Emeritus Announces Operating Results for Fourth Quarter and Full Year 2012
SEATTLE--(BUSINESS WIRE)--
Emeritus Corporation (NYSE: ESC), a national provider of senior living
services, today announced its fourth quarter and full year 2012 results.
Operating Summary for the Full Year 2012 Compared to the Full Year
2011
Community and management fee revenue increased $133.3 million, or
10.6%, to $1.39 billion
Adjusted EBITDAR increased $43.3 million, or 12.5%, to $389.8 million
CFFO per share, as adjusted, increased 13.4% to $1.69
Total Portfolio Same Community (as defined below) average monthly
revenue per occupied unit increased 1.5% to $3,924
Total Portfolio Same Community average occupancy increased 100 basis
points to 86.4%
Total Portfolio Same Community operating margin increased 100 basis
points to 32.2%
Operating Summary for Fourth Quarter 2012 Compared to Fourth
Quarter 2011
Community and management fee revenue increased $88.0 million, or
27.1%, to $412.1 million
Adjusted EBITDAR increased $27.7 million, or 31.3%, to $116.2 million
CFFO per share, as adjusted, increased 25.0% to $0.40
Total Portfolio Same Community average monthly revenue per occupied
unit increased 3.0% to $3,972
Total Portfolio Same Community average occupancy increased 50 basis
points to 86.7%
Total Portfolio Same Community operating margin increased 240 basis
points to 33.7%
Granger Cobb, President and Chief Executive Officer commented, “2012 was
a year of significant accomplishments for Emeritus – we experienced
progressive rate growth throughout the year, which drove compelling CFFO
growth of over 13%. In addition, we invested to a greater degree in
capital improvements to our communities and leadership training
throughout the organization. These investments combined with the
significant strategic transactions completed in the fourth quarter have
positioned us for even stronger growth in the future as evidenced by our
expectation to double our CFFO growth rate in 2013.”
2012 Annual Consolidated Results
Community and management fee revenues increased $133.3 million, or
10.6%, to $1.39 billion in 2012, compared to the prior year. The
increase in revenues was partially due to the Company’s fourth quarter
2012 lease and ownership acquisition of 138 communities that we
previously managed for a joint venture comprised of Emeritus, affiliates
of Blackstone Real Estate Partners VI (“Blackstone”), certain former
tenants in common, and an investment fund affiliated with Dan Baty, the
Company’s chairman (the “Blackstone JV”). The increase in revenues was
also attributable to the Company’s fourth quarter 2012 acquisition of
Nurse on Call, Inc. (“NOC”) and 2011 mid-year acquisitions that were
included in consolidated results for a full year in 2012. Revenues for
those consolidated communities we have continuously operated from
January 1, 2011 to December 31, 2012 (“Consolidated Same Community”)
increased $19.5 million between the periods, driven primarily by rate
growth. As of December 31, 2012, the consolidated Emeritus portfolio
consisted of 461 communities, of which 293 communities are included in
the Company’s definition of Consolidated Same Community.
Total average monthly revenue per occupied unit for the consolidated
portfolio increased 1.6% to $4,127 in 2012 compared to 2011. Over the
same period, total average occupancy for the consolidated portfolio
increased 50 basis points to 86.8%. These increases in rate and
occupancy were due primarily to improvements in the Consolidated Same
Community portfolio, which represented over 80% of the average
consolidated communities during the year. As a result of the Blackstone
JV transaction, we added 129 leased communities and nine owned
communities to our consolidated portfolio beginning in the fourth
quarter of 2012, and four remaining Blackstone JV communities are
expected to be added in 2013 as leased communities. All but five of
these communities have been managed by Emeritus since the second half of
2010. For all communities continuously under Emeritus management from
January 1, 2011 to December 31, 2012 (“Total Portfolio Same Community”),
monthly revenue per occupied unit increased 1.5% from 2011 to 2012, and
average occupancy improved by 100 basis points over the same period.
Community operating expenses increased $72.5 million to $919.6 million
in 2012 compared to $847.2 million in 2011, due primarily to
acquisition-related activities (net of dispositions) between the
periods. Community operating expenses in the Consolidated Same Community
portfolio were held to an increase of 0.8%, or $6.4 million; normal
inflationary and certain other expense increases were offset somewhat by
lower utilities expenses and improved efficiencies in the Company’s
healthcare self-insurance program.
