ESC Emeritus Corp.

Emeritus Corporation (NYSE:ESC), a national provider of senior living services, today announced its first quarter 2014 results.

Operating Summary for First Quarter 2014 Compared to First Quarter 2013

• Community, ancillary services and management fee revenue increased $51.0 million, or 11.0%, to $514.5 million
• Adjusted EBITDAR increased $15.3 million, or 12.4%, to $138.8 million
• Adjusted CFFO per share was $0.43 for both periods
• Total Portfolio Same Community (as defined below) average occupancy improved 80 basis points to 87.5%

Granger Cobb, President and Chief Executive Officer, commented, “Our intense focus on service and customer satisfaction yielded significant results - overcoming historical seasonal softness, we produced a 30-basis-point sequential improvement in Total Portfolio Same Community occupancy from the fourth quarter, and an 80-basis-point improvement over the first quarter of last year. Our performance is a tribute to our 32,000 extremely dedicated Emeritus employees who, amidst potential transaction distraction, remain resolutely focused on providing a fulfilling customer experience for our residents and peace of mind for their families.”

As of March 31, 2014, Emeritus operated 508 senior living communities:

• 494 communities are in the consolidated portfolio (consisting of owned and leased communities);
• 464 communities have been continuously operated (owned, leased, and managed) since January 1, 2013 (“Total Portfolio Same Community”) (information for this portfolio is included for certain comparative purposes but is not a subset of the Company’s historical consolidated results);
• 448 consolidated communities have been continuously operated in our consolidated portfolio since January 1, 2013 (“Consolidated Same Community”); and
• 14 communities are managed.

First Quarter 2014 Consolidated Results

Community, ancillary services and management fee revenue increased $51.0 million, or 11.0%, to $514.5 million in the first quarter of 2014, compared to $463.5 million in the first quarter of 2013. The increase in revenues resulted primarily from the Company's acquisition of 38 communities in September 2013 pursuant to an operating lease with Health Care REIT, Inc. These communities were previously operated by Merrill Gardens (the "Merrill Gardens Communities"). The increase in revenues was also attributable to improved occupancy and rate in the Consolidated Same Community portfolio as well as growth in the Company's ancillary services through the Nurse On Call, Inc. ("NOC") home health care subsidiary. Total average monthly revenue per occupied unit for the consolidated portfolio was $3,986 in the first quarter of 2014 compared to $4,012 in the first quarter of 2013. The rate decrease is primarily due to the Merrill Gardens Communities, which have a higher proportion of independent living units that carry lower rates than assisted living units. In the first quarter of 2014, total average occupancy for the consolidated portfolio grew 160 basis points to 88.0%, compared to 86.4% in the first quarter of 2013; this increase was also impacted by the Merrill Gardens Communities, which have higher average occupancy than the Company's other portfolios.

Total Portfolio Same Community average monthly revenue per occupied unit was $4,042 in the first quarter of 2014, compared to $4,023 in the first quarter of 2013, and average occupancy improved by 80 basis points to 87.5% when comparing the same periods. Consolidated Same Community average monthly revenue was $4,058 in the first quarter of 2014, compared to $4,040 in the first quarter of 2013; average occupancy increased 90 basis points to 87.6% in the first quarter of 2014 compared to the same period last year.

Community and ancillary services operating expenses were $351.7 million in the first quarter of 2014 compared to $323.7 million in the first quarter of 2013. The increase was primarily attributable to the acquisition of the 38 Merrill Garden Communities in September 2013. Community operating expenses in the Consolidated Same Community portfolio increased $6.9 million, or 2.5%, due primarily to utilities and maintenance costs as a result of unusually severe winter weather, as well as increases in marketing and insurance expenses.

Community and ancillary operating income grew $23.1 million, or 16.6%, to $162.1 million in the first quarter of 2014, compared to the first quarter of 2013, primarily as the result of the 38 Merrill Garden Communities. Community and ancillary operating income margin increased to 31.5% in the first quarter of 2014 compared to 30.0% in the 2013 period due primarily to improvements in occupancy.

Excluding consolidated non-cash stock-based compensation expenses, senior living general and administrative expenses as a percent of total operated senior living community revenue decreased to 4.7% in the first quarter of 2014, compared to 5.0% in the first quarter of 2013.

For the first quarter of 2014, Adjusted EBITDAR rose $15.3 million, or 12.4%, to $138.8 million, compared to the first quarter of 2013, driven by the increase in community operating income. Adjusted CFFO increased $1.0 million, or 5.1%, in the first quarter of 2014, compared to the first quarter of 2013. Adjusted CFFO per share was $0.43 for both periods.

