Exhibit 99.3

 

 

 

Supplemental Operating and Financial Data

Third Quarter and Nine Months Ended September 30, 2016

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EPR Properties

Supplemental Operating and Financial Data

Third Quarter and Nine Months Ended September 30, 2016

Table of Contents

 

Section		Page
Company Profile		5
Investor Information		6
Selected Financial Information		7
Selected Balance Sheet Information		8
Selected Operating Data		9
Funds From Operations and Funds From Operations as Adjusted		10
Adjusted Funds From Operations		11
Capital Structure		12
Summary of Ratios		17
Summary of Mortgage Notes Receivable		19
Capital Spending and Disposition Summaries		20
Property Under Development - Investment Spending Estimates		21
Financial Information and Total Investment by Segment		22
Lease Expirations		27
Top Ten Customers by Revenue from Continuing Operations		28
Net Asset Value (NAV) Components		29
Annualized GAAP Net Operating Income		30
Guidance		31
Definitions-Non-GAAP Financial Measures		32
Appendix-Reconciliation of Certain Non-GAAP Financial Measures		35

 

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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,” “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. 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. Except as required by law, 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.

NON-GAAP INFORMATION

This document contains certain non-GAAP measures. These non-GAAP measures, as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP measures are not measurements of financial performance or liquidity under GAAP and should not be considered alternatives to the Company’s other financial information determined under GAAP. See pages 32 through 34 for definitions of certain non-GAAP financial measures used in this document and the reconciliations of certain non-GAAP measures in the Appendix on pages 35 through 41.

IMPORTANT INFORMATION FOR INVESTORS AND SHAREHOLDERS

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the transaction referred to in this communication, EPR Properties expects to file a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) containing a preliminary proxy statement of CNL Lifestyle that also constitutes a preliminary prospectus of EPR Properties. After the registration statement is declared effective, CNL Lifestyle will mail a definitive proxy statement/prospectus to stockholders of CNL Lifestyle. This communication is not a substitute for the joint proxy statement/prospectus or registration statement or for any other document

 

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that EPR Properties or CNL Lifestyle may file with the SEC and send to CNL Lifestyle’s stockholders in connection with the proposed transactions. INVESTORS AND SECURITY HOLDERS OF CNL LIFESTYLE ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of the proxy statement/prospectus (when available) and other documents filed by EPR Properties and CNL Lifestyle with the SEC though the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed by EPR Properties with the SEC will be available free of charge on EPR Properties’ website at www. eprkc.com, or by contacting EPR Properties’ Investor Relations Department at (816) 472-1700. Copies of documents filed by CNL Lifestyle with the SEC will be available free of charge on CNL Lifestyle’s website at www.cnllifestylereit.com, or by contacting CNL Lifestyle’s Investor Relations Department at (866) 650-0650. The content of the websites referenced above are not deemed incorporated by reference into the registration statement or the proxy statement/prospectus.

CERTAIN INFORMATION REGARDING PARTICIPANTS

EPR Properties and CNL Lifestyle and their respective trustees/directors, executive officers and other management members and employees may be deemed participants in the solicitation of proxies with respect to the proposed transactions under the rules of the SEC. Information about the trustees and executive officers of EPR Properties is set forth in its proxy statement for its 2016 annual meeting of shareholders, which was filed with the SEC on April 1, 2016, and Form 4’s of EPR Properties’ trustees and executive officers filed with the SEC. Information about the directors and executive officers of CNL Lifestyle is set forth in its Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on March 28, 2016, its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on November 3, 2015, and in Form 4’s of CNL Lifestyle’s directors and executive officers filed with the SEC. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will also be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC if and when they become available.

 

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EPR Properties

Company Profile

The Company

 

EPR Properties (“EPR” or the “Company”) is a self-administered and self-managed real estate investment trust. EPR was formed in August 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering was completed on November 18, 1997.

Since that time, the Company has grown into a leading specialty real estate investment trust with an investment portfolio that includes Entertainment, Education, Recreation and Other specialty investments.

Company Strategy

 

Our vision is to become the leading specialty REIT by focusing our unique knowledge and resources on select underserved real estate segments which provide the potential for outsized returns.

EPR’s primary business objective is to enhance shareholder value by achieving predictable growth in Funds from Operations (“FFO”) and dividends per share. Central to our growth is remaining focused on acquiring or developing properties in our primary investment segments: Entertainment, Education and Recreation. We may also pursue opportunities to provide mortgage financing for these investment segments in certain situations where this structure is more advantageous than owning the underlying real estate.

Our segment focus is consistent with our strategic organizational design which is structured around building centers of knowledge and strong operating competencies in each of our primary segments. Retention and building of this knowledge depth creates a competitive advantage allowing us to more quickly identify key market trends.

To this end we will deliberately apply information and our ingenuity to identify properties which represent potential logical extensions within each of our segments, or potential future investment segments. As part of our strategic planning and portfolio management process we assess new opportunities against the following five key underwriting principles:

 

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Inflection Opportunity - Renewal or restructuring in an industry’s properties

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Enduring Value - Real estate devoted to and improving long-lived activities

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Excellent Execution - Market-dominant performance that creates value beyond tenant credit

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Attractive Economics - Accretive initial returns along with growth in yield

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Advantageous Position - Sustainable competitive advantages

 

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EPR Properties

Investor Information

Senior Management

 

Greg Silvers		Mark Peterson
President and Chief Executive Officer		Executive Vice President and Chief Financial Officer
Jerry Earnest		Craig Evans
Senior Vice President and Chief Investment Officer		Senior Vice President, General Counsel and Secretary
Tom Wright		Mike Hirons
Senior Vice President - Human Resources and Administration		Senior Vice President - Strategy and Asset Management
Tonya Mater
Vice President and Chief Accounting Officer

Company Information

 

Corporate Headquarters		Trading Symbols
909 Walnut Street, Suite 200		Common Stock:
Kansas City, MO 64106		EPR
888-EPR-REIT		Preferred Stock:
www.eprkc.com		EPR-PrC
		EPR-PrE
Stock Exchange Listing		EPR-PrF
New York Stock Exchange

Equity Research Coverage

 

Bank of America Merrill Lynch		Jeffrey Spector/Joshua Dennerlein		646-855-1363
Citi Global Markets		Michael Bilerman/Nick Joseph		212-816-4471
FBR & Co.		David Corak		703-312-1610
Janney Montgomery Scott		Rob Stevenson		646-840-3217
J.P. Morgan		Anthony Paolone		212-622-6682
Kansas City Capital Associates		Jonathan Braatz		816-932-8019
Keybanc Capital Markets		Jordan Sadler/Craig Mailman		917-368-2280
Ladenburg Thalmann		Daniel Donlan		212-409-2056
RBC Capital Markets		Michael Carroll/Wes Golladay		440-715-2649
Stifel		Simon Yarmak		443-224-1345

EPR Properties is followed by the analysts identified above. Please note that any opinions, estimates, forecasts or recommendations regarding EPR Properties’ performance made by these analysts are theirs alone and do not represent opinions, estimates, forecasts or recommendations of EPR Properties or its management. EPR Properties does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

 

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EPR Properties

Selected Financial Information

(Unaudited, dollars and shares in thousands)

 

		Three Months Ended September 30,								Nine months ended September 30,
Operating Information:		2016				2015				2016				2015
Revenue		$	125,610			$	108,335			$	362,411			$	309,029
Net income available to common shareholders of
EPR Properties			51,575				44,244				148,986				123,927
Adjusted EBITDA (1)(2)			109,068				95,306				314,573				268,181
Interest expense, net			24,265				20,529				70,310				59,123
Recurring principal payments			2,551				3,363				7,447				10,634
Capitalized interest			2,931				4,771				7,982				14,265
Straight-lined rental revenue			4,597				2,738				10,950				8,892
Dividends declared on preferred shares			5,951				5,951				17,855				17,855
Dividends declared on common shares			61,082				53,019				182,948				156,841
General and administrative expense			9,091				7,482				27,309				22,920
Balance Sheet Information:		September 30,
		2016				2015
Total assets		$	4,620,970			$	4,201,105
Accumulated depreciation			609,103				511,949
Total assets before accumulated depreciation (gross assets)			5,230,073				4,713,054
Cash and cash equivalents			7,311				14,614
Debt			2,248,576				2,018,354
Deferred financing costs, net			18,885				19,101
Net debt (2)			2,260,150				2,022,841
Equity			2,189,427				1,989,071
Common shares outstanding			63,628				59,158
Total market capitalization (using EOP closing price)			7,616,469				5,434,479
Net debt/total market capitalization			30%				37%
Net debt/gross assets			43%				43%
Net debt/Adjusted EBITDA (3)			5.18				5.31
Adjusted net debt/Annualized adjusted EBITDA (2)(4)(5)			5.08				n/a

(1) Includes discontinued operations.

(2) See pages 32 through 34 for definitions.

(3) Adjusted EBITDA is for the quarter times four. See pages 32 through 34 for definitions. See calculation on page 41.

(4) Adjusted net debt is net debt less 40% times property under development. See pages 32 through 34 for definitions.

(5) Annualized adjusted EBITDA is adjusted EBITDA for the quarter further adjusted for in-service projects, percentage rent and participating interest and other non-recurring items which is then multiplied times four. These calculations can be found on page 41 under the reconciliation of Adjusted EBITDA and Annualized Adjusted EBITDA. Amounts not calculated for periods prior to 2016. See pages 32 through 34 for definitions.

 

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EPR Properties

Selected Balance Sheet Information

(Unaudited, dollars in thousands)

 

		3rd Quarter 2016				2nd Quarter 2016				1st Quarter 2016				4th Quarter 2015				3rd Quarter 2015				2nd Quarter 2015
Assets
Rental properties:
Entertainment		$	2,483,321			$	2,473,635			$	2,369,351			$	2,337,427			$	2,309,413			$	2,301,551
Education			811,359				687,815				644,854				621,674				589,755				412,088
Recreation			650,350				600,183				608,393				600,401				551,660				315,502
Other			155,071				153,996				153,944				—				—				—
Less: accumulated depreciation			(609,103)				(583,848)				(562,195)				(534,303)				(511,949)				(492,602)
Land held for development			22,530				22,530				22,530				23,610				30,501				30,495
Property under development			263,026				301,605				266,574				378,920				374,533				494,066
Mortgage notes receivable: (1)
Entertainment			36,032				36,032				80,389				58,220				58,220				58,220
Education			70,609				63,828				61,963				79,584				80,230				79,194
Recreation			331,726				322,515				312,577				283,476				311,859				403,799
Other			2,511				2,500				2,500				2,500				5,021				5,032
Investment in a direct financing lease, net			189,152				188,386				191,720				190,880				190,029				189,203
Investment in joint ventures			6,159				5,955				5,869				6,168				6,439				6,101
Cash and cash equivalents			7,311				8,462				10,980				4,283				14,614				6,146
Restricted cash			20,463				16,614				23,428				10,578				21,949				15,289
Accounts receivable, net			81,217				62,061				62,403				59,101				56,006				64,493
Other assets			99,236				97,955				88,260				94,751				93,724				83,051
Total assets		$	4,620,970			$	4,460,224			$	4,343,540			$	4,217,270			$	4,182,004			$	3,971,628
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities		$	101,019			$	91,130			$	77,523			$	92,178			$	98,736			$	80,855
Common dividends payable			20,361				20,360				20,269				18,401				17,896				17,308
Preferred dividends payable			5,951				5,952				5,952				5,951				5,951				5,952
Unearned rents and interest			55,636				49,798				56,627				44,952				51,996				39,270
Line of credit			200,000				347,000				217,000				196,000				196,000				100,000
Deferred financing costs, net			(18,885)				(16,829)				(17,494)				(18,289)				(19,101)				(19,764)
Other debt			2,067,461				1,768,094				1,796,625				1,804,209				1,841,455				1,845,864
Total liabilities			2,431,543				2,265,505				2,156,502				2,143,402				2,192,933				2,069,485
Equity:
Common stock and additional paid-in-capital			2,669,330				2,666,325				2,644,263				2,509,077				2,414,399				2,297,495
Preferred stock at par value			139				139				139				139				139				139
Treasury stock			(107,136)				(107,133)				(104,864)				(97,328)				(95,564)				(77,244)
Accumulated other comprehensive income			4,698				3,485				3,708				5,622				5,410				8,290
Distributions in excess of net income			(377,604)				(368,097)				(356,208)				(343,642)				(335,690)				(326,914)
EPR Properties shareholders’ equity			2,189,427				2,194,719				2,187,038				2,073,868				1,988,694				1,901,766
Noncontrolling interests			—				—				—				—				377				377
Total equity			2,189,427				2,194,719				2,187,038				2,073,868				1,989,071				1,902,143
Total liabilities and equity		$	4,620,970			$	4,460,224			$	4,343,540			$	4,217,270			$	4,182,004			$	3,971,628

(1) Includes related accrued interest receivable.

