EPR Properties Reports Third Quarter Results Company Increases Investment Spending and FFO Guidance for 2013 Introduces Guidance for 2014 Business Wire KANSAS CITY, Mo. -- November 5, 2013 EPR Properties (NYSE:EPR) today announced operating results for the third quarter and the nine months ended September 30, 2013. Three Months Ended September 30, 2013 *Total revenue was $87.8 million for the third quarter of 2013, representing an 8% increase from $81.5 million for the same quarter in 2012. *Net income available to common shareholders was $37.6 million, or $0.79 per diluted common share, for the third quarter of 2013 compared to $28.1 million, or $0.60 per diluted common share, for the same quarter in 2012. *Funds From Operations (FFO) for the third quarter of 2013 was $47.6 million, or $1.00 per diluted common share, compared to $44.4 million, or $0.94 per diluted common share, for the same quarter in 2012. *FFO as adjusted for the third quarter of 2013 was $48.2 million, or $1.01 per diluted common share, compared to $45.1 million, or $0.96 per diluted common share, for the same quarter in 2012, an increase of 6% per share. Nine Months Ended September 30, 2013 *Total revenue was $253.7 million for the nine months ended September 30, 2013, representing an 8% increase from $235.4 million for the same period in 2012. *Net income available to common shareholders was $99.3 million, or $2.10 per diluted common share, for the nine months ended September 30, 2013, compared to $74.3 million, or $1.58 per diluted common share, for the same period in 2012. *FFO for the nine months ended September 30, 2013 was $136.1 million, or $2.88 per diluted common share, compared to $127.8 million, or $2.72 per diluted common share, for the same period in 2012. *FFO as adjusted for the nine months ended September 30, 2013 was $138.6 million, or $2.93 per diluted common share, compared to $128.7 million, or $2.74 per diluted common share, for the same period in 2012, an increase of 7% per share. David Brain, President and CEO, commented, “Our strong performance and updated guidance continue to validate our primary investment segments, along with demonstrating the quality of our portfolio and significant potential for future growth. We also remain diligent in our balance sheet management, making a number of enhancements to our credit facility and term loan, while raising approximately $215 million in equity during and subsequent to quarter end. We expect a continued robust performance in 2014, as we are anticipating an approximate 25% increase in our investment spending.” A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in thousands, except per share amounts): Three Months Ended September 30, 2013 2012 Amount FFO/share Amount FFO/share FFO $ 47,616 $ 1.00 $ 44,394 $ 0.94 Costs associated with loan 223 — 477 0.01 refinancing or payoff Transaction 317 0.01 184 0.01 costs FFO as adjusted $ 48,156 $ 1.01 $ 45,055 $ 0.96 Dividends declared $ 0.79 $ 0.75 per common share FFO as adjusted 78 % 78 % payout ratio Nine Months Ended September 30, 2013 2012 Amount FFO/share Amount FFO/share FFO $ 136,114 $ 2.88 $ 127,802 $ 2.72 Costs associated with loan 6,166 0.13 477 0.01 refinancing or payoff Transaction 859 0.02 373 0.01 costs Gain on early extinguishment (4,539 ) (0.10 ) — — of debt FFO as adjusted $ 138,600 $ 2.93 $ 128,652 $ 2.74 Dividends declared $ 2.37 $ 2.25 per common share FFO as adjusted 81 % 82 % payout ratio Portfolio Update As of September 30, 2013, the Company's portfolio of owned entertainment properties consisted of 10.9 million square feet and was 99% leased, including 118 megaplex theatres that were 100% leased. The Company's portfolio of owned education properties consisted of 2.9 million square feet, including 47 public charter schools and one early education center, and was 100% leased. The Company's portfolio of owned recreation properties was 100% leased. The Company's overall owned portfolio consisted of 14.2million square feet and was 99% leased. Additionally, the Company had $86.0 million in property under development and $200.3 million in land held for development. As of September 30, 2013, the Company's real estate mortgage loan portfolio had a carrying value of $514.1 million and included financing provided for four entertainment properties, seven education properties and 15 recreation properties. Investment Update The Company's investment spending in the third quarter of 2013 totaled approximately $130.1 million (bringing the year-to-date investment spending to $252.8 million), and included investments in each of its four operating segments. Entertainment investment spending in the third quarter of 2013 totaled $55.7 million, and related to investments in build-to-suit construction of eight megaplex theatres that are subject to long-term triple net leases. In addition, the Company's entertainment investment spending for the third quarter included the acquisition