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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934

For the quarterly period ended June 30, 2004.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14012

EMERITUS CORPORATION
(Exact name of registrant as specified in its charter)

WASHINGTON                           91-1605464
(State or other jurisdiction                       (I.R.S Employer
of incorporation or organization)                   Identification No.)

3131 Elliott Avenue, Suite 500
Seattle, WA 98121
(Address of principal executive offices)

(206) 298-2909
(Registrant's telephone number, including area code)
____________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

As of July 31, 2004, there were 10,763,875 shares of the Registrant's Common Stock, par value $.0001, outstanding.

 
     
 

EMERITUS CORPORATION
 
 
 
 
 
 
 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:
Item 1, Item 3, and Item 5 of Part II are omitted because they are not applicable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 


     

Table of Contents


PART I. Financial Information
Item 1. Financial Statements

[The rest of this page is intentionally left blank]

  1  

Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share data)
ASSETS
 
  
June 30,
December 31,
 
  
2004
2003
   
 
 
Current Assets:
    
 
    
 
  
Cash and cash equivalents
  
$
4,891
 
$
6,368
 
Short-term investments
    
1,247
   
987
 
Trade accounts receivable, net
    
2,862
   
2,769
 
Other receivables
    
2,436
   
1,961
 
Prepaid expenses and other current assets
    
11,048
   
6,663
 
   
 
 
Total current assets
    
22,484
   
18,748
 
Long-term investments
    
6,884
   
7,678
 
Property and equipment, net
    
116,322
   
117,546
 
Property held for development
    
1,254
   
1,254
 
Notes receivable from and investments in affiliates
    
1,822
   
2,409
 
Restricted deposits
    
8,278
   
7,306
 
Lease acquisition costs, net
    
24,434
   
19,052
 
Other assets, net
    
6,608
   
5,581
 
   
 
 
Total assets
  
$
188,086
 
$
179,574
 
   
 
 
 
    
 
    
 
  
LIABILITIES AND SHAREHOLDERS' DEFICIT
 
    
 
    
 
  
Current Liabilities:
    
 
    
 
  
Short-term debt
  
$
3,000
 
$
–
 
Current portion of long-term debt
    
5,380
   
4,750
 
Trade accounts payable
    
4,783
   
6,774
 
Accrued employee compensation and benefits
    
7,879
   
5,885
 
Accrued interest
    
2,199
   
1,888
 
Accrued real estate taxes
    
3,420
   
2,702
 
Accrued dividends on preferred stock
    
9,372
   
8,228
 
Other accrued expenses
    
7,895
   
7,941
 
Deferred revenue
    
6,094
   
6,075
 
Other current liabilities
    
11,703
   
6,879
 
   
 
 
Total current liabilities
    
61,725
   
51,122
 
Long-term debt, less current portion
    
136,343
   
136,388
 
Convertible debentures
    
32,000
   
32,000
 
Deferred gain on sale of communities
    
36,340
   
37,389
 
Deferred rent
    
186
   
263
 
Other long-term liabilities
    
1,985
   
1,506
 
   
 
 
Total liabilities
    
268,579
   
258,668
 
   
 
 
Commitments and contingencies
    
 
    
 
  
Shareholders' Deficit:
    
 
    
 
  
Preferred stock, $.0001 par value. Authorized 5,000,000 shares.
    
 
    
 
  
Series B, Authorized 70,000 shares, issued and outstanding 35,529 and 34,830 shares at
   
 
    
 
  
June 30, 2004, and December 31, 2003, respectively
    
–
   
–
 
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and outstanding
    
 
    
 
  
10,762,375 and 10,297,449 shares at June 30, 2004, and December 31, 2003, respectively
    
1
   
1
 
Additional paid-in capital
    
74,779
   
71,703
 
Accumulated deficit
    
(155,273
)
  
(150,798
)
   
 
 
Total shareholders' deficit
    
(80,493
)
  
(79,094
)
   
 
 
Total liabilities and shareholders' deficit
  
$
188,086
 
$
179,574
 
   
 
 
 
    
 
    
 
  


See accompanying Notes to Condensed Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.




  2  
Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
 
  
 
 
1
 
 
 
  
 
 
1
 
 
 
  
 
 
1
 
 
 
  
Three Months ended June 30,
1
Six Months ended June 30,
   
 
 
  
2004
2003
1
2004
2003
   
 
       
 
 
Revenues:
    
 
    
 
    
 
    
 
    
 
  
Community revenue
  
$
75,880
 
$
45,160
   
 
  
$
139,418
 
$
88,246
 
Other service fees
    
1,641
   
1,041
   
 
    
3,006
   
2,035
 
Management fees
    
1,196
   
3,197
   
 
    
2,829
   
6,294
 
   
 
       
 
 
Total operating revenues
    
78,717
   
49,398
   
 
    
145,253
   
96,575
 
   
 
       
 
 
 
    
 
    
 
    
 
    
 
    
 
  
Expenses:
    
 
    
 
    
 
    
 
    
 
  
Community operations
    
48,770
   
29,785
   
 
    
91,225
   
58,430
 
General and administrative
    
6,546
   
5,811
   
 
    
12,778
   
11,215
 
Depreciation and amortization
    
2,328
   
1,840
   
 
    
4,391
   
3,687
 
Facility lease expense
    
17,674
   
9,325
   
 
    
32,366
   
17,929
 
   
 
       
 
 
Total operating expenses
    
75,318
   
46,761
   
 
    
140,760
   
91,261
 
   
 
       
 
 
Income from operations
    
3,399
   
2,637
   
 
    
4,493
   
5,314
 
   
 
       
 
 
 
    
 
    
 
    
 
    
 
    
 
  
Other income (expense):
    
 
    
 
    
 
    
 
    
 
  
Interest income
    
134
   
173
   
 
    
287
   
328
 
Interest expense
    
(4,211
)
  
(3,229
)
  
 
    
(8,004
)
  
(6,502
)
Other, net
    
665
   
1,392
   
 
    
599
   
1,440
 
   
 
       
 
 
Net other expense
    
(3,412
)
  
(1,664
)
  
 
    
(7,118
)
  
(4,734
)
   
 
       
 
 
 
    
 
    
 
    
 
    
 
    
 
  
Net income (loss)
    
(13
)
  
973
   
 
    
(2,625
)
  
580
 
 
    
 
    
 
    
 
    
 
    
 
  
Preferred stock dividends