 

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EPR Properties

Selected Operating Data

(Unaudited, dollars in thousands)

 

		3rd Quarter       2016				2nd Quarter         2016				1st Quarter       2016				4th Quarter       2015				3rd Quarter       2015				2nd Quarter       2015
Rental revenue and tenant reimbursements:
Entertainment		$	67,950			$	65,149			$	64,001			$	63,823			$	63,355			$	63,794
Education			19,905				17,717				17,182				16,552				13,990				10,803
Recreation			15,958				14,789				14,696				14,539				12,079				7,228
Other			2,290				2,291				1,764				—				—				—
Mortgage and other financing income:
Entertainment			1,294				1,481				2,152				1,781				1,782				1,782
Education (1)			7,319				7,178				10,731				7,566				7,479				7,793
Recreation			8,384				7,268				6,998				6,451				8,835				8,613
Other			34				34				34				63				97				97
Other income			2,476				2,126				1,210				1,213				718				1,148
Total revenue		$	125,610			$	118,033			$	118,768			$	111,988			$	108,335			$	101,258
Property operating expense			5,626				5,580				5,481				5,810				5,496				5,770
Other expense			—				—				5				115				221				210
General and administrative expense			9,091				9,000				9,218				8,101				7,482				7,756
Costs associated with loan refinancing or payoff			14				339				552				9				18				243
Interest expense, net			24,265				22,756				23,289				20,792				20,529				20,007
Transaction costs			2,947				1,490				444				700				783				4,429
Depreciation and amortization			27,601				25,666				25,955				24,915				23,498				21,849
Income before equity in income in joint ventures and other items			56,066				53,202				53,824				51,546				50,308				40,994
Equity in income from joint ventures			203				86				212				268				339				198
Gain (loss) on sale of real estate			1,615				2,270				—				—				(95)				—
Income tax benefit (expense)			(358)				(423)				144				936				(498)				7,506
Income from continuing operations			57,526				55,135				54,180				52,750				50,054				48,698
Discontinued operations:
Income from discontinued operations			—				—				—				—				141				68
Net income attributable to EPR Properties			57,526				55,135				54,180				52,750				50,195				48,766
Preferred dividend requirements			(5,951)				(5,952)				(5,952)				(5,951)				(5,951)				(5,952)
Net income available to common shareholders of EPR Properties		$	51,575			$	49,183			$	48,228			$	46,799			$	44,244			$	42,814

(1) Represents income from owned assets under a direct financing lease and 12 mortgage notes receivable.

 

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EPR Properties

Funds From Operations and Funds From Operations as Adjusted

(Unaudited, dollars in thousands except per share information)

 

		3rd Quarter       2016				2nd Quarter         2016				1st Quarter         2016				4th Quarter         2015				3rd Quarter         2015				2nd Quarter         2015
Funds From Operations (“FFO”) (1):
Net income available to common shareholders of EPR Properties		$	51,575			$	49,183			$	48,228			$	46,799			$	44,244			$	42,814
Gain on sale of real estate (excluding land sale)			(549)				(2,270)				—				—				—				—
Real estate depreciation and amortization			27,147				25,216				25,507				24,480				23,071				21,457
Allocated share of joint venture depreciation			56				58				60				62				64				65
FFO available to common shareholders of EPR Properties		$	78,229			$	72,187			$	73,795			$	71,341			$	67,379			$	64,336
FFO available to common shareholders of EPR Properties		$	78,229			$	72,187			$	73,795			$	71,341			$	67,379			$	64,336
Add: Preferred dividends for Series C preferred shares			1,941				1,941				1,941				1,941				1,941				—
Diluted FFO available to common shareholders		$	80,170			$	74,128			$	75,736			$	73,282			$	69,320			$	64,336
Funds From Operations as adjusted (1):
FFO available to common shareholders of EPR Properties		$	78,229			$	72,187			$	73,795			$	71,341			$	67,379			$	64,336
Costs associated with loan refinancing or payoff			14				339				552				9				18				243
Gain on insurance recovery (included in other income)			(1,825)				(1,523)				(489)				—				—				—
Termination fee included in gain on sale			549				2,270				—				—				—				—
Transaction costs			2,947				1,490				444				700				783				4,429
(Gain) loss on sale of land			(1,066)				—				—				—				95				—
Deferred income tax expense (benefit)			(44)				(18)				(602)				(1,366)				53				(6,711)
FFO as adjusted available to common shareholders of EPR Properties		$	78,804			$	74,745			$	73,700			$	70,684			$	68,328			$	62,297
FFO as adjusted available to common shareholders of EPR Properties		$	78,804			$	74,745			$	73,700			$	70,684			$	68,328			$	62,297
Add: Preferred dividends for Series C preferred shares			1,941				1,941				1,941				1,941				1,941				—
Diluted FFO as adjusted available to common shareholders		$	80,745			$	76,686			$	75,641			$	72,625			$	70,269			$	62,297
FFO per common share attributable to EPR Properties:
Basic		$	1.23			$	1.14			$	1.18			$	1.19			$	1.16			$	1.12
Diluted			1.22				1.13				1.17				1.18				1.15				1.12
FFO as adjusted per common share attributable to EPR Properties:
Basic		$	1.24			$	1.18			$	1.18			$	1.18			$	1.18			$	1.09
Diluted			1.23				1.17				1.17				1.17				1.17				1.08
Shares used for computation (in thousands):
Basic			63,627				63,592				62,664				60,125				58,083				57,200
Diluted			63,747				63,678				62,744				60,205				58,278				57,446
Weighted average shares outstanding-diluted EPS			63,747				63,678				62,744				60,205				58,278				57,446
Effect of dilutive Series C preferred shares			2,036				2,045				2,038				2,029				2,022				—
Adjusted weighted-average shares outstanding-diluted			65,783				65,723				64,782				62,234				60,300				57,446

(1) See pages 32 through 34 for definitions.

 

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EPR Properties

Adjusted Funds From Operations

(Unaudited, dollars in thousands except per share information)

 

		3rd Quarter       2016				2nd Quarter         2016				1st Quarter         2016				4th Quarter         2015				3rd Quarter         2015				2nd Quarter         2015
Adjusted Funds from Operations (“AFFO”) (1):
FFO available to common shareholders of EPR Properties		$	78,229			$	72,187			$	73,795			$	71,341			$	67,379			$	64,336
Adjustments:
Amortization of above market leases, net			42				48				48				47				48				49
Transaction costs			2,947				1,490				444				700				783				4,429
Non-real estate depreciation and amortization			454				450				448				436				427				392
Deferred financing fees amortization			1,187				1,163				1,172				1,163				1,156				1,173
Costs associated with loan refinancing or payoff			14				339				552				9				18				243
Gain on insurance recovery			(1,825)				(1,523)				(489)				—				—				—
Termination fees included in gain on sale			549				2,270				—				—				—				—
Share-based compensation expense to management and trustees			2,778				2,739				2,765				2,290				2,161				2,085
Maintenance capital expenditures (2)			(805)				(1,859)				(1,141)				(1,501)				(897)				(435)
Straight-lined rental revenue			(4,597)				(3,264)				(3,089)				(3,267)				(2,738)				(3,211)
Non-cash portion of mortgage and other financing income			(962)				(1,017)				(928)				(1,009)				(2,042)				(3,408)
(Gain) loss on sale of land			(1,066)				—				—				—				95				—
Deferred income tax expense (benefit)			(44)				(18)				(602)				(1,366)				53				(6,711)
AFFO available to common shareholders of EPR Properties		$	76,901			$	73,005			$	72,975			$	68,843			$	66,443			$	58,942
AFFO available to common shareholders of EPR Properties		$	76,901			$	73,005			$	72,975			$	68,843			$	66,443			$	58,942
Add: Preferred dividends for Series C preferred shares			1,941				1,941				1,941				1,941				1,941				—
Diluted AFFO available to common shareholders of EPR Properties		$	78,842			$	74,946			$	74,916			$	70,784			$	68,384			$	58,942
Weighted average diluted shares outstanding (in thousands)			63,747				63,678				62,744				60,205				58,278				57,446
Effect of dilutive Series C preferred shares			2,036				2,045				2,038				2,029				2,022				—
Adjusted weighted-average shares outstanding-diluted			65,783				65,723				64,782				62,234				60,300				57,446
AFFO per diluted common share		$	1.20			$	1.14			$	1.16			$	1.14			$	1.13			$	1.03
Dividends declared per common share		$	0.9600			$	0.9600			$	0.9600			$	0.9075			$	0.9075			$	0.9075
AFFO payout ratio (3)			80%				84%				83%				80%				80%				88%

 

(1)	See pages 32 through 34 for definitions.

 

(2)	Includes maintenance capital expenditures and certain second generation tenant improvements and leasing commissions.

 

(3)	AFFO payout ratio is calculated by dividing dividends declared per common share by AFFO per diluted common share.

 

11

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EPR Properties

Capital Structure at September 30, 2016

(Unaudited, dollars in thousands)

 

Consolidated Debt
Principal Payments Due on Debt:
		Mortgages												Unsecured Credit   Facility (2)				Unsecured   Senior Notes
Year		Amortization				Maturities				Bonds/Term   Loan/Other (1)												Total				Weighted Avg     Interest Rate
2016		$	2,516			$	—			$	—			$	—			$	—			$	2,516				4.69%
2017			5,065				158,201				—				—				—				163,266				4.86%
2018			65				11,619				—				—				—				11,684				6.19%
2019			—				—				—				200,000				—				200,000				1.77%
2020			—				—				350,000				—				250,000				600,000				5.19%
2021			—				—				—				—				—				—				—%
2022			—				—				—				—				350,000				350,000				5.75%
2023			—				—				—				—				275,000				275,000				5.25%
2024			—				—				—				—				148,000				148,000				4.35%
2025			—				—				—				—				300,000				300,000				4.50%
2026			—				—				—				—				192,000				192,000				4.56%
Thereafter			—				—				24,995				—				—				24,995				0.43%
Less: deferred financing costs, net			—				—				—				—				—				(18,885)				—%
		$	7,646			$	169,820			$	374,995			$	200,000			$	1,515,000			$	2,248,576				4.71%
						Balance				Weighted Avg     Interest Rate				Weighted Avg  Maturity
Fixed rate secured debt						$	177,466				4.94%				0.75
Fixed rate unsecured debt (1)							1,815,000				5.15%				6.37
Variable rate secured debt							24,995				0.43%				21.00
Variable rate unsecured debt							250,000				1.80%				2.77
Less: deferred financing costs, net							(18,885)				—%				—
Total						$	2,248,576				4.71%				5.69
(1) Includes  $300 million of term loan that has been fixed through interest rate swaps through April 5, 2019.
(2) Unsecured Credit Facility Summary:
		Commitment				Balance at 9/30/2016				Maturity				Rate at 9/30/2016
		$	650,000			$	200,000				April 24, 2019				1.77%

Note: This facility has a one year extension available at the Company’s option (solely with respect to the unsecured revolving credit portion of the facility) and includes an accordion feature in which the maximum borrowing amount under the combined unsecured revolving credit and term loan facility can be increased from  $1.0 billion to  $2.0 billion, in each case, subject to certain terms and conditions.

