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8-K - FORM 8-K - EPR PROPERTIES | c54468e8vk.htm |
EX-99.2 - EX-99.2 - EPR PROPERTIES | c54468exv99w2.htm |
Exhibit 99.1
ENTERTAINMENT PROPERTIES TRUST REPORTS
THIRD QUARTER RESULTS
THIRD QUARTER RESULTS
Kansas City, MO, November 4, 2009 Entertainment Properties Trust (NYSE:EPR) today announced
operating results for the third quarter and nine months ended September 30, 2009.
Total revenue was $68.1 million for the third quarter of 2009 compared to $75.0 million for the
same quarter in 2008. Net loss available to common shareholders was $66.8 million, or $1.89 per
diluted common share, compared to net income available to common shareholders of $28.5 million, or
$0.88 per diluted common share, for the same quarter in 2008.
Funds From Operations (FFO) for the third quarter of 2009 was $30.4 million or $0.86 per share
before non-cash charges for loan loss provisions and an impairment totaling $101.6 million.
Including these non-cash charges, the Company incurred a FFO loss of $71.2 million or $2.01 per
share compared to FFO of $38.9 million or $1.19 per share for same quarter in 2008.
For the nine months ended September 30, 2009, total revenue was $201.5 million compared to $209.6
million for the same period in 2008. Net loss available to common shareholders was $28.9 million,
or $0.83 per diluted share, versus net income available to common shareholders of $73.9 million, or
$2.42 per diluted share, for the same period last year. FFO for the nine months ended September
30, 2009 was $89.5 million or $2.56 per share before the non-cash charges. Including the non-cash
charges, the Company incurred a FFO loss of $12.1 million or $0.35 per share compared to FFO of
$104.2 million or $3.39 per share in the year ago period.
David Brain, President and CEO, commented on the results, The fundamentals for the vast majority
of our business continue to outperform most retail categories and the economy in general. The
non-cash charges we recognized during the quarter relate to assets that were not otherwise
significantly impacting our year-to-date FFO, and do not impact the health or resilience of our
core business. Mr. Brain continued, Having appropriately addressed these issues, we look forward
to continuing to grow our cash flow and opportunistically seeking accretive transactions.
A reconciliation of FFO and the items impacting results follow:
3rd Quarter | Year to Date | |||||||||||||||
(dollars in millions, except per share amounts) | Amount | FFO/share | Amount | FFO/share | ||||||||||||
Provision
for loan losses Toronto Dundas Square Project |
$ | (34.8 | ) | $ | (0.98 | ) | $ | (34.8 | ) | $ | (0.99 | ) | ||||
Provision for loan losses Cappelli related notes receivable |
(28.0 | ) | (0.79 | ) | (28.0 | ) | (0.80 | ) | ||||||||
Provision for loan losses other notes receivable |
(3.0 | ) | (0.09 | ) | (3.0 | ) | (0.09 | ) | ||||||||
Subtotal-provision for loan losses |
$ | (65.8 | ) | $ | (1.86 | ) | $ | (65.8 | ) | $ | (1.88 | ) | ||||
Impairment charge White Plains City Center |
(35.8 | ) | (1.01 | ) | (35.8 | ) | (1.03 | ) | ||||||||
Total non-cash charges |
$ | (101.6 | ) | $ | (2.87 | ) | $ | (101.6 | ) | $ | (2.91 | ) | ||||
FFO as reported |
(71.2 | ) | (2.01 | ) | (12.1 | ) | (0.35 | ) | ||||||||
Add back non-cash charges |
101.6 | 2.87 | 101.6 | 2.91 | ||||||||||||
FFO as adjusted for non-cash charges |
$ | 30.4 | $ | 0.86 | $ | 89.5 | $ | 2.56 | ||||||||
Dilutive impact of shares issued in Q3, net of interest savings |
(0.01 | ) | (0.01 | ) | ||||||||||||
FFO as adjusted for non-cash charges and shares issued in Q3 |
$ | 0.87 | $ | 2.57 | ||||||||||||
Dividends declared per common share |
$ | 0.65 | $ | 1.95 | ||||||||||||
FFO payout ratio, as adjusted |
75 | % | 76 | % |
Portfolio Highlights
As of September 30, 2009, the Companys real estate portfolio consisted of 80 megaplex theatres
totaling approximately 6.6 million square feet, and restaurant, retail and other destination
recreation and specialty properties totaling 3.9 million square feet. The Company also owned 22
public charter schools, and eight vineyards totaling approximately 1,590 acres and ten wineries
totaling approximately 850 thousand square feet. In addition, as of September 30, 2009, the
Companys real estate mortgage loan portfolio had a carrying value of $518.1 million and included
financing provided for entertainment, retail and recreational properties, including ten
metropolitan ski areas covering approximately 6,100 acres in six states. At September 30, 2009, the
Companys megaplex theatres were 100% occupied, and the overall real estate portfolio was 97%
occupied.