Community operating income increased $63.9 million, or 16.5%, to $450.4
million in 2012, compared to the prior year. Community operating income
margin increased 160 basis points to 32.9% in 2012, compared to 31.3% in
the prior-year period, reflecting improved occupancy and rate, combined
with effective expense controls, as well as decreased self-insurance
reserve adjustments in 2012. Total Portfolio Same Community operating
margin increased 100 basis points to 32.2% in 2012, compared to 31.2% in
2011; the larger percentage increase in this total portfolio was due to
accelerated improved performance in the former Blackstone JV communities.
Excluding noncash stock-based compensation expenses, senior living
general and administrative expenses as a percent of total operated
senior living community revenue (which includes revenues of managed
communities but excludes reimbursed costs of managed communities and
ancillary services revenues) was held flat at 4.8% for 2012, consistent
with the prior year.
Adjusted EBITDAR in 2012 increased $43.3 million, or 12.5%, to $389.8
million, with the increase primarily driven by the increase in community
operating income. Cash from facility operations (CFFO) per share, as
adjusted, increased 13.4% to $1.69 per share, compared to $1.49 per
share in 2011.
2012 Fourth Quarter Consolidated Results
Community and management fee revenues increased $88.0 million, or 27.1%,
to $412.1 million in the fourth quarter of 2012, compared to $324.1
million in the fourth quarter of 2011. The increase in revenues resulted
primarily from the Company’s fourth quarter 2012 lease and ownership
acquisition of 138 communities that we previously managed for the
Blackstone JV and the acquisition of NOC. Additionally, Consolidated
Same Community revenues increased $9.4 million in the fourth quarter of
2012, primarily as a result of improved rate per unit.
Total average monthly revenue per occupied unit for the consolidated
portfolio increased to $4,077 in the fourth quarter of 2012 from $4,073
in the fourth quarter of 2011. The consolidated rate increase was
somewhat muted by the acquisition of the Blackstone JV communities,
which as a group has lower average rates than the legacy Emeritus
communities. In the fourth quarter of 2012, total average occupancy for
the consolidated portfolio increased 20 basis points to 86.8% compared
to 86.6% in the fourth quarter of 2011. The increase was due primarily
to improved occupancy in the Consolidated Same Community portfolio.
Total Portfolio Same Community monthly revenue per occupied unit
increased 3.0% in the fourth quarter of 2012, compared to the fourth
quarter of the prior year, and average occupancy improved by 60 basis
points over the same period.
Community operating expenses increased $56.3 million to $275.7 million
in the fourth quarter of 2012 compared to $219.4 million in the 2011
period, due primarily to acquisition-related activities. Community
operating expenses in the Consolidated Same Community portfolio were
held to an increase of 0.5%, or $1.0 million; normal inflationary and
certain other expense increases were offset somewhat by improved
efficiencies in the Company’s healthcare self-insurance program as well
as lower bad debt expense. The fourth quarter of 2012 included $1.5
million in non-recurring legal settlement costs.
Community operating income increased $34.3 million, or 34.4%, to $133.9
million in the fourth quarter of 2012, compared to the fourth quarter of
2011. Community operating income margin increased 150 basis points to
32.7% in the fourth quarter, compared to 31.2% in the prior-year period,
reflecting improved occupancy and rate, combined with effective expense
controls. Total Portfolio Same Community operating margin increased 240
basis points to 33.7% in 2012, compared to 31.3% in 2011; the larger
percentage increase in this total portfolio was due to accelerated
improved performance in the former Blackstone JV communities.
Excluding noncash stock-based compensation expenses, senior living
general and administrative expenses as a percent of total operated
senior living community revenue was 5.0% in the fourth quarter of 2012,
compared to 4.9% in the fourth quarter of 2011.
For the fourth quarter of 2012, Adjusted EBITDAR increased $27.7
million, or 31.3%, to $116.2 million, with the increase primarily driven
by the increase in community operating income. CFFO per share, as
adjusted, increased 25.0% to $0.40 per share, compared to $0.32 per
share in the fourth quarter of 2011.
2013 Guidance Update
The Company provides guidance for the Company’s existing portfolio and
excludes 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
CFFO, as adjusted, in the range of $2.10 to $2.20 per share
In addition to annual guidance, the Company expects CFFO, as adjusted,
in the first quarter of 2013 to be in the range of $0.41 to $0.45 per
share.