 

 

12

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EPR Properties

Capital Structure at September 30, 2016 and December 31, 2015

(Unaudited, dollars in thousands)

Consolidated Debt (continued)

 

Summary of Debt:

		September 30, 2016				December 31, 2015
Mortgage note payable, 7.37%, paid in full on February 18, 2016			—				4,813
Note payable, 2.50%, paid in full on April 21, 2016			—				1,850
Mortgage notes payable, 6.37%, paid in full on May 2, 2016			—				24,754
Mortgage notes payable, 6.02%, paid in full on August 8, 2016			—				16,738
Mortgage notes payable, 6.10%, paid in full on September 1, 2016			—				22,235
Mortgage note payable, 6.06%, due March 1, 2017			8,706				9,381
Mortgage note payable, 6.07%, due April 6, 2017			9,417				9,667
Mortgage notes payable, 5.73%-5.95%, due May 1, 2017			30,775				31,603
Mortgage notes payable, 4.00%, due July 6, 2017			90,249				93,616
Mortgage note payable, 5.29%, due July 8, 2017			3,338				3,455
Mortgage notes payable, 5.86% due August 1, 2017			22,344				22,931
Mortgage note payable, 6.19%, due February 1, 2018			12,637				13,171
Unsecured revolving variable rate credit facility, LIBOR + 1.25%, due April 24, 2019			200,000				196,000
Unsecured term loan payable, LIBOR + 1.40%, $300,000 fixed through interest rate swaps at a blended rate of 3.14% through April 5, 2019, due April 24, 2020			350,000				350,000
Senior unsecured notes payable, 7.75%, due July 15, 2020			250,000				250,000
Senior unsecured notes payable, 5.75%, due August 15, 2022			350,000				350,000
Senior unsecured notes payable, 5.25%, due July 15, 2023			275,000				275,000
Senior unsecured notes payable, 4.35%, due August 22, 2024			148,000				—
Senior unsecured notes payable, 4.50%, due April 1, 2025			300,000				300,000
Senior unsecured notes payable, 4.56%, due August 22, 2026			192,000				—
Bonds payable, variable rate, due October 1, 2037			24,995				24,995
Less: deferred financing costs, net			(18,885)				(18,289)
Total debt		$	2,248,576			$	1,981,920

 

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EPR Properties

Capital Structure

Senior Notes

Senior Debt Ratings as of September 30, 2016

 

Moody’s		Baa2 (stable)
Fitch		BBB- (stable)
Standard and Poor’s		BBB- (stable)

Summary of Covenants

 

The Company has outstanding senior unsecured notes with fixed interest rates of 4.50%, 5.25%, 5.75% and 7.75%. Interest on these notes is paid semiannually. These senior unsecured notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the Company’s debt to adjusted total assets ratio to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the Company’s secured debt to adjusted total assets ratio to exceed 40%; (iii) a limitation on incurrence of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of the Company’s outstanding unsecured debt.

The following is a summary of the key financial covenants for the Company’s 4.50%, 5.25%, 5.75% and 7.75% senior unsecured notes, as defined and calculated per the terms of the notes. These calculations, which are not based on U.S. generally accepted accounting principles, or GAAP, measurements, are presented to investors to show the Company’s ability to incur additional debt under the terms of the senior unsecured notes only and are not measures of the Company’s liquidity or performance. The actual amounts as of September 30, 2016 and June 30, 2016 are:

 

Note Covenants		Required		Actual 3rd Quarter 2016 (1)		Actual 2nd Quarter 2016 (1)
Limitation on incurrence of total debt (Total Debt/Total Assets)		< 60%		44%		43%
Limitation on incurrence of secured debt (Secured Debt/Total Assets)		< 40%		4%		5%
Debt service coverage (Consolidated Income Available for Debt Service/Annual Debt Service)		> 1.5 x		4.0x		4.1x
Maintenance of total unencumbered assets (Unencumbered Assets/Unsecured Debt)		> 150% of unsecured debt		225%		237%

 

(1)	See page 15 for detailed calculations.

Note: The above excludes the private placement notes.

 

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EPR Properties

Capital Structure

Senior Notes

(Unaudited, dollars in thousands)

Covenant Calculations

 

 

Total Assets:		September 30,   2016								Total Debt:						September 30,   2016
Total Assets per balance sheet		$	4,620,970							Secured debt obligations						$	202,461
Add: accumulated depreciation			609,103							Unsecured debt obligations:
Less: intangible assets			(15,253)							Unsecured debt							2,065,000
Total Assets		$	5,214,820							Outstanding letters of credit							—
										Guarantees							24,929
										Derivatives at fair market value, net, if liability							—
										Total unsecured debt obligations:							2,089,929
										Total Debt						$	2,292,390
Total Unencumbered Assets:		September 30, 2016
Unencumbered real estate assets, gross		$	4,416,850
Cash and cash equivalents			7,311
Land held for development			22,530
Property under development			263,026
Total Unencumbered Assets		$	4,709,717
Consolidated Income Available for Debt Service:		3rd Quarter 2016				2nd Quarter   2016				1st Quarter 2016		4th Quarter 2015				Trailing Twelve Months
Adjusted EBITDA (1)		$	109,068			$	101,930			$        103,575		$	97,962			$	412,535
Less: straight-line rental revenue			(4,597)				(3,264)			(3,089)			(3,267)				(14,217)
Consolidated Income Available for Debt Service		$	104,471			$	98,666			$        100,486		$	94,695			$	398,318
Annual Debt Service:
Interest expense, gross		$	27,196			$	25,516			$          25,580		$	25,076			$	103,368
Less: deferred financing fees amortization			(1,187)				(1,163)			(1,172)			(1,163)				(4,685)
Annual Debt Service		$	26,009			$	24,353			$          24,408		$	23,913			$	98,683
Debt Service Coverage			4.0				4.1			4.1			4.0				4.0

(1) Includes discontinued operations.

 

 

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EPR Properties

Capital Structure at September 30, 2016

(Unaudited, dollars in thousands except share information)

Equity

 

 

Security		Shares Issued     and Outstanding				Price per share   at September 30, 2016				Liquidation     Preference				Dividend Rate				Convertible				Conversion Ratio at   September 30,   2016				Conversion Price at   September 30,   2016
Common shares			63,628,019			$	78.74				N/A				(1)				N/A				N/A				N/A
Series C			5,399,950			$	30.67			$	134,999				5.750%				Y				0.3771				66.30
Series E			3,450,000			$	37.22			$	86,250				9.000%				Y				0.4561				54.81
Series F			5,000,000			$	26.12			$	125,000				6.625%				N				N/A				N/A
Calculation of Total Market Capitalization:
Common shares outstanding at September 30, 2016 multiplied by closing price at September 30, 2016														$	5,010,070
Aggregate liquidation value of Series C preferred shares (2)															134,999
Aggregate liquidation value of Series E preferred shares (2)															86,250
Aggregate liquidation value of Series F preferred shares (2)															125,000
Net debt at September 30, 2016 (3)															2,260,150
Total consolidated market capitalization														$	7,616,469

(1) Total monthly dividends declared in the third quarter of 2016 were  $0.96 per share.

(2) Excludes accrued unpaid dividends at September 30, 2016.

(3) See pages 32 through 34 for definitions.

 

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EPR Properties

Summary of Ratios

(Unaudited)

 

		3rd Quarter     2016		2nd Quarter     2016		1st Quarter     2016		4th Quarter     2015		3rd Quarter     2015		2nd Quarter     2015
Net debt to total market capitalization		30%		28%		30%		34%		37%		36%
Net debt to gross assets		43%		42%		41%		42%		43%		43%
Net debt/Adjusted EBITDA (1)(2)		5.18		5.17		4.81		5.09		5.31		5.54
Adjusted net debt/Annualized adjusted EBITDA (3)(4)		5.08		4.89		4.76		n/a		n/a		n/a
Interest coverage ratio (5)		3.9		4.0		4.0		3.9		3.7		3.5
Fixed charge coverage ratio (5)		3.2		3.2		3.3		3.1		3.0		2.8
Debt service coverage ratio (5)		3.6		3.6		3.7		3.5		3.3		3.0
FFO payout ratio (6)		79%		85%		82%		77%		79%		81%
FFO as adjusted payout ratio (7)		78%		82%		81%		78%		78%		84%
AFFO payout ratio (8)		80%		84%		83%		80%		80%		88%

(1) See pages 32 through 34 for definitions.

(2) Adjusted EBITDA is for the quarter times four. See calculation on page 41.

(3) Adjusted net debt is net debt less 40% times property under development. See pages 32 through 34 for definitions.

(4) Annualized adjusted EBITDA is Adjusted EBITDA for the quarter further adjusted for in-service projects, percentage rent and participating interest and other non-recurring items which is then multiplied times four. These calculations can be found on page 41 under the reconciliation of Adjusted EBITDA and Annualized Adjusted EBITDA. Amounts not calculated for periods prior to 2016. See pages 32 through 34 for definitions.

(5) See page 18 for detailed calculation.

(6) FFO payout ratio is calculated by dividing dividends declared per common share by FFO per diluted common share.

(7) FFO as adjusted payout ratio is calculated by dividing dividends declared per common share by FFO as adjusted per diluted common share.

(8) AFFO payout ratio is calculated by dividing dividends declared per common share by AFFO per diluted common share.