Movie theater box office continues to be robust, up 7% year to date over prior year. Furthermore,
2009/2010 charter school enrollments have been received and with 86% occupancy of our schools, the
Companys expected rent coverage of 1.8 times remains strong.
Capital Markets Update
During August and September 2009, the Company continued to deleverage its balance sheet and
increase its transaction capacity by raising nearly $50 million in common equity. A total of 1.6
million common shares were issued through the direct share purchase component of the Companys
Dividend Reinvestment and Direct Share Purchase Plan, and the proceeds were used to reduce the
balance outstanding on the Companys unsecured revolving credit facility. These shares were sold
at an average price of $31.97 per share.
At September 30, 2009 there was in excess of $149 million of unrestricted cash on hand and
availability under the revolver.
Investment Update
Total investment spending for the nine months ended September 30, 2009 was approximately $58.0
million, with approximately $29.0 million funded for the completion of the Schlitterbahn water park
in Kansas City, Kansas. The balance of investments for the nine months consisted primarily of
continued funding of a wine facility in Sonoma, California, the Companys expansion of pre-leased
space at its Canadian entertainment retail centers, the completion of the Suffolk, Virginia
development and additional investments in mortgage and other notes receivable.
Toronto
Dundas Square Project (formerly known as Toronto Life Square)
During the quarter, the Company recognized a $34.8 million loan loss reserve on its mortgage note
receivable related to the Toronto
Dundas Square Project resulting from an assessment of fair market value as
determined by management taking into account various factors including an independent appraisal of
the property at September 30, 2009. No interest income has been recognized to date in 2009. The
receiver continues to proceed with sale of the property, and the Company may become the owner of
the property at the conclusion of the process. While the sale of the property was anticipated to
close in the Fall of 2009, the receiver now expects the transaction to be completed at the end of
the year. While the Partnership has been in receivership, cash flow has been retained by the
estate and this excess cash flow will increase the amount available to settle the Companys
mortgage note receivable. Occupancy of the property remains at 91%.
Cappelli Related Investments
During the three months ended September 30, 2009, the Company impaired the last of three $10
million notes to Cappelli related entities. Furthermore, as a result of unpaid interest in the
quarter on all three of these impaired loans and an assessment of each loans underlying
collateral, the Company recorded a loan loss reserve of $28 million at September 30, 2009. The
Company will continue to pursue collection of these notes.
The Companys entertainment retail center in White Plains, New York, held in a consolidated joint
venture, had a loan to fair value ratio in excess of 70% at the time of acquisition in May 2007.
The loan, due in October 2010, is personally guaranteed by the principals of our minority partner,
one of which is Mr. Cappelli who is either personally, or through his related interests, in default
on several other obligations to the Company. Absent any improvement in the performance of the
asset, the lender will likely require additional credit support and fees to extend the loan which
will require cooperation of the partners. Without a resolution of our disputes with the principals
of our minority partner, there can be no assurance that the Company and the minority partner will
cooperate. The debt is currently non-recourse to the Company and as such the Company may elect
not to further support the joint venture, which may include a decision to surrender the property at
the loans maturity. Management determined the estimated fair value of the property at September
30, 2009 taking into account an independent appraisal, and determined that an impairment charge of
$35.8 million was necessary. A portion of the impairment charge, $15.1 million, was allocated to
the noncontrolling interest in this venture.
With regard to Concord, a planned casino and resort development in Sullivan County, New York, the
New York legislature in July 2009 amended the hurdles for qualification for the reduction in the
gaming tax from 68% to 25%. Formerly, the legislation required the developer to spend at least $1
billion dollars and employ 2,000 people. As amended, the legislation reduced the spending
requirement to $600 million and the employee requirement was reduced to 1,000. The governor of New
York signed this into law in August 2009. Additionally, the site has been approved for electronic
table games, substantially expanding the gaming operations available to a casino operator. The
developer of the project continues to seek financing for the casino. As previously communicated,
interest income on the Companys mortgage note receivable is being recognized on a cash basis and
no interest income has been recognized on this note to date in 2009.
Notes Receivable
During the first quarter, the Company impaired $11.8 million in notes receivable and as a result
accrual interest income recognition was ceased on January 1, 2009 for these notes. Interest income
recognized on these notes, representing cash received, was $234 thousand and $597 thousand for the
three and nine months ended September 30, 2009, respectively. At September 30, 2009, the Company
recorded a loan loss reserve of $3.0 million related to these notes.
