Amica Mature Lifestyles Inc.
TSX : ACC

Amica Mature Lifestyles Inc.

January 16, 2006 07:00 ET

Amica Mature Lifestyles Announces Second Quarter Results For Fiscal 2006; Conference Call to be Held Monday, January 16th, 2006 at 1:00 pm (EDT)

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 16, 2006) - Mr. Samir Manji, Chairman, President and CEO of Amica Mature Lifestyles Inc. (TSX:ACC), a leading brand manager 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, 2005.

The Company is pleased with the progress made during the second quarter of fiscal 2006. The Company demonstrated growth in most of its key economic drivers as noted in the highlights below.

Financial Highlights

Three Months ended November 30, 2005

(Compared with the Three Months Ended November 30, 2004.)

- Increase in cash flow from operations before changes in non-cash operating working capital of 7% to $1.6 million.

- Increase in EBITDA(1) of 7% to $2.8 million.

- Increase in MARPAS(2) on a same community(3) basis of 3.8%.

- Increase in net earnings attributable to common shareholders of $0.4 million to $0.4 million.

- Decrease in diluted cash flow per share of 15% to $0.11 per share.

Six Months ended November 30, 2005

(Compared with the Six Months Ended November 30, 2004.)

- Increase in cash flow from operations before changes in non-cash operating working capital of 7% to $3.2 million.

- Increase in EBITDA of 1% to $5.5 million.

- Increase in MARPAS on a same community basis of 4.8%.

- Increase in net earnings attributable to common shareholders of $0.6 million to $0.7 million.

- Decrease in diluted cash flow per share of 12% to $0.22 per share.

During the quarter the Company opened its latest Amica Wellness & Vitality Residence™, Amica at City Centre, located in Mississauga, Ontario. This 138 suite luxury independent living retirement residence is part of a $65 million retirement campus and will have an attached 145 suite condominium tower which is scheduled to open in early calendar 2006. Over 96% of the condominiums have been sold and initial lease-up of the rental residence is progressing on budget. The Company has a 34% equity interest in this five-star residence.

Amica at Newmarket is scheduled to open in March 2006. The Company has a 16% equity interest in this 137 suite, $27 million luxury independent living retirement community. Upon completion, Amica at Newmarket will be the premiere retirement community in the area and pre-leasing results to date confirm strong demand within the overall cachement area.

Subsequent to the end of the quarter the Company announced its latest long term management contract. Amica at Thornhill, located in the Vaughan region in the north part of Toronto, Ontario will be a $32 million luxury independent living retirement residence comprised of 143 suites. The Company has a 10% equity interest in this development and will provide $1.5 million in mezzanine financing at an interest rate of 12%. The Company will earn $1.2 million in design and marketing fees during the construction of this retirement residence and will receive a marketing bonus based on the number of suites leased during the first year of operation. The Company will earn a base management fee of 6% of gross revenues and an annual profit participation of 25% on any net operating income in excess of $3.4 million. The $3.4 million threshold remains fixed for the entire 99 year term of the contract.

Strong operating results, including overall occupancy levels over 97% in our mature communities, have been the key contributor to the financial results achieved to date this fiscal year. At the same time, the Company continues to focus on business development initiatives. Additional resources have been allocated to this important area that will drive long term growth and it is expected that the Company will achieve its goal of generating three additional long term management contracts prior to the end of the fiscal year.

As previously disclosed, the Company continues to explore the divestiture of its seven 100% owned assets with the retention of long term management contracts reflecting the Company's focus on management versus ownership.

We believe that the Company is in the strongest position in its history both from a balance sheet and fiscal perspective, and from a people perspective. We have $13.7 million in cash and substantial accrued equity in our seven 100% owned retirement communities that will be crystallized upon the successful completion of the planned divestiture. Most importantly, we have made further strides in our goal of developing Amica into the premiere brand in the luxury independent living retirement residence industry. This, ultimately, is a reflection and product of our people. They continue to demonstrate an unwavering commitment and dedication to our residents and our organization. For this we are grateful and thank all the members of the Amica team.

Amica Mature Lifestyles Inc., a Vancouver based public company, is a leading brand manager in the management, marketing, design and development of luxury housing and services for mature lifestyles. There are 18 Amica Wellness & Vitality™ Residences, including four under development. The common shares of Amica are traded on the Toronto Stock Exchange under the symbol "ACC".

(1) EBITDA is equal to net earnings plus (i) income taxes expense plus (ii) interest expense plus (iii) depreciation and amortization plus (iv) other expense plus (v) loss from discontinued operations, net of income taxes less (vi) earnings from discontinued operations, net of income taxes less (vii) other income less (viii) non-controlling 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 performance, ability to service debt, fund capital expenditures and expand its business. See note 1 for a reconciliation of net earnings to EBITDA.

