Attached files
| file | filename |
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| 8-K - 8-K - EPR PROPERTIES | a8-kforearningsrelease1231.htm |
| EX-99.2 - SUPPLEMENTAL OPERATING AND FINANCIAL DATA - EPR PROPERTIES | ex992-eprx123115supplement.htm |
Exhibit 99.1
EPR PROPERTIES REPORTS FOURTH QUARTER AND
2015 YEAR-END RESULTS
Company Reports Record Revenue and Investment Spending
Kansas City, MO, February 24, 2016 -- EPR Properties (NYSE:EPR) today announced operating results for the fourth quarter and year ended December 31, 2015.
Three Months Ended December 31, 2015
• | Total revenue was $112.0 million for the fourth quarter of 2015, representing a 7% increase from $104.7 million for the same quarter in 2014. |
• | Net income available to common shareholders was $46.8 million, or $0.78 per diluted common share, for the fourth quarter of 2015 compared to $46.7 million, or $0.81 per diluted common share, for the same quarter in 2014. |
• | Funds From Operations (FFO) for the fourth quarter of 2015 was $71.3 million, or $1.18 per diluted common share, compared to $63.5 million, or $1.10 per diluted common share, for the same quarter in 2014. |
• | FFO as adjusted for the fourth quarter of 2015 was $70.7 million, or $1.17 per diluted common share, compared to $65.1 million, or $1.13 per diluted common share, for the same quarter in 2014, representing a 4% increase in per share results. |
Year Ended December 31, 2015
• | Total revenue was $421.0 million for the year ended December 31, 2015, representing a 9% increase from $385.1 million for the same period in 2014. |
• | Net income available to common shareholders was $170.7 million, or $2.93 per diluted common share, for the year ended December 31, 2015 compared to $155.8 million, or $2.86 per diluted common share, for the same period in 2014. |
• | FFO for the year ended December 31, 2015 was $235.2 million, or $4.03 per diluted common share, compared to $220.5 million, or $4.04 per diluted common share, for the same period in 2014. |
• | FFO as adjusted for the year ended December 31, 2015 was $260.3 million, or $4.44 per diluted common share, compared to $225.1 million, or $4.13 per diluted common share, for the same period in 2014, representing an 8% increase in per share results. |
Greg Silvers, President and CEO, commented, “Our focused growth and momentum in 2015 resulted in record revenue and investment spending along with strong earnings growth. Additionally, we recently announced our new dividend level for 2016, our sixth consecutive year with a meaningful dividend increase. Equipped with a strong balance sheet, a proven investment strategy and a robust pipeline, we believe we remain well-positioned to deliver ongoing earnings growth.”
A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in thousands, except per share amounts):
Three Months Ended December 31, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Amount | FFO/share | Amount | FFO/share | |||||||||||||
FFO available to common shareholders (1) | $ | 71,341 | $ | 1.18 | $ | 63,451 | $ | 1.10 | ||||||||
Costs associated with loan refinancing or payoff | 9 | — | 301 | 0.01 | ||||||||||||
Transaction costs | 700 | 0.01 | 1,131 | 0.02 | ||||||||||||
Deferred income tax expense (benefit) | (1,366 | ) | (0.02 | ) | 184 | — | ||||||||||
FFO as adjusted available to common shareholders (1) | $ | 70,684 | $ | 1.17 | $ | 65,067 | $ | 1.13 | ||||||||
Dividends declared per common share | $ | 0.908 | $ | 0.855 | ||||||||||||
FFO as adjusted available to common shareholders payout ratio | 78 | % | 76 | % | ||||||||||||
(1) | Per share results for the three months ended December 31, 2015 and 2014 include the effect of the conversion of the 5.75% Series C cumulative convertible preferred shares if the conversion would be dilutive. | |||||||||||||||
Year Ended December 31, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Amount | FFO/share | Amount | FFO/share | |||||||||||||
FFO available to common shareholders (2) | $ | 235,198 | $ | 4.03 | $ | 220,453 | $ | 4.04 | ||||||||
Costs associated with loan refinancing or payoff | 270 | — | 301 | 0.01 | ||||||||||||
Transaction costs (benefit) | 7,518 | 0.12 | (924 | ) | (0.01 | ) | ||||||||||
Provision for loan loss | — | — | 3,777 | 0.07 | ||||||||||||
Retirement severance expense | 18,578 | 0.31 | — | — | ||||||||||||
Gain on sale of land | (81 | ) | — | (330 | ) | (0.01 | ) | |||||||||
Deferred income tax expense (benefit) | (1,136 | ) | (0.02 | ) | 1,796 | 0.03 | ||||||||||