Dividend Information
On September 15, 2009, the Company declared a regular quarterly cash dividend of $0.65 per common
share, which was paid on October 15, 2009 to common shareholders of record on September 30, 2009.
This dividend represents an annualized dividend of $2.60 per common share. The Company also
declared and paid third quarter cash dividends of $0.4844 per share on the 7.75% Series B Preferred
Shares, $0.3594 per share on the 5.75% Series C Convertible Preferred Shares, $0.4609 per share on
the 7.375% Series D Preferred Shares and $0.5625 per share on the 9.00% Series E Convertible
Preferred Shares.
Earnings Guidance
The Company is revising its FFO per share guidance for 2009 (excluding charges) to $3.35 to $3.40
from its previous guidance of $3.40 to $3.60. This guidance reflects the revised outlook on the
timing of the resolution on the Toronto
Dundas Square Project, the impact of the Companys issuance of common
shares in the third quarter and the impact of lower contribution from notes receivable. The revised
guidance excludes any transaction costs associated with the
acquisition of the Toronto
Dundas Square Project.
Additionally, the Company is announcing 2010 guidance for FFO per share of $3.40 - $3.50, excluding
the impact of any investment spending in 2010.
Quarterly Supplemental
The Companys quarterly supplemental information package for the third quarter and nine months
ended September 30, 2009 is available on the Companys website at www.eprkc.com.
ENTERTAINMENT PROPERTIES TRUST
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except per share data)
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Rental revenue |
$ | 51,297 | $ | 52,139 | $ | 152,215 | $ | 151,201 | ||||||||
Tenant reimbursements |
4,734 | 5,249 | 13,627 | 16,114 | ||||||||||||
Other income |
441 | 460 | 2,310 | 1,657 | ||||||||||||
Mortgage and other financing income |
11,650 | 17,125 | 33,392 | 40,609 | ||||||||||||
Total revenue |
68,122 | 74,973 | 201,544 | 209,581 | ||||||||||||
Property operating expense |
6,708 | 6,612 | 21,108 | 19,947 | ||||||||||||
Other expense |
614 | 430 | 2,087 | 1,982 | ||||||||||||
General and administrative expense |
3,557 | 3,718 | 11,961 | 12,070 | ||||||||||||
Costs associated with loan refinancing |
| | 117 | | ||||||||||||
Interest expense, net |
19,355 | 17,689 | 54,274 | 52,117 | ||||||||||||
Provision for loan losses |
65,757 | | 65,757 | | ||||||||||||
Impairment charges |
35,801 | | 35,801 | | ||||||||||||
Depreciation and amortization |
11,921 | 11,170 | 36,383 | 32,184 | ||||||||||||
Income (loss) before equity in income
from joint ventures and discontinued
operations |
(75,591 | ) | 35,354 | (25,944 | ) | 91,281 | ||||||||||
Equity in income from joint ventures |
229 | 216 | 673 | 1,743 | ||||||||||||
Income (loss) from continuing operations |
$ | (75,362 | ) | $ | 35,570 | $ | (25,271 | ) | $ | 93,024 | ||||||
Discontinued operations: |
||||||||||||||||
Loss from discontinued operations |
| | | (27 | ) | |||||||||||
Gain on sale of real estate |
| | | 119 | ||||||||||||
Net income (loss) |
(75,362 | ) | 35,570 | (25,271 | ) | 93,116 | ||||||||||
Add: Net loss attributable to noncontrolling interests |
16,071 | 488 | 19,014 | 1,474 | ||||||||||||
Net income (loss) attributable to
Entertainment Properties Trust |
(59,291 | ) | 36,058 | (6,257 | ) | 94,590 | ||||||||||
Preferred dividend requirements |
(7,552 | ) | (7,552 | ) | (22,655 | ) | (20,714 | ) | ||||||||
Net income (loss) available to common
shareholders of Entertainment Properties
Trust |
$ | (66,843 | ) | $ | 28,506 | $ | (28,912 | ) | $ | 73,876 | ||||||
Per share data attributable to Entertainment
Properties Trust common shareholders: |
||||||||||||||||
Basic earnings per share data: |
||||||||||||||||
Income (loss) from continuing operations
available to common shareholders |
$ | (1.89 | ) | $ | 0.89 | $ | (0.83 | ) | 2.44 | |||||||
Income from discontinued operations |
| | | | ||||||||||||
Net income (loss) available to common shareholders |
$ | (1.89 | ) | $ | 0.89 | $ | (0.83 | ) | $ | 2.44 | ||||||
Diluted earnings per share data: |
||||||||||||||||
Income (loss) from continuing operations
available to common shareholders |
$ | (1.89 | ) | $ | 0.88 | $ | (0.83 | ) | $ | 2.41 | ||||||
Income from discontinued operations |
