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Emeritus Announces Operating Results for Third Quarter 2009
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Emeritus Corporation (NYSE: ESC), a national provider of assisted living and Alzheimer’s and related dementia care services to senior citizens, today announced its third quarter 2009 results.
Third Quarter 2009 Operating Highlights
- Same store occupancy increased 110 basis points to 88.2% from the third quarter 2008, and increased 50 basis points sequentially;
- Total occupancy increased 60 basis points from the third quarter of 2008, and increased 60 basis points sequentially;
- Average monthly revenue per occupied unit increased 6.2% to $3,673 from the prior year quarter, and increased sequentially from $3,650;
- Community operating income improved 10.4% to $74.6 million from the third quarter 2008.
Total revenue for the third quarter of 2009 increased 16.7% to $222.7 million compared to $190.9 million in the prior year quarter. The average revenue per occupied unit on a total consolidated basis was approximately $3,673 for the third quarter of 2009, compared to $3,459 in the prior year quarter. Total occupancy increased to 87.2% from 86.6% in the prior year third quarter. Month end occupancy on September 30, 2009 was 88.8%, compared to 88.2% on June 30, 2009.
Same Store total revenue for the third quarter of 2009 increased 3.4% to $192.1 million from $185.8 million in the prior year third quarter. Same Store average revenue per occupied unit increased approximately 2.1% to $3,543 from $3,469 in the third quarter of 2008. The third quarter 2009 Same Store average occupancy increased 110 basis points to 88.2% compared to 87.1% in the prior year third quarter and 50 basis points from 87.7% in the second quarter of 2009.
"Our strategy of driving occupancy and gaining market share continued into the third quarter. Through ongoing occupancy gains we will be better positioned to drive rate improvement as demand increases," commented Mr. Granger Cobb, President and Co-CEO of Emeritus. "Furthermore, the strength of our business fundamentals supports our efforts to pursue opportunistic acquisitions."
Community operating income (community revenue less community operating expenses) increased 10.4% to $74.6 million for the third quarter of 2009 from $67.5 million in the prior year third quarter. Community operating income includes an increase in workers’ compensation expenses of $1.4 million in the current quarter and a decrease of $2.1 million in workers’ compensation expenses in the prior year quarter (a swing of $3.5 million between periods), both based on actuarial estimates of ultimate losses. In addition, current quarter health insurance costs increased $2.2 million over the prior year quarter primarily from an increase in employee enrollment. The operating margin decreased by 190 basis points to 33.7% for the third quarter of 2009 compared to 35.6% in the prior year third quarter. Excluding the workers’ compensation adjustments noted above, the operating margin percent would have been relatively flat between the periods. The workers’ compensation increase of $1.4 million in the current quarter includes changes in estimates related to both prior year and prior quarters of 2009 totaling $1.2 million. Therefore, we expect the ongoing workers’ compensation impact to be less in future quarters.
The Company’s net loss of $16.0 million for the third quarter of 2009 improved $7.1 million from a net loss of $23.1 million in the prior year quarter. The current quarter net loss includes a non-cash impairment loss of $1.9 million in addition to the workers’ compensation and health insurance costs discussed above. These expense items resulted in a negative impact of $7.6 million when comparing the net loss between periods.
Including the previously discussed expense increases, the weighted average loss per common share outstanding was $(0.41) and $(0.59) for the three months ended September 30, 2009 and 2008, respectively, and cash from facility operations (CFFO) per weighted average common share outstanding was $0.18 and $0.19 for the three months ended September 30, 2009 and 2008, respectively. CFFO per weighted average common shares outstanding was $0.81 and $0.55 for the nine months ended September 30, 2009 and 2008, respectively.
The total consolidated operating portfolio, excluding discontinued operations, consists of 265 communities with approximately 23,036 operating units as of September 30, 2009. The Same Store portfolio consists of 241 of the 265 consolidated operating communities.
Balance Sheet
As of September 30, 2009, the Company had approximately $52.1 million of cash and cash equivalents, and had no outstanding borrowings under its $25.0 million line of credit. On September 30, 2009, total assets were $2.1 billion, including $1.7 billion of net investments in properties, total debt was $1.6 billion, including capital lease obligations, and shareholders’ equity was $332.5 million.
The current portion of long-term debt of $49.9 million as of September 30, 2009, includes $33.7 million of debt that matures in 2012 and relates to five communities held for sale. This debt is classified as current because the related assets are expected to be sold and the debt paid off from the proceeds of the sale within the next year. The remaining $16.2 million of current portion of debt relates to $10.7 million of routine debt amortization over the next 12 months, and one mortgage of $5.5 million due in July 2010, which we expect to refinance.