FFO as adjusted available to common shareholders (2) | $ | 260,347 | $ | 4.44 | $ | 225,073 | $ | 4.13 | ||||||||
Dividends declared per common share | $ | 3.630 | $ | 3.420 | ||||||||||||
FFO as adjusted available to common shareholders payout ratio | 82 | % | 83 | % | ||||||||||||
(2) | Per share results for the year ended December 31, 2015 and 2014 include the effect of the conversion of the 5.75% Series C cumulative convertible preferred shares if the conversion would be dilutive. | |||||||||||||||
Portfolio Update
The Company's investment portfolio (excluding property under development) consisted of the following at December 31, 2015:
• | The Entertainment segment included investments in 131 megaplex theatre properties, nine entertainment retail centers (which include eight additional megaplex theatre properties and one live performance venue) and seven family entertainment centers. The Company’s portfolio of owned entertainment properties consisted of 11.8 million square feet and was 98% leased, including megaplex theatres that were 100% leased. |
• | The Education segment included investments in 70 public charter school properties, 18 early education centers and three private school properties. The Company’s portfolio of owned education properties consisted of 4.2 million square feet and was 100% leased. |
• | The Recreation segment included investments in 10 metro ski parks, five waterparks and 19 golf entertainment complexes. The Company’s portfolio of owned recreation properties was 100% leased. |
• | The Other segment consisted primarily of the property under development and land held for development related to the Adelaar casino and resort project in Sullivan County, New York. |
The combined owned portfolio consisted of 18.3 million square feet and was 99% leased. As of December 31, 2015, the Company also had a total of approximately $378.9 million invested in property under development.
Investment Update
The Company's investment spending during the three months ended December 31, 2015 totaled $122.5 million (bringing the total spending in 2015 to $632.0 million), and included investments in each of its four operating segments:
• | Entertainment investment spending totaled $23.2 million, and was related primarily to investments in the development or redevelopment of six megaplex theatres, three family entertainment centers and four entertainment retail centers, as well as the acquisition of one megaplex theatre located in Texas, each of which is subject to a long-term triple net lease or long-term mortgage agreement. |
• | Education investment spending totaled $53.1 million, and was related primarily to investments in the development or expansion of 22 public charter schools, four private schools and 26 early childhood education centers, as well as the acquisition of two public charter schools and two early education centers, each of which is subject to a long-term triple net lease or long-term mortgage agreement. |
• | Recreation investment spending totaled $43.0 million, and was related to build-to-suit construction of 16 Topgolf golf entertainment facilities and additional improvements at the Company's Kansas City, Kansas water-park, each of which is subject to a long-term triple net lease or a long-term mortgage agreement. |
• | Other investment spending totaled $3.2 million, and was related to the Adelaar casino and resort project in Sullivan County, New York. |
Adelaar Project Update
As previously announced, in December 2015, a subsidiary of Empire Resorts received a New York gaming license to operate a casino resort within our Adelaar project. The Adelaar project will consist of a casino and resort, golf course, retail village and an indoor waterpark hotel. The Company's funding commitment is related to the build-to-suit development of the waterpark hotel to be leased to a waterpark operator, and the Company anticipates funding between $100 million to $120 million over the next three years. Additionally, the Company has entered into 70-year ground leases with Empire Resorts on the casino, golf course and retail village parcels that are terminable by the lessee after 20 years and contain purchase options.
Balance Sheet Update
The Company's balance sheet remains strong with a debt to gross assets ratio (defined as total debt to total assets plus accumulated depreciation) of 42% at December 31, 2015. The Company had $4.3 million of unrestricted cash on hand and $196 million outstanding under its $650 million unsecured revolving credit facility at December 31, 2015.