of three megaplex theatres located in Louisiana and Alabama, which are leased under long-term triple-net lease agreements. Education investment spending in the third quarter of 2013 totaled $55.6 million, and related to investments in build-to-suit construction of 15 public charter schools and five early childhood education centers, all of which are subject to long-term triple net leases or long-term mortgage agreements. Recreation investment spending in the third quarter of 2013 totaled $17.5 million, and related to fundings under the Company's mortgage notes for improvements at existing ski and waterpark properties. In addition, the Company's recreation investment spending for the third quarter included the build-to-suit construction of six TopGolf golf entertainment facilities as well as funding improvements at the Company's ski property located in Maryland. Other investment spending in the third quarter of 2013 totaled $1.3 million and related to the land held for development in Sullivan County, New York. Subsequent to the end of the quarter, the Company completed the acquisition of the Camelback Mountain Resort located in Tannersville, Pennsylvania for a purchase price of $69.3 million. The investment consists of an acquisition of 160 acres of skiable terrain with a 30-acre outdoor waterpark and adventure park, 40-lane tubing hill, base lodge, parking, ancillary buildings and land. The Camelback Mountain Resort is located approximately 90 miles outside of New York City in the popular Poconos Mountain region. The property is leased to the operator pursuant to a triple net lease with a 20-year term. In addition, the Company has provided a commitment to finance the construction of a 453 room Wilderness Lodge hotel, with an attached 125,000 square foot indoor waterpark, to be located at the base of the mountain. The total project cost for the indoor waterpark hotel is estimated to be approximately $155.0 million, of which the Company will provide up to $110.7 million or approximately 70% of total estimated project costs. Upon completion of the indoor waterpark hotel, it is expected that this investment will be incorporated into the triple net lease of the ski property described above, which will then have an initial term of 20 years from the completion date. Progress on Vineyard and Winery Sales The Company continues to make progress toward selling its remaining vineyard and winery investments. During the third quarter, the Company sold three vineyard and winery properties for net proceeds of $22.3 million and a net gain of $3.2 million was recognized. Dismissal of Litigation On September 18, 2013, the United States District Court for the Southern District of New York dismissed the $1.5 billion antitrust suit filed by affiliates of Louis Cappelli against the Company and certain of its subsidiaries, Empire Resorts, Inc. and Monticello Raceway Management, Inc. (collectively, “Empire”), and Kien Huat Realty III Limited and Genting New York LLC (collectively, “Genting”). The complaint alleged, among other things, that the Company and its subsidiaries had conspired with Empire to monopolize the racing and gaming market in the Catskills by entering into exclusivity and development agreements to develop a comprehensive resort destination in Sullivan County, New York. The plaintiffs are seeking $500 million in damages (trebled to $1.5 billion under antitrust law), punitive damages, and injunctive relief. The District Court dismissed plaintiffs’ federal antitrust claims against all defendants with prejudice, and dismissed the pendent state law claims against Empire and Genting without prejudice, meaning they could be further pursued in state court. The plaintiffs have filed a motion for reconsideration with the District Court, seeking permission to file a Second Amended Complaint, and also have filed a Notice of Appeal. On October 2, 2013, the New York Supreme Court in Sullivan County denied in its entirety the Article 78 petition (the “Petition”) filed by Concord Associates, L.P., an entity controlled by Louis Cappelli. The Petition challenged the actions taken by the Town of Thompson, New York and its Town Board and Planning Board regarding the Concord Project. The Plaintiff has filed a Notice of Appeal. Balance Sheet Update The Company's balance sheet remains strong with a debt to gross assets ratio (defined as total long-term debt to total assets plus accumulated depreciation) of 44% at September 30, 2013. The Company had $24.1 million of unrestricted cash on hand and $68.0 million of debt outstanding under its unsecured revolving credit facility at September 30, 2013. As previously announced, on July 23, 2013, the Company amended and restated both its unsecured revolving credit facility as well as its unsecured term loan facility. Additionally, subsequent to these amendments, the Company exercised a portion of the accordion under its new unsecured revolving credit facility