Recent Developments
In February 2013, NOC borrowed $50.0 million to finance that company’s
expansion and refinance certain existing indebtedness of Emeritus. The
loan has a four-year term, and the interest rate is equal to LIBOR plus
4.75% initially, decreasing to 4.25% and 3.75% over the term, depending
upon the ratio of the principal balance to NOC’s EBITDA. Principal
reductions of $1.875 million are due quarterly.
Webcast and Conference Call
The Company will host a webcast and conference call on Thursday,
February 28, 2013, at 5:00 P.M. Eastern Time to discuss its financial
results for the fourth quarter of 2012.
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, February 28, 2013, until midnight Eastern
Time on Thursday, March 7, 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 408366.
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 Annual Report on Form 10-K for the year ended December 31,
2012, 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 and year ended December 31, 2012 and
2011 (in thousands):
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Net loss
$
(27,525
)
$
(27,976
)
$
(85,075
)
$
(72,263
)
Depreciation and amortization
42,605
32,307
140,629
122,372
Interest income
(105
)
(74
)
(408
)
(429
)
Interest expense
60,862
41,418
176,945
157,262
Net equity losses for unconsolidated joint ventures
76
1,829
576
3,081
Provision for income taxes
(2,078
)
362
(1,158
)
1,019
Loss from discontinued operations
–
3,915
7,705
21,570
Amortization of above/below market rents
1,309
1,754
6,299
7,532
Amortization of deferred gains
(264
)
(274
)
(1,046
)
(1,125
)
Stock-based compensation
2,727
1,224
11,046
8,106
Change in fair value of derivative financial
instruments
29
(1,045
)
948
(3,081
)
Deferred revenue
(620
)
316
(1,375
)
2,601
Deferred straight-line rent
2,859
1,663
6,080
8,792
Contract buyout costs
–
1,586
–
7,842
Impairment of long-lived assets
–
–
2,135
–
Gain on sale of assets
–
(73
)
–
(73
)
Gain on sale of investments
–
–
–
(1,569
)
Acquisition gain
–
–
–
(42,110
)
Acquisition, development, and financing expenses
3,337
(895
)
6,109
2,403
Self-insurance reserve adjustments
3,560
4,133
5,996
15,911
Adjusted EBITDA
86,772
60,170
275,406
237,841
Community lease expense, net
29,446
28,321
114,382
108,627
Adjusted EBITDAR
$
116,218
$
88,491
$
389,788
$
346,468
The following table shows the reconciliation of net cash provided by
operating activities to CFFO, and CFFO as adjusted for transaction
costs, unusual income tax items, and self-insurance reserves related to
prior years (in thousands):
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Net cash provided by operating activities
$
5,937
$
10,349
$
116,558
$
74,102
Changes in operating assets and liabilities, net
17,005
6,420
(14,735
)
(3,812
)
Contract buyout costs
–
1,586
–
7,842
Repayment of capital lease and financing obligations
(5,432
)
(3,793
)
(17,882
)
(14,249
)
Recurring capital expenditures
(9,303
)
(3,667
)
(23,947
)
(17,299
)
Distributions from unconsolidated joint ventures
161
55
1,177
1,519
Cash From Facility Operations
8,368
10,950
61,171
48,103
Transaction costs
3,030
(845
)
5,510
1,984
Unusual income tax items (1)
3,048
–
3,048
–
Self-insurance reserve adjustments, prior years
3,560
4,133
5,996
15,911
Cash From Facility Operations, as adjusted
$
18,006
$
14,238
$
75,725
$
65,998
CFFO per share
$
0.19
$
0.25
$
1.37
$
1.09
CFFO per share, as adjusted
0.40
0.32
1.69
1.49
(1) Consists of state tax expense related to the Company’s portion of
taxable gain on the sale of the Blackstone JV communities
Recurring capital expenditures are actual costs incurred to maintain the
Company’s communities for their intended business purpose and exclude
expenditures for acquisitions, development, expansions and general
corporate purposes.
