EPR Properties (NYSE:EPR) today announced operating results for
the fourth quarter and year ended December 31, 2017.
Three Months Ended December 31, 2017
- Total revenue was $147.7 million for
the fourth quarter of 2017, representing a 13% increase from $130.8
million for the same quarter in 2016.
- Net income available to common
shareholders was $54.7 million, or $0.74 per diluted common share,
for the fourth quarter of 2017, compared to $52.2 million, or $0.82
per diluted common share, for the same quarter in 2016.
- Funds From Operations (FFO) (a non-GAAP
financial measure) for the fourth quarter of 2017 was $78.0
million, or $1.06 per diluted common share, compared to $80.4
million, or $1.25 per diluted common share, for the same period in
2016.
- FFO as adjusted (a non-GAAP financial
measure) for the fourth quarter of 2017 was $95.9 million, or $1.29
per diluted common share, compared to $80.7 million, or $1.26 per
diluted common share, for the same quarter in 2016, representing a
2% increase in per share results.
- As further discussed below, the fourth
quarter of 2017 was negatively impacted by the Company's write-off
of all of the non-cash straight-line rent receivable of $9.0
million against rental revenue and reserve of all accounts
receivable of $6.0 million as bad debt expense (included in
property operating expenses) related to Children’s Learning
Adventure USA, LLC (CLA). These adjustments reduced net income, FFO
(a non-GAAP financial measure) and FFO as adjusted (a non-GAAP
financial measure) by a total of $15.0 million, or $0.20 per
diluted common share for net income and $0.19 per diluted common
share for both FFO and FFO as adjusted. In addition, no further
revenue was recognized related to CLA during the fourth quarter of
2017.
Year Ended December 31, 2017
- Total revenue was $576.0 million for
the year ended December 31, 2017, representing a 17% increase from
$493.2 million for the same period in 2016.
- Net income available to common
shareholders was $234.2 million, or $3.29 per diluted common share,
for the year ended December 31, 2017, compared to $201.2 million,
or $3.17 per diluted common share, for the same period in
2016.
- FFO (a non-GAAP financial measure) for
the year ended December 31, 2017 was $327.4 million, or $4.58 per
diluted common share, compared to $304.6 million, or $4.77 per
diluted common share, for the same period in 2016.
- FFO as adjusted (a non-GAAP financial
measure) for the year ended December 31, 2017 was $360.5 million,
or $5.02 per diluted common share, compared to $308.0 million, or
$4.82 per diluted common share, for the same period in 2016,
representing a 4% increase in per share results.
“With $1.6 billion in investment spending in 2017, EPR concluded
the strongest investment year in the Company’s history,” commented
Company President and CEO Greg Silvers. “We continue to make
enhancements to our balance sheet, and with no debt maturities
until 2022, we will thoughtfully allocate capital as we pursue
ongoing opportunities in our pipeline. We remain focused on
driving shareholder value, as demonstrated by the recently
announced increase of nearly 6% in our well covered 2018
monthly dividend. Our differentiated investment thesis remains
solidly in place with a diversified portfolio of tenants
and assets that are strategically aligned with the
experience economy.”
