Amica Mature Lifestyles Inc.
TSX : ACC

Amica Mature Lifestyles Inc.

January 11, 2008 09:15 ET

Amica Mature Lifestyles Announces Second Quarter Results for Fiscal 2008

Board of Directors Announces Third Quarter Dividend

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 11, 2008) - Mr. Samir Manji, Chairman, President and CEO of Amica Mature Lifestyles Inc. (TSX:ACC) ("Amica" or the "Company"), a leader in the management, marketing, design and development of luxury housing and services for mature lifestyles, is pleased to announce the Company's results for the three and six month periods ended November 30, 2007.

THREE MONTHS ENDED NOVEMBER 30, 2007

(Compared with the three months ended November 30, 2006.)

- Cash flow from operations(1) increased $1.1 million to $2.8 million.

- EBITDA(2) increased $0.5 million to $3.5 million.

- MARPAS(3) increased 4.4% on a same community(4) basis.

- Net earnings increased $1.2 million to $1.8 million.

- Basic and diluted per share net earnings increased $0.06 per share to $0.10 per share.

- Basic and diluted cash flow per share increased $0.04 per share to $0.16 per share.

SIX MONTHS ENDED NOVEMBER 30, 2007

(Compared with the six months ended November 30, 2006.)

- Cash flow from operations increased $1.3 million to $4.9 million.

- EBITDA increased $1.0 million to $7.0 million.

- MARPAS increased 4.0% on a same community basis.

- Net earnings increased $1.7 million to $2.8 million.

- Basic and diluted per share net earnings increased $0.08 per share to $0.16 per share.

- Diluted cash flow per share increased $0.03 per share to $0.27 per share.

The Company continues to see significant growth in EBITDA contributions from management operations. In the second quarter, 11% of EBITDA was generated by management operations. Second quarter cash flow from operations also increased $1.1 million versus the same quarter last year, and 36% year to date versus the same period last year.

Projects Under Development

During the quarter, Amica announced its first long term management contract for fiscal 2008, Amica at Richmond Hill, located in Richmond Hill, Ontario. Amica at Richmond Hill is a two-phase $90 million development that will include an Amica Wellness & Vitality™ Retirement Residence and an Amica-branded seniors' condominium building. Preliminary designs for the $42.5 million Retirement Residence include 148 suites, comprised of 119 independent living suites and a 29-suite Vitalis™ (assisted living) floor, and will include the full complement of Amica's Wellness & Vitality™ amenities. It is also anticipated that the $47.6 million seniors' condominium building, which will be physically connected to the Retirement Residence, will consist of 128 units. The Company has a 50% equity interest in the project. In addition, it will provide the co-tenancy with $3.0 million in mezzanine financing at an interest rate of 10%. Amica at Richmond Hill is the Company's tenth 99-year management contract. These ten developments collectively represent over $490 million of proposed developments, including the three condominium buildings that are planned for Amica at Bayview Gardens (Toronto, Ontario), Amica at Dundas (Dundas, Ontario), and Amica at Richmond Hill (Richmond Hill, Ontario).

Change in Amica's Business Development Strategy

Historically, the Company has presented new development opportunities to its pool of investors at the earliest stage possible in the development process and the risk of rezoning and rising construction costs has been borne by Amica's investors. While this has been a successful tactic, it has limited the Company's pool of investors and has created a long investment cycle before investors receive a return on their investment. The Company has determined that, in the long term, the investor pool would be better served by having Amica and its developer partner assume the initial development risk until zoning is in place and construction documents have been completed to the point where the risk of budget overruns are minimized. In return for taking on this risk, it is anticipated that Amica and its developer partner may receive a 'lift' in the property and/or higher design and marketing fees than it otherwise would have earned. This change in strategy is not expected to impact the previously stated goal of achieving four to five new long term management contracts per year but will impact, in the short term, the timing of achieving such contracts and the timing of recognizing design and marketing fees. Partly as a result of this change in strategy, Amica is unlikely to generate five new long term management contracts this fiscal year. The Company has secured one new long term management contract, and believes that it may secure one additional long term contract this fiscal year. Over and above this, the Company expects to commit to two additional locations this fiscal year in which Amica and its developer partner will make financial commitments for these locations ahead of presenting them to other third party investors.

Recent challenges in the overall credit markets have also impacted the Company's near term plans in the area of financing strategy. While the market for construction financing appears to have held steady with many of the Company's historical lenders continuing to express interest in financing new developments (on overall terms that are consistent with historical transactions), the long term financing market is where significant changes have occurred. The commercial mortgage backed securities market has been reduced to limited players whose terms have changed to lower ratios and higher spreads over comparable period bond rates. This has led to a higher likelihood of pursuing Canada Mortgage and Housing Corporation ("CMHC") financing for existing mortgages that mature and for takeout mortgages on those developments which reach maturity. CMHC financing will also result in a lower ratio of overall financing given CMHC underwriting parameters, however, it will also produce lower borrowing costs. The overall impact to Amica and its investor pool is unknown at this time.

Occupancy

At the end of the second quarter, overall occupancy at mature communities was 96%. While this has dropped slightly, it is expected that occupancy will climb back to the 97% level in the third quarter. Despite this small drop in overall occupancy rates, MARPAS growth for the quarter and year to date has been positive. Overall MARPAS grew approximately 4.4% on a same community basis in the second quarter, compared with the same period last year.

