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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2018
 
EPR Properties
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Maryland
 
001-13561
 
43-1790877
(State or other jurisdiction of
incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
909 Walnut Street, Suite 200
Kansas City, Missouri 64106
(Address of principal executive office)(Zip Code)
(816) 472-1700
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o









Item 2.02 Results of Operations and Financial Condition.

On July 30, 2018, the Company announced its results of operations and financial condition for the second quarter and six months ended June 30, 2018. The public announcement was made by means of a press release, the text of which is set forth in Exhibit 99.1 hereto and is hereby incorporated by reference herein.
In addition, on July 30, 2018, the Company made available on its website an investor slide presentation and supplemental operating and financial data for the second quarter and six months ended June 30, 2018, the text of which are set forth in Exhibits 99.2 and 99.3 hereto, respectively, and are hereby incorporated by reference herein.
The information set forth in Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1, 99.2 and 99.3, is being “furnished” and shall not be deemed “filed” for the purposes of or otherwise subject to liabilities under Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 9.01 Financial Statements and Exhibits.
 
 
 
 
Exhibit
No.
  
Description
  
  
Press Release dated July 30, 2018 issued by EPR Properties announcing its results of operations and financial condition for the second quarter and six months ended June 30, 2018.
 
 
  
Investor slide presentation for the second quarter and six months ended June 30, 2018, made available by EPR Properties on July 30, 2018.
 
 
 
 
Supplemental Operating and Financial Data for the second quarter and six months ended June 30, 2018, made available by EPR Properties on July 30, 2018.







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
EPR PROPERTIES
 
 
 
 
By:
 
/s/ Mark A. Peterson
 
 
 
Mark A. Peterson
 
 
 
Executive Vice President, Treasurer and Chief Financial
Officer
Date: July 30, 2018
 




















































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Section 2: EX-99.1 (PRESS RELEASE)

Exhibit
Exhibit 99.1





EPR PROPERTIES REPORTS SECOND QUARTER 2018 RESULTS
Company Reports Record Quarterly Revenue and Earnings
Increases Earnings Guidance for 2018

Kansas City, MO, July 30, 2018 -- EPR Properties (NYSE:EPR) today announced operating results for the second quarter and six months ended June 30, 2018.    
    
Three Months Ended June 30, 2018
Total revenue was $202.9 million for the second quarter of 2018, including a $45.9 million prepayment fee received from Och-Ziff Real Estate ("OZRE") as further discussed below, and represents a 37% increase from $147.8 million for the same quarter in 2017.
Net income available to common shareholders was $85.5 million, or $1.15 per diluted common share, for the second quarter of 2018 compared to $74.6 million, or $1.02 per diluted common share, for the same quarter in 2017.
Funds From Operations (FFO) (a non-GAAP financial measure) for the second quarter of 2018 was $139.0 million, or $1.84 per diluted common share, compared to $85.0 million, or $1.15 per diluted common share, for the same quarter in 2017.
FFO as adjusted (a non-GAAP financial measure) for the second quarter of 2018 was $141.8 million, or $1.87 per diluted common share, compared to $94.9 million, or $1.29 per diluted common share, for the same quarter in 2017, representing a 45% increase in per share results.

Six Months Ended June 30, 2018
Total revenue was $357.8 million for the six months ended June 30, 2018, representing a 29% increase from $276.9 million for the same period in 2017.
Net income available to common shareholders was $109.0 million, or $1.47 per diluted common share, for the six months ended June 30, 2018 compared to $122.5 million, or $1.78 per diluted common share, for the same period in 2017.
FFO (a non-GAAP financial measure) for the six months ended June 30, 2018 was $200.1 million, or $2.67 per diluted common share, compared to $158.9 million, or $2.30 per diluted common share, for the same period in 2017.
FFO as adjusted (a non-GAAP financial measure) for the six months ended June 30, 2018 was $235.8 million, or $3.12 per diluted common share, compared to $171.4 million, or $2.48 per diluted common share, for the same period in 2017, representing a 26% increase in per share results.


“We are pleased to announce another quarter of record revenues and earnings, as well as an increase in our annual earnings guidance,” stated Company President and CEO Greg Silvers. “This ongoing strong performance is supported by our differentiated portfolio of high quality assets and the underlying strength of each of our investment segments. We also continued our successful capital recycling efforts, allowing EPR to earn attractive prepayment fees and to reinvest the proceeds in accretive opportunities. Additionally, with the completion of a $400 million bond offering our balance sheet is strong and well positioned for future growth.”




A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in thousands, except per share amounts):
 
 
Three Months Ended June 30,
 
 
2018
 
2017
 
 
Amount
 
FFO/share
 
Amount
 
FFO/share
FFO available to common shareholders
$
139,037

 
$
1.84

 
$
84,979

 
$
1.15

 
Costs associated with loan refinancing or payoff
15

 

 
9

 

 
Transaction costs
405

 
0.01

 
218

 

 
Litigation settlement expense
2,090

 
0.03

 

 

 
Termination fee included in gain on sale

 

 
3,900

 
0.05

 
Impairment of direct financing lease - allowance for lease loss portion (1)

 

 
7,298

 
0.10

 
Gain on early extinguishment of debt

 

 
(977
)
 
(0.01
)
 
Gain on insurance recovery (included in other income)

 

 
(606
)
 

 
Deferred income tax expense
235

 

 
50

 

 
Impact of Series C and Series E Dilution

 
(0.01
)
 

 