 

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EPR Properties

Calculation of Interest, Fixed Charge and Debt Service Coverage Ratios

(Unaudited, dollars in thousands)

 

		3rd Quarter   2016				2nd Quarter     2016				1st Quarter     2016				4th Quarter     2015				3rd Quarter     2015				2nd Quarter     2015
Interest Coverage Ratio (1):
Net income		$	57,526			$	55,135			$	54,180			$	52,750			$	50,195			$	48,766
Transaction costs			2,947				1,490				444				700				783				4,429
Interest expense, gross			27,196				25,516				25,580				25,076				25,300				25,164
Depreciation and amortization			27,601				25,666				25,955				24,915				23,498				21,849
Share-based compensation expense to management and trustees			2,778				2,739				2,765				2,290				2,161				2,085
Costs associated with loan refinancing or payoff			14				339				552				9				18				243
Interest cost capitalized			(2,931)				(2,760)				(2,291)				(4,283)				(4,771)				(5,145)
Straight-line rental revenue			(4,597)				(3,264)				(3,089)				(3,267)				(2,738)				(3,211)
(Gain) loss on sale of real estate			(1,615)				(2,270)				—				—				95				—
Gain on insurance recovery			(1,825)				(1,523)				(489)				—				—				—
Deferred income tax expense (benefit)			(44)				(18)				(602)				(1,366)				53				(6,711)
Interest coverage amount		$	107,050			$	101,050			$	103,005			$	96,824			$	94,594			$	87,469
Interest expense, net		$	24,265			$	22,756			$	23,289			$	20,792			$	20,529			$	20,007
Interest income			—				—				—				1				—				12
Interest cost capitalized			2,931				2,760				2,291				4,283				4,771				5,145
Interest expense, gross		$	27,196			$	25,516			$	25,580			$	25,076			$	25,300			$	25,164
Interest coverage ratio			3.9				4.0				4.0				3.9				3.7				3.5
Fixed Charge Coverage Ratio (1):
Interest coverage amount		$	107,050			$	101,050			$	103,005			$	96,824			$	94,594			$	87,469
Interest expense, gross		$	27,196			$	25,516			$	25,580			$	25,076			$	25,300			$	25,164
Preferred share dividends			5,951				5,952				5,952				5,951				5,951				5,952
Fixed charges		$	33,147			$	31,468			$	31,532			$	31,027			$	31,251			$	31,116
Fixed charge coverage ratio			3.2				3.2				3.3				3.1				3.0				2.8
Debt Service Coverage Ratio (1):
Interest coverage amount		$	107,050			$	101,050			$	103,005			$	96,824			$	94,594			$	87,469
Interest expense, gross		$	27,196			$	25,516			$	25,580			$	25,076			$	25,300			$	25,164
Recurring principal payments			2,551				2,298				2,598				2,900				3,363				3,560
Debt service		$	29,747			$	27,814			$	28,178			$	27,976			$	28,663			$	28,724
Debt service coverage ratio			3.6				3.6				3.7				3.5				3.3				3.0

(1) See pages 32 through 34 for definitions. Amounts above include the impact of discontinued operations, which is separately classified in the income statement. See Appendix on pages 35 through 41 for reconciliations of certain non-GAAP financial measures.

 

18

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EPR Properties

Summary of Mortgage Notes Receivable

(Unaudited, dollars in thousands)

Summary of Mortgage Notes Receivable

 

 

		Operating Segment				September 30, 2016				December 31, 2015
Mortgage note and related accrued interest receivable, 9.50%, paid in full January 5, 2016			Education			$	—			$	19,944
Mortgage note and related accrued interest receivable, 9.75%, paid in full April 22, 2016			Entertainment				—				22,188
Mortgage note and related accrued interest receivable, 5.50%, due November 1, 2016			Other				2,511				2,500
Mortgage note, 9.00%, due January 31, 2017			Education				1,345				1,257
Mortgage note receivable and related accrued interest receivable, 9.00%, due March 11, 2017			Education				1,454				1,454
Mortgage note receivable, 9.00%, due March 31, 2017			Recreation				5,500				—
Mortgage notes and related accrued interest receivable, 7.00% to 10.00%, due May 1, 2019			Recreation				165,647				164,543
Mortgage note and related accrued interest receivable, 10.65%, due June 28, 2032			Entertainment				36,032				36,032
Mortgage note and related accrued interest receivable, 9.00%, due December 31, 2032			Education				5,364				5,469
Mortgage notes and related accrued interest receivable, 9.50%, due April 30, 2033			Education				30,904				30,680
Mortgage note and related accrued interest receivable, 10.25%, due June 30, 2033			Education				3,503				3,488
Mortgage note, 11.31%, due July 1, 2033			Recreation				12,595				12,781
Mortgage note and related accrued interest receivable, 8.71%, due June 30, 2034			Education				7,229				4,900
Mortgage note and related accrued interest receivable, 9.50%, due August 31, 2034			Education				12,452				12,392
Mortgage note and related accrued interest receivable, 11.10%, due December 1, 2034			Recreation				51,250				51,450
Mortgage notes, 10.13%, due December 1, 2034			Recreation				37,562				37,562
Mortgage note, 10.40%, due December 1, 2034			Recreation				4,550				4,550
Mortgage note, 8.00%, due January 5, 2036			Recreation				21,000				—
Mortgage note, 10.25%, due July 1, 2036			Recreation				17,550				9,147
Mortgage note and related accrued interest receivable, 9.75%, due July 31, 2036			Education				5,955				—
Mortgage note and related accrued interest receivable, 9.75%, due October 1, 2036			Recreation				16,072				3,443
Mortgage note receivable, 9.75%, due December 31, 2036			Education				2,403				—
Total mortgage notes and related accrued interest receivable						$	440,878			$	423,780

Payments Due on Mortgage Notes Receivable

 

 

		As of September 30,   2016
Year:
2016		$	4,680
2017			9,325
2018			928
2019			165,774
2020			1,143
Thereafter			259,028
Total		$	440,878

 

19

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EPR Properties

Capital Spending and Disposition Summaries

(Unaudited, dollars in thousands)

2016 Capital Spending:

 

Description

Location

Operating Segment

Capital Spending Three Months Ended September 30, 2016

Capital Spending Nine Months Ended September 30, 2016

Development and redevelopment of megaplex theatres

various

Entertainment

$

12,997

$

31,567

Acquisition of megaplex theatres

various

Entertainment

16,264

111,018

Development of other entertainment and retail projects

various

Entertainment

4,657

18,655

Acquisition of family entertainment center

Marietta, GA

Entertainment

—

14,988

Investment in mortgage note receivable for entertainment retail center

Charlotte, NC

Entertainment

—

22,000

Investment in mortgage notes receivable for public charter schools

various

Education

6,888

11,179

Development of public charter school properties

various

Education

22,101

65,454

Development of early childhood education centers

various

Education

30,941

86,992

Development of private school properties

various

Education

11,186

23,680

Development of Topgolf golf entertainment facilities

various

Recreation

37,735

104,527

Investment in mortgage note receivable for ski resort

Hunter, NY

Recreation

—

21,000

Additions to mortgage note receivable for development of excess land at Schlitterbahn waterpark

various

Recreation

—

200

Development of Camelback Mountain Resort

Tannersville, PA

Recreation

1,974

3,446

Redevelopment of ski properties

various

Recreation

7,236

7,336

Investment in waterpark hotel for casino and resort project

Sullivan County, NY

Recreation

2,012

3,508

Investment in casino and resort project

Sullivan County, NY

Other

1,075

1,313

Total investment spending

$

155,066

$

526,863

Infrastructure spending for casino and resort project (1)

Sullivan County, NY

Other

12

17,111

Other capital acquisitions, net

various

n/a

511

3,127

Total capital spending

$

155,589

$

547,101

2016 Dispositions and Mortgage Note Payoffs:

Description

Location

Date of Disposition or Payoff

Net Proceeds

Land easement sale

D’Iberville, MS

January 2016

$

397

Mortgage note payoff of public charter school property

Washington D.C.

January 2016

19,320

Sale of excess land

Sullivan County, NY

February 2016

1,523

Sale of public charter school property

Highlands Ranch, CO

April 2016

11,209

Sale of public charter school property

Marietta, GA

April 2016

4,050

Mortgage note payoff of entertainment retail center

Charlotte, NC

April 2016

44,000

Sale of public charter school property

Loveland, CO

August 2016

5,433

Sale of land

Mesquite, TX

September 2016

2,089

(1) In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds which will fund construction costs for infrastructure improvements related to the Adelaar Resort. The Company received an initial reimbursement of $43.4 million of construction costs and expects to receive an additional $44.9 million of reimbursements over the balance of the construction period. Construction of infrastructure improvements is expected to be completed in 2017.

 

20

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EPR Properties

Property Under Development - Investment Spending Estimates at September 30, 2016 (1)

(Unaudited, dollars in thousands)

 

		September 30, 2016								Owned Build-to-Suit Spending Estimates
		Property Under Development				# of Projects				4th     Quarter     2016				1st     Quarter     2017				2nd     Quarter     2017				3rd     Quarter     2017				Thereafter				Total         Expected         Cost (2)				% Leased
Entertainment		$	33,252				10			$	23,991			$	12,708			$	8,385			$	3,500			$	6,860			$	88,696				100%
Education			98,758				17				28,676				33,150				23,200				19,700				24,240				227,724				100%
Recreation (3)			101,694				7				22,372				15,924				36,472				30,472				81,078				288,012				100%
Total Build-to-Suit			233,704				34			$	75,039			$	61,782			$	68,057			$	53,672			$	112,178			$	604,432
Non Build-to-Suit Development			23,621
Adelaar			5,701
Total Property Under Development		$	263,026
						September 30, 2016				Owned Build-to-Suit In-Service Estimates
						# of Projects				4th Quarter 2016				1st Quarter 2017				2nd Quarter 2017				3rd Quarter 2017				Thereafter				Total In- Service (2)				Actual In-Service     3rd Quarter 2016
Entertainment							10			$	7,407			$	4,573			$	35,011			$	—			$	41,705			$	88,696			$	3,263
Education							17				27,890				15,893				77,684				—				106,257				227,724				121,297
Recreation							7				31,988				23,800				22,362				27,500				182,362				288,012				48,946
Total Build-to-Suit							34			$	67,285			$	44,266			$	135,057			$	27,500			$	330,324			$	604,432			$	173,506
		September 30, 2016								Mortgage Build-to-Suit Spending Estimates
		Mortgage       Notes       Receivable				# of Projects				4th Quarter 2016				1st Quarter 2017				2nd Quarter 2017				3rd Quarter 2017				Thereafter				Total Expected Cost (2)
Entertainment		$	—				—			$	—			$	—			$	—			$	—			$	—			$	—
Education			15,587				3				2,994				2,600				2,500				800				329				24,810
Recreation			16,072				1				2,400				—				—				—				—				18,472
Total Build-to-Suit Mortgage Notes			31,659				4			$	5,394			$	2,600			$	2,500			$	800			$	329			$	43,282
Non Build-to-Suit Mortgage Notes			409,219
Total Mortgage Notes Receivable		$	440,878

(1) This schedule includes only those properties for which the Company has closed on a contract (lease or mortgage) and commenced construction as of September 30, 2016.

(2) “Total Expected Cost” and “Total In-Service” each reflect the total capital costs expected to be funded by the Company through completion (including capitalized interest or accrued interest as applicable).

(3) Recreation includes costs related to waterpark hotel at Adelaar.

Note: This schedule includes future estimates for which the Company can give no assurance as to timing or amounts. Development projects have risks. See Item 1A - “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and, to the extent applicable, the Company’s Quarterly Reports on Form 10-Q.

 

21

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EPR Properties

Financial Information by Segment

For the Three Months Ended September 30, 2016

(Unaudited, dollars in thousands)

 

		Entertainment				Education				Recreation				Other				Subtotal				Corporate/       Unallocated				Consolidated
Rental revenue		$	64,134			$	19,900			$	15,958			$	2,290			$	102,282			$	—			$	102,282
Tenant reimbursements			3,816				5				—				—				3,821				—				3,821
Other income			8				—				1,825				—				1,833				643				2,476
Mortgage and other financing income			1,294				7,319				8,384				34				17,031				—				17,031
Total revenue			69,252				27,224				26,167				2,324				124,967				643				125,610
Property operating expense			5,228				—				—				233				5,461				165				5,626
Total investment expenses			5,228				—				—				233				5,461				165				5,626
General and administrative expense			—				—				—				—				—				9,091				9,091
Less: gain on insurance recovery (1)			—				—				1,825				—				1,825				—				1,825
Adjusted EBITDA (2)		$	64,024			$	27,224			$	24,342			$	2,091			$	117,681			$	(8,613)			$	109,068
			54	%			23	%			21	%			2	%			100	%
Reconciliation to Consolidated Statements of Income:
Costs associated with loan refinancing or payoff																							(14)				(14)
Interest expense, net																							(24,265)				(24,265)
Transaction costs																							(2,947)				(2,947)
Depreciation and amortization																							(27,601)				(27,601)
Equity in income from joint ventures																							203				203
Gain on sale of real estate																							1,615				1,615
Income tax expense																							(358)				(358)
Gain on insurance recovery (1)																							1,825				1,825
Net income attributable to EPR Properties																											57,526
Preferred dividend requirements																							(5,951)				(5,951)
Net income available to common shareholders of EPR Properties																										$	51,575

(1) Included in other income. See reconciliation on page 41.