to increase the initial borrowing amount available under the facility to $475.0 million. During the third quarter, the Company issued an aggregate of 784,978 common shares under its Dividend Reinvestment and Direct Share Purchase Plan (the Plan) for total net proceeds of $38.5 million. Subsequent to quarter end, the Company issued an additional 61,289 shares under the Plan for total net proceeds for $2.9 million. On October 23, 2013, the Company issued 3.6 million common shares in a registered public offering. Total net proceeds, after the underwriting discount and offering expenses, were approximately $174.0 million. Dividend Information The Company declared regular monthly cash dividends during the third quarter totaling $0.79 per common share. The Company also declared and paid third quarter cash dividends of $0.359375 per share on its 5.75% Series C cumulative convertible preferred shares, $0.5625 per share on its 9.00% Series E cumulative convertible preferred shares and $0.4140625 per share on its 6.625% Series F cumulative redeemable preferred shares. Guidance Update The Company is increasing its 2013 guidance for FFO as adjusted per share to a range of $3.87 to $3.93 from a range of $3.83 to $3.93. In addition, the Company is increasing its 2013 investment spending guidance to a range of $400 million to $425 million from a range of $300 million to $350 million. The Company is also introducing its 2014 guidance for FFO as adjusted per diluted share of $4.12 to $4.22. In addition, the Company is introducing 2014 investment spending guidance in a range of $500 million to $550 million. Quarterly Supplemental The Company's supplemental information package for the third quarter and nine months ended September 30, 2013 is available on the Company's website at http://eprkc.com/earnings-releases-supplemental. EPR Properties Consolidated Statements of Income (Unaudited, dollars in thousands except per share data) Three Months Ended Nine Months Ended September September 30, 30, 2013 2012 2013 2012 Rental revenue $ 62,209 $ 59,755 $ 182,758 $ 174,364 Tenant 4,552 4,608 13,748 13,794 reimbursements Other income 1,441 203 1,538 336 Mortgage and other financing 19,639 16,976 55,670 46,861 income Total revenue 87,841 81,542 253,714 235,355 Property operating 6,579 5,939 19,604 17,999 expense Other expense 204 455 508 1,049 General and administrative 6,764 5,486 19,468 17,774 expense Costs associated with loan 223 477 6,166 477 refinancing or payoff Gain on early extinguishment — — (4,539 ) — of debt Interest 20,435 19,994 60,424 56,594 expense, net Transaction 317 184 859 373 costs Impairment — — — 1,914 charges Depreciation and 13,141 11,733 39,140 34,497 amortization Income before equity in income from joint ventures 40,178 37,274 112,084 104,678 and discontinued operations Equity in income from 351 342 1,168 666 joint ventures Income from continuing $ 40,529 $ 37,616 $ 113,252 $ 105,344 operations Discontinued operations: Income (loss) from (195 ) (355 ) 198 334 discontinued operations Impairment — (3,086 ) — (14,015 ) charges Gain on sale or acquisition of 3,168 — 3,733 720 real estate Net income 43,502 34,175 117,183 92,383 Net income attributable to — (24 ) — (61 ) noncontrolling interests Net income attributable to 43,502 34,151 117,183 92,322 EPR Properties Preferred dividend (5,951 ) (6,002 ) (17,855 ) (18,005 ) requirements Net income available to common $ 37,551 $ 28,149 $ 99,328 $ 74,317 shareholders of EPR Properties Per share data attributable to EPR Properties common shareholders: Basic earnings per share data: Income from continuing $ 0.73 $ 0.67 $ 2.03 $ 1.87 operations Income (loss) from 0.06 (0.07 ) 0.08 (0.28 ) discontinued operations Net income available to $ 0.79 $ 0.60 $ 2.11 $ 1.59 common shareholders Diluted earnings per share data: Income from continuing $ 0.73 $ 0.67 $ 2.02 $ 1.86 operations Income (loss) from 0.06 (0.07 ) 0.08 (0.28 ) discontinued operations Net income available to $ 0.79 $ 0.60 $ 2.10 $ 1.58 common shareholders Shares used for computation (in thousands): Basic 47,349 46,840 47,097 46,781 Diluted 47,524 47,090 47,290 47,035 EPR Properties Reconciliation of Net Income Available to Common Shareholders to Funds From Operations (FFO) (A) (Unaudited, dollars in thousands except per share data) Three Months Ended Nine Months Ended September September 30, 30, 2013 2012 2013 2012 FFO: Net income available to common $ 37,551 $ 28,149 $ 99,328 $ 74,317 shareholders of EPR Properties Gain on sale or acquisition of (3,168 ) — (3,733 ) (720 ) property Real estate depreciation 13,069 13,013 40,036 37,844 and amortization Allocated share of joint 164 146 483 432 venture depreciation Impairment — 3,086 — 15,929 charges FFO available to common $ 47,616 $ 44,394 $ 136,114 $ 127,802 shareholders of EPR Properties FFO per common share attributable to EPR Properties: Basic $ 1.01 $ 0.95 $ 2.89 $ 2.73 Diluted 1.00 0.94 2.88 2.72 Shares used for