(2) 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.

(3) Same communities is defined by the Company as mature communities that were classified as income-producing properties for the full current fiscal year and the full prior comparative fiscal year.

Forward-Looking Information

Statements made that are not historical facts are forward-looking statements. Forward-looking statements can be identified because they generally contain the words "anticipate", "believe", "estimate", "plan", "expect", "project", or similar words. Such forward-looking statements are estimates reflecting the best judgment of the Company based upon current information and involve a number of risks and uncertainties and other factors that may cause actual results, performance, or achievements of the Company to differ materially from future results expressed, projected or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on the Company's forward-looking statements. These statements are made as of the date of this document and, except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Management's Discussion and Analysis

The following Management's Discussion and Analysis (MD&A) for the three months and six months ended November 30, 2005, is provided as of January 13, 2006. 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, 2005. 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, 2005. 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 document will contain reference to the following terms - EBITDA and MARPAS. Please refer to footnotes 1 and 2.



Financial Highlights

Management Operations
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3 MONTHS ENDED 6 MONTHS ENDED
(Expressed in thousands NOVEMBER 30 NOVEMBER 30
of dollars) 2005 2004 2005 2004
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Management operations:
Revenues
Management fees from
100% owned
communities $ 425 $ 398 $ 852 $ 790
Management fees from
10% to 62.5% owned
communities 383 315 750 568
Design and marketing
fees from new
developments under
construction 624 255 1,195 762
Other - - - -
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1,432 968 2,797 2,120
General and
administrative
expenses (1,442) (1,052) (2,715) (2,107)
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$ (10) $ (84) $ 82 $ 13
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Ownership and Corporate Operations
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3 MONTHS ENDED 6 MONTHS ENDED
(Expressed in thousands NOVEMBER 30 NOVEMBER 30
of dollars) 2005 2004 2005 2004
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Ownership and corporate
operations:
Retirement communities
operating revenues $ 8,632 $ 9,047 $ 17,253 $ 17,939
Distribution from
investments 40 - 79 -
Expenses:
Retirement communities
operating (5,085) (5,648) (10,438) (11,188)
Corporate (197) (140) (330) (238)
Fees paid to and
reported in
management operations (551) (541) (1,102) (1,033)
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$ 2,839 $ 2,718 $ 5,462 $ 5,480
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Cash Flow From Operations
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3 MONTHS ENDED 6 MONTHS ENDED
(Expressed in thousands NOVEMBER 30 NOVEMBER 30
of dollars) 2005 2004 2005 2004
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Cash flow from
continuing
operations $ 1,570 $ 1,319 $ 3,204 $ 2,706
Cash flow from
discontinued
operations - 149 - 278
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$ 1,570 $ 1,468 $ 3,204 $ 2,984
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Per Share Cash Flow From Operations
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3 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
2005 2004 2005 2004
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Cash flow from
continuing
operations $ 0.11 $ 0.11 $ 0.22 $ 0.22
Cash flow from
discontinued
operations - 0.02 - 0.03
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$ 0.11 $ 0.13 $ 0.22 $ 0.25
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THREE MONTHS ENDED NOVEMBER 30, 2005

(Compared with the three months ended November 30, 2004.)

Operational Review and Analysis

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

Overview

On May 31, 2005, the Company sold Amica at Bearbrook Court, a 111 suite retirement community located in Ottawa, Ontario to a joint venture in which the Company has a 10% equity interest. In accordance with GAAP, this investment is now accounted for under the cost method of accounting and its operations are not consolidated in the Company's consolidated financial statements as of May 31, 2005, impacting the results of operations for the three month period ended November 30, 2005.

A comparison of the financial results for the three month period ended November 30, 2005, to the comparative period ended November 30, 2004, reflects the following: an increase in cash flow from operations of $0.1 million to $1.6 million; a decrease in diluted cash flow per share of $0.02 per share to $0.11 per share; an increase in consolidated revenues of $0.1 million to $9.6 million; an increase in EBITDA(1) of $0.2 million to $2.8 million; and an increase in net earnings attributable to common shareholders of $0.4 million to $0.4 million.

Management Operations

For the three month period ended November 30, 2005, fee revenues increased $0.5 million to $1.4 million and general and administrative expenses increased $0.4 million to $1.4 million resulting in earnings from management operations increasing by $0.1 million.

