Company Raises 2016 Investment Spending and Earnings Guidance

KANSAS CITY, Mo.--(BUSINESS WIRE)-- EPR Properties (NYSE:EPR) today announced operating results for the second quarter and six months ended June 30, 2016.

Three Months Ended June 30, 2016

• Total revenue was $118.0 million for the second quarter of 2016, representing a 17% increase from $101.3 million for the same quarter in 2015.
• Net income available to common shareholders was $49.2 million, or $0.77 per diluted common share, for the second quarter of 2016 compared to $42.8 million, or $0.75 per diluted common share, for the same quarter in 2015.
• Funds From Operations (FFO) (a non-GAAP financial measure) for the second quarter of 2016 was $72.2 million, or $1.13 per diluted common share, compared to $64.3 million, or $1.12 per diluted common share, for the same quarter in 2015.
• FFO as adjusted (a non-GAAP financial measure) for the second quarter of 2016 was $74.7 million, or $1.17 per diluted common share, compared to $62.3 million, or $1.08 per diluted common share, for the same quarter in 2015, representing an 8% increase in per share results.

Six Months Ended June 30, 2016

• Total revenue was $236.8 million for the six months ended June 30, 2016, representing an 18% increase from $200.7 million for the same period in 2015.
• Net income available to common shareholders was $97.4 million, or $1.54 per diluted common share, for the six months ended June 30, 2016 compared to $79.7 million, or $1.39 per diluted common share, for the same period in 2015.
• FFO (a non-GAAP financial measure) for the six months ended June 30, 2016 was $146.0 million, or $2.30 per diluted common share, compared to $96.5 million, or $1.68 per diluted common share, for the same period in 2015.
• FFO as adjusted (a non-GAAP financial measure) for the six months ended June 30, 2016 was $148.4 million, or $2.33 per diluted common share, compared to $121.3 million, or $2.11 per diluted common share, for the same period in 2015, representing a 10% increase in per share results.

“We are pleased to have delivered another very strong quarter, as we continue to benefit from our focused and differentiated investment strategy,” commented company President and CEO Greg Silvers. “The strong momentum we’ve established, along with a very healthy balance sheet, allow us to increase both our investment spending and earnings guidance for the year and support our continued positive outlook.”

A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in thousands, except per share amounts):

Portfolio Update

The Company's investment portfolio (excluding property under development) consisted of the following at June 30, 2016:

• The Entertainment segment included investments in 138 megaplex theatre properties, eight entertainment retail centers (which include eight additional megaplex theatre properties) and eight family entertainment centers. The Company’s portfolio of owned entertainment properties consisted of 12.4 million square feet and was 98% leased, including megaplex theatres that were 100% leased.
• The Education segment included investments in 69 public charter school properties, 21 early education centers and three private school properties. The Company’s portfolio of owned education properties consisted of 4.5 million square feet and was 100% leased.
• The Recreation segment included investments in 11 metro ski parks, five waterparks and 20 golf entertainment complexes. The Company’s portfolio of owned recreation properties was 100% leased.
• The Other segment consisted primarily of the land under ground lease and land held for development related to the Adelaar casino and resort project in Sullivan County, New York.

The combined owned portfolio consisted of 19.0 million square feet and was 99% leased. As of June 30, 2016, the Company also had a total of approximately $301.6 million invested in property under development.

Investment Update

The Company's investment spending during the three months ended June 30, 2016 totaled $226.7 million (bringing the year-to-date investment spending to $371.8 million), and included investments in each of its primary operating segments:

• Entertainment investment spending during the three months ended June 30, 2016 totaled $116.6 million, of which $94.8 million related to the acquisition of a portfolio of six megaplex theatres located in Pennsylvania, Alabama, Tennessee, Texas and Washington. In addition, entertainment investment spending related to the development or redevelopment of eight megaplex theatres, two family entertainment centers and four entertainment retail centers.
• Education investment spending during the three months ended June 30, 2016 totaled $70.4 million, and was related to investments in the development or expansion of 18 public charter schools, three private schools, and 15 early childhood education centers.
• Recreation investment spending during the three months ended June 30, 2016 totaled $39.7 million, and was related to build-to-suit construction of nine Topgolf golf entertainment facilities, as well as additional improvements at Camelback Mountain Resort and the Adelaar waterpark project.