Financing and Other Activities

In January 2014, in connection with the sale of a community, the Company retired a note payable to Keybank with an outstanding principal balance of $4.0 million and an interest rate of 2.70%.

In March 2014, in connection with the sale of a community, the Company retired a note payable to GE Capital with an outstanding principal balance of $7.2 million and an interest rate of 5.05%.

Pending Merger Transaction

On February 20, 2014, the Company entered into a definitive merger agreement with Brookdale Senior Living Inc. ("Brookdale") (NYSE:BKD). Under the agreement, at the effective time of the merger, Emeritus shareholders will receive 0.95 of a share of Brookdale common stock in exchange for each share of their Emeritus common stock. The closing of the merger is expected to occur in the third quarter of 2014, subject to the satisfaction of customary closing conditions and regulatory approvals and shareholder approval for each company.

For additional important information regarding the pending merger transaction with Brookdale, please refer to the Company’s SEC filings at www.sec.gov.

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, 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 ended March 31, 2014 and 2013 (in thousands):

  Three Months Ended March 31, 2014   2013 Net loss $ (49,008 ) $ (39,665 ) Depreciation and amortization 46,228 45,218 Interest income (109 ) (110 ) Interest expense 70,369 72,199 Net equity losses for unconsolidated joint ventures 131 12 Income tax provision 695 1,106 Loss from discontinued operations 1,539 — Amortization of above/below market rents 1,230 1,246 Amortization of deferred gains (224 ) (248 ) Gain on early extinguishment of debt — (493 ) Stock-based compensation 3,161 3,331 Change in fair value of derivative financial instruments 71 (5 ) Deferred revenue 258 2,088 Deferred straight-line rent 5,590 216 Impairment of long-lived assets 1,023 — Transaction costs 10,366 647 Transition costs 79 — Self-insurance reserve adjustments, prior years 2,023   7,482   Adjusted EBITDA 93,422 93,024 Lease expense 45,405   30,502   Adjusted EBITDAR $ 138,827   $ 123,526    

The following table shows the reconciliation of net cash (used in) provided by operating activities to CFFO and Adjusted CFFO (in thousands):

    Three Months Ended March 31, 2014   2013 Net cash (used in) provided by operating activities $ (2,012 ) $ 27,761 Changes in operating assets and liabilities, net 22,991 (5,044 ) Repayment of capital lease and financing obligations (8,176 ) (6,001 ) Recurring capital expenditures (4,995 ) (5,661 ) Distributions from unconsolidated joint ventures (a) 79   177   Cash From Facility Operations 7,887 11,232 Transaction costs 10,366 647 Transition costs 79 — Self-insurance reserve adjustments, prior years 2,023   7,482   Adjusted Cash From Facility Operations $ 20,355   $ 19,361     CFFO per share $ 0.17 $ 0.25 Adjusted CFFO per share $ 0.43 $ 0.43 (a) Excludes distributions resulting from the sale of communities and refinancing of debt. Also excludes distributions in the first quarter of 2013 related to the sale of our equity interest in the former Sunwest JV.  

Recurring capital expenditures are actual costs incurred to maintain the Company’s communities for their intended business purpose and exclude expenditures for community acquisitions, expenditures incurred in the months immediately following acquisition (and specifically excludes the $30.0 million capital commitment under the lease for 133 of the former Sunwest JV communities), new construction and expansions, ROI-designated projects, computer hardware and software, and vehicles.

For a more detailed understanding of Emeritus, please refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, 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 approximately 54,000 residents. Nearly 32,000 employees support more than 500 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.

Important Additional Information about the Proposed Transaction

In connection with the proposed transaction, Brookdale plans to file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement of Emeritus and Brookdale that also constitutes a prospectus of Brookdale. Emeritus and Brookdale will mail the proxy statement/prospectus to each of their respective shareholders. This communication does not constitute a solicitation of any vote or approval. The joint proxy statement/prospectus to be filed with the SEC related to the proposed transaction will contain important information about Brookdale, Emeritus, the proposed transaction and related matters. WE URGE INVESTORS AND SHAREHOLDERS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. You may obtain free copies of the joint proxy statement/prospectus, when it is filed with the SEC, and other documents filed by Emeritus and Brookdale with the SEC through the website maintained by the SEC at www.sec.gov. The joint proxy statement/prospectus, when it is filed with the SEC, and the other documents filed by Emeritus and Brookdale with the SEC may also be obtained for free by accessing Emeritus' website at www.emeritus.com (which website is not incorporated herein by reference) and clicking on the “Investors” link and then clicking on the link for “SEC Filings” or by accessing Brookdale’s website at www.brookdale.com (which website is not incorporated herein by reference) and clicking on “About Brookdale” and then clicking on the link for “Investor Relations” and then the link “SEC Filings.” Emeritus, Brookdale and their respective directors and officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the merger transaction. Information regarding these persons who may, under the rules of the SEC, be considered participants in the solicitation of shareholders in connection with the proposed merger transaction will be set forth in the joint proxy statement/prospectus described above when it is filed with the SEC. Additional information regarding each of Emeritus’ and Brookdale’s respective executive officers and directors, including shareholdings, is included in Emeritus’ Form 10-K/A for the year ended December 31, 2013, and Brookdale’s Form 10-K/A for the year ended December 31, 2013, both of which were filed with the SEC on April 30, 2014. You can obtain free copies of this document from Emeritus or Brookdale, respectively, using the contact information above.