The $0.5 million increase in fee revenues is due to a $0.1 million increase in management fees as a result of increased rents and occupancy levels at the retirement communities, and the opening of Amica at West Vancouver located in West Vancouver, British Columbia in April 2005, and a $0.4 million increase in design and marketing fees from new developments under construction.

The $0.4 million increase in general and administrative expenses is mainly attributable to an increase in staffing, salaries and wages in comparison with the prior comparative quarter.

Ownership Operations and Corporate Operations

Revenues

Retirement communities operating revenues decreased $0.4 million to $8.6 million for the three month period ended November 30, 2005, as compared to the same period in 2004. The $0.4 million decrease in retirement communities operating revenues is due to a $0.3 million increase in revenues from same communities(3) offset by a $0.7 million decrease in revenues due to the sale of Amica at Bearbrook Court.

Same community MARPAS(2) (monthly average revenue per available suite) increased 3.8% when compared to the comparative period.

Expenses

Retirement communities operating expenses decreased $0.6 million to $5.1 million for the three month period ended November 30, 2005. The decrease in retirement communities operating expenses is due to a $0.1 million decrease in same community expenses and a $0.5 million decrease in expenses due to the sale of Amica at Bearbrook Court.

Earnings Before Other Operating Items (EBITDA)

As a result of the changes in management and ownership operations, EBITDA increased $0.2 million to $2.8 million.

Other Items

Interest expense

Interest expense decreased $0.3 million to $1.5 million mainly due to a net $0.2 million decrease in interest expense as a result of the conversion to equity of some, and early redemption of the balance, of the $15.1 million in 8.25% unsecured convertible debentures (Debentures) in December 2004 and a decrease of $0.1 million in interest expense due to the sale of Amica at Bearbrook Court.

Other income

Other income increased $0.2 million due to a $0.2 million increase in interest income as a result of the Company's cash and cash equivalents increasing by $11.9 million to $13.6 million in comparison with the comparative prior period.

Income taxes

Income taxes expense increased $0.2 million mainly due to the $0.7 million increase in earnings.

Net earnings (loss) and earnings (loss) per share

For the three month period ended November 30, 2005, the Company had earnings from continuing operations and net earnings attributable to common shareholders of $0.4 million ($0.03 per share basic and diluted earnings from continuing operations and net earnings attributable to common shareholders). For the three month period ended November 30, 2004, the Company had a loss from continuing operations of $34,000 (nil per share basic and diluted earnings from continuing operations) and net loss attributable to common shareholders of $44,000 (nil per share basic and diluted net earnings attributable to common shareholders).

SIX MONTHS ENDED NOVEMBER 30, 2005

(Compared with the six months ended November 30, 2004.)

Operational Review and Analysis

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

Overview

On May 31, 2005, the Company sold Amica at Bearbrook Court, a 111 suite retirement community located in Ottawa, Ontario to a joint venture in which the Company has a 10% equity interest. In accordance with GAAP, this investment is now accounted for under the cost method of accounting and its operations are not consolidated in the Company's consolidated financial statements as of May 31, 2005, impacting the results of operations for the six month period ended November 30, 2005.

A comparison of the financial results for the six month period ended November 30, 2005, to the comparative period ended November 30, 2004, reflects the following: an increase in cash flow from operations of $0.2 million to $3.2 million; a decrease in basic and diluted cash flow per share of $0.03 per share to $0.22 per share; consolidated revenues remained the same at $19.0 million; EBITDA also remained the same at $5.5 million; and an increase in net earnings attributable to common shareholders of $0.6 million to $0.7 million.

Management Operations

Comparing results for the six month period ended November 30, 2005, with the same period in 2004 reflects that fee revenues increased $0.7 million to $2.8 million and general and administrative expenses increased $0.6 million to $2.7 million resulting in an increase in earnings from management operations to $0.1 million.

The $0.7 million increase in fee revenues is primarily due to: a $0.3 million increase in management fees as a result of increased rents and occupancy levels at the retirement communities, and the opening of Amica at West Vancouver; a $0.1 million bonus marketing fee earned on the lease-up of Amica at West Vancouver; and an increase of $0.3 million in design and marketing fees earned on new developments under construction.

The $0.6 million increase in general and administrative expense is primarily attributable to budgeted increases in staffing levels, wages and benefits.

Ownership Operations and Corporate Operations

Revenues

Retirement communities operating revenues decreased $0.7 million to $17.3 million for the six month period ended November 30, 2005, as compared to the same period in 2004. The $0.7 million decrease in retirement communities operating revenues is due to a $0.8 million increase in revenues from same communities offset by a $1.5 million decrease in revenues due to the sale of Amica at Bearbrook Court.

Same community MARPAS increased 4.8% when compared to the comparative period.