A reconciliation of FFO to FFO as adjusted follows (unaudited,
dollars in thousands, except per share amounts):
Three Months Ended December 31, 2017
2016 Amount FFO/share
Amount FFO/share FFO available to common
shareholders (1) $ 78,040 $ 1.06 $ 80,424 $ 1.25 Costs associated
with loan refinancing or payoff 58 — — — Gain on insurance recovery
(included in other income) — — (847 ) (0.01 ) Termination fee
included in gain on sale 13,275 0.17 — — Preferred share redemption
costs 4,457 0.06 — — Transaction costs 135 — 2,988 0.05 Gain on
sale of land — — (1,430 ) (0.02 ) Deferred income tax benefit (99 )
— (401 ) (0.01 ) FFO as adjusted available to common
shareholders (1) $ 95,866 $ 1.29 $ 80,734 $
1.26 Dividends declared per common share $ 1.02 $
0.96 FFO as adjusted available to common shareholders payout ratio
79 % 76 %
Year Ended December 31, 2017
2016 Amount FFO/share Amount
FFO/share FFO available to common shareholders (1) $ 327,431
$ 4.58 $ 304,635 $ 4.77 Costs associated with loan refinancing or
payoff 1,549 0.02 905 0.01 Gain on insurance recovery (included in
other income) (606 ) (0.01 ) (4,684 ) (0.07 ) Termination fee
included in gain on sale 20,049 0.27 2,819 0.04 Preferred share
redemption costs 4,457 0.06 — — Gain on early extinguishment of
debt (977 ) (0.01 ) — — Transaction costs 523 — 7,869 0.12 Gain on
sale of land — — (2,496 ) (0.04 ) Deferred income tax expense
(benefit) 812 0.01 (1,065 ) (0.01 ) Impairment of direct financing
lease - allowance for lease loss portion (2) 7,298 0.10
— — FFO as adjusted available to common
shareholders (1) $ 360,536 $ 5.02 $ 307,983 $
4.82 Dividends declared per common share $ 4.08 $
3.84 FFO as adjusted available to common shareholders payout ratio
81 % 80 % (1) Per share results for the three months and
year ended December 31, 2017 include the effect of the conversion
of the 5.75% Series C and 9.00% Series E cumulative convertible
preferred shares as the conversion would be dilutive. Per share
results for the three months and year ended December 31, 2016
include the effect of the conversion of the 5.75% Series C
cumulative convertible preferred shares as the conversion would be
dilutive. (2) Impairment charges recognized during the year ended
December 31, 2017 total $10.2 million and related to our investment
in direct financing leases, net, consisting of $2.9 million related
to the residual value portion and $7.3 million related to the
allowance for lease loss portion.
Portfolio Update
The Company's investment portfolio (excluding property under
development) consisted of the following at December 31, 2017:
- The Entertainment segment included
investments in 147 megaplex theatre properties, seven entertainment
retail centers (which include seven additional megaplex theatre
properties) and 11 family entertainment centers. The Company’s
portfolio of owned entertainment properties consisted of 13.1
million square feet and was 99% leased, including megaplex theatres
that were 100% leased.
- The Recreation segment included
investments in 26 ski areas, 20 attractions, 30 golf entertainment
complexes and eight other recreation facilities. The Company’s
portfolio of owned recreation properties was 100% leased.
- The Education segment included
investments in 65 public charter schools, 65 early education
centers and 15 private schools. The Company’s portfolio of owned
education properties consisted of 4.2 million square feet and was
92% leased. This reflects the termination of nine CLA leases, as
further discussed below.
- The Other segment consisted primarily
of the land under ground lease, property under development and land
held for development related to the Resorts World Catskills casino
and resort project in Sullivan County, New York (formerly referred
to as the Adelaar casino and resort project).
The combined owned portfolio consisted of 20.3 million square
feet and was 98% leased. As of December 31, 2017, the Company also
had a total of $257.6 million invested in property under
development.
Investment Update
The Company's investment spending for the three months ended
December 31, 2017 totaled $126.5 million (bringing the full year
2017 total investment spending to $1.6 billion), and included
investments in each of its primary operating segments:
- Entertainment investment spending
during the three months ended December 31, 2017 totaled $54.8
million, including spending on build-to-suit development and
redevelopment of megaplex theatres, entertainment retail centers
and family entertainment centers.
- Recreation investment spending during
the three months ended December 31, 2017 totaled $55.1 million,
including investment spending on build-to-suit development of golf
entertainment complexes and attractions, and redevelopment of ski
areas, as well as $10.8 million for the acquisition of a recreation
facility.
- Education investment spending during
the three months ended December 31, 2017 totaled $16.5 million,
including spending on build-to-suit development and redevelopment
of public charter schools, early education centers and private
schools.
- Other investment spending during the
three months ended December 31, 2017 totaled $0.1 million, and was
related to the Resorts World Catskills casino and resort project in
Sullivan County, New York.