(2) See pages 32 through 34 for definitions.

 

22

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EPR Properties

Financial Information by Segment

For the Nine Months Ended September 30, 2016

(Unaudited, dollars in thousands)

 

		Entertainment				Education				Recreation				Other				Subtotal				Corporate/     Unallocated				Consolidated
Rental revenue		$	185,530			$	54,797			$	45,443			$	6,345			$	292,115			$	—			$	292,115
Tenant reimbursements			11,570				7				—				—				11,577				—				11,577
Other income			222				—				3,635				—				3,857				1,955				5,812
Mortgage and other financing income			4,927				25,228				22,650				102				52,907				—				52,907
Total revenue			202,249				80,032				71,728				6,447				360,456				1,955				362,411
Property operating expense			15,815				—				8				419				16,242				445				16,687
Other expense			—				—				—				5				5				—				5
Total investment expenses			15,815				—				8				424				16,247				445				16,692
General and administrative expense			—				—				—				—				—				27,309				27,309
Less: gain on insurance recovery (1)			202				—				3,635				—				3,837				—				3,837
Adjusted EBITDA (2)		$	186,232			$	80,032			$	68,085			$	6,023			$	340,372			$	(25,799)			$	314,573
			55	%			23	%			20	%			2	%			100	%
Reconciliation to Consolidated Statements of Income:
Costs associated with loan refinancing or payoff																							(905)				(905)
Interest expense, net																							(70,310)				(70,310)
Transaction costs																							(4,881)				(4,881)
Depreciation and amortization																							(79,222)				(79,222)
Equity in income from joint ventures																							501				501
Gain on sale of real estate																							3,885				3,885
Income tax expense																							(637)				(637)
Gain on insurance recovery (1)																							3,837				3,837
Net income attributable to EPR Properties																											166,841
Preferred dividend requirements																							(17,855)				(17,855)
Net income available to common shareholders of EPR Properties																										$	148,986

(1) Included in other income. See reconciliation on page 41.

(2) See pages 32 through 34 for definitions.

 

23

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EPR Properties

Financial Information by Segment

For the Three Months Ended September 30, 2015

(Unaudited, dollars in thousands)

 

		Entertainment				Education				Recreation				Other				Subtotal				Corporate/     Unallocated				Consolidated
Rental revenue		$	59,637			$	13,990			$	12,079			$	—			$	85,706			$	—			$	85,706
Tenant reimbursements			3,718				—				—				—				3,718				—				3,718
Other income			1				—				—				55				56				662				718
Mortgage and other financing income			1,782				7,479				8,835				97				18,193				—				18,193
Total revenue			65,138				21,469				20,914				152				107,673				662				108,335
Property operating expense			5,413				—				—				83				5,496				—				5,496
Other expense			—				—				—				221				221				—				221
Total investment expenses			5,413				—				—				304				5,717				—				5,717
General and administrative expense			—				—				—				—				—				7,482				7,482
Adjusted EBITDA - continuing operations (1)		$	59,725			$	21,469			$	20,914			$	(152)			$	101,956			$	(6,820)			$	95,136
Adjusted EBITDA - discontinued operations (1)			—				—				—				—				—				170				170
Adjusted EBITDA (1)		$	59,725			$	21,469			$	20,914			$	(152)			$	101,956			$	(6,650)			$	95,306
			58	%			21	%			21	%			—	%			100	%
Reconciliation to Consolidated Statements of Income:
Costs associated with loan refinancing or payoff																							(18)				(18)
Interest expense, net																							(20,529)				(20,529)
Transaction costs																							(783)				(783)
Depreciation and amortization																							(23,498)				(23,498)
Equity in income from joint ventures																							339				339
Loss on sale of real estate																							(95)				(95)
Income tax expense (2)																							(527)				(527)
Net income attributable to EPR Properties																											50,195
Preferred dividend requirements																							(5,951)				(5,951)
Net income available to common shareholders of EPR Properties																										$	44,244

(1) See pages 32 through 34 for definitions.

(2) Includes discontinued operations.

 

24

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EPR Properties

Financial Information by Segment

For the Nine Months Ended September 30, 2015

(Unaudited, dollars in thousands)

 

		Entertainment				Education				Recreation				Other				Subtotal				Corporate/     Unallocated				Consolidated
Rental revenue		$	179,407			$	34,887			$	26,012			$	—			$	240,306			$	—			$	240,306
Tenant reimbursements			12,009				—				—				(23)				11,986				—				11,986
Other income (loss)			504				—				—				118				622				1,794				2,416
Mortgage and other financing income			5,346				23,056				25,629				290				54,321				—				54,321
Total revenue			197,266				57,943				51,641				385				307,235				1,794				309,029
Property operating expense			17,399				—				—				224				17,623				—				17,623
Other expense			—				—				—				533				533				—				533
Total investment expenses			17,399				—				—				757				18,156				—				18,156
General and administrative expense			—				—				—				—				—				22,920				22,920
Adjusted EBITDA - continuing operations (1)		$	179,867			$	57,943			$	51,641			$	(372)			$	289,079			$	(21,126)			$	267,953
Adjusted EBITDA - discontinued operations (1)			—				—				—				—				—				228				228
Adjusted EBITDA (1)		$	179,867			$	57,943			$	51,641			$	(372)			$	289,079			$	(20,898)			$	268,181
			62	%			20	%			18	%			—	%			100	%
Reconciliation to Consolidated Statements of Income:
Costs associated with loan refinancing or payoff																							(261)				(261)
Interest expense, net																							(59,123)				(59,123)
Transaction costs																							(6,818)				(6,818)
Retirement severance expense																							(18,578)				(18,578)
Depreciation and amortization																							(64,702)				(64,702)
Equity in income from joint ventures																							701				701
Gain on sale of real estate																							23,829				23,829
Income tax expense (2)																							(1,447)				(1,447)
Net income attributable to EPR Properties																											141,782
Preferred dividend requirements																							(17,855)				(17,855)
Net income available to common shareholders of EPR Properties																										$	123,927

(1) See pages 32 through 34 for definitions.

(2) Includes discontinued operations.

 

25

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EPR Properties

Total Investment by Segment

As of September 30, 2016 and December 31, 2015

(Unaudited, dollars in thousands)

 

		As of September 30, 2016
		Entertainment				Education				Recreation				Other				Consolidated
Rental properties, net of accumulated depreciation		$	1,945,634			$	774,395			$	615,898			$	155,071			$	3,490,998
Add back accumulated depreciation on rental properties			537,687				36,964				34,452				—				609,103
Land held for development			4,457				1,258				—				16,815				22,530
Property under development			54,345				99,482				103,498				5,701				263,026
Mortgage notes and related accrued interest receivable, net			36,032				70,609				331,726				2,511				440,878
Investment in a direct financing lease, net			—				189,152				—				—				189,152
Investment in joint ventures			6,159				—				—				—				6,159
Intangible assets, gross (1)			28,825				190				—				—				29,015
Notes receivable and related accrued interest receivable, net (1)			1,976				3,471				—				—				5,447
Total investments (2)		$	2,615,115			$	1,175,521			$	1,085,574			$	180,098			$	5,056,308
% of total investments			52%				23%				21%				4%				100%
		As of December 31, 2015
		Entertainment				Education				Recreation				Other				Consolidated
Rental properties, net of accumulated depreciation		$	1,849,604			$	597,795			$	577,800			$	—			$	3,025,199
Add back accumulated depreciation on rental properties			487,823				23,879				22,601				—				534,303
Land held for development			4,457				1,258				—				17,895				23,610
Property under development			23,625				112,794				59,453				183,048				378,920
Mortgage notes and related accrued interest receivable, net			58,220				79,584				283,476				2,500				423,780
Investment in a direct financing lease, net			—				190,880				—				—				190,880
Investment in joint ventures			6,168				—				—				—				6,168
Intangible assets, gross (1)			20,715				—				—				—				20,715
Notes receivable and related accrued interest receivable, net (1)			2,228				—				—				—				2,228
Total investments (2)		$	2,452,840			$	1,006,190			$	943,330			$	203,443			$	4,605,803
% of total investments			53%				22%				21%				4%				100%
(1) Included in other assets in the consolidated balance sheets as of September 30, 2016 in the Company’s Quarterly Report on Form 10-Q and December 31, 2015 in the Company’s Annual Report on Form 10-K. Reconciliation is as follows:
		9/30/2016				12/31/2015
Intangible assets, gross		$	29,015			$	20,715
Less: accumulated amortization on intangible assets			(13,762)				(12,079)
Notes receivable and related accrued interest receivable, net			5,447				2,228
Prepaid expenses and other current assets			78,536				83,887
Total other assets		$	99,236			$	94,751
(2) See pages 32 through 34 for definitions.

 

26

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EPR Properties

Lease Expirations

As of September 30, 2016

(Unaudited, dollars in thousands)

 

		Megaplex Theatres														Education Portfolio												Recreation Portfolio
Year		Total   Number of   Properties						Rental Revenue   for the Trailing   Twelve Months Ended September 30, 2016 (1)				% of Total   Revenue				Total   Number of   Properties				Financing Income/ Rental Revenue for   the Trailing Twelve   Months Ended September 30, 2016				% of Total   Revenue				Total   Number of   Properties		Rental Revenue   for the Trailing   Twelve Months Ended September 30, 2016				% of Total   Revenue
2016		1						$	3,351				1%			—				$	—				—%			—		$	—				—%
2017		3							6,740				2%			1					1,804				—%			—			—				—%
2018		16							26,430				6%			1					95				—%			—			—				—%
2019		4							10,769				2%			—					—				—%			—			—				—%
2020		6							9,934				2%			—					—				—%			—			—				—%
2021		9							13,575				3%			—					—				—%			—			—				—%
2022		12							22,303				5%			—					—				—%			—			—				—%
2023		6							11,106				2%			—					—				—%			—			—				—%
2024		14							27,518				6%			—					—				—%			—			—				—%
2025		8							15,408				3%			—					—				—%			—			—				—%
2026		7							11,647				3%			—					—				—%			—			—				—%
2027		13			(2)				15,043				3%			—					—				—%			1			2,896				1%
2028		4							6,138				1%			—					—				—%			—			—				—%
2029		17			(3)				19,016				4%			—					—				—%			—			—				—%
2030		3							5,134				1%			—					—				—%			—			—				—%
2031		10			(4)				9,344				2%			11		(5)			6,325				1%			—			—				—%
2032		3							2,097				—%			12		(6)			16,750				4%			3			4,415				1%
2033		6							4,297				1%			16		(7)			17,255				4%			1			1,676				—%
2034		2							1,977				—%			15					24,281				5%			6			14,362				3%
2035		2							1,797				—%			24		(8)			20,998				5%			11			39,493				8%
Thereafter		1							389				—			13					5,227				1%			2			455				—%
		147						$	224,013				47%			93				$	92,735				20%			24		$	63,297				13%

Note: This schedule relates to owned megaplex theatres, public charter schools, early education centers, private schools, ski parks and golf entertainment complexes only, which together represent approximately 80% of total revenue for the trailing twelve months ended September 30, 2016. This schedule excludes properties under construction, land held for development and investments in mortgage notes receivable.