Expenses

Retirement communities operating expenses decreased $0.8 million to $10.4 million for the six month period ended November 30, 2005. The decrease in retirement communities operating expenses is due to a $0.3 million increase in same community expenses offset by a $1.1 million decrease in expenses due to the sale of Amica at Bearbrook Court.

Earnings Before Other Operating Items (EBITDA)

As a result of the changes in management and ownership operations, EBITDA remained the same at $5.5 million. EBITDA margin remained the same at 29%.

Other Items

Interest expense

Interest expense decreased $0.6 million to $3.1 million mainly due to a net $0.4 million decrease in interest expense as a result of the conversion to equity of some, and early redemption of the balance of the $15.1 million in Debentures and a decrease in interest expense of $0.2 million due to the sale of Amica at Bearbrook Court.

Other income

Other income increased $0.6 million mainly due to the increase in the Company's cash position during the six month period as compared to the comparative period.

Income taxes

Income taxes expense increased $0.4 million mainly due to the $1.2 million increase in earnings in comparison with the prior comparative period.

Net earnings and earnings per share

For the six month period ended November 30, 2005, the Company had earnings from continuing operations and net earnings attributable to common shareholders of $0.7 million ($0.05 per share basic and diluted earnings from continuing operations and net earnings attributable to common shareholders). For the six month period ended November 30, 2004, the Company had earnings from continuing operations of nil (nil per share basic and diluted earnings from continuing operations) and net earnings attributable to common shareholders of $0.1 million ($0.01 per share basic and diluted net earnings attributable to common shareholders).

Balance Sheet Analysis

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



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(Expressed in millions Increase/
of dollars) (Decrease) Explanation
--------------------------------------------------------------------
Income-producing
properties $ (0.8) - Capital expenditures increased
income-producing properties
(IPP) by $0.9
- Depreciation expense decreased
IPP by $1.7
Investment in
co-tenancy properties 0.6 - Investment in new co-tenancies
increased investment in
cotenancy properties by $0.6
Mortgages and loans
receivable 2.3 - Loans provided to co-tenancy
properties increased mortgages
and loans receivable by $2.3

Other assets 0.7 - Net increases in prepaids,
receivables, and sundry
categories increased other
assets by $0.7

Mortgages payable (4.4) - Repayment of a second mortgage
decreased mortgages payable
by $2.5
- Monthly principal payments
decreased mortgages payable
by $1.9

Share capital 0.5 - Exercise of stock options
increased share capital by
$0.5
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Cash Flow

During the six month period ended November 30, 2005, cash flow from continuing operations increased $0.5 million as compared to the prior comparative period while total cash flow from operations increased $0.2 million. While total cash flow from operations increased, diluted per share cash flow from operations decreased $0.03 per share to $0.22 per share due to the difference in the diluted average weighted number of shares outstanding during the period (2005 - 14,677,532 and 2004 - 11,602,834) as a result of the issuance of 2.2 million shares by way of private placement in April 2005 and common shares issued on the exercise of stock options. The funds realized from the issuance of common shares have not been fully deployed in new co-tenancy investments in which the Company would obtain new long term management contracts. After taking into consideration other changes in non-cash operating working capital, total cash flow increased $0.6 million to $1.9 million. In the immediate term, cash flow from operations may decrease depending upon the timing of the sale of the Company's seven 100% owned properties. The Company will seek long term management contracts from the prospective purchaser(s) which, coupled with new management contracts, will generate sufficient cash flow over time to offset the foregone cash flow from the sale of these properties.

Liquidity and Capital Resources

The Company's cash balance at November 30, 2005, was $13.7 million. For the three month period ended November 30, 2005, cash flow generated from operations before changes in non-cash operating working capital was $1.6 million. For the six month period ended November 30, 2005, cash flow generated from operations before changes in non-cash operating working capital was $3.2 million. Cash flow from operations will be impacted by the timing of the disposition of the Company's seven 100% owned properties. This strategic disposition will be undertaken in an orderly manner and may or may not be completed by fiscal year end. This impact will be mitigated by the recurring management fees that are expected to continue to be earned from these properties and the income from investing the net cash realized on sale and from savings in future capital expenditures. The proceeds from these sales will be used to finance the Company's growth strategy.

The Company also anticipates that the equity available in its wholly owned assets available for mortgaging, should the need arise, together with cash on hand and cash generated from operations will be sufficient for the Company to meet its obligations and growth objectives for fiscal 2006.