Early Childhood Education Tenant Update
During 2017, cash flow of CLA was negatively impacted by
challenges brought on by its rapid expansion and related ramp up to
stabilization and by adverse weather events in Texas during the
third quarter of 2017. During 2017, the Company participated in
negotiations among CLA and other landlords regarding a potential
restructuring. Although negotiations are on-going and progress has
been made toward a restructuring, investments necessary to
accomplish the restructuring have not yet been secured. As a result
of the slow progress with negotiations, in October 2017, the
Company terminated nine leases with various subsidiaries of CLA,
seven of which relate to completed construction and two of which
relate to unimproved land. These subsidiaries of CLA continue to
operate these properties (other than the two unimproved properties)
as holdover tenants. In December 2017, these CLA subsidiaries
(other than one of the CLA tenants for an undeveloped land parcel)
and other CLA subsidiaries that are tenants of our remaining leases
(“CLA Debtors”) filed petitions in bankruptcy under Chapter 11
seeking the protections of the Bankruptcy Code. It is the Company's
understanding that the CLA Debtors filed these bankruptcy petitions
to stay our termination of the remaining CLA leases and delay the
eviction process.
While the Company continues to support negotiation of a
restructuring that would permit CLA to continue operations, the
Company is not willing to negotiate indefinitely. The Company
intends to pursue legal remedies to secure possession of its
properties as expeditiously as possible. The Company believes the
time it will take to achieve this outcome gives CLA ample
opportunity to negotiate a restructuring which, if successful,
would obviate the need to evict CLA from the Company's properties.
There can be no assurances as to the ultimate outcome of such a
restructuring or the Company's pursuit of its legal remedies with
respect to the CLA properties.
The Company fully reserved approximately $6.0 million in
receivables from CLA at December 31, 2017. Additionally,
during the three months ended December 31, 2017, the Company
wrote-off the full amount of non-cash straight-line rent
receivables of approximately $9.0 million related to CLA to
straight-line rental revenue classified in rental revenue in the
consolidated statements of income. If the Company receives payments
from CLA in the future, it will recognize them on a cash basis
until a successful restructuring is completed.
Capital Recycling
During the fourth quarter, the Company sold three public charter
school properties, pursuant to tenant purchase options, for total
net proceeds of approximately $52.5 million and recognized a net
gain on sale of real estate of $13.5 million. Additionally, the
Company completed the sale of one early education facility for net
proceeds of $0.7 million. The Company also received prepayments of
$4.2 million on two mortgage notes receivable and recognized
prepayment fees of $0.8 million. Dispositions and mortgage note
pay-offs (excluding principal amortization) totaled $197.6 million
for the year ended December 31, 2017.
Balance Sheet Update
The Company had a net debt to adjusted EBITDA ratio (a non-GAAP
financial measure) of 5.39x at December 31, 2017. The Company had
$41.9 million of unrestricted cash on hand (including $33.8 million
of funds held for a Section 1031 exchange under the Internal
Revenue Code) and $210.0 million outstanding under its $1.0 billion
unsecured revolving credit facility at December 31, 2017.
On October 31, 2017, the Company entered into three interest
rate swap agreements to fix the interest rate at 3.15% on an
additional $50.0 million of borrowings under the unsecured term
loan facility from November 2017 to April 2019 and on $350.0
million of borrowings under the unsecured term loan facility from
April 2019 to February 2022.
As previously announced, on November 30, 2017, the Company
issued 6.0 million shares of 5.75% Series G cumulative redeemable
preferred shares in a registered public offering at a purchase
price of $25.00 per share resulting in net proceeds of
approximately $144.5 million, after underwriting discounts and
expenses. Additionally, on December 21, 2017, the Company redeemed
all 5.0 million outstanding shares of its 6.625% Series F
cumulative redeemable preferred shares for a total aggregate
redemption price of approximately $126.5 million ($25.00 per share
liquidation plus accrued dividends). In conjunction with the
redemption, the Company recognized $4.5 million in expenses
representing the original issuance costs that were paid in 2012 and
other related expenses.