 

(1)	Consists of rental revenue and tenant reimbursements.

(2)	Eleven of these theatre properties are leased under a master lease.

(3)	Fifteen of these theatre properties are leased under a master lease.

(4)	Four of these theatre properties are leased under a master lease as well as five of these theatre properties are leased under a separate master lease.

(5)	Four of these education properties are leased under a master lease to Imagine.

(6)	Four of these education properties are leased under a master lease to Imagine.

(7)	Nine of these education properties are leased under a master lease to Imagine.

(8)	Three of these education properties are leased under a master lease to Imagine.

 

27

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EPR Properties

Top Ten Customers by Revenue from Continuing Operations

(Unaudited, dollars in thousands)

 

		Customers		Asset Type				Total Revenue For The   Three Months Ended September 30, 2016				Percentage of       Total Revenue		Total Revenue For The   Nine Months Ended September 30, 2016				Percentage of   Total Revenue
1.		AMC Theatres			Entertainment			$	21,734			17%		$	65,297			18%
2.		Regal Entertainment Group			Entertainment				11,076			9%			32,190			9%
3.		Topgolf			Recreation				10,819			8%			29,564			8%
4.		Cinemark			Entertainment				8,622			7%			25,595			7%
5.		Carmike Cinemas			Entertainment				7,081			5%			16,942			5%
6.		Imagine Schools			Education				5,742			5%			17,213			5%
7.		Camelback Resort			Recreation				4,769			4%			14,182			4%
8.		Schlitterbahn			Recreation				4,263			3%			10,984			3%
9.		Children’s Learning Adventure			Education				3,412			3%			8,641			2%
10.		Southern Theatres			Entertainment				3,394			3%			9,914			3%
		Total						$	80,912			64%		$	230,522			64%

 

28

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EPR Properties

Net Asset Value (NAV) Components

As of September 30, 2016

(Unaudited, dollars and shares in thousands)

Annualized Cash Net Operating Income (NOI) Run Rate (for NAV calculations) (1)

 

		Owned				Financed				Total
Megaplex		$	203,420			$	1,096			$	204,516
ERC’s/Retail			44,468				—				44,468
Other Entertainment			4,372				3,812				8,184
Entertainment			252,260				4,908				257,168
Public Charter Schools			39,416				26,160				65,576
Early Childhood Education			14,876				—				14,876
Private Schools			19,092				—				19,092
Education			73,384				26,160				99,544
Ski Areas			9,556				11,988				21,544
Waterparks			15,540				14,380				29,920
Golf Entertainment Complexes			38,104				4,956				43,060
Recreation			63,200				31,324				94,524
Annualized cash NOI run rate		$	388,844			$	62,392			$	451,236
Other NAV Components
Assets						Liabilities
Property under development		$	263,026				Long-term debt (2)							$	2,267,461
Land held for development			22,530				Series E liquidation value								86,250
Adelaar land in-service			155,071				Series F liquidation value								125,000
Investment in joint ventures			6,159				Accounts payable and accrued liabilties								101,019
Cash and cash equivalents			7,311				Preferred dividends payable								5,951
Restricted cash			20,463				Unearned rents and interest (4)								23,061
Accounts receivable, net (3)			19,433
Prepaid expenses and other current assets (5)			68,033
Shares
Common shares outstanding			63,628
Effect of dilutive securities - share options			97
Effect of dilutive Series C preferred shares			2,036
Diluted shares outstanding			65,761

(1) See pages 32 through 34 for definitions and see Appendix on pages 35 through 41 for reconciliations of certain non-GAAP financial measures. NOI amounts above are based on the three months ended September 30, 2016.

(2) Excludes deferred financing costs, net of $18.9 million.

(3) Excludes straight-line receivable of $61.8 million.

(4) Excludes deferred rent liabilities related to portions of rental properties funded by tenants of $18.0 million and cash paid by tenants during construction of $14.5 million.

(5) Excludes deferred tax assets of $12.1 million and deferred financing costs, net of $3.8 million.

 

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EPR Properties

Annualized GAAP Net Operating Income

As of September 30, 2016

(Unaudited, dollars in thousands)

 

Annualized GAAP Net Operating Income (NOI) Run Rate (1)
		Owned				Financed				Total
Megaplex		$	204,672			$	1,096			$	205,768
ERC’s/Retail			42,504				—				42,504
Other Entertainment			4,416				3,812				8,228
Entertainment			251,592				4,908				256,500
Public Charter Schools			48,188				30,008				78,196
Early Childhood Education			16,848				—				16,848
Private Schools			20,968				—				20,968
Education			86,004				30,008				116,012
Ski Areas			9,828				11,988				21,816
Waterparks			15,540				14,380				29,920
Golf Entertainment Complexes			38,896				4,956				43,852
Recreation			64,264				31,324				95,588
Annualized GAAP NOI run rate		$	401,860			$	66,240			$	468,100

(1) See pages 32 through 34 for definitions and see Appendix on pages 35 through 41 for reconciliations of certain non-GAAP financial measures. NOI amounts above are based on the three months ended September 30, 2016.

 

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EPR Properties

Guidance

(Dollars in millions except for per share information)

 

Measure				2016 Guidance												2017 Guidance
		YTD     Actuals		Current						Prior						Current
Investment spending		$526.9		$650.0		to		$700.0		$650.0		to		$700.0		$1,300.0		to		$1,350.0
Disposition proceeds and mortgage note payoff		$88.0		$215.0		to		$290.0		$77.3		to		$175.0		$150.0		to		$200.0
Prepayment fee - public charter schools (1)		$3.6		$3.6						$3.6						$—
Termination fee - public charter schools (2)		$2.8		$4.4						$3.8		to		$4.8		$11.0		to		$14.0
Percentage rent		$2.7		$4.0		to		$4.4		$3.7		to		$4.1		$4.2		to		$4.7
Participating interest income		$0.9		$0.9						$1.2		to		$1.6		$0.5		to		$1.0
General and administrative expense		$27.3		$36.5		to		$37.5		$36.5		to		$37.5		$40.5		to		$42.5
FFO per diluted share		$3.52		$4.68		to		$4.75		$4.62		to		$4.70		$4.70		to		$4.81
FFO as adjusted per diluted share		$3.56		$4.75		to		$4.82		$4.72		to		$4.82		$5.05		to		$5.20
Reconciliation from Net income available to common shareholders of EPR Properties (per diluted share):		YTD Actuals		2016 Current   Guidance												2017 Current   Guidance
Net income available to common shareholders of EPR Properties		$2.35		$3.12		to		$3.23								$3.42		to		$3.57
Gain on sale of real estate (excluding land sales) (2)		(0.04)		(0.08)		to		(0.12)								(0.42)		to		(0.46)
Real estate depreciation and amortization		1.23		1.67												1.75
Allocated share of joint venture depreciation		—		—												—
Impact of Series C and Series E Dilution, if applicable		(0.02)		(0.03)												(0.05)
FFO available to common shareholders of EPR Properties		$3.52		$4.68		to		$4.75								$4.70		to		$4.81
Costs associated with loan refinancing or payoff		0.01		0.01												—
Gain on insurance recovery (3)		(0.06)		(0.06)												—
Transaction costs		0.08		0.10												0.17
Gain on sale of land		(0.02)		(0.04)												—
Termination fee - public charter schools (2)		0.04		0.07												0.16		to		0.20
Deferred income tax expense		(0.01)		(0.01)												0.02
FFO as adjusted available to common shareholders of EPR Properties		$3.56		$4.75		to		$4.82								$5.05		to		$5.20

Note: This schedule includes future estimates for which the Company can give no assurance as to timing or amounts. See cautionary statement concerning forward-looking statements on page 3.

(1) Prepayment fees received related to mortgage notes receivable are included in mortgage and other financing income per GAAP and are included in FFO and FFO as adjusted.

(2) Termination fees received related to leases where an operator exercises its option to purchase the property and terminates the lease prior to the lease maturity are included in gain on sale of real estate per GAAP and are excluded from FFO (in accordance with the NAREIT definition) but then included in FFO as adjusted. Including in FFO as adjusted is consistent with how other lease termination fees and fees received for early prepayment of mortgage notes receivable are reflected.

(3) Included in other income. See reconciliation on page 41.

 

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EPR Properties

Definitions - Non-GAAP Financial Measures

ADJUSTED EBITDA AND ANNUALIZED ADJUSTED EBITDA

Management uses Adjusted EBITDA in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDA is useful to investors because it excludes various items that management believes are not indicative of operating performance, and that it is an informative measure to use in computing various financial ratios to evaluate the Company. The Company defines Adjusted EBITDA as net income available to common shareholders excluding costs associated with loan refinancing or payoff, interest expense (net), depreciation and amortization, equity in (income) loss from joint ventures, gain (loss) on the sale of real estate, gain on insurance recovery, income tax expense (benefit), preferred dividend requirements, the effect of non-cash impairment charges, retirement severance expense, the provision for loan losses and transaction costs (benefit), and which is then multiplied by four to get an annual amount. Annualized Adjusted EBITDA is Adjusted EBITDA for the quarter further adjusted for in-service projects, percentage rent and participating interest and other non-recurring items, which is then multiplied by four to get an annual amount.

The Company’s method of calculating Adjusted EBITDA and Annualized Adjusted EBITDA may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not indicative of cash available to fund all cash needs, including distributions. These measures should not be considered as an alternative to net income for the purpose of evaluating the Company’s performance or to cash flows as a measure of liquidity.

NET DEBT AND ADJUSTED NET DEBT

Net Debt represents debt (reported in accordance with GAAP) adjusted to exclude deferred financing costs, net and reduced for cash and cash equivalents. By excluding deferred financing costs, net and cash and cash equivalents, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. The Company believes this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding its financial condition. Adjusted net debt is net debt less 40% times property under development to remove the estimated portion of property under development that has been financed with debt but has not yet produced earnings. The Company’s method of calculating Net Debt and Adjusted Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

NET DEBT TO ADJUSTED EBIDTA AND ADJUSTED NET DEBT TO ANNUALIZED ADJUSTED EBITDA

Net Debt to Adjusted EBITDA and Adjusted Net Debt to Annualized Adjusted EBITDA are supplemental measures derived from non-GAAP financial measures that the Company uses to evaluate its capital structure and the magnitude of its debt against its operating performance. The Company believes that investors commonly use versions of these ratios in a similar manner. In addition, financial institutions use versions of these ratios in connection with debt agreements to set pricing and covenant limitations. The Company’s method of calculating both ratios may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

NET OPERATING INCOME (“NOI”) AND NOI RUN RATES

NOI is a widely used financial measure in many industries, including the REIT industry, and is presented to assist investors and analysts in analyzing the performance of the Company. Management uses NOI in its analysis of the operations and valuation of the Company and believes it is useful to investors because it excludes various items included in net income that are not indicative of the operating performance of the Company’s investments, such as gains (or losses) from sales of property, depreciation and amortization, and general and administrative expense, and is used in computing various financial ratios as a measure of operational performance. The Company computes NOI by adding

 

32

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back to Adjusted EBITDA - Continuing Operations the impact of general and administrative expense and corporate/unallocated and other.

Quarterly Cash NOI Run Rate is computed by taking quarterly NOI and making adjustments for in-service projects, percentage rent and participating interest, non-cash revenue and non-recurring adjustments to provide a quarterly cash run rate of such measure. Quarterly Cash NOI Run Rate multiplied by four equals Annualized Cash NOI Run Rate.

