ------------------
Net cash used in investing
activities........................ (243,494) (9,973)
------------ ------------------
Cash flows from financing activities:
Repayment of short-term borrowings............. - (48,909)
Proceeds from long-term borrowings............. 280,000 -
Repayment of long-term borrowings.............. (533,764) (66,407)
Distributions to stockholders.................. (434,122) -
------------ ------------------
Net cash used in financing
activities........................ (687,886) (115,316)
------------ ------------------
Net increase in cash................ 1,665 1,869
Cash at beginning of period...................... 22,563 24,228
------------ ------------------
Cash at end of period............................ $ 24,228 $ 26,097
============ ==================
Supplemental disclosure of cash flow information
- cash paid during the period for interest..... $1,568,139 $380,183
============ ==================
See accompanying Notes to Combined Financial Statements.
6
LA CASA COMMUNITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Las Casa Communities are comprised of three
communities (the "Communities") which operate residential-
style congregate care, assisted-living and Alzheimer care
communities for seniors. The related organizations which
make up the Communities are as follows:
Owner Community Location
------- ----------- ----------
Englewood Retirement Center, Inc. (S-Corporation) Englewood Retirement Center Englewood, FL
Stanford Center, Inc. (S-Corporation) Stanford Center Altamonte Spring, FL
NPR Retirement Center, Inc. (S-Corporation) New Port Richey Retirement Center New Port Richey, FL
On May 1, 1997 Emeritus Corporation acquired the
Communities.
(B) REVENUE RECOGNITION
Resident units are rented on a month-to-month basis and
rent is recognized in the month the unit is occupied.
Service fees paid by residents for assisted-living and other
related services are recognized in the period services are
rendered.
(C) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method.
Depreciation is computed over the following estimated useful
lives: buildings and improvements, 5 to 40 years and
furniture and equipment, 5 to 15 years.
For long-lived assets, including property and equipment,
the Communities evaluate the carrying value of the assets by
comparing the estimated future cash flows generated from the
use of the assets and their eventual disposition with the
assets' reported net book values. The carrying values of
assets are evaluated for impairment when events or changes in
circumstances occur which may indicate the carrying amount of
the assets may not be recoverable.
(D) DEFERRED REVENUE
Deferred revenue consists of revenue received prior to
the end of a reporting period for resident rental and service
payments that relate to subsequent periods.
(E) INCOME TAXES
The Communities have elected, by consent of its
shareholders, to be taxed under the provisions of Subchapter
S of the Internal Revenue code. Under those provisions, the
Communities do not pay federal or state corporate income
taxes on their taxable income nor receive benefits from their
operating losses. Instead, the stockholders are liable for
individual federal and state income taxes on their share of
the Communities taxable income or receive benefit of their
losses. Accordingly, no federal and state provision has been
recorded in the accompanying financial statements. Pro forma
income taxes have not been presented as the Communities have
net operating losses which have full valuation allowances
that are available to be recognized as needed to reduce pro
forma tax expense to zero.
7
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(F) COMMUNITY OPERATIONS
Community operations represent direct costs incurred to
operate the communities and include costs such as activities
for the residents, marketing, housekeeping, food service,
payroll and benefits, facility maintenance, utilities, taxes
and licenses.
(G) USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at
December 31, 1996:
Land............................ $ 1,504,816
Building and improvements....... 20,311,356
Furniture and equipment......... 1,578,181
------------
23,394,353
Less accumulated depreciation... (5,717,873)
------------
$17,676,480
============
Depreciation expense was $763,550 for the year ended December
31, 1996.
(3) DEFERRED FINANCING COSTS
Deferred financing costs totaling $157,242, which are
included in other assets, net, are amortized using the
straight-line method over the term of the related debt which
approximates the level yield method. Accumulated
amortization at December 31, 1996 totaled $24,552.