FFO as adjusted available to common shareholders
$
141,782

 
$
1.87

 
$
94,871

 
$
1.29

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
 
$
1.08

 
 
 
$
1.02

FFO as adjusted available to common shareholders payout ratio
 
 
58
%
 
 
 
79
%

 
 
Six Months Ended June 30,
 
 
2018
 
2017
 
 
Amount
 
FFO/share
 
Amount
 
FFO/share
FFO available to common shareholders
$
200,061

 
$
2.67

 
$
158,873

 
$
2.30

 
Costs associated with loan refinancing or payoff
31,958

 
0.43

 
14

 

 
Transaction costs
1,014

 
0.01

 
275

 

 
Litigation settlement expense
2,090

 
0.03

 

 

 
Termination fee included in gain on sale

 

 
5,820

 
0.08

 
Impairment of direct financing lease - allowance for lease loss portion (1)

 

 
7,298

 
0.10

 
Gain on early extinguishment of debt

 

 
(977
)
 
(0.01
)
 
Gain on insurance recovery (included in other income)

 

 
(606
)
 

 
Deferred income tax expense
663

 
0.01

 
684

 
0.01

 
Impact of Series C and Series E Dilution

 
(0.03
)
 

 

FFO as adjusted available to common shareholders
$
235,786

 
$
3.12

 
$
171,381

 
$
2.48

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
 
$
2.16

 
 
 
$
2.04

FFO as adjusted available to common shareholders payout ratio
 
 
69
%
 
 
 
82
%
(1
)
Impairment charges recognized during the three and six months ended June 30, 2017 total $10.2 million and related to our investment in a direct financing lease, 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 June 30, 2018:

The Entertainment segment included investments in 151 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 13.3 million square feet and was 99% leased, including megaplex theatres that were 100% leased.
The Recreation segment included investments in 18 ski areas, 21 attractions, 31 golf entertainment complexes and ten other recreation facilities. The Company’s portfolio of owned recreation properties was 100% leased.



The Education segment included investments in 65 public charter schools, 67 early education centers and 14 private schools. The Company’s portfolio of owned education properties consisted of 4.7 million square feet and was 98% leased.
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.

The combined owned portfolio consisted of 21.2 million square feet and was 99% leased. As of June 30, 2018, the Company also had a total of $268.1 million invested in property under development.

During the three months ended June 30, 2018, Six Flags Entertainment Corporation ("Six Flags") completed their acquisition of the leasehold interest in five of the Company's attraction properties which were previously operated by Premier Parks, LLC. As a result, Six Flags operates six of the Company's attraction properties at June 30, 2018.

Investment Update

The Company's investment spending for the three months ended June 30, 2018 totaled $129.9 million (bringing the year-to-date investment spending to $238.5 million), and included investments in each of its primary operating segments:

Entertainment investment spending during the three months ended June 30, 2018 totaled $23.8 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 June 30, 2018 totaled $88.6 million, including investment spending on build-to-suit development of golf entertainment complexes and attractions, an acquisition of an attraction property described below and the redevelopment of ski areas.

On June 22, 2018, the Company acquired one attraction property located in Pagosa Springs, Colorado for approximately $36.4 million. The property is a natural hot springs resort and spa on approximately eight acres and is subject to a long-term, triple-net lease.

Education investment spending during the three months ended June 30, 2018 totaled $17.5 million, including spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools.

Early Childhood Education Tenant Update

In July 2018, the Company entered into a new lease agreement with Children’s Learning Adventure USA ("CLA") related to 21 open schools which replaces the prior lease arrangements and provides for a one-month term for rent of $1.0 million expiring on August 31, 2018. The Company may agree to extend this lease, in its sole discretion, if the Company believes CLA is making adequate progress towards a satisfactory restructuring. CLA made all of the $4.2 million of scheduled rent payments under the prior lease arrangements covering the period of March through July, 2018. If the new lease is not extended, CLA will be required to expeditiously vacate these properties, in which case the Company intends to lease some or all of the 21 schools to other operators.

CLA also agreed to relinquish control of four of the Company’s properties that were still under development as the Company no longer intends to develop these properties for CLA.  During the three months ended June 30, 2018, the Company obtained independent appraisals of these four properties and reduced the carrying value of these assets to $9.8 million, recording an impairment charge of $16.5 million. The charge is primarily related to the cost of improvements specific to the development of CLA’s prototype.




CLA continues to negotiate with third parties regarding a restructuring that would permit CLA to continue operation of the CLA properties. In addition, the Company is actively pursuing other alternatives for these properties, including replacement tenants and operators.

Cappelli Legal Settlement
During the three months ended June 30, 2018, the Company entered into a settlement agreement with affiliates of Louis Cappelli whereby each of the parties fully settled all disputes between and among them relating to previously disclosed litigation in which the Company was a defendant. The terms of the settlement agreement include, among other terms, the Company's payment of $2.0 million to the plaintiffs, the mutual release of all parties, and the dismissal of the final pending New York state court case with prejudice.