During the fourth quarter, the Company issued 454,511 common
shares under its Direct Share Purchase Plan (DSPP) for net proceeds
of $30.3 million. The proceeds were used to pay down a portion of
the Company's unsecured revolving credit facility.
Subsequent to December 31, 2017, the Company redeemed all of its
outstanding 7.75% Senior Notes due July 15, 2020. The notes were
redeemed on February 28, 2018 at a price equal to the principal
amount of $250.0 million plus a premium calculated pursuant to the
terms of the indenture of $28.6 million, together with accrued and
unpaid interest up to, but not including the redemption date.
Additionally, the Company prepaid in full a mortgage note payable
totaling $11.7 million with an annual interest rate of 6.19%, which
was secured by one theatre property. Subsequent to these
transactions, the Company has no debt maturities until 2022.
Dividend Information
The Company declared regular monthly cash dividends during the
fourth quarter of 2017 totaling $1.02 per common share, bringing
total declared dividends for the year ended December 31, 2017, to
$4.08 per common share, an increase of 6.25% over the prior year.
The Company also declared fourth quarter cash dividends of
$0.359375 per share on its 5.75% Series C cumulative convertible
preferred shares, $0.5625 per share on its 9.00% Series E
cumulative convertible preferred shares, $0.2990425 per share on
its 6.625% Series F cumulative redeemable preferred shares and
$0.183681 per share on its 5.75% Series G cumulative redeemable
preferred shares.
As previously announced, the Company declared a regular monthly
cash dividend to common shareholders of $0.36 per common share for
each of the months of January and February 2018. This dividend
level represents an annualized dividend of $4.32 per common share,
an increase of almost 6% over 2017, and would be the Company's
eighth consecutive year with a significant annual dividend
increase.
2018 Guidance
The Company is reducing its 2018 guidance for FFO as adjusted
per diluted share to a range of $5.23 to $5.38 from a range of
$5.33 to $5.48. In addition, the Company is reducing its 2018
investment spending guidance to a range of $400.0 million to $700.0
million from a range of $700.0 million to $800.0 million and
increasing its disposition proceeds guidance to a range of $350.0
million to $450.0 million from a range of $125.0 million to $225.0
million for 2018.
FFO as adjusted guidance for 2018 is based on FFO per diluted
share of $4.60 to $4.70 adjusted for estimated costs associated
with loan refinancing or payoff, transaction costs, termination
fees related to public charter schools and deferred income tax
expense. FFO per diluted share is based on a net income per diluted
share range of $2.98 to $3.13 less estimated gain on sale of real
estate of a range of $0.35 to $0.40 and the impact of Series C and
Series E dilution of $0.06, plus estimated real estate depreciation
of $2.03 per diluted share (in accordance with the NAREIT
definition of FFO).
Quarterly and Year-Ended Supplemental
The Company's supplemental information package for the fourth
quarter and year ended December 31, 2017 is available on the
Company's website at
http://investors.eprkc.com/earnings-supplementals.