Quarterly GAAP NOI Run Rate is computed by taking quarterly NOI and making adjustments for in-service projects, percentage rent and participating interest and non-recurring adjustments to provide a quarterly GAAP run rate of such measure. Quarterly GAAP NOI Run Rate multiplied by four equals Annualized GAAP NOI Run Rate.

The Company’s method of calculating NOI, Quarterly Cash NOI Run Rate and Quarterly GAAP NOI Run Rate may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

FUNDS FROM OPERATIONS (“FFO”) AND FFO AS ADJUSTED

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 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. In addition, we present FFO as adjusted by adding to FFO costs (gains) associated with loan refinancing or payoff, net, transaction costs (benefit), retirement severance expense, provision for loan losses, preferred share redemption costs and termination fees associated with tenants’ exercises of public charter school buy-out options and by subtracting gain on early extinguishment of debt, gain (loss) on sale of land, gain on insurance recovery and deferred income tax benefit (expense). FFO and FFO as adjusted are a non-GAAP financial measures. FFO and FFO as adjusted do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are 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 and FFO as adjusted the same way so comparisons with other REITs may not be meaningful.

ADJUSTED FUNDS FROM OPERATIONS (“AFFO”)

In addition to FFO, we present AFFO by adding to FFO provision for loan losses, transaction costs (benefit), retirement severance expense, non-real estate depreciation and amortization, deferred financing fees amortization, costs (gain) associated with loan refinancing or payoff, net, share-based compensation expense to management and trustees, amortization of above market leases, net, preferred share redemption costs, and termination fees associated with tenants’ exercises of public charter school buy-out options; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-lined rental revenue, the non-cash portion of mortgage and other financing income, gain (loss) on sale of land, gain on insurance recovery and deferred income tax benefit (expense). AFFO 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 and management provides AFFO herein because it believes this information is useful to investors in this regard. AFFO is a non-GAAP financial measure. AFFO 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

 

33

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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 AFFO the same way so comparisons with other REITs may not be meaningful.

INTEREST COVERAGE RATIO

The interest coverage ratio is calculated as the interest coverage amount divided by interest expense, gross. We calculate the interest coverage amount by adding to net income impairment charges, provision for loan losses, transaction costs (benefit), interest expense, gross (including interest expense in discontinued operations), retirement severance expense, depreciation and amortization, share-based compensation expense to management and trustees and costs (gain) associated with loan refinancing or payoff, net; subtracting interest cost capitalized, straight-line rental revenue, gain on early extinguishment of debt, gain (loss) on sale or acquisition of real estate from continuing and discontinued operations, gain on insurance recovery, gain on previously held equity interest and deferred income tax benefit (expense). We calculated interest expense, gross, by adding to interest expense, net, interest income and interest cost capitalized. We consider the interest coverage ratio to be an appropriate supplemental measure of a company’s ability to meet its interest expense obligations and management believes it is useful to investors in this regard. Our calculation of the interest coverage ratio may be different from the calculation used by other companies, and therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.

FIXED CHARGE COVERAGE RATIO

The fixed charge coverage ratio is calculated in exactly the same manner as the interest coverage ratio, except that interest expense, gross and preferred share dividends are also added to the denominator. We consider the fixed charge coverage ratio to be an appropriate supplemental measure of a company’s ability to make its interest and preferred share dividend payments and management believes it is useful to investors in this regard. Our calculation of the fixed charge coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.

DEBT SERVICE COVERAGE RATIO

The debt service coverage ratio is calculated in exactly the same manner as the interest coverage ratio, except that interest expense, gross and recurring principal payments are also added to the denominator. We consider the debt service coverage ratio to be an appropriate supplemental measure of a company’s ability to make its debt service payments and management believes it is useful to investors in this regard. Our calculation of the debt service coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures.

TOTAL INVESTMENTS

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of rental properties (before accumulated depreciation), rental properties held for sale (before accumulated depreciation), land held for development, property under development, mortgage notes receivable (including related accrued interest receivable), investment in a direct financing lease, net, investment in joint ventures, intangible assets, gross (included in other assets) and notes receivable and related accrued interest receivable, net (included in other assets). Total investments is a useful measure for management and investors as it illustrates across which asset categories the Company’s funds have been invested.

 

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Appendix to Supplemental Operating and Financial Data

Reconciliation of Certain Non-GAAP Financial Measures

Third Quarter and Nine Months Ended September 30, 2016

 

35

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EPR Properties

Reconciliation of Interest Coverage Amount to Net Cash Provided by Operating Activities

(Unaudited, dollars in thousands)

The interest coverage amount per the table on page 18 is a non-GAAP financial measure and should not be considered an alternative to any GAAP liquidity measures. It is most directly comparable to the GAAP liquidity measure, “Net cash provided by operating activities,” and is not directly comparable to the GAAP liquidity measures, “Net cash used by investing activities” and “Net cash provided by financing activities.” The interest coverage amount can be reconciled to “Net cash provided by operating activities” per the consolidated statements of cash flows as follows:

 

		3rd Quarter   2016				2nd Quarter   2016				1st Quarter   2016				4th Quarter   2015				3rd Quarter   2015				2nd Quarter   2015
Net cash provided by operating activities		$	63,241			$	83,944			$	68,588			$	93,638			$	64,415			$	62,889
Equity in income from joint ventures			203				86				212				268				339				198
Distributions from joint ventures			—				—				(511)				(540)				—				—
Amortization of deferred financing costs			(1,187)				(1,163)				(1,172)				(1,163)				(1,156)				(1,173)
Amortization of above market leases, net			(42)				(48)				(48)				(47)				(48)				(49)
Increase (decrease) in mortgage notes and related accrued interest receivable			916				(214)				(514)				(1,332)				2,456				2,410
Increase (decrease) in restricted cash			(202)				(556)				2,221				(1,923)				373				197
Increase (decrease) in accounts receivable, net			14,739				1,359				2,968				3,303				(805)				6,981
Increase in direct financing lease receivable			767				896				840				851				826				948
Increase (decrease) in other assets			448				1,838				2,907				(2,744)				344				(834)
Decrease (increase) in accounts payable and accrued liabilities			4,329				(5,947)				6,878				(8,406)				8,697				(3,437)
Decrease (increase) in unearned rents and interest			1,223				(127)				(8)				(3,307)				579				(1,898)
Straight-line rental revenue			(4,597)				(3,264)				(3,089)				(3,267)				(2,738)				(3,211)
Interest expense, gross			27,196				25,516				25,580				25,076				25,300				25,164
Interest cost capitalized			(2,931)				(2,760)				(2,291)				(4,283)				(4,771)				(5,145)
Transaction costs			2,947				1,490				444				700				783				4,429
Interest coverage amount (1)		$	107,050			$	101,050			$	103,005			$	96,824			$	94,594			$	87,469
Net cash used by investing activities		$	(147,051)			$	(137,285)			$	(130,915)			$	(96,423)			$	(185,190)			$	(193,764)
Net cash provided (used) by financing activities		$	82,672			$	51,457			$	68,439			$	(7,291)			$	129,530			$	34,775

(1) See pages 32 through 34 for definitions. Amounts above include the impact of discontinued operations, which is separately classified in the income statement.

 

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EPR Properties

Reconciliations of Quarterly Cash NOI Run Rate and Quarterly GAAP NOI Run Rate

Net Operating Income (“NOI”), Quarterly Cash NOI Run Rate and Quarterly GAAP NOI Run Rate as used on pages 29 and 30 are non-GAAP financial measures and should not be considered as alternatives to net income (loss) in accordance with GAAP as indications of our performance or to cash flows as a measure of our liquidity. The tables on pages 38 through 40 provide reconciliations of these non-GAAP measures with respect to each segment and property type, and should be read in conjunction with the reconciliations on page 22 of our segment Adjusted EBITDA - continuing operations to our net income.

The following explanatory notes apply to the tables on pages 38 through 40.

(1) Adjustments for Corporate/Unallocated and Other is calculated by subtracting total investment expenses from total revenue for these categories on page 22.

(2) Adjustments for properties commencing or terminating GAAP net operating income during the quarter.

(3) To adjust percentage rents and participating interest income from the actual latest quarterly amount to the trailing 12 month amount divided by 4.

(4) Adjustments for properties commencing or terminating cash payments during the quarter, as well as in-service projects with only straight-line revenue.

(5) Adjustments to income from mortgages receivable to be consistent with end of quarter balance.

(6) Non-recurring adjustments relate to termination fees and a gain from an insurance claim.

 

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EPR Properties

Reconciliation of Net Asset Value (NAV) Components

(Unaudited, dollars in thousands)

Annualized Net Operating Income (NOI) Run Rates - Owned Properties (for NAV calculations)

For the three months ended September 30, 2016

 

		Entertainment																Education																Recreation
		Megaplex				ERC’s/ Retail				Other Entertainment				Entertainment Total				Public Charter Schools				Early Childhood Education				Private Schools				Education Total				Ski Areas				Waterparks				Golf Entertainment Complexes				Recreation Total				Corporate/ unallocated and other				Total
Total revenue		$	51,245			$	15,577			$	1,136			$	67,958			$	11,559			$	4,035			$	4,311			$	19,905			$	4,263			$	3,885			$	9,635			$	17,783			$	2,933			$	108,579
Property operating expense			216				4,752				260				5,228				—				—				—				—				—				—				—				—				398				5,626
Total investment expense			216				4,752				260				5,228				—				—				—				—				—				—				—				—				398				5,626
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				(9,091)				(9,091)
Less: gain on insurance recovery			—				—				—				—				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,825)
Adjusted EBITDA		$	51,029			$	10,825			$	876			$	62,730			$	11,559			$	4,035			$	4,311			$	19,905			$	2,438			$	3,885			$	9,635			$	15,958			$	(6,556)			$	92,037
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				9,091				9,091
Gain on insurance recovery			—				—				—				—				—				—				—				—				1,825				—				—				1,825				—				1,825
Corporate/unallocated and other (1)			—				—				—				—				—				—				—				—				—				—				—				—				(2,535)				(2,535)
NOI		$	51,029			$	10,825			$	876			$	62,730			$	11,559			$	4,035			$	4,311			$	19,905			$	4,263			$	3,885			$	9,635			$	17,783			$	—			$	100,418
Quarterly GAAP NOI run rate
NOI		$	51,029			$	10,825			$	876			$	62,730			$	11,559			$	4,035			$	4,311			$	19,905			$	4,263			$	3,885			$	9,635			$	17,783			$	—			$	100,418
In-service adjustments (2)			112				—				228				340				488				177				1,056				1,721				—				—				541				541				—				2,602
Percentage rent/participation adjustments (3)			30				(194	)			—				(164)				—				—				(125	)			(125)				19				—				(452	)			(433)				—				(722)
Non-recurring adjustments (6)			(3	)			(5	)			—				(8)				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,833)
Quarterly GAAP NOI run rate		$	51,168			$	10,626			$	1,104			$	62,898			$	12,047			$	4,212			$	5,242			$	21,501			$	2,457			$	3,885			$	9,724			$	16,066			$	—			$	100,465
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized GAAP NOI run rate		$	204,672			$	42,504			$	4,416			$	251,592			$	48,188			$	16,848			$	20,968			$	86,004			$	9,828			$	15,540			$	38,896			$	64,264			$	—			$	401,860
Quarterly cash NOI run rate
NOI		$	51,029			$	10,825			$	876			$	62,730			$	11,559			$	4,035			$	4,311			$	19,905			$	4,263			$	3,885			$	9,635			$	17,783			$	—			$	100,418
In-service adjustments (4)			112				—				228				340				833				995				1,317				3,145				—				—				541				541				—				4,026
Percentage rent/participation adjustments (3)			30				(194	)			—				(164)				—				—				(125	)			(125)				19				—				(452	)			(433)				—				(722)
Non-recurring adjustments (6)			(3	)			(5	)			—				(8)				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,833)
Non-cash revenue			(313	)			491				(11	)			167				(2,538	)			(1,311	)			(730	)			(4,579)				(68	)			—				(198	)			(266)				—				(4,678)
Quarterly cash NOI run rate			50,855				11,117				1,093				63,065				9,854				3,719				4,773				18,346				2,389				3,885				9,526				15,800				—				97,211
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized cash NOI run rate		$	203,420			$	44,468			$	4,372			$	252,260			$	39,416			$	14,876			$	19,092			$	73,384			$	9,556			$	15,540			$	38,104			$	63,200			$	—			$	388,844