For a more detailed understanding of Emeritus, please refer to the
Company’s Annual Report on Form 10-K for the year ended December 31,
2012, 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
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share data)
ASSETS
December 31,
December 31,
2012
2011
Current Assets:
Cash and cash equivalents
$
59,795
$
43,670
Short-term investments
4,910
3,585
Trade accounts receivable, net of allowance of $7,179 and $2,294
53,138
26,195
Other receivables
38,607
16,117
Tax, insurance, and maintenance escrows
23,813
20,501
Prepaid insurance expense
51,742
36,020
Deferred tax asset
33,781
19,934
Other prepaid expenses and current assets
12,185
8,140
Total current assets
277,971
174,162
Investments in unconsolidated joint ventures
2,513
15,428
Property and equipment, net of accumulated depreciation of $533,710
and $407,952
4,011,884
2,355,425
Restricted deposits
23,226
16,427
Goodwill
186,756
118,725
Other intangible assets, net of accumulated amortization of $47,547
and $48,722
131,971
100,873
Other assets, net
26,429
29,288
Total assets
$
4,660,750
$
2,810,328
LIABILITIES, SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST
Current Liabilities:
Current portion of long-term debt
$
49,381
$
74,175
Current portion of capital lease and financing obligations
25,736
17,004
Trade accounts payable
14,244
7,959
Accrued employee compensation and benefits
103,398
70,936
Accrued interest
8,467
9,061
Accrued real estate taxes
16,432
11,791
Accrued professional and general liability
50,752
24,525
Other accrued expenses
30,291
19,477
Deferred revenue
22,417
16,348
Unearned rental income
30,552
22,965
Total current liabilities
351,670
274,241
Long-term debt obligations, less current portion
1,558,936
1,528,710
Capital lease and financing obligations, less current portion
2,384,857
619,088
Deferred gain on sale of communities
3,743
4,789
Deferred straight-line rent
63,920
61,481
Other long-term liabilities
72,795
39,283
Total liabilities
4,435,921
2,527,592
Redeemable noncontrolling interest
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
outstanding 45,814,988 and 44,989,861 shares
5
4
Additional paid-in capital
839,511
822,345
Accumulated deficit
(628,093
)
(543,249
)
Total Emeritus Corporation shareholders' equity
211,423
279,100
Noncontrolling interest
3,301
3,636
Total shareholders' equity
214,724
282,736
Total liabilities, shareholders' equity, and noncontrolling interest
$
4,660,750
$
2,810,328
EMERITUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Revenues:
Community revenue
$
409,594
$
318,986
$
1,370,019
$
1,233,665
Management fees
2,519
5,159
18,009
21,105
Community and management fee revenue
412,113
324,145
1,388,028
1,254,770
Reimbursed costs incurred on behalf of managed communities
25,450
52,230
180,048
217,853
Total operating revenues
437,563
376,375
1,568,076
1,472,623
Expenses:
Community operations
275,648
219,356
919,635
847,167
General and administrative
26,133
22,163
95,625
88,767
Transaction costs
3,030
741
5,510
9,826
Impairments of long-lived assets
–
–
2,135
–
Depreciation and amortization
42,605
32,306
140,629
122,372
Community leases
33,614
31,738
126,761
124,951
Costs incurred on behalf of managed communities
25,450
52,230
180,048
217,853
Total operating expenses
406,480
358,534
1,470,343
1,410,936
Operating income from continuing operations
31,083
17,841
97,733
61,687
Other income (expense):
Interest income
105
74
408
429
Interest expense
(60,862
)
(41,418
)
(176,945
)
(157,262
)
Change in fair value of derivative financial instruments
(29
)
1,045
(948
)
3,081
Net equity losses for unconsolidated joint ventures
(76
)
(1,829
)
(576
)
(3,081
)
Acquisition gain
–
–
–
42,110
Other, net
176
588
1,800
3,362
Net other expense
(60,686
)
(41,540
)
(176,261
)
(111,361
)
Loss from continuing operations before income taxes
(29,603
)
(23,699
)
(78,528
)
(49,674
)
Benefit of (provision for) income taxes
2,078
(362
)
1,158
(1,019
)
Loss from continuing operations
(27,525
)
(24,061
)
(77,370
)
(50,693
)
Loss from discontinued operations
–
(3,915
)
(7,705
)
(21,570
)
Net loss
(27,525
)
(27,976
)
(85,075
)
(72,263
)