EPR Properties Consolidated Statements of Income
(Unaudited, dollars in thousands except per share data)
Three Months Ended December 31,
Year Ended December 31, 2017 2016
2017 2016 Rental revenue $ 119,315 $ 107,474 $
468,648 $ 399,589 Tenant reimbursements 4,131 4,018 15,555 15,595
Other income 577 3,227 3,095 9,039 Mortgage and other financing
income 23,677 16,112 88,693 69,019
Total revenue 147,700 130,831 575,991 493,242 Property operating
expense 12,891 5,915 31,653 22,602 Other expense 242 — 242 5
General and administrative expense 9,596 10,234 43,383 37,543 Costs
associated with loan refinancing or payoff 58 — 1,549 905 Gain on
early extinguishment of debt — — (977 ) — Interest expense, net
35,271 26,834 133,124 97,144 Transaction costs 135 2,988 523 7,869
Impairment charges — — 10,195 — Depreciation and amortization
37,027 28,351 132,946 107,573 Income
before equity in income from joint ventures and other items 52,480
56,509 223,353 219,601 Equity in (loss) income from joint ventures
(14 ) 118 72 619 Gain on sale of real estate 13,480 1,430
41,942 5,315 Income before income taxes 65,946
58,057 265,367 225,535 Income tax (expense) benefit (383 ) 84
(2,399 ) (553 ) Net income 65,563 58,141 262,968 224,982
Preferred dividend requirements (6,438 ) (5,951 ) (24,293 ) (23,806
) Preferred share redemption costs (4,457 ) — (4,457 ) —
Net income available to common shareholders of EPR
Properties $ 54,668 $ 52,190 $ 234,218 $
201,176 Per share data attributable to EPR Properties common
shareholders: Basic earnings per share data: Net income available
to common shareholders $ 0.74 $ 0.82 $ 3.29 $
3.17 Diluted earnings per share data: Net income available
to common shareholders $ 0.74 $ 0.82 $ 3.29 $
3.17 Shares used for computation (in thousands): Basic
73,774 63,635 71,191 63,381 Diluted 73,832 63,716 71,254 63,474
EPR Properties Condensed Consolidated
Balance Sheets (Unaudited, dollars in thousands)
December 31, 2017
2016 Assets Rental properties, net of accumulated
depreciation of $741,334 and $635,535 at December 31, 2017 and
2016, respectively $ 4,604,231 $ 3,595,762 Land held for
development 33,692 22,530 Property under development 257,629
297,110 Mortgage notes and related accrued interest receivable
970,749 613,978 Investment in direct financing leases, net 57,903
102,698 Investment in joint ventures 5,602 5,972 Cash and cash
equivalents 41,917 19,335 Restricted cash 17,069 9,744 Accounts
receivable, net 93,693 98,939 Other assets 109,008 98,954
Total assets $ 6,191,493 $ 4,865,022
Liabilities
and Equity Accounts payable and accrued liabilities $ 136,929 $
119,758 Dividends payable 30,185 26,318 Unearned rents and interest
68,227 47,420 Debt 3,028,827 2,485,625 Total liabilities
3,264,168 2,679,121 Total equity $ 2,927,325 $
2,185,901 Total liabilities and equity $ 6,191,493 $
4,865,022
EPR Properties Reconciliation of
Non-GAAP Financial Measures (Unaudited, dollars in thousands
except per share data) Three Months
Ended December 31,
Year Ended December 31,
2017 2016 2017
2016 FFO: (A) Net income available to
common shareholders of EPR Properties $ 54,668 $ 52,190 $ 234,218 $
201,176 Gain on sale of real estate (excluding land sale) (13,480 )
— (41,942 ) (2,819 ) Real estate depreciation and amortization
36,797 28,179 132,040 106,049 Allocated share of joint venture
depreciation 55 55 218 229 Impairment of direct financing
lease-residual value portion (1) — — 2,897 —
FFO available to common shareholders of EPR Properties $
78,040 $ 80,424 $ 327,431 $ 304,635
FFO available to common shareholders of EPR Properties $
78,040 $ 80,424 $ 327,431 $ 304,635 Add: Preferred dividends for
Series C preferred shares 1,940 1,941 7,763 7,764 Add: Preferred
dividends for Series E preferred shares 1,940 — 7,761
— Diluted FFO available to common shareholders of EPR
Properties $ 81,920 $ 82,365 $ 342,955 $
312,399 FFO per common share: Basic $ 1.06 $ 1.26 $
4.60 $ 4.81 Diluted 1.06 1.25 4.58 4.77 Shares used for computation
(in thousands): Basic 73,774 63,635 71,191 63,381 Diluted 73,832
63,716 71,254 63,474 Weighted average shares
outstanding-diluted EPS 73,832 63,716 71,254 63,474 Effect of
dilutive Series C preferred shares 2,083 2,044 2,068 2,032 Effect
of dilutive Series E preferred shares 1,592 — 1,586
— Adjusted weighted average shares
outstanding-diluted 77,507 65,760 74,908
65,506 Other financial information: Straight-lined
rental revenue $ (7,085 ) $ 6,062 $ 4,332 $ 17,012 Dividends per
common share $ 1.02 $ 0.96 $ 4.08 $ 3.84 (1) Impairment
charges recognized during the year ended December 31, 2017 total
$10.2 million and related to our investment in direct financing