Capital Recycling

On May 7, 2018, Boyne USA, Inc. ("Boyne") purchased seven ski properties from OZRE that partially secured the Company’s mortgage note receivable due from OZRE. Following the acquisition by Boyne, OZRE made a partial prepayment to the Company of approximately $175.4 million on this mortgage note receivable, leaving a carrying value of $74.6 million at June 30, 2018 that is secured by the remaining six ski properties. In connection with the partial prepayment of this note, the Company recognized a prepayment fee totaling $45.9 million that is included in mortgage and other financing income.
On June 4, 2018, Vail Resorts, Inc. announced it intends to acquire four ski properties from OZRE. This sale is expected to close by the end of the year. These four properties partially secure the Company's mortgage note receivable from OZRE and in conjunction with this sale it is expected that OZRE will prepay the entire remaining note balance. In connection with this prepayment, the Company is entitled to receive a prepayment fee, the amount of which is dependent upon the timing of the note repayment, and is currently estimated to be approximately $15.0 million.
On May 29, 2018, the Company received a partial prepayment of $8.0 million on one mortgage note receivable that is secured by the observation deck of the John Hancock Tower in Chicago, Illinois. In connection with the partial prepayment of this note, the Company recognized a prepayment fee of $1.4 million that is included in mortgage and other financing income.

During the second quarter of 2018, the Company completed the sale of two entertainment parcels located in Illinois for net proceeds totaling $4.2 million and recognized a gain on sale of $0.5 million.
Disposition proceeds and mortgage note pay-offs (excluding principal amortization) totaled $247.4 million for the six months ended June 30, 2018.
Subsequent to quarter end, the Company completed the sale of four public charter schools leased to Imagine Schools Inc. for net proceeds of $43.4 million. In connection with this sale, the Company will recognize a $5.5 million gain on sale during the third quarter of 2018. Additionally subsequent to quarter end, the Company sold one public charter school property, pursuant to a tenant purchase option, for total net proceeds of $11.9 million and will recognize a gain on sale of $1.9 million during the third quarter of 2018.
Balance Sheet Update
Excluding prepayment penalties from earnings, the Company had a net debt to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.6x at June 30, 2018. The Company had $3.0 million of unrestricted cash on hand and $30.0 million outstanding under its $1.0 billion unsecured revolving credit facility at June 30, 2018.
On April 16, 2018, the Company issued $400.0 million in senior unsecured notes due April 15, 2028. The notes bear interest at an annual rate of 4.95%. The Company used the net proceeds from the note offering to pay down its unsecured revolving credit facility.




Dividend Information

The Company declared regular monthly cash dividends during the second quarter of 2018 totaling $1.08 per common share. This dividend represents an annualized dividend of $4.32 per common share, an increase of almost 6% over the prior year, and would be the Company's eighth consecutive year with a significant 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 $0.359375 per share on its 5.75% Series G cumulative redeemable preferred shares.

2018 Guidance

The Company is increasing its 2018 guidance for FFO as adjusted per diluted share to a range of $5.97 to $6.07 from a range of $5.75 to $5.90. In addition, the Company is narrowing its 2018 investment spending guidance to a range of $450.0 million to $650.0 million from a range of $400.0 million to $700.0 million and increasing its 2018 disposition proceeds guidance to a range of $450.0 million to $500.0 million from a range of $350.0 million to $450.0 million.

FFO as adjusted guidance for 2018 is based on FFO per diluted share of $5.40 to $5.45 adjusted for estimated costs associated with loan refinancing or payoff, litigation settlement expense, 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 $3.41 to $3.51 less estimated gain on sale of real estate of a range of $0.21 to $0.26 and the impact of Series C and Series E dilution of $0.06, plus estimated real estate depreciation of $2.04 and impairment of rental properties of $0.22 (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, 2018 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 June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Rental revenue
$
137,019

 
$
123,410

 
$
269,943

 
$
234,196

Other income
646

 
1,304

 
1,276

 
1,996

Mortgage and other financing income
65,202

 
23,068

 
86,616

 
40,702

Total revenue
202,867

 
147,782

 
357,835

 
276,894

Property operating expense
7,334

 
6,072

 
14,898

 
12,422

General and administrative expense
12,976

 
10,660

 
25,300

 
21,717

Litigation settlement expense
2,090

 

 
2,090

 

Costs associated with loan refinancing or payoff
15

 
9

 
31,958

 
14

Gain on early extinguishment of debt

 
(977
)
 

 
(977
)
Interest expense, net
34,079

 
32,967

 
68,416

 
63,659

Transaction costs
405

 
218

 
1,014

 
275

Impairment charges
16,548

 
10,195

 
16,548

 
10,195

Depreciation and amortization
37,582

 
33,148

 
75,266

 
61,225

Income before equity in income from joint ventures and other items
91,838

 
55,490

 
122,345

 
108,364

Equity in (loss) income from joint ventures
(88
)
 
59

 
(37
)
 
51

Gain on sale of real estate
473

 
25,461

 
473

 
27,465

Income before income taxes
92,223

 
81,010

 
122,781

 
135,880

Income tax expense
(642
)
 
(475
)
 
(1,662
)
 
(1,429
)
Net income
91,581

 
80,535

 
121,119

 
134,451

Preferred dividend requirements
(6,036
)
 
(5,952
)
 
(12,072
)
 
(11,904
)
Net income available to common shareholders of EPR Properties
$
85,545

 
$
74,583

 
$
109,047

 
$
122,547

Per share data attributable to EPR Properties common shareholders:
 
 
 
 
 
 
 
Basic earnings per share data:
 
 
 
 
 
 
 
Net income available to common shareholders
$
1.15

 
$
1.02

 
$
1.47

 
$
1.79

Diluted earnings per share data:
 
 
 
 
 
 
 
Net income available to common shareholders
$
1.15

 
$
1.02

 
$
1.47

 
$
1.78

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
74,329

 
73,159

 
74,238

 
68,621

Diluted
74,365

 
73,225

 
74,273

 
68,689












EPR Properties
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands)
 
June 30, 2018
 
December 31, 2017
Assets
 
 
 
