Real Estate — November 7, 2012Leisureworld Senior Care Corporation Reports Strong 2012 Third Quarter Results, Increases Dividend
MARKHAM, ONTARIO--(Marketwire - Nov. 7, 2012) - Leisureworld Senior Care Corporation (TSX:LW) ("Leisureworld" or "the Company") today announced its financial results for the third quarter and nine months ended September 30, 2012. The Company also announced a 5.9% dividend increase, raising its monthly dividend to $0.075 per share, representing $0.90 per share on an annualized basis. The increase will be effective for Leisureworld's December 2012 dividend.
Percentage calculations in the following summary of Leisureworld's third quarter financial results 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.
|$000s except per share data||Quarter ended Sept 30, 2012||Quarter ended Sept 30, 2011||Nine months ended Sept 30, 2012||Nine months ended Sept 30, 2011|
|Average total occupancy (LTC)||99.1||%||98.9||%||98.7||%||98.5||%|
|Average private occupancy (LTC)||99.0||%||97.0||%||98.2||%||96.6||%|
|Average occupancy (retirement and independent living)1||74.8||%||59.5||%||
|Net Operating Income (NOI)2||15,393||12,358||41,365||33,872|
|Funds from Operations (FFO)2||7,164||5,033||19,374||14,820|
|Construction Funding (Principal)||1,468||1,352||4,266||4,041|
|Adjusted Funds from Operations (AFFO)23||9,095||7,656||25,731||19,825|
|Basic AFFO per share||$||0.3111||$||0.3135||$||0.9631||$||0.8790|
|Dividends declared per share||$||0.2124||$||0.2124||$||0.6372||$||0.6372|
|Basic AFFO payout ratio||68.3||%||67.8||%||66.2||%||72.5||%|
|1.||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 retirement and independent living occupancy rates include the addition of the BC retirement properties as of May 24, 2012, with one of the properties (The Royale Astoria) currently in lease-up and not yet at stabilized occupancy.|
|2.||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).|
|3.||AFFO includes adjustments of $0, $65, $52 and $29, respectively, for HRIS expenses; and $928, $1,299, $2,872 and $2,204, respectively, for income support.|
"We achieved a 24.6% increase in Net Operating Income and an 18.8% increase in Adjusted Funds from Operations, compared to the third quarter a year ago. Our year-to-date payout ratio is 66.2%. This strong performance was driven by growth in both our LTC and retirement residence portfolios. With our continued strong performance, our board today approved a 5.9% increase to our shareholder dividend, demonstrating confidence in the sustainability of Leisureworld's cash flows and growth potential," said Dino Chiesa, Interim CEO and Chairman of Leisureworld. "Growth in our LTC portfolio was driven by increased funding, the acquisition of the Madonna LTC home in Orleans, Ontario, which we closed early in the quarter, and disciplined cost management. Our retirement residence portfolio growth resulted primarily from the acquisition of the BC retirement properties in our second quarter, and higher occupancy rates in the Ontario portfolio."
"Looking ahead, our growth strategy remains focused on: ensuring exceptional quality seniors care and services, supporting and increasing our occupancy rates, maintaining disciplined cost management, building our presence across the continuum of seniors living in Canada, and maintaining a strong balance sheet and reliable shareholder dividends," added Mr. Chiesa.
During the second quarter, Leisureworld completed the acquisition of three luxury retirement residences in the Greater Vancouver Area in British Columbia ("the BC Portfolio"), which include The Royale Pacifica, The Royale Peninsula and The Royale Astoria. The BC portfolio purchase consideration included an income support agreement of $2.0 million for The Royale Astoria, to be held in escrow as an income guarantee to supplement cash flow during the lease-up period.
On July 16, 2012, Leisureworld closed the acquisition of the Madonna LTC home, a 160-bed, "A" Class Long-Term Care (LTC) residence in Orleans, Ontario. The property's current occupancy rate is in excess of 97% and includes a 60/40 private/shared accommodation ratio.
For the quarter ended September 30, 2012, Leisureworld's Net Operating Income (NOI) increased 24.6% to $15.4 million, compared to $12.4 million in the third quarter a year ago. The Company's LTC operations generated NOI of $11.9 million, compared to $11.1 million for the third quarter 2011. The increase was primarily attributable to the inclusion of NOI from the Madonna acquisition, increased funding and higher private occupancy rates, partly offset by higher property operating costs. Leisureworld's retirement residence portfolio generated a $2.3 million increase in NOI mainly as a result of the acquisition of the BC Portfolio. NOI for the Company's Preferred Health Care Services (PHCS) subsidiary decreased by $80,000 compared to third quarter 2011 results. This decrease was due to higher staffing costs to accommodate increased volumes and a temporary increase to operating costs.
Leisureworld generated $7.2 million in Funds from Operations (FFO) in the third quarter of 2012, an increase of 42.3% from $5.0 million in the third quarter a year ago. The increase reflects higher NOI in the quarter and a higher transaction costs add-back of $0.4 million. Increased FFO was partly offset by increased finance charges of $0.6 million, higher administrative expenses and current income taxes of $0.5 million and $0.2 million, respectively. The net finance charges increased due to the debt assumed in relation to the acquisition of the BC Portfolio and interest on the mortgage assumed on the Madonna acquisition. This was partly offset by lower interest charges on the credit facility related to the acquisition of the Ontario portfolio, as the Company paid down $20.0 million of this facility during the quarter.