Adelaar Project Update

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 public infrastructure improvements related to the Adelaar casino and resort project. 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.

Asset Recycling

On April 6, 2016, pursuant to a tenant purchase option, the Company completed the sale of a public charter school located in Colorado for net proceeds of $11.2 million. In connection with this sale, the Company recognized a gain on sale of $2.3 million during the three months ended June 30, 2016. This gain represents the premium charged to the tenant over the total development cost for early lease termination in accordance with the purchase option in the lease. This termination fee has been included in FFO as adjusted, similar to how other lease termination fees and fees received for early prepayment of mortgage notes receivable are reflected when applicable.

As previously announced, on April 22, 2016, the Company received prepayment in full on one mortgage note receivable of $44.3 million that was secured by an entertainment retail center located in North Carolina.

Balance Sheet Update

The Company continues to have a conservative capital structure and strong balance sheet with a net debt to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.17x at June 30, 2016. The Company had $8.5 million of unrestricted cash on hand and $347.0 million outstanding under its $650 million unsecured revolving credit facility at June 30, 2016.

During the quarter, the Company prepaid in full two mortgage notes payable totaling $24.5 million with an average annual interest rate of 6.37% and paid in full an unsecured note payable totaling $1.9 million. Additionally, during the quarter, the Company issued an additional 258,263 common shares under its Direct Share Purchase Plan (DSPP) for net proceeds of $16.9 million.

Subsequent to June 30, 2016, the Company entered into a note purchase agreement with certain institutional investors dated August 1, 2016, pursuant to which the Company agreed to issue $340.0 million of senior unsecured notes in a private placement transaction to close on August 22, 2016. The notes will be issued in two tranches with $148.0 million bearing interest at 4.35% and due August 22, 2024, and $192.0 million bearing interest at 4.56% and due August 22, 2026. The notes will be guaranteed by our subsidiaries that guarantee our bank credit agreement and existing senior unsecured notes.

Dividend Information

The Company declared regular monthly cash dividends during the second quarter of 2016 totaling $0.96 per common share. This dividend represents an annualized dividend of $3.84 per common share, an increase of 5.8% over the prior year, and would be the Company's sixth consecutive year with an annual dividend increase.

The Company also declared second 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.

2016 Guidance

The Company is increasing its 2016 guidance for FFO as adjusted per diluted share to a range of $4.72 to $4.82 from a range of $4.70 to $4.80. In addition, the Company is increasing its 2016 investment spending guidance to a range of $650 million to $700 million from a range of $600 million to $650 million.

FFO as adjusted guidance for 2016 is based on FFO per diluted share of $4.62 to $4.70 adjusted for costs associated with loan refinancing or payoff, gain on insurance recovery, transaction costs, termination fees related to public charter schools and deferred income tax expense. FFO per diluted share is based on a net income per diluted share range of $3.03 to $3.13 less estimated gain on sale of real estate of a range of $0.06 to $0.08 and the impact of Series C dilution of $0.02, plus estimated real estate depreciation of $1.67 per diluted share (in accordance with the NAREIT definition of FFO).

Quarterly Supplemental

The Company's supplemental information package for the second quarter and six months ended June 30, 2016 is available on the Company's website at http://eprkc.com/earnings-releases-supplemental.

The conversion of the 5.75% Series C cumulative convertible preferred shares would be dilutive to FFO per share and FFOAA per share for the three and six months ended June 30, 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 these periods. The additional 2.0 million common shares that would result from the conversion of the 5.75% Series C cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted per share data for the remaining periods above because the effect is not dilutive. 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 per share data for the three and six months ended June 30, 2016 and 2015.

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):

About EPR Properties

EPR Properties is a specialty real estate investment trust (REIT) that invests in properties in select market segments which require unique industry knowledge, while offering the potential for stable and attractive returns. Our total investments exceed $4.9 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 ouracquisition 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.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/20160803006590/en/

EPR Properties
Brian Moriarty, 888-EPR-REIT
www.eprkc.com

Source: EPR Properties