Rental properties, net of accumulated depreciation of $810,604 and $741,334 at June 30, 2018 and December 31, 2017, respectively
$
4,853,188

 
$
4,604,231

Land held for development
31,076

 
33,692

Property under development
268,090

 
257,629

Mortgage notes and related accrued interest receivable
641,428

 
970,749

Investment in direct financing leases, net
58,305

 
57,903

Investment in joint ventures
4,999

 
5,602

Cash and cash equivalents
3,017

 
41,917

Restricted cash
11,283

 
17,069

Accounts receivable, net
97,804

 
93,693

Other assets
135,034

 
109,008

Total assets
$
6,104,224

 
$
6,191,493

Liabilities and Equity
 
 
 
Accounts payable and accrued liabilities
$
122,359

 
$
136,929

Dividends payable
32,801

 
30,185

Unearned rents and interest
79,121

 
68,227

Debt
2,983,975

 
3,028,827

Total liabilities
3,218,256

 
3,264,168

Total equity
$
2,885,968

 
$
2,927,325

Total liabilities and equity
$
6,104,224

 
$
6,191,493




EPR Properties
Reconciliation of Non-GAAP Financial Measures
(Unaudited, dollars in thousands except per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
FFO: (A)
 
 
 
 
 
 
 
Net income available to common shareholders of EPR Properties
$
85,545

 
$
74,583

 
$
109,047

 
$
122,547

Gain on sale of real estate
(473
)
 
(25,461
)
 
(473
)
 
(27,465
)
Impairment of rental properties
16,548

 

 
16,548

 

Impairment of direct financing lease-residual value portion (1)

 
2,897

 

 
2,897

Real estate depreciation and amortization
37,359

 
32,906

 
74,823

 
60,786

Allocated share of joint venture depreciation
58

 
54

 
116

 
108

FFO available to common shareholders of EPR Properties
$
139,037

 
$
84,979

 
$
200,061

 
$
158,873

 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
139,037

 
$
84,979

 
$
200,061

 
$
158,873

Add: Preferred dividends for Series C preferred shares
1,940

 
1,941

 
3,880

 
3,882

Diluted FFO available to common shareholders of EPR Properties
$
140,977

 
$
86,920

 
$
203,941

 
$
162,755

 
 
 
 
 
 
 
 
 
FFO per common share:
 
 
 
 
 
 
 
Basic
$
1.87

 
$
1.16

 
$
2.69

 
$
2.32

Diluted
1.84

 
1.15

 
2.67

 
2.30

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
74,329

 
73,159

 
74,238

 
68,621

Diluted
74,365

 
73,225

 
74,273

 
68,689

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding-diluted EPS
74,365

 
73,225

 
74,273

 
68,689

Effect of dilutive Series C preferred shares
2,110

 
2,063

 
2,104

 
2,058

Adjusted weighted average shares outstanding-diluted
76,475

 
75,288

 
76,377

 
70,747

 
 
 
 
 
 
 
 
Other financial information:
 
 
 
 
 
 
 
Straight-lined rental revenue
$
2,060

 
$
4,009

 
$
3,934

 
$
9,060

Dividends per common share
$
1.08

 
$
1.02

 
$
2.16

 
$
2.04

 
 
(1)
Impairment charges recognized during the three and six months ended June 30, 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. In addition to FFO, the Company presents FFO as adjusted. Management believes it is useful to provide FFO as adjusted as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO as adjusted is FFO plus costs (gain) associated with loan refinancing or payoff, transaction costs, retirement severance expense, litigation settlement 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 provision for loan losses, and by subtracting gain on early extinguishment of debt, gain (loss) on sale of land, gain on



insurance recovery and deferred tax benefit (expense). FFO and FFO as adjusted are non-GAAP financial measures. FFO and FFO as adjusted do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are 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 would be dilutive to FFO per share for the three and six months ended June 30, 2018. Therefore, the additional 2.1 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 per share for the three and six months ended June 30, 2018. 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 FFOAA per share for the three and six months ended June 30, 2018. 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 FFOAA per share for the three and six months ended June 30, 2018.

The conversion of the 5.75% Series C cumulative convertible preferred shares would be dilutive to FFO and FFOAA per share for the three and six months ended June 30, 2017. Therefore, the additional 2.1 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 and six months ended June 30, 2017. 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 and six months ended June 30, 2017.

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 (both reported in accordance with GAAP) to Net Debt, EBITDAre, 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):



 
June 30,
 
2018
 
2017
Net Debt: (B)
 
 
 
Debt
$
2,983,975

 
$
2,792,920

Deferred financing costs, net
36,020

 
34,086

Cash and cash equivalents
(3,017
)
 
(70,872
)
Net Debt
$
3,016,978

 
$
2,756,134

 
 
 
 
 
Three Months Ended June 30,
 
2018
 
2017
EBITDAre and Adjusted EBITDA:
 
 
 
Net income
$
91,581

 
$
80,535

Interest expense, net
34,079

 
32,967

Income tax expense
642

 
475

Depreciation and amortization
37,582

 
33,148

Gain on sale of real estate
(473
)
 
(25,461
)
Impairment of rental properties
16,548

 

Impairment of direct financing lease - residual value portion

 
2,897

Costs associated with loan refinancing or payoff
15

 
9

Gain on early extinguishment of debt

 
(977
)
Equity in loss (income) from joint ventures
88

 
(59
)
EBITDAre (for the quarter) (C)
$
180,062

 
$
123,534

 
 
 
 