(4) FINANCIAL INSTRUMENTS
The Communities have financial instruments consisting of
cash, receivables, accounts payable, short-term borrowings,
related party note payable and long-term debt. The
Communities have determined the fair value of their financial
instruments using available market information such as
prevailing interest rates and appropriate valuation
methodologies. The fair value of the Communities financial
instruments approximate their carrying amounts.
8
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(5) NOTES PAYABLE
Short-term borrowings consist of the following at
December 31, 1996:
Unsecured note payable, interest
only at 10% payable monthly, due
upon ninety days written demand.... $ 160,000
Note payable, interest at 8.5% due
August 1997........................ 20,000
Unsecured note payable, interest at
9%, principal and interest due
at the time the facility is sold... 15,000
Unsecured note payable, interest
only at 9% payable monthly,
balance due at the time the
facility is sold................... 12,500
Other notes payable.................. 28,909
-----------
Total short-term borrowings...... $ 236,409
===========
Related party notes payable consist of the following at
December 31, 1996:
Unsecured note payable to a
relative of a shareholder,
interest only at 9% payable
monthly, due on demand............. $ 250,000
Unsecured notes payable to
shareholder, interest only at 9%
payable monthly, due on demand..... 45,000
Unsecured note payable to
shareholder, interest at 9%,
principal and interest due on
demand............................. 10,000
-----------
Total related party notes
payable........................ $ 305,000
===========
Long-term debt consists of the following at December 31,
1996:
Mortgage notes payable, interest at
9% payable monthly, due January
2020............................... $10,363,591
Mortgage payable, interest at 7.9%
payable monthly, due October
2020............................... 6,102,771
Unsecured notes payable to
shareholder, interest at 9%
payable monthly, due September
2005............................... 557,539
Note payable, interest at 8.6%
payable monthly, balance due
December 1998...................... 209,654
Unsecured note payable, interest at
9.8%, payable monthly, balance
due November 1998.................. 175,930
Other notes payable..................
24,020
-----------
17,433,505
Less current portion................. 399,339
-----------
Total long-term debt............. $17,034,166
===========
Secured notes are secured primarily by the Communities'
property and equipment.
9
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Maturities of long-term debt follow:
1997.............. $ 399,339
1998.............. 632,899
1999.............. 324,653
2000.............. 350,885
2001.............. 382,404
Thereafter........ 15,343,325
-----------
$17,433,505
===========
(6) LEASE COMMITMENTS
Effective July 28, 1991, the Communities entered into
employee leasing agreements with an unrelated third party.
The employee leasing agreements call for the Communities to
pay a leasing fee equal to 2.9% of gross payroll, the leased
employees' gross payroll, and all related federal and state
payroll taxes. The Communities are also responsible for
providing workers' compensation insurance on all leased
employees and reasonable time off for vacation and sick
leave. The agreements are to remain in effect until either
party, in writing, terminates the agreements with such
termination being effective thirty days after receipt of the
termination notice.
(7) PARTNERSHIP BUY-OUT
Effective January 1, 1996, the assets and related
liabilities of the New Port Richey ACLC partnership, previous
owner of the building operated by NPR Retirement Center, Inc.
("NPR") and under common ownership with the Communities, were
transferred into NPR. The transaction was accounted for in a
manner similar to the pooling-of-interests method of
accounting, and accordingly, the net assets were recorded at
their historical cost as required by generally accepted
accounting principles. The effect of this business
combination was to increase assets by $5,501,701, increase
liabilities by $6,576,143, increase common stock by $600,
reduce additional paid-in capital by $322,400, which
represented the total additional paid-in capital of NPR, and
increase accumulated deficit by $752,624 to record the excess
of liabilities assumed over the basis of assets acquired.
10
(b) Pro Forma Financial Information.
The following unaudited pro forma consolidated balance
sheet as of December 31, 1996 assumes that the La Casa
Acquisition had occurred on December 31, 1996.
The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1996 and three
months ended March 31, 1997 assumes that the La Casa
Acquisition had occurred on January 1, 1996.
The unaudited pro forma combined financial information
set forth below is not necessarily indicative of the
Company's combined financial position or the results of
operations that actually would have occurred if the
transactions had been consummated on such dates. In
addition, they are not intended to be a projection of results
of operations that may be obtained in the Company's future.