Looking Ahead

In calendar 2008, it is expected that the Company will open four new communities, Amica at Dundas (Dundas, Ontario), Amica at Westboro Park (Ottawa, Ontario), Amica at London (London, Ontario) and Amica at Thornhill (Thornhill, Ontario). Amica at Dundas, in which the Company has a 17% equity interest, is scheduled to open in March, 2008. The luxury Retirement Residence is comprised of 136 suites (including a 29-suite Vitalis™ assisted living floor), of which 70 suites have been reserved to date. Pre-leasing results have also been strong at Amica at Westboro Park, located in Ottawa, Ontario. The 140-suite rental residence, in which the Company has a 6% equity interest, is scheduled to open in Summer 2008. The Company anticipates that Amica at London, in which the Company has an 18% equity interest, and Amica at Thornhill, in which the Company has a 10% equity interest, will open towards the end of calendar 2008. The Company looks forward to opening its doors at these four communities to new Amica residents and their families.

Third Quarter Dividend

The Company's Board of Directors (the "Board") has approved a dividend of $0.06 per share on all issued and outstanding common shares which will be payable on March 15, 2008, to shareholders of record on February 28, 2008.

Management's Discussion and Analysis

The following Management's Discussion and Analysis ("MD&A") for the three months and six months ended November 30, 2007, is provided as of January 10, 2008. It should be read in conjunction with the interim consolidated financial statements for those periods and the MD&A (which includes a discussion of business risks) and audited consolidated financial statements for the year ended May 31, 2007. Except as disclosed in this MD&A, there has been no material change in the information disclosed in the MD&A for the year ended May 31, 2007. A summary of selected financial data for the past eight quarters is disclosed in note 2.

All dollar amounts referred to in this document are in Canadian dollars. The financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). This report makes reference to the following terms - cash flow from operations, EBITDA, MARPAS and same communities which are defined in footnotes 1, 2, 3, and 4 respectively.

Financial Highlights



Management Operations
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(Expressed in THREE MONTHS ENDED SIX MONTHS ENDED
thousands of NOVEMBER 30 NOVEMBER 30
Canadian dollars) 2007 2006 2007 2006
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Management
operations:
Revenues
Management fees
from 100% owned
communities $ 460 $ 442 $ 911 $ 877
Management fees
from less than
100% owned
communities 588 522 1,160 1,019
Design and
marketing fees
from new
developments
under construction 1,378 1,046 2,940 1,704
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2,426 2,010 5,011 3,600
General and
administrative
expenses (1,995) (1,756) (3,856) (3,283)
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$ 431 $ 254 $ 1,155 $ 317
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Ownership and Corporate Operations
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(Expressed in THREE MONTHS ENDED SIX MONTHS ENDED
thousands of NOVEMBER 30 NOVEMBER 30
Canadian dollars) 2007 2006 2007 2006
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Ownership and
corporate operations:
Retirement
communities
operating
revenues $ 9,409 $ 8,981 $ 18,581 $ 17,882
Income (loss) from
equity-accounted
property (6) - 151 56
Distributions from
investments 142 40 181 80
Expenses:
Retirement
communities
operating (5,533) (5,443) (11,418) (10,830)
Corporate (298) (278) (465) (424)
Fees paid to and
reported on
management
operations (605) (573) (1,188) (1,126)
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$ 3,109 $ 2,727 $ 5,842 $ 5,638
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Cash Flow From Operations
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(Expressed in THREE MONTHS ENDED SIX MONTHS ENDED
thousands of NOVEMBER 30 NOVEMBER 30
Canadian dollars) 2007 2006 2007 2006
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Cash flow $ 2,806 $ 1,744 $ 4,927 $ 3,577
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Per Share Cash Flow From Operations
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THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
2007 2006 2007 2006
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Basic cash flow $ 0.16 $ 0.12 $ 0.28 $ 0.24
Diluted cash flow $ 0.16 $ 0.12 $ 0.27 $ 0.24

Weighted average
basic number
of shares 17,613,274 14,600,490 17,589,591 14,620,852
Weighted average
diluted number
of shares 17,957,443 14,902,199 17,950,142 14,932,372
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THREE MONTHS ENDED NOVEMBER 30, 2007

(Compared with the three months ended November 30, 2006.)

Operational Review and Analysis

(All properties are 100% owned unless stated otherwise.)

Overview

A comparison of the financial results for the three month period ended November 30, 2007, to the comparative period ended November 30, 2006, reflects the following: an increase in cash flow from operations of $1.1 million to $2.8 million; an increase in EBITDA of $0.5 million to $3.5 million; a 4.4% increase in MARPAS; an increase in basic and diluted cash flow per share of $0.04 per share to $0.16 per share; and an increase in net earnings of $1.2 million to $1.8 million.

Management Operations

For the three month period ended November 30, 2007, fee revenues increased $0.4 million to $2.4 million, and general and administrative expenses increased $0.2 million to $2.0 million resulting in earnings from management operations of $0.4 million, $0.1 million ahead of the comparative period ended November 30, 2006.

The $0.4 million increase in fee revenues is mainly attributable to an increase in design and marketing fees from communities under development.

The $0.2 million increase in general and administrative expenses is mainly attributable to an increase in wages and benefits, staffing levels, professional fees and other expenses, primarily to build development and operating capacity.

Ownership and Corporate Operations

Revenues

Retirement communities operating revenues increased $0.4 million to $9.4 million due to an increase in revenues from same communities.