Gain on insurance recovery

 
(606
)
Litigation settlement expense
2,090

 

Impairment of direct financing lease - allowance for lease loss portion

 
7,298

Transaction costs
405

 
218

Prepayment fees
(47,293
)
 

Adjusted EBITDA (for the quarter)
$
135,264

 
$
130,444

 
 
 
 
Adjusted EBITDA (1) (D)
$
541,056

 
$
521,776

 
 
 
 
Net Debt/Adjusted EBITDA Ratio
5.6

 
5.3

 
 
 
 
(1) 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)
NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, the Company calculates EBITDAre as net income, computed in accordance with GAAP, excluding interest expense (net), income tax expense (benefit), depreciation and amortization, gains and losses from sales of depreciable operating properties, impairment losses of depreciable real estate, costs (gain) associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure as it can help facilitate comparisons of operating performance between periods and with other REITs. EBITDAre does not represent cash flow 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 or cash flows or liquidity as defined by GAAP.




(D)
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 EBITDAre (defined above) excluding gain on insurance recovery, retirement severance expense, litigation settlement expense, impairment of direct financing lease (allowance for lease loss portion), the provision for loan losses, transaction costs and prepayment fees, and which is then multiplied by four to get an annual amount.

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, 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.


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

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Section 3: EX-99.2 (EARNINGS RELEASE PRESENTATION)

ex992_6302018earningscal
Q2 2018 EARNINGS CALL JULY 31, 2018 This information is as of the date indicated and, to our knowledge, was timely and accurate when presented. We are under no obligation to update or remove outdated information other than as required by applicable law or regulation.


 
INTRODUCTORY COMMENTS


 
HEADLINES 1. Record Quarterly Revenue and Earnings 3


 
HEADLINES 1. Record Quarterly Revenue and Earnings 2. Successfully Executing our Capital Recycling Strategy 4


 
HEADLINES 1. Record Quarterly Revenue and Earnings 2. Successfully Executing our Capital Recycling Strategy 3. Recent Results Reflect Strong Tenant Performance 5


 
HEADLINES 1. Record Quarterly Revenue and Earnings 2. Successfully Executing our Capital Recycling Strategy 3. Recent Results Reflect Strong Tenant Performance 4. Increasing Earnings Guidance 6


 
PORTFOLIO UPDATE


 
PORTFOLIO STATISTICS $6.7B+ 396 TOTAL PROPERTIES INVESTMENTS IN SERVICE 99% 1.77X RENT OCCUPANCY COVERAGE* $129.9M $236.9M Q2 INVESTMENT Q2 DISPOSITION SPENDING PROCEEDS * Coverage is weighted average for the segments. Theatres and Family Entertainment Centers data is TTM March 2018. Golf Entertainment Complexes and Other Recreation data is TTM March 2018. Ski Area data is TTM April 2018 and Attractions data is TTM August 30, 2017. Public Charter School data is TTM June 2017, Private school data is TTM June 2017 and Early Childhood Education data is TTM March 2018. 8


 
ENTERTAINMENT EPR PORTFOLIO DETAIL $3.0B 169 1* 23** 1.67x $23.8M INVESTED PROPERTIES PROPERTY OPERATORS RENT Q2 2018 IN SERVICE UNDER COVERAGE INVESTMENT DEVELOPMENT SPENDING UPDATES YTD Box Office revenue is up ~8%*** Box Office expected to end the year up 2% to 4% * Property not yet in service , ** Does not include operators at ERCs, *** Source: Box Office Mojo Megaplex Theatres Entertainment Retail Centers Family Entertainment Centers 9


 
RECREATION EPR PORTFOLIO DETAIL $2.1B 80 5* INVESTED PROPERTIES PROPERTIES IN SERVICE UNDER DEVELOPMENT 21 2.05x $88.6M OPERATORS RENT Q2 2018 COVERAGE INVESTMENT SPENDING *Properties not yet in service Golf Ski Attractions Other Recreation 10


 
RECREATION 11


 
RECREATION EPR PORTFOLIO DETAIL $2.1B 80 5* 21 2.05x $88.6M INVESTED PROPERTIES PROPERTIES OPERATORS RENT Q2 2018 IN SERVICE UNDER COVERAGE INVESTMENT DEVELOPMENT SPENDING UPDATES Received ~$221M proceeds from Och-Ziff Real Estate loan paydown, expect additional ~$90M in Q4 Through April, ski visits were up 7% and revenue was up 8% versus the trailing three-year average Expanded Six Flags partnership to 6 Attractions *Properties not yet in service Golf Ski Attractions Other Recreation 12


 
EDUCATION EPR PORTFOLIO DETAIL $1.4B 146 6* 58 1.47x $17.4M INVESTED PROPERTIES PROPERTIES OPERATORS RENT Q2 2018 IN SERVICE UNDER COVERAGE INVESTMENT DEVELOPMENT SPENDING UPDATES Reduced exposure to Imagine Schools – sold four properties in July 2018, netting ~$43M New agreement with Children’s Learning Adventure (CLA) terminates August 31, may be extended if CLA makes satisfactory progress *Properties not yet in service Public Charter Schools Private Schools Early Childhood Education 13


