Entertainment Properties Trust Reports Fourth Quarter and Year-End Results
KANSAS CITY, Mo.--(BUSINESS WIRE)-- Entertainment Properties Trust (NYSE: EPR) today announced operating results for the fourth quarter and year ended December 31, 2009.
Total revenue was $69.3 million for the fourth quarter of 2009 compared to $77.0 million for the same quarter in 2008. Net income available to common shareholders was $6.7 million, or $0.17 per diluted common share, for the fourth quarter of 2009 compared to net income available to common shareholders of $27.8 million, or $0.84 per diluted common share, for the same quarter in 2008.
Funds From Operations (FFO) for the fourth quarter of 2009 was $31.8 million or $0.80 per diluted common share, before non-cash charges for loan loss provisions and impairments totaling $11.6 million and transaction costs totaling $3.2 million. Including these charges, FFO was $17.0 million, or $0.43 per diluted common share, for the fourth quarter of 2009 compared to FFO of $38.4 million, or $1.15 per diluted common share, for same quarter in 2008.
For the year ended December 31, 2009, total revenue was $270.8 million compared to $286.1 million for the year ended December 31, 2008. Net loss available to common shareholders was $22.2 million, or $0.61 per common share for the year ended December 31, 2009, versus net income available to common shareholders of $101.7 million, or $3.26 per diluted common share, for the year ended December 31, 2008. FFO for the year ended December 31, 2009 was $121.4 million, or $3.35 per diluted common share, before the charges. Including the charges, FFO was $4.9 million, or $0.13 per diluted common share, for the year ended December 31, 2009 compared to FFO of $142.6 million, or $4.54 per diluted common share, for the year ended December 31, 2008.
David Brain, President and CEO, commented on the results, "We enter 2010 with a continued optimistic outlook on our core businesses, particularly after observing their stability during one of the most challenging economic environments we have seen in generations. The exhibition industry continues to deliver movies and events that draw in the consumer and the public support for charter schools continues to gain momentum." Mr. Brain continued, "We also enter 2010 well positioned for growth having further strengthened our balance sheet over the past year, and we continue to make progress in rehabilitating under-performing assets so that they may meaningfully contribute to our future results."
A reconciliation of FFO and the items impacting results follow:
(dollars in millions, except 4th Quarter Year to Date
per share amounts)
Amount FFO/share Amount FFO/share
Provision for loan losses - $ -- $ -- $ (34.8 ) $ (0.96 )
Toronto Dundas Square Project
Provision for loan losses -
Cappelli related notes -- -- (28.0 ) (0.77 )
receivable
Provision for loan losses - (5.2 ) (0.13 ) (8.2 ) (0.23 )
other notes receivable
Subtotal-provision for loan $ (5.2 ) $ (0.13 ) $ (71.0 ) $ (1.96 )
losses
Impairment charge - White -- -- (35.8 ) (0.99 )
Plains City Center
Impairment charge - Vineyard (6.4 ) (0.16 ) (6.4 ) (0.18 )
and Winery Properties
Total non-cash charges $ (11.6 ) $ (0.29 ) $ (113.2 ) $ (3.13 )
Transaction costs (3.2 ) (0.08 ) (3.3 ) (0.09 )
Total charges (14.8 ) (0.37 ) (116.5 ) (3.22 )
FFO 17.0 0.43 4.9 0.13
Add back total charges 14.8 0.37 116.5 3.22
FFO as adjusted for charges $ 31.8 $ 0.80 $ 121.4 $ 3.35
Dividends declared per common $ 0.65 $ 2.60
share
FFO payout ratio, as adjusted 81 % 78 %
Portfolio Highlights
As of December 31, 2009, the Company's real estate portfolio consisted of 95 megaplex theatres totaling approximately 7.8 million square feet, and restaurant, retail and other destination recreation and specialty properties totaling 4.1 million square feet. The Company also owned 22 public charter schools, and eight vineyards totaling approximately 1,590 acres and ten wineries totaling approximately 850 thousand square feet. In addition, as of December 31, 2009, the Company's real estate mortgage loan portfolio had a carrying value of $522.9 million and included financing provided for entertainment, retail and recreational properties, including ten metropolitan ski areas covering approximately 6,100 acres in six states. At December 31, 2009, the Company's megaplex theatres were 100% occupied, and the overall real estate portfolio was 97% occupied.
Theatres
Strength in the box office continued through the fourth quarter, with total U.S. box office receipts up approximately 10% in 2009 compared to 2008, representing the best box office year on record. Management believes the 2009 box office results demonstrated the widespread acceptance of new 3D technology, reinforcing its appeal and the opportunity that it unlocks in terms of increased attendance and premium ticket prices.