Same community MARPAS (monthly average revenue per available suite) increased 4.4%.

Effective November 15, 2007, Amica at City Centre (Mississauga, Ontario) had been operational for two years, and is considered to be an income-producing property. Prior to November 15, 2007, net losses from the property had been capitalized by the property. As the Company owns a 34% interest in the co-tenancy investment, it is accounted for using the equity method of accounting. In accordance with the Company's accounting policy, the Company recognized its proportionate share of net earnings (loss) after depreciation and financing expense in income (loss) from equity-accounted property.

Expenses

Retirement communities operating expenses increased to $5.5 million for the three month period ended November 30, 2007, $0.1 million higher than the comparative period ended November 30, 2006.

Earnings Before Other Operating Items (EBITDA)

As a result of the improvements in management and ownership operations, EBITDA increased $0.5 million to $3.5 million.

Other Items

Interest expense

Interest expense remained the same at $1.6 million.

Interest and other income

Interest and other income increased $0.3 million to $0.6 million as a result of the Company's mortgages and loans receivable increasing by $11.5 million to $22.2 million.

Income taxes

Income taxes expense decreased $0.3 million, mainly due to a $0.8 million non-capital loss carry forward adjustment to prior year taxes and tax deductions from co-tenancy investments that are accounted for on the cost method for accounting purposes but are deductible for tax purposes.

Net earnings and earnings per share

For the three month period ended November 30, 2007, the Company had net earnings of $1.8 million ($0.10 per share basic and diluted earnings). For the three month period ended November 30, 2006, the Company had net earnings of $0.6 million ($0.04 per share basic and diluted earnings).

The weighted average number of shares outstanding at November 30, 2007, was 17,613,274 shares (November 30, 2006 - 14,600,490 shares) and on a dilutive basis was 17,957,443 shares (November 30, 2006 - 14,902,199 shares).

SIX MONTHS ENDED NOVEMBER 30, 2007

(Compared with the six months ended November 30, 2006.)

Operational Review and Analysis

(All properties are 100% owned unless stated otherwise.)

Overview

A comparison of the financial results for the six month period ended November 30, 2007, to the comparative period ended November 30, 2006, reflects the following: an increase in cash flow from operations of $1.3 million to $4.9 million; an increase in EBITDA of $1.0 million to $7.0 million; an increase in diluted cash flow per share of $0.03 per share to $0.27 per share; an increase in consolidated revenues of $2.2 million to $22.6 million; and an increase in net earnings of $1.7 million to $2.8 million.

Management Operations

For the six month period ended November 30, 2007, fee revenues increased $1.4 million to $5.0 million, and general and administrative expenses increased $0.6 million to $3.9 million, resulting in increased earnings from management operations of $0.9 million.

The $1.4 million increase in fee revenues is attributable mainly to an increase of $0.2 million in management fees as a result of increased rents and occupancy levels at the retirement communities; and an increase of $1.2 million in design and marketing fees earned on new developments under construction.

The $0.6 million increase in general and administrative expenses is attributable mainly to an increase in wages and benefits, staffing levels, professional fees and other expenses and a $0.2 million increase in stock option expenses, primarily to build development and operating capacity.

Ownership and Corporate Operations

Revenues

Retirement communities operating revenues increased $0.7 million to $18.6 million due to an increase in revenues from same communities.

Same community MARPAS increased 4.0%.

Expenses

Retirement communities operating expenses increased $0.6 million to $11.4 million due to an increase in same community expenses.

Earnings Before Other Operating Items (EBITDA)

As a result of the changes in management and ownership operations, EBITDA increased $1.0 million to $7.0 million while EBITDA margin increased 2% to 31%.

Other Items

Interest expense

Interest expense decreased $0.2 million to $3.1 million, mainly due to lower mortgage principal balances and lower interest rates on new mortgages and refinancing on existing mortgages.

Other income

Interest and other income increased $0.4 million to $1.1 million as a result of the Company's mortgages and loans receivable increasing by $11.5 million to $22.2 million.

Income taxes

Income tax expense decreased $0.1 million, mainly due to a $0.8 million non-capital loss carry forward adjustment to prior year taxes and tax deductions from co-tenancy investments that are accounted for on the cost method for accounting purposes but are deductible for tax purposes. These tax recoveries were mostly offset by tax expense resulting from an increase of $1.7 million in earnings for the six months ended November 30, 2007.

Net earnings and earnings per share

For the six month period ended November 30, 2007, the Company had net earnings of $2.8 million ($0.16 basic and diluted earnings per share). For the six month period ended November 30, 2006, the Company had net earnings of $1.1 million ($0.08 per share basic and diluted earnings).