Net loss attributable to the noncontrolling interests
33
39
231
354
Net loss attributable to Emeritus Corporation
common shareholders
$
(27,492
)
$
(27,937
)
$
(84,844
)
$
(71,909
)
Basic and diluted loss per common share attributable to
Emeritus Corporation common shareholders:
Continuing operations
$
(0.61
)
$
(0.54
)
$
(1.73
)
$
(1.14
)
Discontinued operations
-
(0.09
)
(0.17
)
(0.49
)
$
(0.61
)
$
(0.63
)
$
(1.90
)
$
(1.63
)
Weighted average common shares outstanding: basic and diluted
44,888
44,437
44,680
44,312
EMERITUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
Year Ended December 31,
2012
2011
Cash flows from operating activities:
Net loss
$
(85,075
)
$
(72,263
)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization
140,629
122,372
Amortization of above/below market rents
6,299
7,532
Amortization of deferred gains
(1,046
)
(1,125
)
Acquisition gain
–
(42,110
)
Net loss on sale of assets
527
902
Impairment of long-lived assets
8,430
17,947
Loss on early extinguishment of debt
866
1,978
Gain on sale of investments
–
(1,569
)
Amortization of loan fees
3,219
3,283
Allowance for doubtful receivables
9,346
8,090
Equity investment losses
576
3,081
Stock-based compensation
11,046
8,106
Change in fair value of derivative financial instruments
948
(3,081
)
Deferred straight-line rent
6,080
8,792
Deferred revenue
(1,375
)
2,601
Other
1,353
5,754
Changes in operating assets and liabilities:
Trade accounts receivable and other receivables
(13,704
)
(14,406
)
Prepaid expenses
(14,625
)
(5,106
)
Other assets
(1,281
)
(3,592
)
Trade accounts payable
2,149
(793
)
Other accrued expenses and current liabilities
41,878
25,140
Security deposits and other long-term liabilities
318
2,569
Net cash provided by operating activities
116,558
74,102
Cash flows from investing activities:
Purchase of property and equipment
(37,212
)
(33,340
)
Acquisitions, net of cash acquired
(103,784
)
(180,228
)
Deposits
(409
)
525
Proceeds from the sale of assets
15,599
40,947
Lease acquisition costs
(711
)
(368
)
Advances to affiliates and other managed communities, net
(1,108
)
(2,224
)
Distributions from unconsolidated joint ventures, net
90,064
2,028
Net cash used in investing activities
(37,561
)
(172,660
)
Cash flows from financing activities:
Sale of stock, net
5,331
2,804
Contribution from (distribution to) non-controlling interest
–
(6,668
)
Decrease (increase) in restricted deposits
(180
)
(2,092
)
Purchase of interest rate cap contract
–
(1,590
)
Debt issuance and other financing costs
(1,424
)
(10,063
)
Proceeds from long-term borrowings and financings
21,783
297,991
Repayment of long-term borrowings and financings
(70,500
)
(234,029
)
Repayment of capital lease and financing obligations
(17,882
)
(14,249
)
Net cash provided by (used in) financing activities
(62,872
)
32,104
Net increase (decrease) in cash and cash equivalents
16,125
(66,454
)
Cash and cash equivalents at the beginning of the year
43,670
110,124
Cash and cash equivalents at the end of the year
$
59,795
$
43,670
Emeritus Corporation
Cash Lease and Interest Expense
Three Months Ended December 31, 2012
(unaudited)
(In thousands)
Projected
Actual
Range
Q4-12
Q1-2013
Facility lease expense - GAAP
$
33,614
$
31,000
—
$
32,000
Less:
Straight-line rents (1)
(2,859
)
(300
)
—
(400
)
Above/below market rents
(1,309
)
(1,200
)
—
(1,300
)
Plus:
Capital lease interest - cash
34,994
46,000
—
47,000
Capital lease interest - noncash
(4,674
)
(7,000
)
—
(8,000
)
Capital lease principal
5,432
5,500
—
6,500
Facility lease expense - CASH
$
65,198
$
74,000
—
$
75,800
Interest expense - GAAP
$
60,861
$
74,000
—
$
75,000
Less:
Capital lease interest
(34,994
)
(46,500
)
—
(47,000
)
Loan fee amortization and other
(784
)
(700
)
—
(800
)
Interest expense - CASH
$
25,083
$
26,800
—
$
27,200
Depreciation - owned assets
$
20,119
$
18,000
—
$
19,000
Depreciation - capital leases
19,832
27,000
—
28,500
Amortization - intangible assets
2,654
1,500
—
2,000
Total depreciation and amortization
$
42,605
$
46,500
—
$
49,500
(1) Fourth quarter 2012 expense includes a $2.3 million noncash charge
related to a residual value guarantee in a lease.