During the fourth quarter, the Company issued 1.66 million common shares under its Direct Stock Purchase Plan (DSPP) for net proceeds of $90.4 million, which were used to pay down a portion of the Company's unsecured revolving credit facility. Additionally during the quarter, the Company prepaid in full two mortgage notes payable totaling $34.2 million that had an average annual interest rate of 5.84%.
On January 21, 2016, the Company issued 2.25 million common shares in a registered public offering. Total net proceeds, after the underwriting discount and offering expenses, were approximately $125.0 million. The proceeds from the common share issuance were used to reduce the balance outstanding on the Company's unsecured revolving credit facility.
Dividend Information
The Company declared regular monthly cash dividends during the fourth quarter of 2015 totaling $0.9075 per common share. The Company also declared fourth quarter cash dividends of $0.359375 per share on its 5.75% Series C cumulative convertible preferred shares, $0.5625 per share on its 9.00% Series E cumulative convertible preferred shares and $0.4140625 per share on its 6.625% Series F cumulative redeemable preferred shares.
As previously announced, the Company declared a regular monthly cash dividend to common shareholders of $0.32 per common share for the month of January 2016 . This dividend level represents an annualized dividend of $3.84 per common share, an increase of 5.8% over 2015 and the Company’s sixth consecutive year with an annual dividend increase.
2016 Guidance
The Company is confirming its 2016 guidance for FFO as adjusted per diluted share of a range of $4.70 to $4.80. In addition, the Company is confirming its 2016 investment spending guidance of a range of $600 million to $650 million.
FFO as adjusted guidance for 2016 is based on FFO per diluted share of $4.61 to $4.67 adjusted for costs associated with loan refinancing or payoff, transaction costs, termination fees related to public charter schools and deferred income tax expense. FFO per diluted share is based on a net income per diluted share range of $3.05 to $3.15 less
estimated gains on sale of real estate of a range of $.04 to $.08, plus estimated real estate depreciation of $1.60 per diluted share (in accordance with the NAREIT definition of FFO).
Quarterly and Year-End Supplemental
The Company's supplemental information package for the fourth quarter and year ended December 31, 2015 is available on the Company's website at http://eprkc.com/earnings-releases-supplemental.
EPR Properties
Consolidated Statements of Income
(Unaudited, dollars in thousands except per share data)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Rental revenue | $ | 90,580 | $ | 75,914 | $ | 330,886 | $ | 286,673 | |||||||
Tenant reimbursements | 4,334 | 4,308 | 16,320 | 17,663 | |||||||||||
Other income | 1,213 | 303 | 3,629 | 1,009 | |||||||||||
Mortgage and other financing income | 15,861 | 24,144 | 70,182 | 79,706 | |||||||||||
Total revenue | 111,988 | 104,669 | 421,017 | 385,051 | |||||||||||
Property operating expense | 5,810 | 6,961 | 23,433 | 24,897 | |||||||||||
Other expense | 115 | 206 | 648 | 771 | |||||||||||
General and administrative expense | 8,101 | 6,306 | 31,021 | 27,566 | |||||||||||
Retirement severance expense | — | — | 18,578 | — | |||||||||||
Costs associated with loan refinancing or payoff | 9 | 301 | 270 | 301 | |||||||||||
Interest expense, net | 20,792 | 20,015 | 79,915 | 81,270 | |||||||||||
Transaction costs | 700 | 1,131 | 7,518 | 2,452 | |||||||||||
Provision for loan loss | — | — | — | 3,777 | |||||||||||
Depreciation and amortization | 24,915 | 17,989 | 89,617 | 66,739 | |||||||||||
Income before equity in income from joint ventures and other items | 51,546 | 51,760 | 170,017 | 177,278 | |||||||||||
Equity in income from joint ventures | 268 | 395 | 969 | 1,273 | |||||||||||
Gain on sale of real estate | — | 879 | 23,829 | 1,209 | |||||||||||
Gain on sale of investment in a direct financing lease | — | — | — | 220 | |||||||||||
Income before income taxes | 51,814 | 53,034 | 194,815 | 179,980 | |||||||||||
Income tax benefit (expense) | 936 | (896 | ) | (482 | ) | (4,228 | ) | ||||||||
Income from continuing operations | $ | 52,750 | $ | 52,138 | $ | 194,333 | $ | 175,752 | |||||||
Discontinued operations: | |||||||||||||||
Income from discontinued operations | — | 497 | 199 | 505 | |||||||||||
Transaction (costs) benefit | — | — | — | 3,376 | |||||||||||
Net income attributable to EPR Properties | 52,750 | 52,635 | 194,532 | 179,633 | |||||||||||