Balance Sheet Analysis

The following table summarizes the significant changes from May 31, 2007, in Amica's assets, liabilities and shareholders' equity:



---------------------------------------------------------------------------
(Expressed in millions of Increase/ Explanation of
Canadian dollars) (Decrease) Significant Balances
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Income-producing properties $ 0.2 - Capital expenditures increased
income-producing properties
(IPP) by $2.0
- Depreciation expense decreased
IPP by $1.8

Properties under development 3.5 - A 50% ownership interest in a
new co-tenancy investment under
construction increased
properties under development by
$3.5

Co-tenancy investments (0.5) - Return of equity in a co-tenancy
decreased co-tenancy investments
by $0.5

Mortgages and loans 4.2 - Loans advanced to co-tenancy
receivable investments, net of amounts
repaid, increased mortgages and
loans receivable by $1.3
- A vendor-take-back mortgage
increased mortgages and loans
receivable by $2.9

Other assets 2.6 - Deposits on land held for future
co-tenancy investments increased
other assets by $2.6

Mortgages payable 2.9 - Monthly principal payments
decreased mortgages payable by
$1.1
- Proceeds from a mortgage payable
of a new co-tenancy investment
increased mortgages payable by
$2.0
- Proceeds from refinancing of
Amica at Swan Lake first
mortgage increased mortgages
payable by $9.4
- Repayment of Amica at Swan Lake
mortgages decreased mortgages
payable by $7.2
- Reclassification of deferred
financing costs net of
amortization decreased mortgages
payable by $0.2

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In October 2007, the Company announced that it had taken a 50% ownership interest in Amica at Richmond Hill, a new co-tenancy investment consisting of retirement rental and condominium residences, which is located in Richmond Hill, Ontario. As the Company has a 50% interest and jointly controls the property under development, it is being proportionately-consolidated in the Company's financial statements. As at November 30, 2007, land and related construction costs of $3.5 million (50% share) are capitalized in properties under development. A mortgage loan payable of $2.0 million (50% share) was financed in October 2007, which bears interest at prime plus 1.0% and is due on demand but no later than December 31, 2010. The loan is secured by a first mortgage charge against the property.

Cash Flow

Cash flow from operations increased $1.3 million. After taking into consideration other changes in non-cash operating working capital, total cash flow increased $1.2 million to $3.3 million.

Liquidity and Capital Resources

The Company's cash balance at November 30, 2007, was $11.3 million. For the three month period ended November 30, 2007, cash flow generated from operations before changes in non-cash operating working capital was $4.9 million, compared to $3.6 million for the comparative period in the prior year.

The Company also anticipates that its cash on hand, cash generated from operations, and the equity available in its wholly owned assets available for mortgaging will be sufficient for it to meet its obligations, including the payment of dividends and planned objectives for fiscal 2008, absent unusual investment occurrences.

The Company, generally in conjunction with its development participants, funds all funding shortfalls in operating co-tenancies and co-tenancy investments under development. The Company charges interest on these advances and is indemnified by the other capital participants or co-tenancy investors. As at November 30, 2007, advances to co-tenancies totaled $15.3 million, compared to $14.1 million at May 31, 2007. The Company may also provide guarantees in excess of its proportionate interest in the co-tenancies, and as at November 30, 2007, the Company provided financial guarantees totaling a maximum of $40.8 million, of which $39.4 million is funded and currently outstanding. This compares to $30.6 million which was outstanding at May 31, 2007. These guarantees are for the indebtedness on certain properties in excess of the indebtedness otherwise disclosed in the consolidated financial statements, all of which the Company is indemnified by other investors. In the opinion of management, these properties have a value in excess of the indebtedness that is guaranteed. Independent third party appraisals have been performed on many of these properties and they indicate that they have a value in excess of the indebtedness that is guaranteed. The underlying properties are available to satisfy any claims under these guarantees and to reimburse the Company for any advances made to the co-tenancies.

On October 12, 2007, the Board declared a dividend of $0.06 per common share payable to all holders of record, on November 30, 2007, of its issued and outstanding common shares. A dividend payable of $1.1 million is recorded in the financial statements as at November 30, 2007.

On January 10, 2008, the Company announced that on January 15, 2008, it will commence a normal course issuer bid to purchase for cancellation up to approximately 880,000 common shares of the Company at prices that will be established by the Board in accordance with Toronto Stock Exchange policies. The bid will run for a one-year period and is subject to applicable securities laws and the policies of the Toronto Stock Exchange.

During the current quarter, the Company refinanced a first mortgage on Amica at Mayfair (Port Coquitlam, BC). The $5.8 million mortgage is for a five year term with an interest rate of 4.83% and is on a non-recourse basis.

On December 1, 2007, the first mortgage on Amica at Douglas House (Victoria, BC) was extended on a floating-rate basis until it is refinanced.

In fiscal 2008, the Company expects to spend approximately $4.8 million on capital expenditures on its wholly-owned or proportionately consolidated communities and corporate operations, including major expenditures of $1.6 million on various infrastructure upgrades to Amica at Rideau Manor (Burnaby, BC). The Company has also approved capital expenditures of approximately $5.0 million on Amica at Arbutus Manor (Vancouver, BC) and $2.7 million on Amica at Beechwood Village (Sidney, BC) which will be funded from cash resources; these expenditures are expected to commence during fiscal 2009. The Arbutus Manor project will take approximately 18 months, and the Beechwood Village project will take approximately eight months. These capital expenditures include renovations and capital upgrades that will enhance the revenue generating capacity of each of these properties.



Outstanding Share Data
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Designation Outstanding as of January 10, 2008
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Common shares 17,613,274
Options to acquire common shares 1,049,650
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Looking Ahead

The Company's vision is "To Deliver Superior Wellness & Vitality™ within Exceptional Independent Living Retirement Communities". While the Company has many departmental and corporate objectives in its business plan, the three key Company objectives in fiscal 2008 are:

- To increase diluted cash flow from operations per share over fiscal 2007 by at least 7.5%.

- To increase MARPAS by at least 4.0%.

- To generate five new long term management contracts.

