Real Estate — August 8, 2012Leisureworld Senior Care Corporation Reports Strong 2012 Second Quarter Results
MARKHAM, ONTARIO--(Marketwire - Aug. 8, 2012) - Leisureworld Senior Care Corporation (TSX:LW) ("Leisureworld" or "the Company") today announced its financial results for the second quarter and six months ended June 30, 2012. Percentage calculations are based on the numbers in the Financial Statements and/or Management's Discussion and Analysis, and may not correspond to rounded figures presented in this release. Full Financial Statements and Management's Discussion and Analysis are available on the Company's website at www.leisureworld.ca.
|$000s except per share and percentage data||Quarter ended
June 30, 2012
|Quarter ended June 30, 2011||Six months ended June 30, 2012||Six months ended June 30, 2011|
|Average total occupancy (LTC)||98.5||%||98.7||%||98.5||%||98.3||%|
|Average private occupancy (LTC)||98.1||%||96.7||%||97.8||%||96.3||%|
|Average occupancy (retirement and independent living)1||73.3||%||60.5||%||
|Net Earnings (Loss)||(5,039||)||(2,449||)||(7,648||)||(5,313||)|
|Net Operating Income (NOI)²||14,061||11,408||25,972||21,514|
|Funds from Operations (FFO)²||7,261||5,703||12,210||9,786|
|Construction Funding (Principal)||1,403||1,344||2,798||2,689|
|Adjusted Funds from Operations (AFFO)2,3||9,495||7,007||16,636||12,168|
|Basic AFFO per share||$||0.3589||$||0.3024||$||0.6539||$||0.5633|
|Dividends declared per share||$||0.2124||$||0.2124||$||0.4248||$||0.4248|
|Basic AFFO payout ratio||59.2||%||70.2||%||65.0||%||75.4||%|
- The 2011 retirement and independent living occupancy rates include the addition of the Kingston and Kanata properties as of April 27, 2011, which are currently in lease-up and not yet at stabilized occupancy. The 2012 second quarter retirement and independent living occupancy rates include the addition of the BC retirement properties, acquired as of May 24, 2012, with one of the properties (The Royale Astoria) currently in lease-up and not yet at stabilized occupancy.
- Net operating income (loss) ("NOI"), funds from operations ("FFO"), and adjusted funds from operations ("AFFO") are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. NOI, FFO and AFFO are supplemental measures of a company's performance and Leisureworld believes that NOI, FFO and AFFO are relevant measures of its ability to pay dividends on the Company's common shares. The IFRS measurement most directly comparable to NOI, FFO and AFFO is net income (loss).
- AFFO includes adjustments of $63, $16, $52 and ($36), respectively, for HRIS expenses; and $947, $905, $1,944 and $905, respectively, for income support.
"We are pleased to report a 23.3% increase in Net Operating Income and a 35.5% increase in Adjusted Funds from Operations, compared to the second quarter a year ago. Our strong financial performance in the quarter reflects increased funding, high occupancy rates and efficient cost management in our core LTC portfolio, and contributions from our expanded retirement residence portfolio," said David Cutler, President and Chief Executive Officer of Leisureworld.
"Over the past 16 months, we have added five properties in Ontario and BC to our retirement residence portfolio and one property to our Ontario LTC portfolio, demonstrating our commitment to be a leading provider of seniors living facilities and services across Canada," said Dino Chiesa, Chairman of Leisureworld. "Our year-to-date payout ratio in 2012 is 65%, reflecting our ability to continue growing our business while maintaining attractive and reliable shareholder dividends."
During the second quarter, Leisureworld completed the acquisition three luxury retirement residences in the Greater Vancouver Area in British Columbia for a purchase price of $119.8 million, including working capital adjustments and an income support agreement of $2.0 million for one of the properties, to be held in escrow as an income guarantee to supplement cash flow during the lease-up period. The properties, which together are comprised of 392 suites, feature top quality amenities and are competitively positioned in the attractive markets of South Surrey and Port Coquitlam. This transaction marks Leisureworld's entrance into the BC seniors housing market, further diversifying the Company's seniors living portfolio.