Charter Schools
Enrollments in the Company's charter schools for the 2009/2010 academic year have been received, and with 86% occupancy, the Company's expected rent coverage of 1.8 times remains strong. Charter school attendance continues to grow with more than 1.5 million students now enrolled in charter schools nation-wide, representing an 11% increase from a year ago.
Vineyard and Winery Investments
As previously communicated, the Company's vineyard and winery investments continue to be negatively impacted by recessionary pressures. During the fourth quarter we recorded impairment charges of $6.4 million and a loan loss reserve of $5.2 million related to such investments.
Capital Markets Update
As previously communicated, on November 16, 2009, the Company issued 6,325,000 common shares (including the exercise of the over-allotment option of 825,000 shares) at a purchase price of $31.50 per share in a registered public offering. Total net proceeds after underwriting discounts and expenses were approximately $190.6 million. Including this offering, approximately $285.0 million of equity capital was raised in 2009 as the Company deleveraged its balance sheet.
At December 31, 2009 there was in excess of $200 million of unrestricted cash on hand and availability under the revolver.
Investment Update
The majority of the Company's investment spending for 2009 of $196.5 million was executed in the fourth quarter of the year. Total investment spending for the fourth quarter was $138.0 million and consisted primarily of the acquisition of 15 theatres for a total investment of $121.5 million. The theatres are located in Connecticut, Massachusetts, New Jersey, Virginia, Kentucky, Ohio, Michigan, and Iowa. These theatres consist of 1.25 million building square feet and 231 screens, including 59 digital screens (24 of which are 3D), along with 3 IMAX installations. The theatres are leased to Rave Cinemas, LLC under a master lease that is structured as a long term triple net lease.
In addition, on January 8, 2010, the Company signed a purchase agreement to become the owner of the Toronto Dundas Square Project, currently in receivership. This project consists of approximately 330,000 square feet of net rentable area and 25,000 square feet of digital and static signage, and contains one of the highest grossing theatre complexes in Canada. Occupancy of the property remains at approximately 90%. The transaction is expected to close in early 2010. The Company has finalized the terms of a credit facility with a group of banks to provide $100 million Canadian first mortgage financing that is expected to close in conjunction with the purchase. The Company expects to consolidate the financial results of the property subsequent to the purchase.
On January 21, 2010, the Company completed an additional investment with Imagine Schools, Inc., one of the leading operators of public charter schools in the country. The $48 million transaction added five new schools at a cost of approximately $44 million, and the Company committed to provide approximately $4 million in expansion capital for two schools. The new schools contain over 357,000 square feet of educational space and have an enrollment in excess of 2,600 students. All of the Imagine schools owned by the Company, including those in this tranche, are governed by a triple-net master lease with a 25 year primary term. The total portfolio now includes 27 public charter schools located in nine states and the District of Columbia.
In connection with the Company's loans to Concord Resorts, LLC ("Concord Resorts") related to a planned casino and resort development in Sullivan County, New York controlled by Louis Cappelli, and several other loans to Mr. Cappelli and his affiliates, each of which are currently in default, the Company has initiated litigation seeking payment of amounts due and a declaratory judgment that the Company has no obligation to make an additional advance to Concord Resorts under any prior loan commitment. The Company's loans to Concord Resorts, Mr. Cappelli and his affiliates subject to this litigation total approximately $163.1 million.
Transaction Costs
In 2009, a new accounting pronouncement, FASB ASC Topic 805 "Business Combinations," went into effect requiring acquisition-related costs incurred in connection with business combinations to be expensed as incurred. Accordingly, costs related to such transactions, as well as costs associated with terminated transactions, are now included as a separate line item entitled "Transaction costs" in the Company's Consolidated Statements of Income.
Dividend Information
On December 15, 2009, the Company declared a regular quarterly cash dividend of $0.65 per common share, which was paid on January 15, 2010 to common shareholders of record on December 31, 2009. This dividend represents an annualized dividend of $2.60 per common share. The Company also declared and paid fourth quarter cash dividends of $0.4844 per share on the 7.75% Series B Preferred Shares, $0.3594 per share on the 5.75% Series C Convertible Preferred Shares, $0.4609 per share on the 7.375% Series D Preferred Shares and $0.5625 per share on the 9.00% Series E Convertible Preferred Shares.