EMERITUS CORPORATION
Consolidated Supplemental Financial Information
For the Quarters Ended
(unaudited)(Dollars in thousands, except non-financial
and per-unit data)
Non-Financial Data:
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Average consolidated communities
332.8
328.0
327.3
325.3
414.3
Average available units
30,096
29,667
29,629
29,513
36,672
Average occupied units
26,059
25,694
25,603
25,719
31,482
Average occupancy
86.6
%
86.6
%
86.4
%
87.1
%
86.8
%
Average monthly revenue per occupied unit
$
4,073
$
4,115
$
4,140
$
4,189
$
4,077
Calendar days
92
91
91
92
92
Community revenues:
Community revenues
$
313,613
$
312,724
$
314,170
$
319,556
$
406,044
Move-in fees
5,751
5,816
5,816
5,753
5,503
Move-in incentives
(378
)
(617
)
(1,358
)
(1,434
)
(1,953
)
Total community revenues
$
318,986
$
317,923
$
318,628
$
323,874
$
409,594
Community operating expenses:
Salaries and wages - regular and overtime
$
100,884
$
98,277
$
98,030
$
99,456
$
130,116
Average daily salary and wages
$
1,097
$
1,080
$
1,077
$
1,081
$
1,414
Average daily wages per occupied unit
$
42.08
$
42.03
$
42.08
$
42.03
$
44.42
Payroll taxes and employee benefits
$
32,347
$
34,839
$
33,203
$
32,145
$
38,376
Percent of salaries and wages
32.1
%
35.4
%
33.9
%
32.3
%
29.5
%
Prior year self-insurance reserve adjustments
$
4,133
$
397
$
1,849
$
190
$
3,560
Utilities
$
12,586
$
13,532
$
12,141
$
14,805
$
15,337
Average monthly cost per occupied unit
$
161
$
176
$
158
$
192
$
161
Facility maintenance and repairs
$
8,178
$
7,877
$
8,427
$
8,644
$
9,835
Average monthly cost per occupied unit
$
105
$
102
$
110
$
112
$
103
All other community operating expenses
$
61,227
$
58,551
$
59,921
$
61,703
$
78,424
Average monthly cost per occupied unit
$
783
$
760
$
780
$
780
$
821
Total community operating expenses
$
219,355
$
213,473
$
213,571
$
216,943
$
275,648
Community operating income
$
99,631
$
104,450
$
105,057
$
106,931
$
133,946
Operating income margin
31.2
%
32.9
%
33.0
%
33.0
%
32.7
%
EMERITUS CORPORATION
Selected Consolidated and Same Community Information
For the Quarters Ended
(unaudited)
(Community revenue and operating expense in thousands)
Press Release $ESC Emeritus Corp.
SEATTLE--(BUSINESS WIRE)-- Emeritus Corporation (NYSE: ESC), a national provider of senior living services, today announced its fourth quarter and full year 2012 results.
Operating Summary for the Full Year 2012 Compared to the Full Year 2011
Operating Summary for Fourth Quarter 2012 Compared to Fourth Quarter 2011
Granger Cobb, President and Chief Executive Officer commented, “2012 was a year of significant accomplishments for Emeritus – we experienced progressive rate growth throughout the year, which drove compelling CFFO growth of over 13%. In addition, we invested to a greater degree in capital improvements to our communities and leadership training throughout the organization. These investments combined with the significant strategic transactions completed in the fourth quarter have positioned us for even stronger growth in the future as evidenced by our expectation to double our CFFO growth rate in 2013.”