Adjusted Funds from Operations (AFFO) for the third quarter of 2012 increased 18.8% to $9.1 million, compared with $7.7 million in the third quarter of 2011. Increased AFFO was primarily attributable to increased FFO in the quarter, partly offset by lower income support and higher maintenance capital expenditures.
Dividends declared by Leisureworld in the quarter were $0.2124 per share and Basic AFFO per share was $0.3110, representing a quarterly payout ratio of 68.3%. Leisureworld's payout ratio in the third quarter of 2011 was 67.8%.
Leisureworld generated total revenue of $82.9 million for the quarter ended September 30, 2012, an increase of 13.1% from $73.3 million in the third quarter a year ago. LTC contributed approximately $4.5 million of the increase, primarily as a result of the Madonna property acquisition and increased government funding. Retirement residence revenue accounted for $4.3 million of the increase, primarily as a result of the addition of the BC properties acquired late in the second quarter as well as increased revenues from the Ontario Portfolio due to higher occupancy levels. PHCS contributed $0.9 million of the revenue increase, primarily due to a rise in personal support contract volumes.
The Company's net loss was $0.1 million in the third quarter of 2012 compared to a net loss of $3.3 million in the third quarter of 2011. This improvement resulted primarily from higher income from operations, largely attributable to the retirement portfolio acquisitions, as well as reduced depreciation and amortization charges. This was partly offset by a $0.1 million tax expense, compared to an income tax recovery of $1.1 million in the third quarter of 2011. The increase in current taxes was primarily driven by earnings attributable to the Madonna and BC Portfolio acquisitions.
For the nine months ended September 30, 2012, NOI was $41.4 million, up 22.1% from $33.9 million in the corresponding period in 2011. LTC contributed $2.4 million of the NOI increase, reflecting increased LTC funding, preferred accommodation premiums, lower utility costs and higher management fees. The retirement portfolio contributed a $4.7 million increase in NOI, attributable to continued lease-up of the Ontario Portfolio and the recent acquisition of the BC Portfolio. PCHS contributed $0.4 million to the increase in NOI. AFFO for the first nine months of 2012 increased 29.8% to $25.7 million from $19.8 million in the first nine months of 2011. Favourable FFO contributed $4.6 million to the increase, partly offset by higher maintenance capital expenditures. Other factors contributing to the AFFO increase include higher income support draws, increased principal portion of construction funding and the prior year reduction associated with the income tax book to filing adjustment, which did not recur in the current year. Dividends declared by Leisureworld in the first nine months of 2012 totaled $0.6372 per share and Basic AFFO per share was $0.9631, representing a payout ratio of 66.2% for the period.
For the nine months ended September 30, 2012, the Company's net loss was $7.8 million, compared to $8.6 million in the same period a year ago. The decreased net loss resulted from higher income from operations of $6.7 million and from lower expenses related to depreciation and amortization, partly offset by a $7.0 million increase in income tax expense over the comparable period last year, and a one-time $2.7 million impairment loss related to the write down of the Company's Human Resource Information System in the second quarter.
For the nine months ended September 30, 2012, total tax expense was $2.6 million compared to a recovery of $4.4 million last year. The variance was primarily a result of the rate adjustment in deferred taxes of $3.8 million as well as the book to filing tax adjustment in the third quarter of the prior year. The Company also had higher earnings associated with the performance of the acquired portfolios.
"Occupancy rates for the Royale Ontario retirement properties in Kingston and Kanata at quarter end were 71.3% and 68.4%, respectively. As at September 30, 2012, we had drawn down the full amount of income support related to these properties. We do not expect this to have a significant impact on our AFFO or payout ratio during the remainder of the lease-up period. We continue to target stabilized occupancy in the second half of 2013," said Manny DiFilippo, Chief Financial Officer. "As at September 30, 2012, $0.7 million had been drawn down from our $2.0 million in income support funds related to the Royale Astoria in Port Coquitlam, B.C., which is in-line with our financial performance expectations related to the Royale Astoria. We expect this property to reach stabilized occupancy by early 2014."
As at September 30, 2012, the Company's debt to gross book value ratio was 52.1%. 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; $35.0 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; an assumed $23.7 million mortgage that matures on January 1, 2017 and an assumed $15.7 million mortgage. Leisureworld had cash and cash equivalents at quarter end totaling $20.1 million and a further committed undrawn revolving credit facility with a Canadian chartered bank of $10.0 million for working capital purposes. As at September 30, 2012, Leisureworld had 29,272,889 common shares issued and outstanding.
Dino Chiesa, Chairman and Interim CEO, and Manny DiFilippo, CFO, will host a conference call for the investment community on Thursday, November 8, 2012 at 1:00 p.m. (ET). The call-in numbers for participants are 416-695-6616 or 800-355-4959. The call will be webcast at: http://www.gowebcasting.com/3946.
A replay of the call will be available until November 22, 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
(416) 447-4740 ext. 232
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