Earnings and Investment Spending Guidance
The Company is revising its FFO per share guidance for 2010 to $3.30 to $3.45. This guidance reflects the revised outlook on the timing of the purchase of the Toronto Dundas Square Project, the impact of the Company's issuance of common shares in the fourth quarter of 2009, a reserve due to a more aggressive posture on rehabilitating the Company's underperforming assets, and approximately $100 million of investment spending in the latter half of the year beyond what has previously been communicated. The revised guidance for 2010 excludes any transaction costs that must be expensed per Topic 805. Additional transaction costs to be expensed related to the acquisition of the Toronto Dundas Square Project are expected to total up to $8 million, or $.19 per share, consisting primarily of land transfer taxes. Including this level of additional transaction costs related to the Toronto Dundas Square Project, FFO per share guidance for 2010 is $3.11 to $3.26.
The Company's investment spending guidance for 2010 is approximately $270 million and consists of $117 million associated with the acquisition of the Toronto Dundas Square Project, $53 million associated with the acquisition of public charter schools and $100 million of additional investments in the latter half of 2010.
Quarterly Supplemental
The Company's supplemental information package for the fourth quarter and year ended December 31, 2009 is available on the Company's website at www.eprkc.com.
ENTERTAINMENT PROPERTIES TRUST
Consolidated Statements of Income
(Dollars in thousands except per share data)
(unaudited)
Three Months Ended December 31, Year Ended December 31,
2009 2008 2009 2008
Rental revenue $ 52,395 $ 51,380 $ 204,610 $ 202,581
Tenant reimbursements 4,685 4,768 18,312 20,883
Other income 581 1,023 2,890 2,241
Mortgage and other 11,607 19,826 44,999 60,435
financing income
Total revenue 69,268 76,997 270,811 286,140
Property operating 7,730 6,827 28,839 26,775
expense
Other expense 525 559 2,611 2,103
General and
administrative 3,373 4,253 15,177 15,286
expense
Costs associated with - - 117 -
loan refinancing
Interest expense, net 18,441 18,834 72,715 70,951
Transaction costs 3,165 592 3,321 1,628
Provision for loan 5,197 - 70,954 -
losses
Impairment charges 6,357 - 42,158 -
Depreciation and 11,336 11,646 47,720 43,829
amortization
Income (loss) before
equity in income from
joint ventures and
discontinued 13,144 34,286 (12,801 ) 125,568
operations
Equity in income from 222 219 895 1,962
joint ventures
Income (loss) from $ 13,366 $ 34,505 $ (11,906 ) $ 127,530
continuing operations
Discontinued
operations:
Loss from
discontinued - - - (26 )
operations
Gain on sale of real - - - 119
estate
Net income (loss) 13,366 34,505 (11,906 ) 127,623
Add: Net loss
attributable to 899 880 19,913 2,353
noncontrolling
interests
Net income (loss)
attributable to
Entertainment
Properties Trust 14,265 35,385 8,007 129,976
Preferred dividend (7,550 ) (7,551 ) (30,206 ) (28,266 )
requirements
Net income (loss)
available to common
shareholders of
Entertainment $ 6,715 $ 27,834 $ (22,199 ) $ 101,710
Properties Trust
Per share data
attributable to
Entertainment
Properties
Trust common
shareholders:
Basic earnings per
share data:
Income (loss) from
continuing operations
available to
common shareholders $ 0.17 $ 0.85 $ (0.61 ) 3.29
Income from
discontinued - - - -
operations
Net income (loss)
available to common $ 0.17 $ 0.85 $ (0.61 ) $ 3.29
shareholders
Diluted earnings per
share data:
Income (loss) from
continuing operations
available to
common shareholders $ 0.17 $ 0.84 $ (0.61 ) $ 3.26
Income from
discontinued - - - -
operations
Net income (loss)
available to common $ 0.17 $ 0.84 $ (0.61 ) $ 3.26
shareholders
Shares used for
computation (in
thousands):
Basic 39,641 32,873 36,122 30,910
Diluted 39,901 33,008 36,122 31,177
ENTERTAINMENT PROPERTIES TRUST
Reconciliation of Net Income Available to Common Shareholders
to Funds From Operations (FFO) (A)
(Unaudited, Dollars in thousands except per share data)
Three Months Ended December Year Ended December 31,
31,
2009 2008 2009 2008
Net income (loss)
available to common
shareholders of
Entertainment $ 6,715 $ 27,834 $ (22,199 ) $ 101,710
Properties Trust
Real estate
depreciation and 11,143 11,454 46,947 43,051
amortization
Allocated share of
joint venture 66 65 263 510
depreciation
Noncontrolling (956 ) (958 ) (20,143 ) (2,630 )
interest
FFO available to
common shareholders
of $ 16,968 $ 38,395 $ 4,868 $ 142,641
Entertainment
Properties Trust
FFO available to
common shareholders
of 16,968 38,395 4,868 142,641
Entertainment
Properties Trust
Preferred dividends - 1,940 - 7,763
for Series C
Diluted FFO
available to common
shareholders of $ 16,968 $ 40,335 $ 4,868 $ 150,404
Entertainment
Properties
Trust
FFO per common share
attributable to
Entertainment
Properties Trust:
Basic $ 0.43 $ 1.17 $ 0.13 $ 4.61
Diluted 0.43 1.15 0.13 4.54
Shares used for
computation (in
thousands):
Basic 39,641 32,873 36,122 30,910
Diluted 39,901 34,937 36,236 33,094
Weighted average
shares outstanding-
diluted EPS 39,901 33,008 36,236 31,177
Effect of dilutive
Series C preferred - 1,929 - 1,917
shares
Adjusted weighted
average shares 39,901 34,937 36,236 33,094
outstanding -
diluted
Other financial
information:
Straight-lined rental $ 696 $ 942 $ 2,483 $ 3,851
revenue
Dividends per common $ 0.65 $ 0.84 $ 2.60 $ 3.36
share
(A) 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 Generally Accepted Accounting Principles (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 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 defined under the NAREIT definition and presented by us, is net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from sales of depreciable operating properties, 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. 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 the Company's operations, 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, impairments and transaction costs. 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 dilutive effect of potential common shares from the exercise of share options is included in diluted earnings per share except in those periods with a loss from continuing operations.