Generally, the Company, sometimes in conjunction with its development partner, funds all funding shortfalls in joint ventures and investments in co-tenancy properties under development. The Company charges interest on these advances and is indemnified by the other joint venture or co-tenancy investors. As well, the Company may provide guarantees in excess of its proportionate interest in the joint venture and co-tenancies and is indemnified by the other investors. As at November 30, 2005, the Company provided guarantees totaling $28.3 million as compared to $22.5 million in the comparative period for the indebtedness on certain properties in excess of the indebtedness otherwise disclosed in the consolidated financial statements. In management's opinion, substantiated in some cases by third party appraisals, these properties have a value, in the aggregate, in excess of their obligations.

In fiscal 2006, the Company expects to spend $2.3 million on capital expenditures and $12.0 million on new investments.



Outstanding Share Data
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Designation Outstanding as of January 13, 2006
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Common shares 14,546,938
Options to acquire common shares 786,220
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Looking Ahead

As disclosed in the MD&A for the year ended May 31, 2005, the Company's business plan for fiscal 2006 focuses on improving all aspects of the Company's business with the goal of meeting the Company's vision - "To Be The Best in the World at Delivering Superior Wellness & Vitality™ Within Exceptional Independent Living Retirement Communities".

The Company's three key objectives for fiscal 2006 are:

- Increase cash flow from operations over fiscal 2005 by at least 10%.

- Increase in MARPAS by at least 6.0%.

- Generate a minimum of four new long term management contracts.

The Company believes that it will achieve its cash flow growth objective subject to the impact of the timing of the sale of any or all of the Company's 100% owned properties. The Company also believes that it will have signed four new long term management contracts by the end of fiscal 2006. While the Company will continue to work hard to increase MARPAS by at least 6% it believes that MARPAS growth will be in the 5% to 5.5% range.

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings made pursuant to Multilateral Instrument 52-109 is recorded, processed, summarized and reported within the time periods specified in the Canadian Securities Administrators rules and forms. The Chief Executive Officer and Chief Financial Officer have evaluated the Company's disclosure controls and procedures as of November 30, 2005, and concluded that the Company's current disclosure controls and procedures are effective.

Critical Accounting Policies

The significant accounting policies used by the Company in preparing its consolidated financial statements are described in note 2 to the consolidated financial statements for the year ended May 31, 2005, and 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 GAAP.



NOTES

1. Reconciliation of Net Earnings (Loss) to EBITDA
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3 MONTHS ENDED 6 MONTHS ENDED
(Expressed in thousands NOVEMBER 30 NOVEMBER 30
of dollars) 2005 2004 2005 2004
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Net earnings (loss) $ 374 $ (50) $ 720 $ 208

Add:
Interest expense 1,545 1,823 3,087 3,710
Depreciation and
amortization 860 841 1,765 1,691
Other expense - 1 - 14
Income tax expense 264 111 596 186
Loss from discontinued
operations - 16 - -

Deduct:
Earnings from
discontinued
operations - - - 166
Other income 204 - 539 -
Non-controlling
interest 10 108 85 150
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EBITDA $ 2,829 $ 2,634 $ 5,544 $ 5,493
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2. Two Year Summary by Quarter

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(Expressed in
thousands of
dollars 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
except for (4) (4) (4) (4)
per share ----------------------------------------------------
amounts) 2006 2005 2006 2005 2005 2004 2005 2004
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Consolidated
revenues from
continuing
operations $9,553 $9,474 $9,474 $9,552 $9,835 $8,996 $9,685 $8,829

Earnings
(loss):
Management
operations $ (10)$ (84)$ 92 $ 97 $ (61)$ 48 $ (179)$ 259
Ownership and
corporate
operations 2,839 2,718 2,623 2,762 3,012 2,672 3,051 2,473

Earnings
before
other
operating
items
(EBITDA) 2,829 2,634 2,715 2,859 2,951 2,720 2,872 2,732

Earnings
(loss) from
continuing
operations 374 (34) 346 76 1,396 (321) 72 543

Earnings (loss)
from
discontinued
operations,
net of income
taxes - (16) - 182 (317) (34) (688) (113)

Net earnings
(loss)
attributable
to common
share-
holders $ 374 $ (44)$ 346 $ 129 $1,091 $ (306)$ (648)$ 322

Basic and
diluted
earnings
(loss) per
share
Continuing
operations $ 0.03 $ - $ 0.02 $ - $ 0.10 $(0.03)$ - $ 0.04
Discontinued
operations - - - 0.01 (0.02) - (0.05) (0.01)
Net earnings
(loss)
attributable
to common
share-
holders $ 0.03 $ - $ 0.02 $ 0.01 $ 0.08 $(0.03)$(0.05)$ 0.03