Subsequent to the quarter end, Leisureworld closed its acquisition of a 160 bed, "A" Class Long-Term Care (LTC) residence in Orleans, Ontario, for a purchase price of $19.9 million, comprised of $13.4 million for the operating assets and approximately $6.5 million of construction funding. The property's current occupancy rate is 99.4% and includes a 60/40 private/shared accommodation ratio.
For the quarter ended June 30, 2012, Leisureworld's Net Operating Income (NOI) increased 23.3% to $14.1 million, compared to $11.4 million in the second quarter a year ago. The Company's long-term care (LTC) operations generated increased NOI of $1.0 million, primarily attributable to increased government funding, lower utility costs and effective cost management. Leisureworld's retirement residence portfolio generated a $1.5 million increase in NOI resulting from the timing of the Company's Royale retirement properties acquisition in Ontario in the second quarter of 2011, and the acquisition of the BC retirement properties in May, 2012. The Company's Preferred Health Care Services (PHCS) subsidiary generated increased NOI of $0.2 million due to higher personal support volumes.
Leisureworld generated $7.3 million in Funds from Operations (FFO) in the second quarter of 2012, an increase of 27.3% from $5.7 million in the second quarter a year ago. The increase reflects higher NOI in the quarter and a higher transaction costs add-back of $0.3 million, resulting from Leisureworld's closing of its acquisition of the BC retirement properties in the quarter. Increased FFO was partly offset by increased net finance charges of $0.4 million, and higher current net income taxes of $0.8 million, as the prior year period had a favorable income tax book to filing adjustment of $0.7 million. Increased net finance charges resulted from a full quarter impact of financing charges related to the credit facility used to partially fund the Company's Royale Ontario retirement properties acquisition, as well as the finance costs associated with the debt incurred to partially fund the acquisition of the BC retirement properties.
Adjusted Funds from Operations (AFFO) for the second quarter of 2012 increased 35.5% to $9.5 million, compared with $7.0 million in the second quarter of 2011. Increased AFFO was primarily attributable to increased FFO in the quarter and the $0.7 million income tax book to filing adjustment in the second quarter a year ago, which did not occur in 2012.
Dividends declared by Leisureworld in the quarter were $0.2124 per share and Basic AFFO per share was $0.3589, representing a quarterly payout ratio of 59.2%. Leisureworld's payout ratio in the second quarter of 2011 was 70.2%.
Leisureworld generated total revenue of $76.1 million for the quarter ended June 30, 2012, an increase of 8.7% from $70.0 million in the second quarter a year ago. Long-term care contributed approximately $2.3 million of the increase, primarily as a result of increased government funding. Retirement residence revenue accounted for $2.8 million of the increase, primarily as a result of the timing of the addition of the Royale Ontario retirement properties acquired during the second quarter of 2011 and the recent acquisition of the BC retirement properties in May, 2012. PHCS contributed $0.9 million of the revenue increase, due to higher personal support contract volumes.
The Company's net loss was $5.0 million in the second quarter of 2012 compared to $2.4 million in the second quarter of 2011. The increased net loss resulted primarily from higher income tax expense and a one-time Human Resource Information System ("HRIS") impairment loss, partially offset by higher income from operations. The income tax expense for the quarter ended June 30, 2012 was $3.3 million compared to an income tax recovery of $2.1 million in the second quarter of 2011. The increased income tax expense was primarily attributable to the deferred income tax expense arising from a change in corporate tax rates. Per the last federal and Ontario provincial budgets, corporate tax rates will be frozen at a combined rate of 26.5%. Previously, these rates were expected to decrease to 25.0% over the next few years. During the second quarter, the Company determined that the carrying value of its HRIS which was in development was greater than its recoverable amount and that the project was no longer sustainable. The termination of the HRIS development project resulted in a one-time $2.7 million impairment loss.