Cash Flow

While the Company is on track to increase cash flow from operations over fiscal 2007 by 7.5%, due to the delays in redeploying all of the capital in structuring new developments which was raised from the issuance of the additional 2.75 million common shares issued in February 2007, diluted cash flow from operations per share over fiscal 2007 is now anticipated to decrease by approximately $0.02 or 4.0% per share.

MARPAS

The Company is on track to increase MARPAS by at least 4.0% in fiscal 2008.

Long Term Management Contracts

Historically, the Company has presented new development opportunities to its pool of investors at the earliest stage possible in the development process and the risk of rezoning and rising construction costs has been borne by Amica's investors. While this has been a successful tactic, it has limited the Company's pool of investors and has created a long investment cycle before investors receive a return on their investment. The Company has determined that, in the long term, the investor pool would be better served by having Amica and its developer partner assume the initial development risk until zoning is in place and construction documents have been completed to the point where the risk of budget overruns are minimized. In return for taking on this risk, it is anticipated that Amica and its developer partner may receive a 'lift' in the property and/or higher design and marketing fees than it otherwise would have earned. This change in strategy is not expected to impact the previously stated goal of achieving four to five new long term management contracts per year but will impact, in the short term, the timing of achieving such contracts and the timing of recognizing design and marketing fees. Partly as a result of this change in strategy, Amica is unlikely to generate five new long term management contracts this fiscal year. The Company has secured one new long term management contract, and believes that it may secure one additional long term contract this fiscal year. Over and above this, the Company expects to commit to two additional locations this fiscal year in which Amica and its developer partner will make financial commitments for these locations ahead of presenting them to other third party investors.

Recent challenges in the overall credit markets have also impacted the Company's near term plans in the area of financing strategy. While the market for construction financing appears to have held steady with many of the Company's historical lenders continuing to express interest in financing new developments (on overall terms that are consistent with historical transactions), the long term financing market is where significant changes have occurred. The commercial mortgage backed securities market has been reduced to limited players whose terms have changed to lower ratios and higher spreads over comparable period bond rates. This has led to a higher likelihood of pursuing Canada Mortgage and Housing Corporation ("CMHC") financing for existing mortgages that mature and for takeout mortgages on those developments which reach maturity. CMHC financing will also result in a lower ratio of overall financing given CMHC underwriting parameters, however, it will also produce lower borrowing costs. The overall impact to Amica and its investor pool is unknown at this time.

Disclosure Controls and Procedures

The Company's management under the supervision of, and with the participation of the Company's CEO and CFO, has designed and evaluated the effectiveness and operation of its disclosure controls and procedures, as defined under Multilateral Instrument 52 - 109 of the Canadian Securities Administrators ("MI 52-109").

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports filed with Canadian securities regulatory authorities is recorded, processed, summarized and reported in a timely fashion. The disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in such reports is then accumulated and communicated to the Company's management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. Due to the inherent limitations in all control systems, an evaluation of the disclosure controls can only provide reasonable assurance of the effectiveness of the controls. The disclosure controls are not expected to prevent and detect all misstatements due to error or fraud.

Based on the evaluation of disclosure controls and procedures, management has concluded that, subject to the inherent limitations noted above, the Company's disclosure controls and procedures are effective as at November 30, 2007.

Internal Controls and Financial Reporting

The Company's management under the supervision of, and with the participation of the Company's CEO and CFO, has designed and implemented internal controls over financial reporting, as defined under MI 52 - 109. The purpose of internal controls over financial reporting is to provide reasonable assurance regarding the reliability of financial reporting, in accordance with GAAP, focusing in particular on controls over information contained in the annual and interim financial statements. The internal controls are not expected to prevent and detect all misstatements due to error or fraud. The design of internal controls over financial reporting was evaluated as defined in MI 52 - 109.

Based on the results of this evaluation, management has concluded that the design of internal controls over financial reporting was effective as of November 30, 2007.

As required under MI 52 - 109, management advises that there have been no changes in the Company's internal controls over financial reporting during the second quarter ended November 30, 2007, that have materially affected or are reasonably likely to materially affect the Company's internal controls over financial reporting.

Operating Risks

The business of the Company is subject to many risks and uncertainties, and these remain substantially unchanged from those outlined in the Company's 2007 annual MD&A dated August 8, 2007, available on www.sedar.com.

Critical Accounting Policies

The significant accounting policies used by the Company in preparing its consolidated financial statements are described in Note 2 to the Company's consolidated financial statements for the year ended May 31, 2007, available on www.sedar.com, which should be read to ensure proper understanding and evaluation of the estimates and judgments made by management in preparing these financial statements. The Company's financial statements are prepared in accordance with Canadian generally accepted accounting principles.

Changes in Accounting Policies

During the first six months of fiscal 2008 there were no changes in the Company's accounting policies with the following exceptions.

On June 1, 2007, the Company adopted three new accounting standards that were issued by the Canadian Institute of Chartered Accountants ("CICA"): Handbook Section 1530, Comprehensive Income; Handbook Section 3855, Financial Instruments - Recognition and Measurement; and Handbook Section 3865, Hedges. Changes prescribed by each of the three new accounting standards are set out below.

Comprehensive Income

As a result of adopting these standards, a new category, accumulated other comprehensive income, is required to be added to shareholders' equity in the interim consolidated balance sheets. Comprehensive income consists of net income and other comprehensive income. Amounts are recorded in other comprehensive income until the criteria for recognition in the interim consolidated statement of income are met.