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 (issued on April 2, 2008) and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted earnings per share for the three months and years ended December 31, 2008 and 2009 because the effect is anti-dilutive. However, because a conversion of the 5.75% Series C cumulative convertible preferred shares would be dilutive to FFO per share for the three months and year ended December 31, 2008, these adjustments have been made in the calculation of diluted FFO per share for these periods.
The Company's nonvested share awards are considered participating securities and are included in the calculation of earnings per share under the two-class method as required by the Earnings Per Share Topic of the Financial Accounting Standards Board Accounting Standards Codification. Prior-period earnings per share data was computed using the treasury stock method and has been adjusted retrospectively, which lowered basic and diluted FFO per share by $0.01 for the three months ended December 31, 2008 and lowered basic FFO per share by $0.03 and diluted FFO per share by $0.02 for the year ended December 31, 2008.
ENTERTAINMENT PROPERTIES TRUST
Condensed Consolidated Balance Sheets
(Dollars in thousands)
As of As of
December 31, 2009 December 31, 2008
Assets
Rental properties, net $ 1,854,629 $ 1,735,026
Property under development 12,729 30,835
Mortgage notes and related accrued 522,880 508,506
interest receivable, net
Investment in a direct financing lease, 169,850 166,089
net
Investment in joint ventures 4,080 2,493
Cash and cash equivalents 23,138 50,082
Restricted cash 12,857 11,004
Intangible assets, net 6,727 12,400
Deferred financing costs, net 12,136 10,741
Accounts receivable, net 33,289 33,405
Notes and related accrued interest 7,204 40,338
receivable, net
Other assets 21,213 33,006
Total assets $ 2,680,732 $ 2,633,925
Liabilities and Equity
Accounts payable and accrued liabilities $ 28,411 $ 35,665
Dividends payable 35,432 34,929
Unearned rents and interest 7,509 8,312
Long-term debt 1,141,423 1,262,368
Total liabilities 1,212,775 1,341,274
Entertainment Properties Trust 1,472,862 1,277,434
shareholders' equity
Noncontrolling interests (4,905 ) 15,217
Equity 1,467,957 1,292,651
Total liabilities and equity $ 2,680,732 $ 2,633,925
About Entertainment Properties Trust
Entertainment Properties Trust (NYSE: EPR) is a real estate investment trust (REIT) that develops, owns, leases, and finances properties for consumer-preferred, high-quality businesses. EPR's investments are guided by a focus on inflection opportunities that are associated with or support enduring uses, excellent executions, attractive economics, and an advantageous market position. The Company's total assets exceed $2.6 billion and include megaplex movie theatres and entertainment retail centers, as well as other destination recreational and specialty investments. Further information is available at www.eprkc.com or from Jon Weis at 888-EPR-REIT or info@eprkc.com.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain statements contained or incorporated by reference herein constitute forward-looking statements as such term is defined in 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"). The forward-looking statements may refer to our financial condition, results of operations, plans, objectives, acquisition or disposition of properties, future expenditures for development projects, capital resources, future financial performance and business. Forward-looking statements are not guarantees of performance. They involve numerous risks, uncertainties and assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "will be," "continue," "hope," "goal," "forecast," "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans" "would," "may" or other similar expressions contained or incorporated by reference herein. In addition, references to our budgeted amounts are forward-looking statements. 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.
Source: Entertainment Properties Trust
Released February 25, 2010