Forward-Looking Statements

Statements made in this communication and related statements that express Emeritus' or our management’s intentions, hopes, indications, beliefs, expectations, or predictions of the future constitute forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, and relate to matters that are not historical facts. 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 ability to obtain licensure, regulatory and other third party approvals of the merger transaction on the proposed terms and schedule; the ability to obtain shareholder approval of the pending merger transaction; any delay in the closing of the pending merger transaction; disruptions to our business as a result of the pending merger transaction, affecting relationships with residents, employees and other business relationships; 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 refinancing; 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, 2013 filed with the SEC. The Company undertakes no obligation to update the information provided herein.

 

EMERITUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share data)

  ASSETS March 31,   December 31, 2014 2013 Current Assets: Cash and cash equivalents $ 58,670 $ 76,672 Short-term investments 7,692 7,394 Trade accounts receivable, net of allowance of $10,375 and $9,380 56,555 53,714 Other receivables 12,299 10,310 Tax, insurance, and maintenance escrows 29,506 28,067 Prepaid insurance expense 27,676 28,109 Deferred tax asset 48,126 49,203 Other prepaid expenses and current assets 15,803 14,588 Property held for sale 7,714   17,459   Total current assets 264,041 285,516 Investments in unconsolidated joint ventures 2,571 2,720 Property and equipment, net of accumulated depreciation of $746,269 and $701,743 3,840,932 3,875,172 Restricted deposits and escrows 85,677 80,919 Goodwill 189,382 189,626 Other intangible assets, net of accumulated amortization of $42,479 and $40,665 121,743 123,557 Other assets, net 37,228   37,138   Total assets $ 4,541,574   $ 4,594,648     LIABILITIES, SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST Current Liabilities: Current portion of long-term debt $ 141,848 $ 152,989 Current portion of capital lease and financing obligations 35,671 33,565 Trade accounts payable 13,167 30,856 Accrued employee compensation and benefits 48,384 44,603 Accrued interest 7,497 7,529 Accrued real estate taxes 14,471 16,528 Accrued insurance liabilities 40,710 40,482 Other accrued expenses 42,653 39,954 Deferred revenue 26,349 25,822 Unearned rental income 32,654   30,745   Total current liabilities 403,404 423,073 Long-term debt obligations, less current portion 1,336,672 1,345,242 Capital lease and financing obligations, less current portion 2,479,631 2,481,930 Deferred gain on sale of communities 2,561 2,786 Deferred straight-line rent 78,111 74,320 Other long-term liabilities 154,961   153,278   Total liabilities 4,455,340   4,480,629   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 48,999,284 and 48,118,623 shares 5 5 Additional paid-in capital 913,542 892,319 Accumulated deficit (829,100 ) (780,654 ) Total Emeritus Corporation shareholders' equity 84,447 111,670 Noncontrolling interest 1,787   2,349   Total shareholders' equity 86,234   114,019   Total liabilities, shareholders' equity, and noncontrolling interest $ 4,541,574   $ 4,594,648      

EMERITUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

  Three Months Ended March 31, 2014   2013 Revenues: Community and ancillary services revenue $ 513,817 $ 462,719 Management fees 703   785   Community, ancillary services and management fee revenue 514,520 463,504 Reimbursed costs incurred on behalf of managed communities 7,310   8,864   Total operating revenues 521,830   472,368     Expenses: Community and ancillary services operations 351,716 323,741 General and administrative 29,644 29,440 Transaction costs 10,366 647 Impairments of long-lived assets 1,023 — Depreciation and amortization 46,228 45,218 Lease expense 52,225 31,964 Costs incurred on behalf of managed communities 7,310   8,864   Total operating expenses 498,512   439,874   Operating income from continuing operations 23,318   32,494     Other income (expense): Interest income 109 110 Interest expense (70,369 ) (72,199 ) Change in fair value of derivative financial instruments (71 ) 5 Net equity losses for unconsolidated joint ventures (131 ) (12 ) Other, net 370   1,043   Net other expense (70,092 ) (71,053 )   Loss from continuing operations before income taxes (46,774 ) (38,559 ) Provision for income taxes (695 ) (1,106 ) Loss from continuing operations (47,469 ) (39,665 ) Loss from discontinued operations (1,539 ) —   Net loss (49,008 ) (39,665 ) Net loss (income) attributable to the noncontrolling interests 562   (91 ) Net loss attributable to Emeritus Corporation common shareholders $ (48,446 ) $ (39,756 )   Basic and diluted loss per common share attributable to Emeritus Corporation common shareholders: Continuing operations $ (0.99 ) $ (0.88 ) Discontinued operations (0.03 ) —   $ (1.02 ) $ (0.88 )   Weighted average common shares outstanding: basic and diluted 47,633 45,417    

EMERITUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

  Three Months Ended March 31, 2014   2013 Cash flows from operating activities: Net loss $ (49,008 ) $ (39,665 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities Depreciation and amortization 46,228 45,218 Amortization of above/below market rents 1,230 1,246 Amortization of deferred gains (224 ) (248 ) Loss on lease termination 85 — Loss (gain) on early extinguishment of debt 233 (493 ) Impairment of long-lived assets 2,399 — Amortization of loan fees 705 790 Allowance for doubtful receivables 2,759 2,172 Net equity losses for unconsolidated joint ventures 131 12 Gain on sale of assets (131 ) — Stock-based compensation 3,161 3,331 Change in fair value of derivative financial instruments 71 (5 ) Deferred straight-line rent 5,590 216 Deferred revenue 258 2,088 Non-cash interest expense 7,466 7,975 Other 26 80 Changes in operating assets and liabilities: (22,991 ) 5,044   Net cash (used in) provided by operating activities (2,012 ) 27,761     Cash flows from investing activities: Purchase of property and equipment (18,008 ) (15,907 ) Acquisitions — (78 ) Proceeds from the sale of assets 13,895 — Lease acquisition costs and other assets, net (89 ) (1,029 ) Advances (to) from affiliates and other managed communities, net (898 ) 1,273 Distributions from unconsolidated joint ventures, net 79   14,926   Net cash used in investing activities (5,021 ) (815 )   Cash flows from financing activities: Sale of stock and exercise of options, net 17,168 37,826 Purchase and distributions to non-controlling interest, net — (3,726 ) Increase in restricted deposits (159 ) (525 ) Debt issuance and other financing costs (91 ) (819 ) Proceeds from long-term borrowings and financings — 50,000 Repayment of long-term borrowings and financings (19,711 ) (49,972 ) Repayment of capital lease and financing obligations (8,176 ) (6,001 ) Net cash (used in) provided by financing activities (10,969 ) 26,783     Net (decrease) increase in cash and cash equivalents (18,002 ) 53,729 Cash and cash equivalents at the beginning of the period 76,672   59,795   Cash and cash equivalents at the end of the period $ 58,670   $ 113,524       Emeritus Corporation Cash Lease and Interest Expense (unaudited) (In thousands)       Projected Actual Range Q1-14 Q2-2014 Facility lease expense - GAAP $ 52,225 $ 49,000

 — 

$ 50,000 Less: Straight-line rents (5,590 ) (3,500 )

 — 

(4,000 ) Above/below market rents (1,230 ) (1,200 )

 — 

(1,300 ) Plus: Capital lease interest 47,716 47,000

 — 

48,000 Capital lease interest - noncash (7,466 ) (7,500 )

 — 

(8,000 ) Capital lease principal 8,176   8,000  

 — 

8,500   Facility lease expense - CASH $ 93,831   $ 91,800  

 — 

$ 93,200     Interest expense - GAAP $ 70,369 $ 70,000

 — 

$ 72,000 Less: Capital lease interest (47,716 ) (47,000 )

 — 

(48,000 ) Loan fee amortization and other (718 ) (700 )

 — 

(800 ) Interest expense - CASH $ 21,935   $ 22,300  

 — 

$ 23,200     Depreciation - owned assets $ 21,429 $ 21,000

 — 

$ 22,000 Depreciation - capital leases 24,161 24,000

 — 

24,500 Amortization - intangible assets 638   600  

 — 

700   Total depreciation and amortization $ 46,228   $ 45,600  

 — 

$ 47,200       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 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Average consolidated communities 463 465 476 500 496 Average available units 40,524 40,757 42,109 44,909 44,557 Average occupied units 35,007 35,333 36,765 39,434 39,228 Average occupancy 86.4 % 86.7 % 87.3 % 87.8 % 88.0 % Average monthly revenue per occupied unit $ 4,012 $ 4,014 $ 4,008 $ 3,968 $ 3,986 Calendar days 90 91 92 92 90  