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
--------- ----------- ------------ ------------
(in thousands)
Current Assets:
Cash and cash equivalents..... $ 23,039 $ - $ - $ 23,039
Current portion of restricted
cash........................ 934 - - 934
Trade accounts receivable..... 1,713 - - 1,713
Other receivables............. 1,292 - - 1,292
Inventory..................... 292 - - 292
Prepaid expense and other
current assets.............. 2,977 - - 2,977
Investment securities
available for sale.......... 2,152 - - 2,152
--------- ----------- ------------ ------------
Total current assets... 32,399 - - 32,399
--------- ----------- ------------ ------------
Property and equipment, net...... 97,150 17,676 14,934 (a) 129,760
Property held for development.... 8,796 - - 8,796
Note receivable from and
investment in affiliate, net... 2,464 - - 2,464
Restricted deposits, less
current portion................ 6,875 - - 6,875
Lease acquisition costs, net..... 8,127 - - 8,127
Other assets, net................ 2,227 - 390 (a) 2,617
--------- ----------- ------------ ------------
Total assets........... $158,038 $17,676 $15,324 $191,038
========= =========== ============ =========
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
11
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 - (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term borrowings......... $ - $ - $ - $ -
Current portion of long-term
debt........................ 5,816 - - 5,816
Trade accounts payable........ 4,707 - - 4,707
Construction advances - leased
communities................. 6,387 - - 6,387
Employee compensation and
benefits.................... 3,071 - - 3,071
Accrued interest.............. 1,120 - - 1,120
Other accrued expenses........ 778 - - 778
Other current liabilities..... 763 - - 763
--------- ----------- ----------- ------------
Total current
liabilities.......... 22,642 - - 22,642
--------- ----------- ----------- ------------
Security deposits................ 1,014 - - 1,014
Other long-term liabilities...... 3,740 - - 3,740
Deferred gain on sale of
communities.................... 9,433 - - 9,433
Deferred income.................. 843 - - 843
Convertible debentures........... 32,000 - - 32,000
Long-term debt, less current
portion........................ 60,260 - 33,000 (a) 93,260
Liabilities retained by
stockholders, net.............. - 18,271 (18,271)(a) -
--------- ----------- ----------- ------------
Total liabilities...... 129,932 18,271 14,729 162,932
--------- ----------- ----------- ------------
Minority interests............... 1,918 - - 1,918
Shareholders' equity (deficit):
Preferred stock, $.0001 par
value. Authorized
5,000,000 shares; no
shares issued and
outstanding................. - - - -
Common stock, $.0001 par
value. Authorized
40,000,000 shares; issued
and outstanding 11,000,000
shares...................... 1 - - 1
Common stock, $1 par value.
Authorized 20,000 shares;
issued and outstanding
2,200 shares................ - 2 (2) (a) -
Common stock, $10 par value.