Preferred dividend requirements | (5,951 | ) | (5,951 | ) | (23,806 | ) | (23,807 | ) | |||||||
Net income available to common shareholders of EPR Properties | $ | 46,799 | $ | 46,684 | $ | 170,726 | $ | 155,826 | |||||||
Per share data attributable to EPR Properties common shareholders: | |||||||||||||||
Basic earnings per share data: | |||||||||||||||
Income from continuing operations | $ | 0.78 | $ | 0.81 | $ | 2.93 | $ | 2.80 | |||||||
Income from discontinued operations | — | 0.01 | 0.01 | 0.07 | |||||||||||
Net income available to common shareholders | $ | 0.78 | $ | 0.82 | $ | 2.94 | $ | 2.87 | |||||||
Diluted earnings per share data: | |||||||||||||||
Income from continuing operations | $ | 0.78 | $ | 0.80 | $ | 2.92 | $ | 2.79 | |||||||
Income from discontinued operations | — | 0.01 | 0.01 | 0.07 | |||||||||||
Net income available to common shareholders | $ | 0.78 | $ | 0.81 | $ | 2.93 | $ | 2.86 | |||||||
Shares used for computation (in thousands): | |||||||||||||||
Basic | 60,125 | 57,141 | 58,138 | 54,244 | |||||||||||
Diluted | 60,205 | 57,355 | 58,328 | 54,444 | |||||||||||
EPR Properties
Reconciliation of Net Income Available to Common Shareholders
to Funds From Operations (FFO) (A)
(Unaudited, dollars in thousands except per share data)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
FFO: | |||||||||||||||
Net income available to common shareholders of EPR Properties | $ | 46,799 | $ | 46,684 | $ | 170,726 | $ | 155,826 | |||||||
Gain on sale of real estate (excluding land sale) | — | (879 | ) | (23,748 | ) | (879 | ) | ||||||||
Gain on sale of investment in a direct financing lease | — | — | — | (220 | ) | ||||||||||
Real estate depreciation and amortization | 24,480 | 17,582 | 87,965 | 65,501 | |||||||||||
Allocated share of joint venture depreciation | 62 | 64 | 255 | 225 | |||||||||||
FFO available to common shareholders of EPR Properties | $ | 71,341 | $ | 63,451 | $ | 235,198 | $ | 220,453 | |||||||
FFO available to common shareholders of EPR Properties | $ | 71,341 | $ | 63,451 | $ | 235,198 | $ | 220,453 | |||||||
Add: Preferred dividends for Series C preferred shares | 1,941 | 1,941 | 7,763 | 7,763 | |||||||||||
Diluted FFO available to common shareholders of EPR Properties | $ | 73,282 | $ | 65,392 | $ | 242,961 | $ | 228,216 | |||||||
FFO per common share attributable to EPR Properties: | |||||||||||||||
Basic | $ | 1.19 | $ | 1.11 | $ | 4.05 | $ | 4.06 | |||||||
Diluted | 1.18 | 1.10 | 4.03 | 4.04 | |||||||||||
Shares used for computation (in thousands): | |||||||||||||||
Basic | 60,125 | 57,141 | 58,138 | 54,244 | |||||||||||
Diluted | 62,234 | 59,353 | 60,345 | 56,433 | |||||||||||
Weighted average shares outstanding-diluted EPS | 60,205 | 57,355 | 58,328 | 54,444 | |||||||||||
Effect of dilutive Series C preferred shares | 2,029 | 1,998 | 2,017 | 1,989 | |||||||||||
Adjusted weighted average shares outstanding-diluted | 62,234 | 59,353 | 60,345 | 56,433 | |||||||||||
Other financial information: | |||||||||||||||
Straight-lined rental revenue | $ | 3,267 | $ | 3,515 | $ | 12,159 | $ | 8,665 | |||||||
Dividends per common share | $ | 0.908 | $ | 0.855 | $ | 3.630 | $ | 3.420 | |||||||
(A) | 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 GAAP and management provides FFO herein because it believes this information is useful to investors in this regard. 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. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from sales [or acquisitions] of depreciable operating properties and impairment losses of depreciable real estate, 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. We have calculated FFO for all periods presented in accordance with this definition. 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 our operations or our 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. In addition to FFO, we present FFO as adjusted. Management believes it is useful to provide it here as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO as adjusted is FFO plus provision for loan losses, costs (gain) associated with loan refinancing or payoff, net, retirement severance expense, preferred share redemption costs, termination fees associated |
with tenants' exercises of public charter school buy-out options and transaction costs (benefit), less gain on early extinguishment of debt, gain (loss) on sale of land and deferred tax benefit (expense). FFO as adjusted is a non-GAAP financial measure. FFO as adjusted 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 Company's operations, cash flows or liquidity as defined by GAAP.