Cash flow from
operations
Continuing
operations $1,570 $1,319 $1,634 $1,387 $1,428 $1,383 $1,523 $1,255
Discontinued
operations - 149 - 129 57 173 33 140
Total $1,570 $1,468 $1,634 $1,516 $1,485 $1,556 $1,556 $1,395

Basic and
diluted
per share
cash flow
from
operations
Continuing
operations $ 0.11 $ 0.11 $ 0.11 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.11
Discontinued
operations - 0.02 - 0.01 - 0.01 - 0.01
Total $ 0.11 $ 0.13 $ 0.11 $ 0.13 $ 0.12 $ 0.13 $ 0.12 $ 0.12
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(4) Quarterly results have been restated to reflect discontinued
operations.


Forward-Looking Information

Statements made in this MD&A that are not historical facts are forward-looking statements. Forward-looking statements can be identified because they generally contain the words "anticipate", "believe", "estimate", "plan", "expect", "project", or similar words. Such forward-looking statements are estimates reflecting the best judgment of the Company based upon current information and involve a number of risks and uncertainties and other factors that may cause actual results, performance, or achievements of the Company to differ materially from future results expressed, projected or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on the Company's forward-looking statements. These statements are made as of the date of this document and, except as required by law, the Company undertakes no obligation to publicly update or revise any forwardlooking statement, whether as a result of new information, future events or otherwise.

(1) EBITDA is equal to net earnings plus (i) income taxes expense plus (ii) interest expense plus (iii) depreciation and amortization plus (iv) other expense plus (v) loss from discontinued operations, net of income taxes less (vi) earnings from discontinued operations, net of income taxes less (vii) other income less (viii) non-controlling 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 performance, ability to service debt, fund capital expenditures and expand its business. See note 1 for a reconciliation of net earnings to EBITDA.

(2) 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.

(3) Same communities is defined by the Company as mature communities that were classified as income-producing properties for the full current fiscal year and the full prior comparative fiscal year.



Consolidated Balance Sheets

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NOVEMBER 30 MAY 31
2005 2005
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(Expressed in thousands of dollars) (unaudited) (audited)

ASSETS
Properties:
Income-producing $ 120,007 $ 120,826
Investment in co-tenancy properties 7,624 7,016
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127,631 127,842
Cash and cash equivalents 13,656 19,542
Management fees receivable 1,467 1,028
Mortgages and loans receivable (note 3) 8,405 6,130
Deferred financing costs, net of
accumulated amortization 381 482
Other assets 2,115 1,399
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$ 153,655 $ 156,423
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LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages payable $ 98,965 $ 103,372
Accounts payable and accrued
liabilities 4,925 5,056
Accrued interest payable 462 481
Future income taxes 5,517 5,017
Non-controlling interest 1,658 1,743
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111,527 115,669
Shareholders' equity:
Share capital 38,990 38,505
Contributed surplus 1,771 1,602
Retained earnings 1,367 647
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42,128 40,754
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$ 153,655 $ 156,423
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See accompanying notes to consolidated financial statements.


Samir A. Manji, CA Leonard Barkin, FCA
DIRECTOR DIRECTOR


Consolidated Statements of Operations and Retained Earnings

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3 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
2005 2004 2005 2004
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(Expressed in thousands
of dollars, except per
share amounts) (unaudited) (unaudited) (unaudited) (unaudited)
(restated) (restated)
Consolidated revenues
from continuing
operations $ 9,553 $ 9,474 $ 19,027 $ 19,026
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Management operations:
Revenues $ 1,432 $ 968 $ 2,797 $ 2,120
General and
administrative
expenses (1,442) (1,052) (2,715) (2,107)
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(10) (84) 82 13
Ownership and corporate
operations:
Retirement communities
operating revenues 8,632 9,047 17,253 17,939
Distributions from
investments 40 - 79 -
Expenses:
Retirement communities
operating (5,085) (5,648) (10,438) (11,188)
Corporate (197) (140) (330) (238)
Fees to management
operations (551) (541) (1,102) (1,033)
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2,839 2,718 5,462 5,480
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Earnings before other
operating items 2,829 2,634 5,544 5,493
Depreciation and
amortization (860) (841) (1,765) (1,691)
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Earnings from operations 1,969 1,793 3,779 3,802
Interest expense (1,545) (1,823) (3,087) (3,710)
Other income (expense) 204 (1) 539 (14)
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Earnings (loss) before
income taxes and
non-controlling interest 628 (31) 1,231 78
Income taxes:
Current expense 48 48 96 96
Future expense 216 63 500 90
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264 111 596 186
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Earnings (loss) before
non-controlling interest 364 (142) 635 (108)
Non-controlling interest 10 108 85 150
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Earnings (loss) from
continuing operations 374 (34) 720 42
Earnings (loss) from
discontinued operations,
net of income taxes - (16) - 166
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Net earnings (loss) 374 (50) 720 208
Imputed interest on
convertible debentures,
net of income taxes - 6 - (123)
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Net earnings (loss)
attributable to
common shareholders 374 (44) 720 85
Retained earnings,
beginning of period 993 248 647 119
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Retained earnings, end
of period $ 1,367 $ 204 $ 1,367 $ 204
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Basic and diluted
earnings per share
Continuing operations $ 0.03 $ - $ 0.05 $ -
Discontinued operations - - - 0.01
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Net earnings attributable
to common shareholders $ 0.03 $ - $ 0.05 $ 0.01
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See accompanying notes to consolidated financial statements.