2012 Annual Consolidated Results
Community and management fee revenues increased $133.3 million, or 10.6%, to $1.39 billion in 2012, compared to the prior year. The increase in revenues was partially due to the Company’s fourth quarter 2012 lease and ownership acquisition of 138 communities that we previously managed for a joint venture comprised of Emeritus, affiliates of Blackstone Real Estate Partners VI (“Blackstone”), certain former tenants in common, and an investment fund affiliated with Dan Baty, the Company’s chairman (the “Blackstone JV”). The increase in revenues was also attributable to the Company’s fourth quarter 2012 acquisition of Nurse on Call, Inc. (“NOC”) and 2011 mid-year acquisitions that were included in consolidated results for a full year in 2012. Revenues for those consolidated communities we have continuously operated from January 1, 2011 to December 31, 2012 (“Consolidated Same Community”) increased $19.5 million between the periods, driven primarily by rate growth. As of December 31, 2012, the consolidated Emeritus portfolio consisted of 461 communities, of which 293 communities are included in the Company’s definition of Consolidated Same Community.
Total average monthly revenue per occupied unit for the consolidated portfolio increased 1.6% to $4,127 in 2012 compared to 2011. Over the same period, total average occupancy for the consolidated portfolio increased 50 basis points to 86.8%. These increases in rate and occupancy were due primarily to improvements in the Consolidated Same Community portfolio, which represented over 80% of the average consolidated communities during the year. As a result of the Blackstone JV transaction, we added 129 leased communities and nine owned communities to our consolidated portfolio beginning in the fourth quarter of 2012, and four remaining Blackstone JV communities are expected to be added in 2013 as leased communities. All but five of these communities have been managed by Emeritus since the second half of 2010. For all communities continuously under Emeritus management from January 1, 2011 to December 31, 2012 (“Total Portfolio Same Community”), monthly revenue per occupied unit increased 1.5% from 2011 to 2012, and average occupancy improved by 100 basis points over the same period.
Community operating expenses increased $72.5 million to $919.6 million in 2012 compared to $847.2 million in 2011, due primarily to acquisition-related activities (net of dispositions) between the periods. Community operating expenses in the Consolidated Same Community portfolio were held to an increase of 0.8%, or $6.4 million; normal inflationary and certain other expense increases were offset somewhat by lower utilities expenses and improved efficiencies in the Company’s healthcare self-insurance program.
Community operating income increased $63.9 million, or 16.5%, to $450.4 million in 2012, compared to the prior year. Community operating income margin increased 160 basis points to 32.9% in 2012, compared to 31.3% in the prior-year period, reflecting improved occupancy and rate, combined with effective expense controls, as well as decreased self-insurance reserve adjustments in 2012. Total Portfolio Same Community operating margin increased 100 basis points to 32.2% in 2012, compared to 31.2% in 2011; the larger percentage increase in this total portfolio was due to accelerated improved performance in the former Blackstone JV communities.
Excluding noncash stock-based compensation expenses, senior living general and administrative expenses as a percent of total operated senior living community revenue (which includes revenues of managed communities but excludes reimbursed costs of managed communities and ancillary services revenues) was held flat at 4.8% for 2012, consistent with the prior year.
Adjusted EBITDAR in 2012 increased $43.3 million, or 12.5%, to $389.8 million, with the increase primarily driven by the increase in community operating income. Cash from facility operations (CFFO) per share, as adjusted, increased 13.4% to $1.69 per share, compared to $1.49 per share in 2011.
2012 Fourth Quarter Consolidated Results
Community and management fee revenues increased $88.0 million, or 27.1%, to $412.1 million in the fourth quarter of 2012, compared to $324.1 million in the fourth quarter of 2011. The increase in revenues resulted primarily from the Company’s fourth quarter 2012 lease and ownership acquisition of 138 communities that we previously managed for the Blackstone JV and the acquisition of NOC. Additionally, Consolidated Same Community revenues increased $9.4 million in the fourth quarter of 2012, primarily as a result of improved rate per unit.
Total average monthly revenue per occupied unit for the consolidated portfolio increased to $4,077 in the fourth quarter of 2012 from $4,073 in the fourth quarter of 2011. The consolidated rate increase was somewhat muted by the acquisition of the Blackstone JV communities, which as a group has lower average rates than the legacy Emeritus communities. In the fourth quarter of 2012, total average occupancy for the consolidated portfolio increased 20 basis points to 86.8% compared to 86.6% in the fourth quarter of 2011. The increase was due primarily to improved occupancy in the Consolidated Same Community portfolio. Total Portfolio Same Community monthly revenue per occupied unit increased 3.0% in the fourth quarter of 2012, compared to the fourth quarter of the prior year, and average occupancy improved by 60 basis points over the same period.