| | | 0.01 | ||||||||||||
Net income (loss) available to common shareholders |
$ | (1.89 | ) | $ | 0.88 | $ | (0.83 | ) | $ | 2.42 | ||||||
Shares used for computation (in thousands): |
||||||||||||||||
Basic |
35,445 | 32,033 | 34,937 | 30,252 | ||||||||||||
Diluted |
35,445 | 32,365 | 34,937 | 30,565 |
ENTERTAINMENT PROPERTIES TRUST
Reconciliation of Net Income Available to Common Shareholders to Funds From Operations (A)
(Unaudited, Dollars in thousands except per share data)
Reconciliation of Net Income Available to Common Shareholders to Funds From Operations (A)
(Unaudited, Dollars in thousands except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||
Net income (loss) available to common shareholders of Entertainment
Properties Trust |
$ | (66,843 | ) | $ | 28,506 | $ | (28,912 | ) | $ | 73,876 | ||||||||
Real estate depreciation and amortization |
11,728 | 10,958 | 35,804 | 31,597 | ||||||||||||||
Allocated share of joint venture depreciation |
66 | 64 | 197 | 445 | ||||||||||||||
Noncontrolling interest |
(16,118 | ) | (604 | ) | (19,188 | ) | (1,673 | ) | ||||||||||
FFO available to
common shareholders
of Entertainment
Properties Trust |
$ | (71,167 | ) | $ | 38,924 | $ | (12,099 | ) | $ | 104,245 | ||||||||
FFO available to common shareholders of Entertainment Properties Trust |
(71,167 | ) | 38,924 | (12,099 | ) | 104,245 | ||||||||||||
Preferred dividends for Series C |
| 1,941 | | 5,822 | ||||||||||||||
Diluted FFO
available to common
shareholders of
Entertainment
Properties Trust |
$ | (71,167 | ) | $ | 40,865 | $ | (12,099 | ) | $ | 110,067 | ||||||||
FFO per common share attributable to Entertainment Properties Trust: |
||||||||||||||||||
Basic |
$ | (2.01 | ) | $ | 1.22 | $ | (0.35 | ) | $ | 3.45 | ||||||||
Diluted |
(2.01 | ) | 1.19 | (0.35 | ) | 3.39 | ||||||||||||
Shares used for computation (in thousands): |
||||||||||||||||||
Basic |
35,445 | 32,033 | 34,937 | 30,252 | ||||||||||||||
Diluted |
35,445 | 34,284 | 34,937 | 32,479 | ||||||||||||||
Weighted average shares outstanding
diluted EPS |
35,445 | 32,365 | 34,937 | 30,565 | ||||||||||||||
Effect of dilutive Series C preferred shares |
| 1,919 | | 1,914 | ||||||||||||||
Adjusted weighted average shares
outstanding diluted |
35,445 | 34,284 | 34,937 | 32,479 | ||||||||||||||
Other financial information: |
||||||||||||||||||
Straight-lined rental revenue |
$ | 642 | $ | 1,016 | $ | 1,787 | $ | 2,909 | ||||||||||
Dividends per common share |
$ | 0.65 | $ | 0.84 | $ | 1.95 | $ | 2.52 |
(A) | The National Association of Real Estate Investment Trusts (NAREIT) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under Generally Accepted Accounting Principles (GAAP). FFO is a widely used measure of the operating performance of real estate companies and is provided here as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO, as defined under the NAREIT definition and presented by us, is net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from sales of depreciable operating properties, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. FFO is a non-GAAP financial measure. FFO does not represent cash flows from operations as defined by GAAP and is not indicative that cash flows are adequate to fund all cash needs and is not to be considered an alternative to net income or any other GAAP measure as a measurement of the results of the Companys operations, cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO the same way so comparisons with other REITs may not be meaningful. |
The dilutive effect of potential common shares from the exercise of share options is included in
diluted earnings per share except in those periods with a loss from continuing operations.
The additional 1.9 million common shares that would result from the conversion of the Companys
5.75% Series C cumulative convertible preferred shares and the additional 1.6 million common shares
that would result from the conversion of the Companys 9.00% Series E cumulative convertible
preferred shares (issued on April 2, 2008) and the corresponding add-back of the preferred
dividends declared on those shares are not included in the calculation of diluted earnings per
share for the three and nine months ended September 30, 2009 because the effect is anti-dilutive.