Community and Ancillary Services Revenues:

Community revenues $ 417,581 $ 422,288 $ 438,732 $ 465,811 $ 464,672 Move-in fees 5,503 5,430 5,538 6,038 6,126 Move-in incentives (1,722 ) (2,282 ) (2,186 ) (2,422 ) (1,751 ) Total community revenues 421,362 425,436 442,084 469,427 469,047 Ancillary services revenues 41,357   42,374   41,774   43,257   44,770   Total community and ancillary services revenues 462,719   467,810   483,858   512,684   513,817    

Community and Ancillary Services Operating Expenses:

Salaries and wages - regular and overtime 127,713 129,904 135,849 142,169 138,741 Average daily salary and wages 1,419 1,428 1,477 1,545 1,542 Average daily wages per occupied unit 41 40 40 39 39   Payroll taxes and employee benefits 45,523 40,981 41,706 41,358 46,722 Percent of salaries and wages 35.6 % 31.5 % 30.7 % 29.1 % 33.7 %   Prior year self-insurance reserve adjustments 7,482 5,654 288 5,952 2,023   Utilities 18,595 16,963 21,090 20,521 22,593 Average monthly cost per occupied unit 177 160 191 173 192   Facility maintenance and repairs 11,830 11,674 12,783 12,365 13,173 Average monthly cost per occupied unit 113 110 116 105 112   All other community operating expenses 81,140 81,970 84,945 92,098 92,924 Average monthly cost per occupied unit 773 773 770 778 790                     Community operating expenses 292,283 287,146 296,661 314,463 316,176 Ancillary services operating expenses 31,458   32,702   32,966   34,962   35,540   Total community and ancillary services operating expenses 323,741   319,848   329,627   349,425   351,716     Community operating income 129,079   138,290   145,423   154,964   152,871   Consolidated operating income $ 138,978   $ 147,962   $ 154,231   $ 163,259   $ 162,101     Operating income margin - Communities 30.6 % 32.5 % 32.9 % 33.0 % 32.6 % Operating income margin - Consolidated 30.0 % 31.6 % 31.9 % 31.8 % 31.5 %     EMERITUS CORPORATION Selected Consolidated and Same Community Information For the Quarters Ended (unaudited) (Community and ancillary revenue and operating expense in thousands)           Q1 2013   Q2 2013   Q3 2013   Q4 2013   Q1 2014

Consolidated:

Average consolidated communities 463 465 476 500 496 Community and ancillary revenue $ 462,719 $ 467,810 $ 483,858 $ 512,684 $ 513,817 Community and ancillary operating expense 323,741 319,848 329,627 349,425 351,716 Average occupancy 86.4 % 86.7 % 87.3 % 87.8 % 88.0 % Average monthly revenue per unit $ 4,012 $ 4,014 $ 4,008 $ 3,968 $ 3,986 Operating income margin 30.0 % 31.6 % 31.9 % 31.8 % 31.5 %  

Consolidated Same Community:

Average consolidated communities 448 448 448 448 448 Community revenue $ 414,052 $ 415,542 $ 418,578 $ 417,509 $ 420,002 Community operating expense 277,854 273,790 281,376 276,616 284,720 Average occupancy 86.7 % 86.9 % 87.2 % 87.3 % 87.6 % Average monthly revenue per unit $ 4,040 $ 4,045 $ 4,060 $ 4,046 $ 4,058 Operating income margin 32.9 % 34.1 % 32.8 % 33.7 % 32.2 %  

Total Portfolio Same Community:

Average consolidated communities 464 464 464 464 464 Community revenue $ 427,168 $ 428,873 $ 432,060 $ 430,793 $ 433,136 Community operating expense 287,224 282,646 290,787 286,118 294,252 Management fees 738 587 627 606 600 Average occupancy 86.7 % 86.8 % 87.2 % 87.2 % 87.5 % Average monthly revenue per unit $ 4,023 $ 4,032 $ 4,046 $ 4,031 $ 4,042 Operating income margin 32.8 % 34.1 % 32.7 % 33.6 % 32.1 %

Emeritus CorporationInvestor Relations, 206-298-2909orMedia Contacts:Liz Brady, 646-277-1226Liz.brady@icrinc.comorSari Martin, 203-682-8345Sari.martin@icrinc.com