Consolidated Statements of Cash Flow from Operations
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3 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
2005 2004 2005 2004
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(Expressed in thousands
of dollars)
(unaudited) (unaudited) (unaudited) (unaudited)
(restated) (restated)
Earnings (loss) from
continuing operations $ 374 $ (34) $ 720 $ 42

Items not involving cash:
Stock-based compensation 71 58 169 82
Depreciation and
amortization 860 841 1,765 1,691
Amortization of
deferred financing
costs 44 116 90 185
Amortization of deemed
debt discount on
convertible debentures - 368 - 736
Other 15 15 45 30
Future income taxes 216 63 500 90
Non-controlling interest (10) (108) (85) (150)
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Cash flow from continuing
operations 1,570 1,319 3,204 2,706
Cash flow from
discontinued operations - 149 - 278
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Cash flow from operations
before changes in
non-cash operating
working capital $ 1,570 $ 1,468 $ 3,204 $ 2,984
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See accompanying notes to consolidated financial statements.


Consolidated Statements of Cash Flows
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3 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
2005 2004 2005 2004
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(Expressed in thousands
of dollars)
(unaudited) (unaudited) (unaudited) (unaudited)
(restated) (restated)

Cash provided by
(used in):
Operations:
Cash flow from
operations before
changes in non-cash
operating working
capital $ 1,570 $ 1,468 $ 3,204 $ 2,984
Other changes in
non-cash operating
working capital 297 (433) (1,324) (1,655)
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1,867 1,035 1,880 1,329
Investments:
Investment in
co-tenancy properties (495) (410) (653) (607)
Recovery of investment
in co-tenancy properties - 525 - 525
Mortgages and loans
receivable (2,462) (380) (2,275) (1,720)
Acquisition of additional
interest in income-
producing property - (323) - (323)
Expenditures on income
-producing properties (867) (98) (946) (809)
Restricted cash 56 418 30 1,641
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(3,768) (268) (3,844) (1,293)
Financing:
Interest payments on
convertible debentures - (625) - (625)
Principal repayments on
mortgages payable (3,284) (653) (4,407) (1,401)
Issuance of common
shares for cash,
net of costs 151 129 485 133
Deferred financing costs - (53) - (59)
Capital contributions
from non-controlling
interest - - - 429
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(3,133) (1,202) (3,922) (1,523)
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Decrease in cash and
cash equivalents (5,034) (435) (5,886) (1,487)
Cash and cash
equivalents, beginning
of period 18,690 2,192 19,542 3,244
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Cash and cash
equivalents, end of
period $ 13,656 $ 1,757 $ 13,656 $ 1,757
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Supplementary
information:
Non-cash investing &
financing activities:
Non-controlling
interest $ - $ - $ - $ 1,894
Assumption of
mortgage payable - - - 5,163
Mortgage payable
provided on
acquisition of
income-producing
property - - - 330
Assumption of
working capital on
acquisition of
interest - - - 294
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See accompanying notes to consolidated financial statements.


Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada. The consolidated financial statements have been prepared from the books and records without audit, however, in the opinion of management, all adjustments which are necessary to the fair presentation of the results of the interim periods have been made.

These interim consolidated financial statements do not include all disclosures required under Canadian generally accepted accounting principles for annual financial statements and should be read in conjunction with the audited consolidated financial statements the year ended May 31, 2005. 2. Significant Accounting Policies The accounting policies applied in these interim financial statements are consistent with those applied in the audited consolidated financial statements the year ended May 31, 2005. Certain comparative figures have been reclassified to conform with the financial statement presentation adopted for the current year.

2. Significant Accounting Policies

The accounting policies applied in these interim financial statements are consistent with those applied in the audited consolidated financial statements the year ended May 31, 2005.