The conversion of the 5.75% Series C cumulative convertible preferred shares would be dilutive to FFO per share and FFO as adjusted per share for the three months and year ended December 31, 2015 and FFO per share for the three months and year ended December 31, 2014. Therefore, the additional 2.0 million shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO per share and FFO as adjusted per share for these periods as applicable. The additional 2.0 million shares that would result from conversion of the 5.75% Series C cumulative convertible preferred shares and the additional 1.6 million common shares that would result from the conversion of our 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted per share data for the remaining periods above because the effect is not dilutive.
EPR Properties
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, | |||||||
2015 | 2014 | ||||||
Assets | |||||||
Rental properties, net of accumulated depreciation of $534,303 and $465,660 at December 31, 2015 and 2014, respectively | $ | 3,025,199 | $ | 2,451,534 | |||
Land held for development | 23,610 | 206,001 | |||||
Property under development | 378,920 | 181,798 | |||||
Mortgage notes and related accrued interest receivable | 423,780 | 507,955 | |||||
Investment in a direct financing lease, net | 190,880 | 199,332 | |||||
Investment in joint ventures | 6,168 | 5,738 | |||||
Cash and cash equivalents | 4,283 | 3,336 | |||||
Restricted cash | 10,578 | 13,072 | |||||
Deferred financing costs, net | 4,894 | 4,136 | |||||
Accounts receivable, net | 59,101 | 47,282 | |||||
Other assets | 89,857 | 66,091 | |||||
Total assets | $ | 4,217,270 | $ | 3,686,275 | |||
Liabilities and Equity | |||||||
Accounts payable and accrued liabilities | $ | 92,178 | $ | 82,180 | |||
Dividends payable | 24,352 | 22,233 | |||||
Unearned rents and interest | 44,952 | 25,623 | |||||
Debt | 1,981,920 | 1,629,750 | |||||
Total liabilities | 2,143,402 | 1,759,786 | |||||
EPR Properties shareholders’ equity | 2,073,868 | 1,926,112 | |||||
Noncontrolling interests | — | 377 | |||||
Total equity | 2,073,868 | 1,926,489 | |||||
Total liabilities and equity | $ | 4,217,270 | $ | 3,686,275 | |||
About EPR Properties
EPR Properties is a specialty real estate investment trust (REIT) that invests in properties in select market segments which require unique industry knowledge, while offering the potential for stable and attractive returns. Our total investments exceed $4.5 billion and our primary investment segments are Entertainment, Recreation and Education. We adhere to rigorous underwriting and investing criteria centered on key industry and property level cash flow standards. We believe our focused niche approach provides a competitive advantage, and the potential for higher growth and better yields.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of 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”), such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects, and our results of operations and financial condition. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “anticipates,” “estimates,” “offers,” “plans,” “would” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions contained or incorporated by reference herein. While references to commitments for investment spending are based on present commitments and agreements of the Company, we cannot provide assurance that these transactions will be completed on satisfactory terms. In addition, references to our budgeted amounts and guidance are forward-looking statements. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise. 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.
EPR Properties
Brian Moriarty, 888-EPR-REIT
www.eprkc.com