Conference Call:
The Company will host a conference call on Monday, November 9, 2009, at 5:00 P.M. Eastern Time to discuss its financial results for the third quarter ended September 30, 2009. Hosting the call will be Mr. Daniel Baty, Chairman and Co-Chief Executive Officer, Mr. Granger Cobb, President and Co-Chief Executive Officer, and Mr. Raymond Brandstrom, Chief Financial Officer.
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) 407-9039, or for international participants (201) 689-8470. A replay of the conference call will be available after 8:00 P.M. Eastern Time on Monday, November 9, 2009, until midnight Eastern Time on Monday, November 16, 2009, and can be accessed by dialing (877) 660-6853, or for international participants (201) 612-7415 along with the conference ID 335960.
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). We believe these non-GAAP measures are useful in identifying trends in our 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 our industry. We strongly urge you to review the reconciliation of net loss to Adjusted EBITDA/EBITDAR and CFFO provided below, along with our consolidated balance sheets, statements of operations, and cash flows. We define Adjusted EBITDA/EBITDAR and CFFO and provide other information about these non-GAAP measures in our annual report on Form 10-K.
The table below shows the reconciliation of net loss to Adjusted EBITDAR for the three and nine month periods ended September 30, 2009 and 2008 (in thousands):
< ;td class="accounting">122
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2009 | 2008 | 2009 | 2008 | |
| Net loss | $(16,221) | $(23,075) | $(38,620) | $(74,278) |
| Provision for income taxes | 360 | 270 | 900 | 750 |
| Equity losses (earnings) in unconsolidated joint ventures | 76 | 33 | (1,108) | 890 |
| Depreciation and amortization | 18,643 | 28,925 | 58,031 | 88,742 |
| Amortization of deferred gains | (312) | (130) | (460) | (1,134) |
| Non-cash stock option compensation expenses | 1,187 | 968 | 3,250 | 3,786 |
| Impairment of long-lived assets | 1,857 | - | 1,857 | - |
| Debt refinancing fees | - | - | - | 1,090 |
| Interest expense | 26,170 | 24,874 | 77,649 | 68,030 |
| Straight-line rent expense | 4,847 | 2,220 | 14,796 | 7,012 |
| Above/below market rent amortization | 2,457 | 2,524 | 7,430 | 7,572 |
| Development and transaction costs | 81 | 504 | 545 | 832 |
| Deferred revenues | 460 | 432 | 475 | 2,688 |
| Change in fair value of interest rate swaps | 221 | 119 | (621) | (16) |
| Interest income | (575) | (480) | (902) | (1,913) |
| Discontinued operations | 616 | 849 | 6,349 | |
| Professional and workers' compensation liability | 818 | (624) | (908) | (2,478) |
| Adjusted EBITDA | 40,191 | 37,175 | 123,163 | 107,922 |
| Facility lease expense | 22,056 | 17,595 | 65,803 | 52,384 |
| Adjusted EBITDAR | $62,247 | $54,770 | $188,966 | $160,306 |
The following table shows CFFO for the three and nine month periods ended September 30, 2009 and 2008 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2009 | 2008 | 2009 | 2008 | |
| Net cash provided by operating activities | $21,761 | $17,195 | $55,110 | $56,457 |
| Adjust for changes in operating assets and liabilities | (7,182) | (3,184) | (3,772) | (11,860) |
| Recurring capital expenditures, net | (5,793) | (4,080) | (14,039) | (11,544) |
| Repayment of capital lease and financing obligations | (2,495) | (2,365) | (7,003) | (11,743) |
| Distributions from unconsolidated joint ventures, net | 571 | - | 1,589 | - |
| Cash From Facility Operations | $6,862 | $7,566 | $31,885 | $21,310 |
CFFO per weighted average common shares outstanding was $0.18 and $0.19 for the three months ended September 30, 2009 and 2008, respectively. CFFO per weighted average common shares outstanding was $0.81 and $0.55 for the nine months ended September 30, 2009 and 2008, respectively.
For a more detailed understanding of Emeritus, please refer to the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009, or visit the Company’s Internet site at www.emeritus.com to obtain a copy.
About Emeritus Senior Living
Emeritus Corporation is a national provider of assisted living and Alzheimer's and related dementia care services to seniors. Emeritus is one of the largest and most experienced operators of freestanding assisted living communities located throughout the United States. These communities provide a residential housing alternative for senior citizens who need assistance with the activities of daily living, with an emphasis on personal care services, which provides support to the residents in the aging process. Emeritus currently operates 309 communities in 36 states representing capacity for approximately 27,200 units and approximately 32,400 residents. Our common stock is traded on the New York Stock Exchange under the symbol ESC, and our home page can be found on the Internet at www.emeritus.com.
Forward Looking Statements
"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 our rate enhancement programs without adversely affecting occupancy levels; increases in interest costs as a result of re-financings; 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 operation; and uncertainties related to professional liability 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, 2008.
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