The Company has determined that there are no items that should be reported in other comprehensive income either at May 31, 2007 or November 30, 2007, and therefore the Company's net earnings is equal to comprehensive income.

Financial Instruments - Recognition and Measurement

Under the new standard, for accounting purposes, financial assets are classified as one of the following: held-to-maturity, loans and receivables, held-for-trading or available-for-sale and financial liabilities are classified as held-for-trading or other than held-for-trading. Financial assets and liabilities held-for-trading are measured at fair value with gains and losses recognized in net income. Financial assets held-to-maturity, loans and receivables, and financial liabilities other than those held-for-trading, are measured at amortized cost. Financial assets purchased and sold, where the contract requires the asset to be delivered within an established time frame, are recognized on a trade-date basis. All derivatives, including embedded derivatives that must be separately accounted for, generally must be classified as held-for-trading and recorded at fair value in the interim consolidated balance sheets. Transaction costs for financial liabilities are capitalized as incurred for financial instruments classified and amortized using the effective interest rate method.

The new standard permits designation of any financial instrument as held-for-trading (the fair value option) upon initial recognition. This designation by the Company requires that the financial instrument be reliably measurable, and eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities.

The Company adopted these standards prospectively, and, as such, comparative amounts for prior periods have not been restated.

As a result of applying the new standards, the Company recorded a charge of $94,000 to opening retained earnings to apply the effective interest rate method in accounting for transaction costs for mortgages payable. Mortgages payable are now recorded net of unamortized transaction costs totaling $211,000 at November 30, 2007.

The Company performed a review to identify derivatives and has concluded that there are no derivatives that need to be accounted for either at May 31, 2007 or November 30, 2007.

Hedges

The new standard specifies the criteria under which hedge accounting can be applied and how hedge accounting is to be executed for each of the permitted hedging strategies: fair value hedges, cash flow hedges, and hedges of a foreign currency exposure of a net investment in a self-sustaining foreign operation. In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging derivative is recognized in other comprehensive income. The ineffective portion is recognized in net income. The amounts recognized in accumulated other comprehensive income are reclassified to net income in the periods in which net income is affected by the variability in the cash flows of the hedged item.

The Company does not have any hedges, and therefore the Company was not impacted by the adoption of this standard.

Additional Information

Additional information about the Company, including the most recent Annual Information Form dated August 17, 2007, is available on SEDAR at www.sedar.com.

NOTES

1. Reconciliation of Net Earnings to EBITDA



--------------------------------------------------------------------------
(Expressed in THREE MONTHS ENDED SIX MONTHS ENDED
thousands of NOVEMBER 30 NOVEMBER 30
Canadian dollars) 2007 2006 2007 2006
--------------------------------------------------------------------------

Net earnings and
comprehensive income $ 1,767 $ 599 $ 2,838 1,124
Add:
Interest expense 1,572 1,634 3,068 3,311
Depreciation and
amortization 905 866 1,814 1,779
Income tax expense - 198 444 492
Deduct:
Interest and other income (627) (280) (1,082) (670)
Income tax recovery (51) - - -
Non-controlling interest (26) (36) (85) (81)
--------------------------------------------------------------------------
EBITDA $ 3,540 $ 2,981 $ 6,997 5,955
--------------------------------------------------------------------------
--------------------------------------------------------------------------


2. Two Year Summary by Quarter



--------------------------------------------------------------------------
(Expressed in thousands of 2nd Quarter 1st Quarter
Canadian dollars, -------------------------------------
except per share amounts) 2008 2007 2008 2007
--------------------------------------------------------------------------

Consolidated revenues from
operations $ 11,372 $ 10,458 $ 11,213 $ 9,978

Earnings (loss):
Management operations $ 431 $ 254 $ 724 $ 63
Ownership and corporate
operations 3,109 2,727 2,733 2,911

Earnings before other
operating items (EBITDA) $ 3,540 $ 2,981 $ 3,457 $ 2,974

Net earnings and comprehensive
income $ 1,767 $ 599 $ 1,071 $ 525

Basic earnings per share $ 0.10 $ 0.04 $ 0.06 $ 0.04

Diluted earnings per share $ 0.10 $ 0.04 $ 0.06 $ 0.04

Cash flow from operations $ 2,806 $ 1,744 $ 2,121 $ 1,833

Basic per share
cash flow from operations: $ 0.16 $ 0.12 $ 0.12 $ 0.13

Diluted per share
cash flow from operations: $ 0.16 $ 0.12 $ 0.12 $ 0.12

--------------------------------------------------------------------------
--------------------------------------------------------------------------


--------------------------------------------------------------------------
(Expressed in thousands of 4th Quarter 3rd Quarter
Canadian dollars, -------------------------------------
except per share amounts) 2007 2006 2007 2006
--------------------------------------------------------------------------

Consolidated revenues from
operations $ 11,704 $ 9,674 $ 10,472 $ 9,592

Earnings (loss):
Management operations $ 1,283 $ (137) $ 474 $ 54
Ownership and corporate
operations 2,891 3,057 2,812 2,640

Earnings before other
operating items (EBITDA) $ 4,174 $ 2,920 $ 3,286 $ 2,694

Net earnings and comprehensive
income $ 1,430 $ 1,204 $ 752 $ 337

Basic earnings per share $ 0.08 $ 0.08 $ 0.05 $ 0.02

Diluted earnings per share $ 0.08 $ 0.08 $ 0.05 $ 0.02

Cash flow from operations $ 3,292 $ 1,352 $ 1,768 $ 1,528

Basic per share
cash flow from operations: $ 0.19 $ 0.09 $ 0.12 $ 0.10

Diluted per share
cash flow from operations: $ 0.18 $ 0.09 $ 0.11 $ 0.10

--------------------------------------------------------------------------
--------------------------------------------------------------------------


Amica Mature Lifestyles Inc.

