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Emeritus Corp Reports Operating Results (10-Q)

November 06, 2012 | About:
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10qk

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Emeritus Corp (ESC) filed Quarterly Report for the period ended 2012-09-30.

Emeritus Corportion has a market cap of $1.04 billion; its shares were traded at around $22.76 with and P/S ratio of 0.8. Emeritus Corportion had an annual average earning growth of 7.7% over the past 10 years. GuruFocus rated Emeritus Corportion the business predictability rank of 1-star.

Highlight of Business Operations:

As of September 30, 2012, we had a working capital deficit of $72.1 million compared to a working capital deficit of $100.1 million at December 31, 2011. We are able to operate in the position of a working capital deficit because we often convert our revenues to cash more quickly than we are required to pay the corresponding obligations incurred to generate those revenues, and we have historically refinanced or extended maturities of debt obligations as they become current liabilities. Our operations result in a low level of current assets to the extent we have used cash for business development expenses or to pay down long-term liabilities. Additionally, the working capital deficit as of September 30, 2012 included the following non-cash items: a $20.7 million deferred tax asset and, as part of current liabilities, $34.0 million of deferred revenue and unearned rental income. A $20.7 million deferred tax liability was included in other long-term liabilities. We do not expect the level of current liabilities to change from period to period in such a way as to require the use of significant cash in excess of normal requirements, except for $29.1 million in final (“balloon”) payments of principal on long-term debt maturing in the next 12 months, which is included in current portion of long-term debt as of September 30, 2012.

Revenues from our Same Community Portfolio represented 91.0% of our total community revenue for the third quarter of 2012, compared to 90.5% for the third quarter of 2011. Of the $6.8 million increase in same community revenues, $1.2 million was due to improved occupancy and $5.6 million was due to an increase in average revenue per occupied unit.

The equity losses in the three months ended September 30, 2012 were comprised primarily of equity losses of $123,000 from a start-up joint venture with Wegman, net of equity earnings from the other joint ventures. The equity losses in the three months ended September 30, 2011 were comprised of equity losses of $678,000 from the Sunwest JV and equity losses of $140,000 from joint ventures with Wegman.

The equity losses in the nine months ended September 30, 2012 were comprised primarily of equity losses of $360,000 from the Sunwest JV and $123,000 from a start-up joint venture with Wegman. As described in Note 4, Acquisitions and Other Significant Transactions—2011 Blackstone JV Acquisition, we acquired the 24 communities that we previously managed for the Blackstone JV and have included them in our Consolidated Portfolio effective on the June 1, 2011 acquisition date. The equity losses in the nine months ended September 30, 2011 consisted primarily of equity losses of $2.1 million from the Sunwest JV, partially offset by equity earnings of $921,000 from the Blackstone JV.

The Company has incurred significant operating losses since its inception, and we had working capital deficits of $72.1 million and $100.1 million as of September 30, 2012 and December 31, 2011, respectively. Due to the nature of our business, it is not unusual to operate in the position of a working capital deficit because we collect revenues much more quickly, often in advance, than we are required to pay obligations, and we have historically refinanced or extended maturities of debt obligations as they become current liabilities. Our operations result in a very low level of current assets to the extent cash has been deployed in business development opportunities or to pay down long-term liabilities. Along those lines, the working capital deficit as of September 30, 2012 included a $20.7 million deferred tax asset and, as part of current liabilities, $34.0 million of deferred revenue and unearned rental income. A $20.7 million deferred tax liability is included in other long-term liabilities. We do not expect the level of current liabilities to change from period to period in such a way as to require the use of significant cash, except for $29.1 million in balloon payments of principal on long-term debt maturing during the next 12 months, which is included in current portion of long-term debt as of September 30, 2012. We intend to refinance, extend, or retire these obligations prior to their maturities. Given the continuing instability in worldwide credit markets, there can be no assurance that we will be able to obtain such refinancing or be able to retire the obligations.

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10qk
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