Authorized 4,500 shares;
issued and outstanding
4,400 shares................ - 44 (44) (a) -
Additional paid-in capital.... 44,787 1,138 (1,138) (a) 44,787
Unrealized gain on investment
securities.................. 18 - - 18
Accumulated deficit........... (18,618) (1,779) 1,779 (a) (18,618)
--------- ----------- ----------- -----------
Total shareholders'
equity (deficit)..... 26,188 (595) 595 26,188
--------- ----------- ----------- -----------
Total liabilities and
shareholders' equity
(deficit)............ $158,038 $17,676 $15,324 $191,038
========= =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
12
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
-------- ----------- ----------- --------
(in thousands, except per share amounts)
Revenues:
Rent.......................... $64,143 $ 9,173 $ - $ 73,316
Service fees.................. 4,783 452 - 5,235
-------- ----------- ----------- ---------
Total operating revenues... 68,926 9,625 - 78,551
-------- ----------- ----------- ---------
Expenses:
Community operations.......... 48,900 6,113 - 55,013
General and administrative.... 6,158 1,128 - 7,286
Depreciation and amortization. 3,122 791 (791) (b)
1,233 (b) 4,355
Rent.......................... 16,114 - - 16,114
-------- ----------- ----------- ---------
Total operating expenses... 74,294 8,032 442 82,768
-------- ----------- ----------- ---------
Income (loss) from
operations............... (5,368) 1,593 (442) (4,217)
-------- ----------- ----------- ---------
Other income (expense):
Interest income............... 1,236 - - 1,236
Interest expense on notes
payable to related parties.. - (77) 77 (c) -
Interest expense, net......... (4,018) (1,491) 1,491 (c)
(3,512) (c) (7,530)
Other, net.................... (52) 15 - (37)
-------- ----------- ----------- ---------
Net other expense.......... (2,834) (1,553) (1,944) (6,331)
-------- ----------- ----------- ---------
Net income (loss) ......... $(8,202) $ 40 $(2,386) $(10,548)
======== =========== =========== =========
Net loss per share............... $ (0.75) $ (0.96)
======== =========
Weighted average number of common
shares outstanding............. 11,000 11,000
======== =========
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
13
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
--------- ----------- ----------- ---------
(in thousands, except per share amounts)
Revenues:
Rent.......................... $20,731 $2,381 $ - $23,112
Service fees.................. 3,771 113 - 3,884
--------- ----------- ----------- ---------
Total operating revenues... 24,502 2,494 - 26,996
--------- ----------- ----------- ---------
Expenses:
Community operations.......... 16,947 1,472 - 18,419
General and administrative.... 2,207 293 - 2,500
Depreciation and amortization. 1,169 196 (196) (d)
308 (d) 1,477
Rent.......................... 6,843 - - 6,843
--------- ----------- ----------- ---------
Total operating expenses... 27,166 1,961 112 29,239
--------- ----------- ----------- ---------
Income (loss) from
operations............... (2,664) 533 (112) (2,243)
--------- ----------- ----------- ---------
Other income (expense):
Interest expense, related
party....................... - (20) 20 (e) -
Interest expense, net......... (728) (360) 360 (e)
(871) (e) (1,599)
Other, net.................... (180) - - (180)
--------- ----------- ----------- ---------
Net other expense...... (908) (380) (491) (1,779)
--------- ----------- ----------- ---------
Net income (loss)...... $(3,572) $ 153 $ (603) $(4,022)
========= =========== =========== =========
Net loss per share............ $ (0.32) $ (0.37)
========= =========
Weighted average number of
common shares outstanding... 11,000 11,000
========= =========
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
14
EMERITUS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated
balance sheet as of December 31, 1996 assumes that the La
Casa Acquisition occurred on December 31, 1996.
The accompanying unaudited pro forma consolidated
statements of operations for the year ended December 31, 1996
and three months ended March 31, 1997 gives effect to the La
Casa Acquisition as if such transaction had occurred on
January 1, 1996.
(2) PRO FORMA ADJUSTMENTS
(a) To record the La Casa Acquisition pursuant to which
Emeritus acquired all the common stock of the La Casa
Communities, excluding all of the Communities liabilities and
assets other than property and equipment which were retained
by the previous stockholders, for a purchase price of $33.0
million financed through borrowings with deferred financing
costs of $390,000. The transaction was accounted for under
the purchase method of accounting and accordingly, the
purchase price was allocated to the net assets acquired based
upon their relative fair market values. Purchase accounting
adjustments include; (i) an increase in property and
equipment of $14,934,000 and (ii) the retention of net
liabilities by stockholders in the amount of $18,271,000; and
(iii) the elimination of La Casa equity prior to the
acquisition, including common stock and additional paid-in
capital of $1,184,000 and accumulated deficit of $1,779,000.
(b) To record depreciation for the La Casa Communities
in the amount of $1,233,000 for the year ended December 31,
1996 as if they had been acquired on January 1, 1996, and the
elimination of historical depreciation and amortization in
the amount of $791,000 for the year ended December 31, 1996.