Community operating expenses increased $56.3 million to $275.7 million in the fourth quarter of 2012 compared to $219.4 million in the 2011 period, due primarily to acquisition-related activities. Community operating expenses in the Consolidated Same Community portfolio were held to an increase of 0.5%, or $1.0 million; normal inflationary and certain other expense increases were offset somewhat by improved efficiencies in the Company’s healthcare self-insurance program as well as lower bad debt expense. The fourth quarter of 2012 included $1.5 million in non-recurring legal settlement costs.
Community operating income increased $34.3 million, or 34.4%, to $133.9 million in the fourth quarter of 2012, compared to the fourth quarter of 2011. Community operating income margin increased 150 basis points to 32.7% in the fourth quarter, compared to 31.2% in the prior-year period, reflecting improved occupancy and rate, combined with effective expense controls. Total Portfolio Same Community operating margin increased 240 basis points to 33.7% in 2012, compared to 31.3% in 2011; the larger percentage increase in this total portfolio was due to accelerated improved performance in the former Blackstone JV communities.
Excluding noncash stock-based compensation expenses, senior living general and administrative expenses as a percent of total operated senior living community revenue was 5.0% in the fourth quarter of 2012, compared to 4.9% in the fourth quarter of 2011.
For the fourth quarter of 2012, Adjusted EBITDAR increased $27.7 million, or 31.3%, to $116.2 million, with the increase primarily driven by the increase in community operating income. CFFO per share, as adjusted, increased 25.0% to $0.40 per share, compared to $0.32 per share in the fourth quarter of 2011.
2013 Guidance Update
The Company provides guidance for the Company’s existing portfolio and excludes future acquisitions and dispositions.
The Company’s guidance for 2013 is as follows:
In addition to annual guidance, the Company expects CFFO, as adjusted, in the first quarter of 2013 to be in the range of $0.41 to $0.45 per share.
Recent Developments
In February 2013, NOC borrowed $50.0 million to finance that company’s expansion and refinance certain existing indebtedness of Emeritus. The loan has a four-year term, and the interest rate is equal to LIBOR plus 4.75% initially, decreasing to 4.25% and 3.75% over the term, depending upon the ratio of the principal balance to NOC’s EBITDA. Principal reductions of $1.875 million are due quarterly.
Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, February 28, 2013, at 5:00 P.M. Eastern Time to discuss its financial results for the fourth quarter of 2012.
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, February 28, 2013, until midnight Eastern Time on Thursday, March 7, 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 408366.
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 Annual Report on Form 10-K for the year ended December 31, 2012, 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 and year ended December 31, 2012 and 2011 (in thousands):
The following table shows the reconciliation of net cash provided by operating activities to CFFO, and CFFO as adjusted for transaction costs, unusual income tax items, and self-insurance reserves related to prior years (in thousands):
(845
)
14,238
0.32
(1) Consists of state tax expense related to the Company’s portion of taxable gain on the sale of the Blackstone JV communities
Recurring capital expenditures are actual costs incurred to maintain the Company’s communities for their intended business purpose and exclude expenditures for acquisitions, development, expansions and general corporate purposes.
For a more detailed understanding of Emeritus, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, 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
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share data)
EMERITUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
EMERITUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
(1) Fourth quarter 2012 expense includes a $2.3 million noncash charge related to a residual value guarantee in a lease.
EMERITUS CORPORATION
Consolidated Supplemental Financial Information
For the Quarters Ended
(unaudited) (Dollars in thousands, except non-financial and per-unit data)
Non-Financial Data:
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Community revenues:
Community operating expenses:
EMERITUS CORPORATION
Selected Consolidated and Same Community Information
For the Quarters Ended
(unaudited)
(Community revenue and operating expense in thousands)
Consolidated:
Consolidated Same Community:
Total Portfolio Same Community:
Consolidated:
Consolidated Same Community:
Total Portfolio Same Community:
Emeritus
Investor Relations:
206-298-2909
or
Media:
Liz Brady, 646-277-1226
Liz.brady@icrinc.com
Sari Martin, 203-682-8345
Sari.martin@icrinc.com
Source: Emeritus Corporation