Amica Mature Lifestyles Inc., a Vancouver based public company, is a leader in the management, marketing, design and development of luxury housing and services for mature lifestyles. There are 25 Amica Wellness & Vitality™ Residences, including ten under development. The common shares of Amica are traded on the Toronto Stock Exchange under the symbol "ACC". For more information visit www.amica.ca.

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of the Securities Act (Ontario) ("forward-looking statements"). These forward-looking statements are made as of the date of this news release and the Company does not intend, and does not assume any obligation, to update these forward-looking statements.

Forward-looking statements include, but are not limited to, statements concerning the number of management contracts expected to be added in this and future years, profit margin and earnings trends, expected future financing opportunities and other similar statements concerning anticipated future events, conditions or results that are not historical facts. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to dependence on the ability of Amica's co-tenancy participants to meet their obligations; interest rate volatility in the marketplace; job actions including strikes and labour stoppages; possible liability under environmental laws and regulations, relating to removal or remediation of hazardous or toxic substances on properties owned or operated by Amica; risks associated with new developments, including cost overruns and start-up losses; the ability of seniors to pay for Amica's services; operational risks inherent in owning and operating residences; the risks associated with global events such as infectious diseases, extreme weather conditions and natural disasters; the availability of capital to finance growth; Amica's ability to attract seniors with its services and keep pace with changing consumer preferences, as well as those factors described in Amica's Annual Information Form dated August 17, 2007, filed with the Canadian Securities Administrators and available at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

(1) Cash Flow from operations is a supplemental non-GAAP measure of operating performance and is equal to net earnings (loss) plus (i) stock-based compensation plus (ii) depreciation and amortization plus (iii) amortization of intangible assets plus (iv) future income taxes plus (v) cash distributions in excess of income from equity-accounted property plus (vi) non-controlling interest plus (vii) loss on land held for sale plus (viii) other. Cash flow from operations may not be comparable to similar measures presented by other entities in the same industry. Management considers cash flow from operations to be a useful measure for reviewing the Company's operating and financial performance because, by excluding non-cash expenses and depreciation and amortization which can vary based on estimates of useful lives of real estate assets, cash flow from operations can help to compare the operating performance of the Company between financial reporting periods and with other entities in the same industry.

(2) EBITDA is equal to net earnings (loss) plus (i) income taxes expense plus (ii) interest expense plus (iii) depreciation and amortization less (iv) interest and other income less (v) noncontrolling interest. EBITDA is the same as earnings before other operating items as disclosed in the consolidated financial statements. EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles, and EBITDA should not be considered as an alternative to net earnings, cash flow from operations or any other measure of performance prescribed by generally accepted accounting principles. EBITDA of Amica Mature Lifestyles Inc. may also not be comparable to EBITDA used by other companies, which may be calculated differently. EBITDA is included because the Company's management believes it can be used to measure the Company's ability to service debt, fund capital expenditures and expand its business. See table under "Earnings Before Other Operating Items (EBITDA)" for a reconciliation of net earning to EBITDA.

(3) MARPAS is defined by the Company as Monthly Average Revenue Per Available Suite and is equal to gross monthly revenues generated at the seniors residences divided by the number of suites. MARPAS is used by the Company to measure period-over-period performance of its properties.

(4) Same communities is defined by the Company as mature communities that were classified as income-producing properties for thirteen months after reaching 95% occupancy.



Consolidated Balance Sheets

--------------------------------------------------------------------------
--------------------------------------------------------------------------
NOVEMBER 30 May 31
2007 2007
--------------------------------------------------------------------------
(Expressed in thousands of Canadian dollars) (audited)

ASSETS

Properties:
Income-producing $ 119,783 $ 119,576
Properties under development 4,919 1,355
Co-tenancy investments 11,413 11,887
-------------------------------------------------------------------------
136,115 132,818

Cash and cash equivalents 11,278 14,565
Management fees receivable 1,746 1,773
Mortgages and loans receivable 22,164 17,997
Land held for sale - 4,026
Other assets 10,832 8,162
--------------------------------------------------------------------------

$ 182,135 $ 179,341
--------------------------------------------------------------------------
--------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Mortgages payable $ 96,423 $ 93,526
Accounts payable and accrued liabilities 5,340 6,344
Income taxes payable 577 951
Dividends payable 1,057 877
Future income taxes 6,005 6,072
Non-controlling interest 1,489 1,574
--------------------------------------------------------------------------
110,891 109,344

Shareholders' equity:
Share capital 65,109 64,878
Contributed surplus 2,505 2,120
Retained earnings 3,630 2,999
-------------------------------------------------------------------------
71,244 69,997
--------------------------------------------------------------------------

$ 182,135 $ 179,341
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Consolidated Statements of Operations and Retained Earnings

--------------------------------------------------------------------------
--------------------------------------------------------------------------
3 MONTHS ENDED 3 MONTHS ENDED 6 MONTHS ENDED 6 MONTHS ENDED
November 30, November 30, November 30, November 30,
2007 2006 2007 2006
--------------------------------------------------------------------------
(Expressed in
thousands of
Canadian dollars)