(c) To record interest expense and amortization of
deferred financing costs for the La Casa Communities in the
amount of $3,512,000 for the year ended December 31, 1996
relating to acquisition debt of $26.0 million bearing
interest at LIBOR plus 2.50% and $7.0 million bearing
interest at 18% as if they had been incurred on January 1,
1996, and the elimination of historical interest expense in
the amount of $1,568,000 for the year ended December 31,
1996, related to the debt retained by previous stockholders.
(d) To record depreciation for the La Casa Communities
in the amount of $308,000 for the three months ended March
31, 1997 as if they had been acquired on January 1, 1996, and
the elimination of historical depreciation and amortization
in the amount of $196,000 for the three months ended March
31, 1997.
(e) To record interest expense and amortization of
deferred financing costs for the La Casa Communities in the
amount of $871,000 for the three months ended March 31, 1996
relating to acquisition debt of $26.0 million bearing
interest at LIBOR plus 2.50% and $7.0 million bearing
interest at 18% as if they had been incurred on January 1,
1997, and the elimination of historical interest expense in
the amount of $380,000 for the three months ended March 31,
1997, related to the debt retained by previous stockholders.
15
(c) Exhibits.
10.1 * Stock Purchase Agreement dated September 30, 1996
between Wayne Voegele, Jerome Lang, Ronald Carlson,
Thomas Stanford, Frank McMillan, Lonnie Carlson, and
Carla Holweger ("Seller") and the registrant
("Purchaser") with respect to La Casa Grande.
10.2 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to La Case Grande.
10.3 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to River Oaks.
10.4 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to River Oaks.
10.5 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to Stanford Centre.
10.6 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to Stanford Centre.
10.7 Term Loan Agreement dated May 1, 1997 in the amount
of $26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.8 Promissory note dated May 1, 1997 in the amount of
$26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.9 Promissory Note dated May 1, 1997 in the amount of
$7,000,000 between Emeritus Properties V, Inc.,
("Borrower") and High Yield Partners LLC, ("Lender").
10.10 Credit Agreement dated May 1, 1997 between Emeritus
Properties V, Inc. and High Yield Partners LLC.
10.11 Guaranty dated May 1, 1997 between the registrant
("Guarantor") Emeritus Properties V, Inc., ("Debtor")
and High Yield Partners LLC ("Lender")
23.1 Consent of KPMG Peat Marwick LLP.
* Previously filed.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: July 14, 1997
EMERITUS CORPORATION
(Registrant)
/s/ Kelly J. Price
--------------------------
Kelly J. Price, Chief Financial Officer and
Vice President, Finance
/s/ James S. Keller
--------------------------
James S. Keller, Controller
(Principal Accounting Officer)
17
EXHIBIT INDEX
Exhibit No. Description
10.1 * Stock Purchase Agreement dated September 30, 1996
between Wayne Voegele, Jerome Lang, Ronald Carlson,
Thomas Stanford, Frank McMillan, Lonnie Carlson, and
Carla Holweger ("Seller") and the registrant
("Purchaser") with respect to La Casa Grande.
10.2 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to La Case Grande.
10.3 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to River Oaks.
10.4 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to River Oaks.
10.5 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to Stanford Centre.
10.6 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to Stanford Centre.
10.7 Term Loan Agreement dated May 1, 1997 in the amount
of $26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.8 Promissory note dated May 1, 1997 in the amount of
$26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.9 Promissory Note dated May 1, 1997 in the amount of
$7,000,000 between Emeritus Properties V, Inc.,
("Borrower") and High Yield Partners LLC, ("Lender").
10.10 Credit Agreement dated May 1, 1997 between Emeritus
Properties V, Inc. and High Yield Partners LLC.
10.11 Guaranty dated May 1, 1997 between the registrant
("Guarantor") Emeritus Properties V, Inc., ("Debtor")
and High Yield Partners LLC ("Lender")
23.1 Consent of KPMG Peat Marwick LLP.
* Previously filed.
18