leases, net, consisting of $2.9 million related to the residual
value portion and $7.3 million related to the allowance for lease
loss portion. (A) NAREIT
developed FFO as a relative non-GAAP financial measure of
performance of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on
the basis determined under GAAP and management provides FFO herein
because it believes this information is useful to investors in this
regard. FFO is a widely used measure of the operating performance
of real estate companies and is provided here as a supplemental
measure to GAAP net income available to common shareholders and
earnings per share. Pursuant to the definition of FFO by the Board
of Governors of NAREIT, the Company calculates FFO as net income
available to common shareholders, computed in accordance with GAAP,
excluding gains and losses from sales 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. The Company has calculated FFO for all periods
presented in accordance with this definition. FFO is a non-GAAP
financial measure. FFO does not represent cash flows from
operations as defined by GAAP and is not indicative that cash flows
are adequate to fund all cash needs and is not to be considered an
alternative to net income or any other GAAP measure as a
measurement of the results of our operations or our cash flows or
liquidity as defined by GAAP. In addition to FFO, the Company
presents FFO as adjusted. Management believes it is useful to
provide it here as a supplemental measure to GAAP net income
available to common shareholders and earnings per share. FFO as
adjusted is FFO plus provision for loan losses, costs (gain)
associated with loan refinancing or payoff, net, retirement
severance expense, preferred share redemption costs, termination
fees associated with tenants' exercises of education properties
buy-out options, impairment of direct financing lease (allowance
for lease loss portion) and transaction costs, less gain on early
extinguishment of debt, gain (loss) on sale of land, gain on
insurance recovery and deferred tax benefit (expense). FFO as
adjusted is a non-GAAP financial measure. FFO as adjusted does not
represent cash flows from operations as defined by GAAP and is not
indicative that cash flows are adequate to fund all cash needs and
is not to be considered an alternative to net income or any other
GAAP measure as a measurement of the results of the Company's
operations, cash flows or liquidity as defined by GAAP. It should
also be noted that not all REITs calculate FFO or FFO as adjusted
the same way so comparisons of each of these non-GAAP measures with
other REITs may not be meaningful.
The conversion of the 5.75% Series C cumulative convertible
preferred shares and the 9.00% Series E cumulative convertible
preferred shares would be dilutive to FFO and FFOAA per share for
the three months and year ended December 31, 2017. Therefore, the
additional 2.1 million and 1.6 million common shares that would
result from the conversion and the corresponding add-back of the
preferred dividends declared on those shares are included in the
calculation of diluted FFO and diluted FFOAA per share for the
three months and year ended December 31, 2017.
The conversion of 5.75% Series C cumulative convertible
preferred shares would be dilutive to FFO and FFOAA per share for
the three months and year ended December 31, 2016. Therefore, the
additional 2.0 million common shares that would result from the
conversion and the corresponding add-back of the preferred
dividends declared on those shares are included in the calculation
of diluted FFO and diluted FFOAA per share for the three months and
year ended December 31, 2016. The effect of the conversion of our
9.0% Series E cumulative convertible preferred shares and the
additional 1.6 million common shares that would result from
the conversion do not result in more dilution to per share results
and are therefore not included in the calculation of diluted FFO
and FFOAA per share data for the three months and year ended
December 31, 2016.
Net Debt to Adjusted EBITDA Ratio
Net Debt to Adjusted EBITDA Ratio is a supplemental measure
derived from non-GAAP financial measures 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 this ratio in a similar manner.
In addition, financial institutions use versions of this ratio in
connection with debt agreements to set pricing and covenant
limitations. The Company's method of calculating Net Debt to
Adjusted EBITDA Ratio may be different from methods used by other
REITs and, accordingly, may not be comparable to such other REITs.