However, because a conversion of the 5.75% Series C cumulative convertible preferred shares would
be dilutive to FFO per share for the three and nine months ended September 30, 2008, these
adjustments have been made in the calculation of diluted FFO per share for these periods.
The Companys nonvested share awards are considered participating securities and are included in
the calculation of earnings per share under the two-class method as required by the Earnings Per
Share Topic of the Financial Accounting Standards Board Accounting Standards Codification.
Prior-period earnings per share data was computed using the treasury stock method and has been
adjusted retrospectively, which lowered basic and diluted FFO per share by $0.01 for the three
months ended September 30, 2008 and lowered basic FFO per share by $0.03 and diluted FFO per share
by $0.02 for the nine months ended September 30, 2008.
ENTERTAINMENT PROPERTIES TRUST
Condensed Consolidated Balance Sheets
(Dollars in thousands)
Condensed Consolidated Balance Sheets
(Dollars in thousands)
As of | As of | |||||||
September 30, 2009 | December 31, 2008 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Rental properties, net |
$ | 1,726,136 | $ | 1,735,026 | ||||
Property under development |
20,575 | 30,835 | ||||||
Mortgage notes and related accrued interest receivable, net |
518,069 | 508,506 | ||||||
Investment in a direct financing lease, net |
168,884 | 166,089 | ||||||
Investment in joint ventures |
2,435 | 2,493 | ||||||
Cash and cash equivalents |
11,196 | 50,082 | ||||||
Restricted cash |
15,902 | 11,004 | ||||||
Intangible assets, net |
6,908 | 12,400 | ||||||
Deferred financing costs, net |
13,159 | 10,741 | ||||||
Accounts receivable, net |
31,714 | 33,405 | ||||||
Notes and related accrued interest receivable, net |
12,395 | 40,338 | ||||||
Other assets |
26,164 | 33,006 | ||||||
Total assets |
$ | 2,553,537 | $ | 2,633,925 | ||||
Liabilities and Shareholders Equity |
||||||||
Accounts payable and accrued liabilities |
$ | 28,608 | $ | 35,665 | ||||
Dividends payable |
31,300 | 34,929 | ||||||
Unearned rents and interest |
12,277 | 8,312 | ||||||
Long-term debt |
1,184,139 | 1,262,368 | ||||||
Total liabilities |
1,256,324 | 1,341,274 | ||||||
Entertainment Properties Trust shareholders equity |
1,301,206 | 1,277,434 | ||||||
Noncontrolling interests |
(3,993 | ) | 15,217 | |||||
Total liabilities and shareholders equity |
$ | 2,553,537 | $ | 2,633,925 | ||||
About Entertainment Properties Trust
Entertainment Properties Trust (NYSE:EPR) is a real estate investment trust (REIT) that develops,
owns, leases, and finances properties for consumer-preferred, high-quality businesses. EPRs
investments are guided by a focus on inflection opportunities that are associated with or support
enduring uses, excellent executions, attractive economics, and an advantageous market position. The
Companys total assets exceed $2.5 billion and include megaplex movie theatres and entertainment
retail centers, as well as other destination recreational and specialty investments. Further
information is available at www.eprkc.com or from Jon Weis at 888-EPR-REIT or info@eprkc.com.
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
With the exception of historical information, certain statements contained or incorporated by
reference herein constitute forward-looking statements as such term is defined in Section 27A of
the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). The forward-looking statements may refer to
our financial condition, results of operations, plans, objectives, acquisition or disposition of
properties, future expenditures for development projects, capital resources, future financial
performance and business. Forward-looking statements are not guarantees of performance. They
involve numerous risks, uncertainties and assumptions. Our future results, financial condition and
business may differ materially from those expressed in these forward-looking statements. You can
find many of these statements by looking for words such as will be, continue, hope, goal,
forecast, approximates, believes, expects, anticipates, estimates, intends, plans
would, may or other similar expressions contained or incorporated by reference herein. In
addition, references to our budgeted amounts are forward looking statements. These forward-looking
statements represent our intentions, plans, expectations and beliefs and are subject to numerous
assumptions, risks and uncertainties. Many of the factors that will determine these items are
beyond our ability to control or predict. For further discussion of these factors see Item 1A.
Risk Factors in our most recent Annual Report on Form 10-K and, to the extent applicable, our
Quarterly Reports on Form 10-Q.
For these statements, we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place
undue reliance on our forward-looking statements, which speak only as of the date hereof or the
date of any document incorporated by reference herein. All subsequent written and oral
forward-looking statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.
We do not undertake any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances after the date hereof.