 

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EPR Properties

Reconciliation of Net Asset Value (NAV) Components

(Unaudited, dollars in thousands)

Annualized Net Operating Income (NOI) Run Rates - Financed Properties (for NAV calculations)

For the three months ended September 30, 2016

 

		Entertainment																Education																Recreation
		Megaplex				ERC’s/ Retail				Other Entertainment				Entertainment Total				Public Charter Schools				Early Childhood Education				Private Schools				Education Total				Ski Areas				Waterparks				Golf Entertainment Complexes				Recreation Total				Corporate/ unallocated and other				Total
Total revenue		$	341			$	—			$	953			$	1,294			$	7,319			$	—			$	—			$	7,319			$	2,937			$	4,263			$	1,184			$	8,384			$	34			$	17,031
Property operating expense			—				—				—				—				—				—				—				—				—				—				—				—				—				—
Total investment expense			—				—				—				—				—				—				—				—				—				—				—				—				—				—
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				—				—
Adjusted EBITDA		$	341			$	—			$	953			$	1,294			$	7,319			$	—			$	—			$	7,319			$	2,937			$	4,263			$	1,184			$	8,384			$	34			$	17,031
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				—				—
Corporate/unallocated and other (1)			—				—				—				—				—				—				—				—				—				—				—				—				(34)				(34)
NOI		$	341			$	—			$	953			$	1,294			$	7,319			$	—			$	—			$	7,319			$	2,937			$	4,263			$	1,184			$	8,384			$	—			$	16,997
Quarterly GAAP NOI run rate
NOI		$	341			$	—			$	953			$	1,294			$	7,319			$	—			$	—			$	7,319			$	2,937			$	4,263			$	1,184			$	8,384			$	—			$	16,997
In-service adjustments (5)			(67	)			—				—				(67)				183				—				—				183				60				—				55				115				—				231
Percentage rent/participation adjustments (3)			—				—				—				—				—				—				—				—				—				(668	)			—				(668)				—				(668)
Non-recurring adjustments (6)			—				—				—				—				—				—				—				—				—				—				—				—				—				—
Quarterly GAAP NOI run rate		$	274			$	—			$	953			$	1,227			$	7,502			$	—			$	—			$	7,502			$	2,997			$	3,595			$	1,239			$	7,831			$	—			$	16,560
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized GAAP NOI run rate		$	1,096			$	—			$	3,812			$	4,908			$	30,008			$	—			$	—			$	30,008			$	11,988			$	14,380			$	4,956			$	31,324			$	—			$	66,240
Quarterly cash NOI run rate
NOI		$	341			$	—			$	953			$	1,294			$	7,319			$	—			$	—			$	7,319			$	2,937			$	4,263			$	1,184			$	8,384			$	—			$	16,997
In-service adjustments (5)			(67	)			—				—				(67)				183				—				—				183				60				—				55				115				—				231
Percentage rent/participation adjustments (3)			—				—				—				—				—				—				—				—				—				(668	)			—				(668)				—				(668)
Non-recurring adjustments (6)			—				—				—				—				—				—				—				—				—				—				—				—				—				—
Non-cash revenue			—				—				—				—				(962	)			—				—				(962)				—				—				—				—				—				(962)
Quarterly cash NOI run rate			274				—				953				1,227				6,540				—				—				6,540				2,997				3,595				1,239				7,831				—				15,598
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized cash NOI run rate		$	1,096			$	—			$	3,812			$	4,908			$	26,160			$	—			$	—			$	26,160			$	11,988			$	14,380			$	4,956			$	31,324			$	—			$	62,392

 

39

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EPR Properties

Reconciliation of Net Asset Value (NAV) Components

(Unaudited, dollars in thousands)

Annualized Net Operating Income (NOI) Run Rates - Total - Owned and Financed Properties (for NAV calculations) - sum of pages 38 and 39

For the three months ended September 30, 2016

 

		Entertainment																Education																Recreation
		Megaplex				ERC’s/ Retail				Other Entertainment				Entertainment Total				Public Charter Schools				Early Childhood Education				Private Schools				Education Total				Ski Areas				Waterparks				Golf Entertainment Complexes				Recreation Total				Corporate/ unallocated and other				Total
Total revenue		$	51,586			$	15,577			$	2,089			$	69,252			$	18,878			$	4,035			$	4,311			$	27,224			$	7,200			$	8,148			$	10,819			$	26,167			$	2,967			$	125,610
Property operating expense			216				4,752				260				5,228				—				—				—				—				—				—				—				—				398				5,626
Total investment expense			216				4,752				260				5,228				—				—				—				—				—				—				—				—				398				5,626
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				(9,091)				(9,091)
Less: gain on insurance recovery			—				—				—				—				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,825)
Adjusted EBITDA		$	51,370			$	10,825			$	1,829			$	64,024			$	18,878			$	4,035			$	4,311			$	27,224			$	5,375			$	8,148			$	10,819			$	24,342			$	(6,522)			$	109,068
General and administrative expense			—				—				—				—				—				—				—				—				—				—				—				—				9,091				9,091
Gain on insurance recovery			—				—				—				—				—				—				—				—				1,825				—				—				1,825				—				1,825
Corporate/unallocated and other (1)			—				—				—				—				—				—				—				—				—				—				—				—				(2,569)				(2,569)
NOI		$	51,370			$	10,825			$	1,829			$	64,024			$	18,878			$	4,035			$	4,311			$	27,224			$	7,200			$	8,148			$	10,819			$	26,167			$	—			$	117,415
Quarterly GAAP NOI run rate
NOI		$	51,370			$	10,825			$	1,829			$	64,024			$	18,878			$	4,035			$	4,311			$	27,224			$	7,200			$	8,148			$	10,819			$	26,167			$	—			$	117,415
In-service adjustments (2) (5)			45				—				228				273				671				177				1,056				1,904				60				—				596				656				—				2,833
Percentage rent/participation adjustments (3)			30				(194	)			—				(164)				—				—				(125	)			(125)				19				(668	)			(452	)			(1,101)				—				(1,390)
Non-recurring adjustments (6)			(3	)			(5	)			—				(8)				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,833)
Quarterly GAAP NOI run rate		$	51,442			$	10,626			$	2,057			$	64,125			$	19,549			$	4,212			$	5,242			$	29,003			$	5,454			$	7,480			$	10,963			$	23,897			$	—			$	117,025
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized GAAP NOI run rate		$	205,768			$	42,504			$	8,228			$	256,500			$	78,196			$	16,848			$	20,968			$	116,012			$	21,816			$	29,920			$	43,852			$	95,588			$	—			$	468,100
Quarterly cash NOI run rate
NOI		$	51,370			$	10,825			$	1,829			$	64,024			$	18,878			$	4,035			$	4,311			$	27,224			$	7,200			$	8,148			$	10,819			$	26,167			$	—			$	117,415
In-service adjustments (4) (5)			45				—				228				273				1,016				995				1,317				3,328				60				—				596				656				—				4,257
Percentage rent/participation adjustments (3)			30				(194	)			—				(164)				—				—				(125	)			(125)				19				(668	)			(452	)			(1,101)				—				(1,390)
Non-recurring adjustments (6)			(3	)			(5	)			—				(8)				—				—				—				—				(1,825	)			—				—				(1,825)				—				(1,833)
Non-cash revenue			(313	)			491				(11	)			167				(3,500	)			(1,311	)			(730	)			(5,541)				(68	)			—				(198	)			(266)				—				(5,640)
Quarterly cash NOI run rate			51,129				11,117				2,046				64,292				16,394				3,719				4,773				24,886				5,386				7,480				10,765				23,631				—				112,809
			x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4				x4								x4
Annualized cash NOI run rate		$	204,516			$	44,468			$	8,184			$	257,168			$	65,576			$	14,876			$	19,092			$	99,544			$	21,544			$	29,920			$	43,060			$	94,524			$	—			$	451,236

 

40 

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EPR Properties

Reconciliation of Adjusted EBITDA and Annualized Adjusted EBITDA

(Unaudited, dollars in thousands)

		3rd Quarter   2016				2nd Quarter   2016				1st Quarter   2016				4th Quarter   2015				3rd Quarter   2015				2nd Quarter   2015
Adjusted EBITDA (1):
Net income available to common shareholder of EPR Properties		$	51,575			$	49,183			$	48,228			$	46,799			$	44,244			$	42,814
Costs associated with loan refinancing or payoff			14				339				552				9				18				243
Interest expense, net			24,265				22,756				23,289				20,792				20,529				20,007
Transaction costs			2,947				1,490				444				700				783				4,429
Depreciation and amortization			27,601				25,666				25,955				24,915				23,498				21,849
Equity in income from joint ventures			(203)				(86)				(212)				(268)				(339)				(198)
(Gain) loss on sale of real estate			(1,615)				(2,270)				—				—				95				—
Income tax expense (benefit)			358				423				(144)				(936)				527				(7,506)
Preferred dividend requirements			5,951				5,952				5,952				5,951				5,951				5,952
Gain on insurance recovery (2)			(1,825)				(1,523)				(489)				—				—				—
Adjusted EBITDA (for the quarter)		$	109,068			$	101,930			$	103,575			$	97,962			$	95,306			$	87,590
Adjusted EBITDA (3)		$	436,272			$	407,720			$	414,300			$	391,848			$	381,224			$	350,360
Annualized Adjusted EBITDA (1) (4):
Adjusted EBITDA (for the quarter)		$	109,068			$	101,930			$	103,575
Corporate/unallocated and other NOI (5)			(2,569)				(2,675)				(2,289)
In-service adjustments (6)			2,833				2,920				948
Percentage rent/participation adjustments (7)			(1,390)				866				594
Non-recurring adjustments (8)			(1,833)				(1,497)				(3,637)
Annualized Adjusted EBITDA (for the quarter)		$	106,109			$	101,544			$	99,191
Annualized Adjusted EBITDA (9)		$	424,436			$	406,176			$	396,764
(2) Included in other income in the consolidated statements of income in the Company’s Quarterly Report on Form 10-Q . Reconciliation is as follows:
Income from settlement of foreign currency swap contracts		$	643			$	595			$	719
Gain on insurance recovery			1,825				1,523				489
Miscellaneous income			8				8				2
Other income		$	2,476			$	2,126			$	1,210

(1) See pages 32 through 34 for definitions.

(3) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.

(4) Amounts not calculated for periods prior to 2016.

(5) Adjustments for Corporate/Unallocated and Other is calculated by subtracting total investment expenses from total revenue for these categories on page 22.

(6) Adjustments for properties commencing or terminating GAAP net operating income during the quarter.

(7) To adjust percentage rents and participating interest income from the actual latest quarterly amount to the trailing 12 month amount divided by 4.

(8) Non-recurring adjustments relate to termination fees and a gain from an insurance claim.

(9) Annualized Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.

 

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