Reconciliations of debt and net income available to common
shareholders (both reported in accordance with GAAP) to Net Debt,
Adjusted EBITDA, and Net Debt to Adjusted EBITDA Ratio (each of
which is a non-GAAP financial measure) are included in the
following tables (unaudited, in thousands):
December 31, 2017
2016 Net Debt: (B) Debt $ 3,028,827 $
2,485,625 Deferred financing costs, net 32,852 29,320 Cash and cash
equivalents (41,917 ) (19,335 ) Net Debt $ 3,019,762 $
2,495,610
Three Months Ended December 31,
2017 2016 Adjusted EBITDA: (C)
Net income available to common shareholders of EPR Properties $
54,668 $ 52,190 Costs associated with loan refinancing or payoff 58
— Interest expense, net 35,271 26,834 Transaction costs 135 2,988
Depreciation and amortization 37,027 28,351 Equity in loss (income)
from joint ventures 14 (118 ) Gain on sale of real estate (13,480 )
(1,430 ) Income tax expense (benefit) 383 (84 ) Preferred dividend
requirements 6,438 5,951 Preferred share redemption costs 4,457 —
Gain on insurance recovery (1) — (847 ) Straight-line rental
revenue write-off related to CLA (2) 9,010 — Bad debt expense
related to CLA (3) 6,003 — Adjusted EBITDA (for the
quarter) $ 139,984 $ 113,835 Adjusted EBITDA
(4) $ 559,936 $ 455,340 Net Debt/Adjusted
EBITDA Ratio 5.39 5.48 (1) Included in other income in the
accompanying consolidated statements of income. Other income
includes the following:
Three Months Ended December 31,
2017 2016 Income from settlement of foreign currency
swap contracts $ 577 $ 705 Gain on insurance recovery — 847 Fee
income — 1,588 Miscellaneous income — 87 Other income
$ 577 $ 3,227 (2) Included in rental revenue
in the accompanying consolidated statements of income. Rental
revenue includes the following:
Three Months Ended December
31, 2017 2016 Minimum rent $ 123,208 $ 99,354
Percentage rent 3,108 1,966 Straight-line rental revenue 1,925
6,062 Straight-line rental revenue write-off related to CLA (9,010
) — Other rental revenue 84 92 Rental revenue $
119,315 $ 107,474 (3) Included in property
operating expense in the accompanying consolidated statements of
income. Property operating expense includes the following:
Three
Months Ended December 31, 2017 2016 Expenses
related to the operations of our retail centers and other specialty
properties $ 6,649 $ 5,778 Bad debt expense 239 137 Bad debt
expense related to CLA 6,003 — Property operating
expense $ 12,891 $ 5,915 (4) Adjusted EBITDA
for the quarter is multiplied by four to calculate an annual
amount. (B) 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
reducing debt for cash and cash equivalents on hand, 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 our
financial condition. The Company's method of calculating Net Debt
may be different from methods used by other REITs and, accordingly,
may not be comparable to such other REITs. (C) 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, preferred share
redemption costs, the effect of non-cash impairment charges,
retirement severance expense, the provision for loan losses and
transaction costs, and which is then multiplied by four to get an
annual amount. For the three months ended December 31, 2017,
Adjusted EBITDA was further adjusted to reflect zero Adjusted
EBITDA related to one of our early education tenants, CLA.
The Company's method of calculating Adjusted EBITDA may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. Adjusted EBITDA is not a
measure of performance under GAAP, does not represent cash
generated from operations as defined by GAAP and is not indicative
of cash available to fund all cash needs, including distributions.
This measure 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.
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 $6.7
billion and our primary investment segments are Entertainment,
Recreation and Education. We adhere to rigorous underwriting and
investing criteria centered on key industry and property level cash
flow standards. We believe our focused niche approach provides a
competitive advantage, and the potential for higher growth and
better yields.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain statements
contained or incorporated by reference herein may contain
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), such as those pertaining to our
acquisition or disposition of properties, our capital resources,
future expenditures for development projects, expected dividend
payments, expectations regarding CLA, 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.
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. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180228006451/en/
EPR PropertiesBrian Moriarty,
888-EPR-REITwww.eprkc.com
EPR Properties (NYSE:EPR)
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