For the six months ended June 30, 2012, NOI was $26.0 million, up 20.7% from $21.5 million in the corresponding period in 2011, reflecting increased resident revenues for LTC, lower utility costs and cost management across the portfolio, increased NOI of $2.4 million from the Company's retirement residence portfolio, and a $0.5 million increase in NOI from PCHS. AFFO for the first six months of 2012 increased 36.7% to $16.6 million from $12.2 million in the first six months of 2011, reflecting a $2.4 million increase in FFO, a $1.0 million increase to the drawdown of income support funds, primarily related to an additional quarter of owning the Royale Ontario retirement properties, and the prior year reduction associated with the income tax book to filing adjustment of $0.7 million, which did not occur in the current year. Dividends declared by Leisureworld in the first six months of 2012 totaled $0.4248 per share and Basic AFFO per share was $0.6539, representing a payout ratio of 65.0% for the period.
"Occupancy rates for the Royale Ontario retirement properties in Kingston and Kanata at quarter end were 72.8% and 66.5%, respectively. We continue to target a net new average move-in rate for these properties of 2.5 residents per property per month over a 12-month period and we exceeded this target rate in the second quarter. However, to date, we have drawn down $4.9 million of the available $5.5 million in income support related to these properties, a pace that is six months ahead of the planned end date in early 2013. Given the current run rate of net new move-ins and expenditures, it is anticipated that we will not have the full value of income support to supplement cash flow during the remainder of the lease-up period. This will not have a significant impact to AFFO or our payout ratio as the properties reach stabilized occupancy," said Manny DiFilippo, Chief Financial Officer.
As at June 30, 2012, the Company's debt to gross book value ratio was 53.1%. The debt is represented by: 4.814% Series A Senior Secured Notes due November 24, 2015, rated "A- (stable)" by Standard & Poor's Rating Services and "A (stable)" by Dominion Bond Rating Service Limited; $55.0 million drawn from the $61.5 million available revolving credit facility; a one-year $26.1 million term loan; a two-year $26.0 million term loan; and an assumed $23.7 million mortgage that matures on January 1, 2017. Leisureworld had cash and cash equivalents at quarter end totaling $34.2 million and a further committed undrawn revolving credit facility of $10.0 million for working capital purposes. Subsequent to quarter end, the Company paid down $20.0 million against the drawn revolving credit facility. As at June 30, 2012, Leisureworld had 29,272,889 common shares issued and outstanding.
Dino Chiesa, Chairman; David Cutler, CEO; and Manny DiFilippo, CFO, will host a conference call for the investment community on Thursday, August 9 at 11:00 a.m. (ET). The call-in numbers for participants are 416-340-2218 or 866-226-1793. The call will be webcast at: http://www.gowebcasting.com/3579.
A replay of the call will be available until August 23, 2012. To access the replay, dial 905-694-9451 or 800-408-3053 (pass code: 9211730). The webcast archive will be available via Leisureworld's website or the web link above.
Leisureworld Senior Care Corporation is Canada's fifth largest operator of seniors' housing and the third largest licensed long-term care (LTC) provider in Ontario. Leisureworld owns and operates 27 LTC homes across Ontario with 4,474 beds. The Company also owns and operates six retirement residences and one independent living residence, representing 768 suites, in Ontario and British Columbia. Leisureworld subsidiaries include: Preferred Health Care Services, an accredited provider of professional nursing and personal support services; and Ontario Long Term Care, a provider of purchasing services, and dietary, social work, and other regulated health professional services. For more information, please visit the Company's website at www.leisureworld.ca.
Certain of the statements contained in this news release are forward-looking statements and are provided for the purpose of presenting information about management's current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements generally use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "estimate", "believe" or other similar words and include, among other things, statements related to the Company's financial results or strategic plans. These statements are subject to significant known and unknown risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions, including the funding of long-term care facilities by government entities. Other material factors or assumptions that were applied in formulating the forward-looking statements contained herein include the assumption that the business and economic conditions affecting Leisureworld's operations will continue substantially in their current state, including, with respect to industry conditions, general levels of economic activity and government regulations.
Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of Leisureworld as at the date of this news release and speak only as at the date of this news release. Leisureworld does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
Leisureworld Senior Care Corporation
Chief Financial Officer
Leisureworld Senior Care Corporation
(416) 447-4740 ext. 232
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