Certain comparative figures have been reclassified to conform with the financial statement presentation adopted for the current year.



3. Mortgages and loans receivable
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NOVEMBER 30, MAY 31,
2005 2005
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(thousands) (thousands)
Mortgages receivable
from sale of properties $ 4,500 $ 4,500
Loans due from co-tenancies 3,905 1,630
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$ 8,405 $ 6,130
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4. Discontinued Operations and Properties Held for Sale
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3 MONTHS ENDED 3 MONTHS ENDED
NOVEMBER 30, 2005 NOVEMBER 30, 2004
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(thousands) (thousands)

Revenues $ - $ 560
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Earnings from operations - 319
Interest expense - 138
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- 181
Income taxes expense - 197
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$ - $ (16)
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6 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30, 2005 NOVEMBER 30, 2004
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(thousands) (thousands)

Revenues $ - $ 1,079
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Earnings from operations - 595
Interest expense - 273
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- 322
Income taxes expense - 156
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$ - $ 166
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In May 2005, the Company reclassified a property that had been classified in discontinued operations throughout fiscal 2005 to an income-producing property in continuing operations. The property was sold in May 2005 to a joint venture in which the company has a 10% interest. The comparative 2005 quarterly financial statements have been restated to reflect the reclassification of this property into continuing operations.



5. Information on Common Shares
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NUMBER OF ASSIGNED VALUE
COMMON SHARES (in thousands of dollars)
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Authorized
Unlimited number of
common shares
Unlimited number of
preferred shares
Issued
November 30, 2005 14,543,938 $ 38,990
Stock options outstanding 789,220
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6. Information on Stock Options
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STOCK OPTIONS WEIGHTED
OUTSTANDING AVERAGE PRICE
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Balance May 31, 2005 634,950 $ 3.06
Granted 327,352 5.19
Exercised (173,082) 2.81
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Balance November 30, 2005 789,220 $ 4.00
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NUMBER WEIGHTED
OUTSTANDING AVERAGE LIFE
RANGE OF AND EXERCISABLE REMAINING WEIGHTED
EXERCISE PRICE NOVEMBER 30, 2005 (YEARS) AVERAGE PRICE
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$1.80 to $3.15 223,536 1.6 $ 2.67
$3.20 to $5.50 565,684 6.9 4.53
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789,220 5.4 $ 4.00
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7. Stock-Based Compensation

The Company has established a share option plan (the "Plan") for directors, officers, employees and consultants of the Company. The aggregate number of common shares reserved for issuance under the Plan is 2,466,666 of which there are 1,088,348 remaining for issuance. Pursuant to the Plan, non-transferable options to purchase common shares are granted by the Board of Directors at an exercise price based on the market price of the common shares at the time the option is granted. Options must be exercised within a period of up to ten years from the option grant date and vest as determined by the Board of Directors.

The Company accounts for employee stock options using the fair value method. Included in general and administrative expenses, and residential operating expenses is $71,000 (2004 - $58,000) in stock compensation expense for the current quarter. Stock compensation expense for the six months ended November 30, 2005 is $169,000 (2004 - $82,000).

Stock compensation expense has been calculated using an option pricing model based on the following factors: volatility of 28.50% (2004 - 25.60%), term of three to seven years (2004 - 3 years), dividend rate of nil (2004 - nil) and risk-free interest rate of 3.69% - 3.80% (2004 - 3.78%). The average fair value of options granted during the six months ended November 30, 2005 was $1.77 (2004 - $0.71).



8. Earnings Per Share
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6 MONTHS ENDED 6 MONTHS ENDED
NOVEMBER 30, 2005 NOVEMBER 30, 2004
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Denominator for
basic earnings per share 14,490,105 11,519,944
Effect of dilutive stock options 187,427 82,890
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Denominator for
diluted earnings per share 14,677,532 11,602,834
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9. Guarantees

The Company has provided guarantees totaling $28,300,000 (2004 - $22,500,000) for the indebtedness on certain properties in excess of the indebtedness otherwise recorded in these financial statements. In the opinion of management, these properties have a value in excess of the indebtedness that is guaranteed and independent third party appraisals have confirmed that the majority of these properties have a value in excess of the indebtedness that is guaranteed. As well, the other investors in these properties have indemnified the Company for their guarantees.

The Company earns a fee for providing these guarantees. The Company remains as a guarantor on mortgages on income-producing properties sold in the amount of $20,600,000 (2004 - $10,700,000) at November 30, 2005. The properties were sold for $32,100,000 (2004 - $15,850,000). The purchasers have indemnified the Company for these guarantees. In the opinion of management, these properties have a value in excess of these guarantees.


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