computation (in thousands): Basic 47,349 46,840 47,097 46,781 Diluted 47,524 47,090 47,290 47,035 Other financial information: Straight-lined $ 1,350 $ 2,042 $ 3,271 $ 3,705 rental revenue Dividends per $ 0.79 $ 0.75 $ 2.37 $ 2.25 common share 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 (A) definition. FFO is a non-GAAP financial measure. FFO does not represent cash flows from operations as defined by GAAP and is not indicative that cash flows are adequate to fund all cash needs and is not to be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO the same way so comparisons with other REITs may not be meaningful. In addition to FFO, we present FFO as adjusted. Management believes it is useful to provide it here as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO as adjusted is FFO plus charges for loan losses, costs (gain) associated with loan refinancing or payoff, net, preferred share redemption costs and transaction costs, less gain on early extinguishment of debt. FFO as adjusted is a non-GAAP financial measure. FFO as adjusted does not represent cash flows from operations as defined by GAAP and is not indicative that cash flows are adequate to fund all cash needs and is not to be considered an alternative to net income or any other GAAP measure as a measurement of the results of the Company's operations, cash flows or liquidity as defined by GAAP. The additional 1.9 million common shares that would result from the conversion of the Company's 5.75% Series C cumulative convertible preferred shares and the additional 1.6 million common shares that would result from the conversion of the Company's 9.00% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted earnings per share and FFO per share for the three and nine months ended September 30, 2013 and 2012 because the effect is not-dilutive. EPR Properties Condensed Consolidated Balance Sheets (Dollars in thousands) September 30, 2013 December 31, 2012 Assets (unaudited) Rental properties, net of accumulated depreciation of $398,037 and $ 1,933,782 $ 1,885,093 $375,684 at September 30, 2013 and December 31, 2012, respectively Rental properties held for sale, 2,788 2,788 net Land held for development 200,325 196,177 Property under development 86,048 29,376 Mortgage notes and related 514,071 455,752 accrued interest receivable Investment in a direct financing 240,990 234,089 lease, net Investment in joint ventures 13,683 11,971 Cash and cash equivalents 24,141 10,664 Restricted cash 18,110 23,991 Deferred financing costs, net 24,318 19,679 Accounts receivable, net 40,326 38,738 Other assets 36,691 38,412 Total assets $ 3,135,273 $ 2,946,730 Liabilities and Equity Accounts payable and accrued $ 58,273 $ 65,481 liabilities Dividends payable 18,587 41,186 Unearned rents and interest 18,979 11,333 Long-term debt 1,545,973 1,368,832 Total liabilities 1,641,812 1,486,832 EPR Properties shareholders’ 1,493,084 1,459,521 equity Noncontrolling interests 377 377 Total equity 1,493,461 1,459,898 Total liabilities and equity $ 3,135,273 $ 2,946,730 About EPR Properties EPR Properties is a specialty real estate investment trust (REIT) that invests in properties in select market segments which require unique industry knowledge, while offering the potential for stable and attractive returns. Our total investments exceed $3.4 billion and our primary investment segments are Entertainment, Recreation and Education. We adhere to rigorous underwriting and investing criteria centered on key industry and property level cash flow standards. We believe our focused niche approach provides a competitive advantage, and the potential for higher growth and better yields. Further information is available at www.eprkc.com. 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 Section27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects, and our results of operations and financial condition. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “anticipates,” “estimates,” “offers,” “plans,” “would” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions contained or incorporated by reference herein. While references to commitments for investment spending are based on present commitments and agreements of the Company, we cannot provide assurance that these transactions will be completed on satisfactory terms. In addition, references to our budgeted amounts and guidance are forward-looking statements. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise. These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K and, to the extent applicable, our Quarterly Reports on Form 10-Q. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date hereof or the date of any document incorporated by reference herein. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date hereof. Contact: EPR Properties Brian Moriarty, 888-EPR-REIT www.eprkc.com
EPR Properties Reports Third Quarter Results
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