Consolidated
revenues $ 11,372 $ 10,458 $ 22,585 $ 20,436
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Management
operations:
Revenues 2,426 2,010 5,011 3,600
General and
administrative
expenses (1,995) (1,756) (3,856) (3,283)
-------------------------------------------------------------------------
431 254 1,155 317

Ownership and
corporate
operations:
Retirement
communities
operating
revenues 9,409 8,981 18,581 17,882
Income (loss)
from equity-
accounted
property (6) - 151 56
Distributions
from
investments 142 40 181 80
Expenses:
Retirement
communities
operating (5,533) (5,443) (11,418) (10,830)
Corporate (298) (278) (465) (424)
Fees to
management
operations (605) (573) (1,188) (1,126)
-------------------------------------------------------------------------
3,109 2,727 5,842 5,638
--------------------------------------------------------------------------

Earnings before
other operating
items 3,540 2,981 6,997 5,955

Depreciation and
amortization (905) (866) (1,814) (1,779)
--------------------------------------------------------------------------

Earnings from
operations 2,635 2,115 5,183 4,176

Interest expense (1,572) (1,634) (3,068) (3,311)
Interest and
other income 627 280 1,082 670
--------------------------------------------------------------------------

Earnings before
income taxes and
non-controlling
interest 1,690 761 3,197 1,535

Income taxes:
Current expense
(recovery) (1) 47 511 97
Future expense
(recovery) (50) 151 (67) 395
-------------------------------------------------------------------------
(51) 198 444 492
--------------------------------------------------------------------------

Earnings before
non-controlling
interest 1,741 563 2,753 1,043

Non-controlling
interest 26 36 85 81
--------------------------------------------------------------------------

Net earnings and
comprehensive
income 1,767 599 2,838 1,124

Retained earnings,
beginning of
period 2,920 2,702 2,999 2,908

Adjustment for
impact of adopting
new accounting
policies - - (94) -

Dividends declared (1,057) (733) (2,113) (1,464)

--------------------------------------------------------------------------
Retained earnings,
end of period $ 3,630 $ 2,568 $ 3,630 $ 2,568
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Basic earnings
per share $ 0.10 $ 0.04 $ 0.16 $ 0.08

Diluted earnings
per share $ 0.10 $ 0.04 $ 0.16 $ 0.08
--------------------------------------------------------------------------


Consolidated Statements of Cash Flows

--------------------------------------------------------------------------
--------------------------------------------------------------------------
3 MONTHS ENDED 3 MONTHS ENDED 6 MONTHS ENDED 6 MONTHS ENDED
November 30, November 30, November 30, November 30,
2007 2006 2007 2006
--------------------------------------------------------------------------
(Expressed in
thousands of
Canadian dollars)

Cash provided
by (used in):

Operations:
Net earnings and
comprehensive
income $ 1,767 $ 599 $ 2,838 $ 1,124
Items not
involving cash:
Stock-based
compensation 90 61 385 225
Depreciation
and
amortization 905 866 1,814 1,779
Amortization
of intangible
assets 57 53 70 100
Future income
taxes (50) 151 (67) 395
Cash distributions
in excess of
income (loss)
from equity-
accounted
property 6 - (151) (56)
Non-controlling
interest (26) (36) (85) (81)
Other 57 50 123 91
------------------------------------------------------------------------
2,806 1,744 4,927 3,577
Other changes in
non-cash operating
working capital 115 (494) (1,626) (1,460)
-------------------------------------------------------------------------
2,921 1,250 3,301 2,117

Investments:
Co-tenancy
investments, net
of recoveries 340 (71) 510 622
Mortgages and
loans receivable,
net of recoveries (2,269) (1,792) (4,167) (2,615)
Expenditures on
income-producing
properties (1,179) (1,139) (2,021) (1,949)
Restricted cash (5) (7) (5) 6
Deposit on land
for future
co-tenancy - - (2,656) -
Land held for sale - - 4,026 (37)
Properties under
development (3,564) (15) (3,564) (123)
-------------------------------------------------------------------------
(6,677) (3,024) (7,877) (4,096)
--------------------------------------------------------------------------

Financing:
Proceeds from
mortgage payable 2,000 22,400 11,400 22,400
Principal
repayments on
mortgages payable (502) (22,409) (8,292) (23,141)
Deferred
financing costs (116) (448) (116) (495)
Issuance of common
shares for cash,
net of costs 46 78 231 170
Dividends paid (1,057) - (1,934) -
-------------------------------------------------------------------------
371 (379) 1,289 (1,066)
--------------------------------------------------------------------------

Decrease in cash
and cash
equivalents (3,385) (2,153) (3,287) (3,045)

Cash and cash
equivalents,
beginning of
period 14,663 7,358 14,565 8,250
--------------------------------------------------------------------------

Cash and cash
equivalents,
end of period $ 11,278 $ 5,205 $ 11,278 $ 5,205
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Contact Information

  • Amica Mature Lifestyles Inc.
    Mr. Doug Allen
    Chief Financial Officer
    (604) 630-3473
    Email: d.allen@amica.ca
    or
    Amica Mature Lifestyles Inc.
    Ms. Alyssa Williams
    Investor Communications Administrator
    (604) 639-2171
    Email: a.williams@amica.ca
    Website: www.amica.ca