 
SUMMARY PLANNED DISPOSITIONS $450M – $500M INVESTMENT SPENDING GUIDANCE $450M – $650M 14


 
FINANCIAL REVIEW


 
FINANCIAL PERFORMANCE QUARTER ENDED JUNE 30, 2018 2017 $ CHANGE % CHANGE Total Revenue $202.9 $147.8 $55.1 37% Net Income - Common 85.5 74.6 10.9 15% FFO – Common* 139.0 85.0 54.0 64% FFO as adj. – Common* 141.8 94.9 46.9 49% Net Income/share – Common 1.15 1.02 0.13 13% FFO/share – Common* 1.84 1.15 0.69 60% FFO/share - Common, as adj.* 1.87 1.29 0.58 45% (In millions except per share data) *See investor supplementals for the applicable periods for definitions and calculations of these non-GAAP measures. 16


 
FINANCIAL PERFORMANCE SIX MONTHS ENDED JUNE 30, 2018 2017 $ CHANGE % CHANGE Total Revenue $357.8 $276.9 $80.9 29% Net Income - Common 109.0 122.5 (13.5) (11%) FFO – Common* 200.1 158.9 41.2 26% FFO as adj. – Common* 235.8 171.4 64.4 38% Net Income/share – Common 1.47 1.78 (0.31) (17%) FFO/share – Common* 2.67 2.30 0.37 16% FFO/share - Common, as adj.* 3.12 2.48 0.64 26% (In millions except per share data) *See investor supplementals for the applicable periods for definitions and calculations of these non-GAAP measures. 17


 
KEY RATIOS* QUARTER ENDED JUNE 30, 2018 2017 Fixed charge coverage 3.2x 3.1x Debt service coverage 3.7x 3.6x Interest coverage 3.7x 3.6x Net debt to Adjusted EBITDA 5.6x 5.3x FFO as adjusted payout 58% 79% *See investor supplementals for the applicable periods for definitions and calculations of these non-GAAP measures. Ratios exclude all termination and prepayment fees except FFO as adjusted payout percentage. 18


 
CAPITAL MARKETS AND LIQUIDITY UPDATE


 
CAPITAL MARKETS UPDATE TOTAL DEBT IS $3.0B AT 6/30/18 • $2.9B is fixed rate or fixed through interest rate swaps, wtd. avg. = 4.6% • $30M outstanding on $1B revolver at 6/30/18; $3.0M unrestricted cash ISSUANCE OF SENIOR UNSECURED NOTES • On April 16, 2018, issued $400M of 10-year senior unsecured notes at a coupon of 4.95% CAD DERIVATIVE HEDGING ACTIVITY • On July 1, 2018, settled two forward agreements with a combined notional amount of $200M; received $30.8M. • Entered into two cross-currency swaps effective July 1, 2018 for a notional amount of $200M and locked in exchange rate of $1.32 CAD per USD through June 2023 20


 
2018 GUIDANCE FFO AS ADJUSTED PER SHARE Revised Guidance $5.97 - $6.07 Prior Guidance $5.75 - $5.90 INVESTMENT SPENDING Revised Guidance $450M - $650M Prior Guidance $400M - $700M DISPOSITION PROCEEDS Revised Guidance $450M - $500M Prior Guidance $350M - $450M 21


 
* RECONCILIATION OF MIDPOINT OF FFOAA/SHARE GUIDANCE FFO as adjusted per share (previous guidance midpoint) $5.82 Additional prepayment fees from OZRE/Chicago 0.23 observation deck Lost interest income, net, related to additional note (0.02) pay-downs Lower termination fees related to Education (0.01) Properties Incremental dilution from convertible preferreds (0.01) Net increase to prepayment and termination fees 0.19 Additional percentage rents 0.01 Additional payment from CLA, net of expenses 0.01 Increase in G&A expense (0.01) FFO as adjusted per share (current guidance midpoint) 6.02 *See investor supplementals for the definition of this non-GAAP measure. 22


 
CLOSING COMMENTS


 
EPR Properties 909 Walnut Street, Suite 200 Kansas City, MO 64106 www.eprkc.com (888) EPR REIT info@eprkc.com


 
(Back To Top)

Section 4: EX-99.3 (SUPPLEMENTAL OPERATING AND FINANCIAL DATA)

Exhibit



Exhibit 99.3


394420141_eprsupplementalcoverva04.jpg





394420141_image0a14.jpg                
Supplemental Operating and Financial Data
Second Quarter and Six Months Ended June 30, 2018







TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
SECTION
 
 
 
 
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
Company Profile
Investor Information
Selected Financial Information
Selected Balance Sheet Information
Selected Operating Data
Funds From Operations and Funds From Operations as Adjusted
Adjusted Funds From Operations
Capital Structure
Summary of Ratios
Summary of Mortgage Notes Receivable
Capital Spending and Disposition Summaries
Property Under Development - Investment Spending Estimates
Financial Information and Total Investment by Segment
Lease Expirations
Top Ten Customers by Total Revenue
Net Asset Value (NAV) Components
Annualized GAAP Net Operating Income
Guidance
Definitions-Non-GAAP Financial Measures
Appendix-Reconciliation of Certain Non-GAAP Financial Measures


394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 2
 
 
 




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, 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. 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.

NON-GAAP INFORMATION

This document contains certain non-GAAP measures. These non-GAAP measures, as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP measures are not measurements of financial performance or liquidity under GAAP and should not be considered alternatives to the Company's other financial information determined under GAAP. See pages 31 through 33 for definitions of certain non-GAAP financial measures used in this document and the reconciliations of certain non-GAAP measures in the Appendix on pages 34 through 41.



394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 3
 
 
 




COMPANY PROFILE

    
 
THE COMPANY
 
EPR Properties (“EPR” or the “Company”) is a self-administered and self-managed real estate investment trust. EPR was formed in August 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering was completed on November 18, 1997.

 
Since that time, the Company has grown into a leading specialty real estate investment trust with an investment portfolio that includes Entertainment, Recreation, Education and Other specialty investments.

 
394420141_eprsegmentsv2a01.jpg
 
 
 
 
 
 
        
COMPANY STRATEGY
Our vision is to become the leading specialty REIT by focusing our unique knowledge and resources on select underserved real estate segments which provide the potential for outsized returns.
EPR’s primary business objective is to enhance shareholder value by achieving predictable growth in Funds from Operations (“FFO”) and dividends per share. Central to our growth is remaining focused on acquiring or developing properties in our primary investment segments: Entertainment, Recreation and Education. We may also pursue opportunities to provide mortgage financing for these investment segments in certain situations where this structure is more advantageous than owning the underlying real estate.
Our segment focus is consistent with our strategic organizational design which is structured around building centers of knowledge and strong operating competencies in each of our primary segments. Retention and building of this knowledge depth creates a competitive advantage allowing us to more quickly identify key market trends.
To this end we will deliberately apply information and our ingenuity to identify properties which represent potential logical extensions within each of our segments, or potential future investment segments. As part of our strategic planning and portfolio management process we assess new opportunities against the following five key underwriting principles:
INFLECTION OPPORTUNITY - Renewal or restructuring in an industry’s properties
ENDURING VALUE - Real estate devoted to and improving long-lived activities
EXCELLENT EXECUTION - Market-dominant performance that creates value beyond tenant credit
ATTRACTIVE ECONOMICS - Accretive initial returns along with growth in yield
ADVANTAGEOUS POSITION - Sustainable competitive advantages



394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 4
 
 
 




INVESTOR INFORMATION
 
 
 
SENIOR MANAGEMENT
 
 
 
Greg Silvers
 
Mark Peterson
President and Chief Executive Officer
 
Executive Vice President and Chief Financial Officer
 
 
 
Craig Evans
 
Mike Hirons
Senior Vice President, General Counsel and Secretary
 
Senior Vice President - Strategy and Asset Management
 
 
 
Tonya Mater
 
 
Vice President and Chief Accounting Officer
 
 
 
 
 
COMPANY INFORMATION
 
 
 
CORPORATE HEADQUARTERS
 
TRADING SYMBOLS
909 Walnut Street, Suite 200
 
Common Stock:
Kansas City, MO 64106
 
EPR
888-EPR-REIT
 
Preferred Stock:
www.eprkc.com
 
EPR-PrC
 
 
EPR-PrE
STOCK EXCHANGE LISTING
 
EPR-PrG
New York Stock Exchange
 
 
EQUITY RESEARCH COVERAGE
 
 
 
Bank of America Merrill Lynch
Jeffrey Spector/Joshua Dennerlein
646-855-1363
Citi Global Markets
Michael Bilerman/Nick Joseph
212-816-4471
FBR & Co.
David Corak
703-312-1610
Janney Montgomery Scott
Rob Stevenson
646-840-3217
J.P. Morgan
Anthony Paolone/Nikita Bely
212-622-6682
Kansas City Capital Associates
Jonathan Braatz
816-932-8019
Keybanc Capital Markets
Jordan Sadler/Craig Mailman
917-368-2280
Ladenburg Thalmann
John Massocca
212-409-2056
Raymond James & Associates
Collin Mings
727-567-2585
RBC Capital Markets
Michael Carroll/Wes Golladay
440-715-2649
Stifel
Simon Yarmak
443-224-1345
SunTrust Robinson Humphrey
Ki Bin Kim
212-303-4124

EPR Properties is followed by the analysts identified above.  Please note that any opinions, estimates, forecasts or recommendations regarding EPR Properties’ performance made by these analysts are theirs alone and do not represent opinions, estimates, forecasts or recommendations of EPR Properties or its management.  EPR Properties does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 5
 
 
 




SELECTED FINANCIAL INFORMATION
(UNAUDITED, DOLLARS AND SHARES IN THOUSANDS)

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED JUNE 30,
 
SIX MONTHS ENDED JUNE 30,
Operating Information:
2018
 
2017
 
2018
 
2017
Revenue
$
202,867

 
$
147,782

 
$
357,835

 
$
276,894

Net income available to common shareholders of EPR Properties
85,545

 
74,583

 
109,047

 
122,547

EBITDAre (1)
180,062

 
123,534

 
314,533

 
235,182

Adjusted EBITDA (1)
135,264

 
130,444

 
270,344

 
242,149

Interest expense, net
34,079

 
32,967

 
68,416

 
63,659

Recurring principal payments

 
437

 

 
2,852

Capitalized interest
2,294

 
2,550

 
4,538

 
5,341

Straight-lined rental revenue
2,060

 
4,009

 
3,934

 
9,060

Dividends declared on preferred shares
6,036

 
5,952

 
12,072

 
11,904

Dividends declared on common shares
80,277

 
75,126

 
160,539

 
140,746

General and administrative expense
12,976

 
10,660

 
25,300

 
21,717

 
 
 
 
 
 
 
 
 
JUNE 30,
 
 
 
 
Balance Sheet Information:
2018
 
2017
 
 
 
 
Total assets
$
6,104,224

 
$
5,938,886

 
 
 
 
Accumulated depreciation
810,604

 
676,364

 
 
 
 
Total assets before accumulated depreciation (gross assets)
6,914,828

 
6,615,250

 
 
 
 
Cash and cash equivalents
3,017

 
70,872

 
 
 
 
Debt
2,983,975

 
2,792,920

 
 
 
 
Deferred financing costs, net
36,020

 
34,086

 
 
 
 
Net debt (1)
3,016,978

 
2,756,134

 
 
 
 
Equity
2,885,968

 
2,901,346

 
 
 
 
Common shares outstanding
74,348

 
73,661

 
 
 
 
Total market capitalization (using EOP closing price)
8,205,138

 
8,396,356

 
 
 
 
Net debt/total market capitalization
37
%
 
33
%
 
 
 
 
Net debt/gross assets
44
%
 
42
%
 
 
 
 
Net debt/Adjusted EBITDA (2)
5.6

 
5.3

 
 
 
 
Adjusted net debt/Annualized adjusted EBITDA (1)(3)(4)
5.5

 
5.1

 
 
 
 
 
 
 
 
 
 
 
 
(1) See pages 31 through 33 for definitions.
(2) Adjusted EBITDA is for the quarter multiplied times four. See pages 31 through 33 for definitions. See calculation on page 40.
(3) Adjusted net debt is net debt less 40% times property under development. See pages 31 through 33 for definitions.
 
 
 
 
(4) Annualized adjusted EBITDA is adjusted EBITDA for the quarter further adjusted for in-service projects, percentage rent and participating interest and other non-recurring items which is then multiplied times four. These calculations can be found on page 40 under the reconciliation of Adjusted EBITDA and Annualized Adjusted EBITDA. See pages 31 through 33 for definitions.

394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 6
 
 
 




SELECTED BALANCE SHEET INFORMATION
(UNAUDITED, DOLLARS IN THOUSANDS)
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
2ND QUARTER 2018
 
1ST QUARTER 2018
 
4TH QUARTER 2017
 
3RD QUARTER 2017
 
2ND QUARTER 2017
 
1ST QUARTER 2017
Rental properties:
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment
 
$
2,854,274

 
$
2,812,120

 
$
2,762,801

 
$
2,696,125

 
$
2,549,940

 
$
2,545,532

Recreation
 
1,476,759

 
1,452,087

 
1,420,690

 
1,361,445

 
1,320,216

 
754,521

Education
 
1,175,973

 
1,170,548

 
1,005,340

 
1,033,149

 
938,673

 
877,716

Other
 
156,786

 
156,786

 
156,734

 
156,659

 
156,420

 
156,390

Less: accumulated depreciation
 
(810,604
)
 
(776,404
)
 
(741,334
)
 
(711,384
)
 
(676,364
)
 
(661,029
)
Land held for development
 
31,076

 
33,693

 
33,692

 
33,674

 
33,672

 
22,530

Property under development
 
268,090

 
249,931

 
257,629

 
284,211

 
271,692

 
331,934

Mortgage notes receivable: (1)
 
 
 


 
 
 
 
 
 
 
 
Entertainment
 
23,321

 
31,061

 
31,105

 
39,679

 
36,418

 
33,735

Recreation
 
439,759

 
614,405

 
602,145

 
602,701

 
601,910

 
349,653

Education
 
178,348

 
174,371

 
337,499

 
329,991

 
303,271

 
288,409

Investment in direct financing leases, net
 
58,305

 
58,101

 
57,903

 
57,698

 
93,307

 
103,095

Investment in joint ventures
 
4,999

 
5,538

 
5,602

 
5,616

 
5,581

 
5,522

Cash and cash equivalents
 
3,017

 
24,514

 
41,917

 
11,412

 
70,872

 
14,446

Restricted cash
 
11,283

 
15,640

 
17,069

 
24,323

 
24,255

 
28,523

Accounts receivable, net
 
97,804

 
88,750

 
93,693

 
99,213

 
106,480

 
96,267

Other assets
 
135,034

 
127,725

 
109,008

 
108,498

 
102,543

 
99,538

Total assets
 
$
6,104,224

 
$
6,238,866

 
$
6,191,493

 
$
6,133,010

 
$
5,938,886

 
$
5,046,782

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
122,359

 
$
117,583

 
$
136,929

 
$
140,582

 
$
142,526

 
$
101,438

Common dividends payable
 
26,765

 
26,755

 
25,203

 
25,046

 
25,044

 
22,022

Preferred dividends payable
 
6,036

 
6,036

 
4,982

 
5,951

 
5,952

 
5,952

Unearned rents and interest
 
79,121

 
81,461

 
68,227

 
85,198

 
71,098

 
61,579

Line of credit
 
30,000

 
570,000

 
210,000

 
170,000

 

 
150,000

Deferred financing costs, net
 
(36,020
)
 
(28,558
)
 
(32,852
)
 
(33,951
)
 
(34,086
)
 
(28,231
)
Other debt
 
2,989,995

 
2,589,995

 
2,851,679

 
2,851,876

 
2,827,006

 
2,494,613

Total liabilities
 
3,218,256

 
3,363,272

 
3,264,168

 
3,244,702

 
3,037,540

 
2,807,373

Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and additional paid-in- capital
 
3,492,333

 
3,487,902

 
3,479,755

 
3,421,631

 
3,417,750

 
2,755,783

Preferred stock at par value
 
148

 
148

 
148

 
138

 
139

 
139

Treasury stock
 
(129,048
)
 
(128,707
)
 
(121,591
)
 
(121,539
)
 
(121,533
)
 
(120,955
)
Accumulated other comprehensive income
 
17,497

 
16,481

 
12,483

 
10,919

 
9,698

 
8,606

Distributions in excess of net income
 
(494,962
)
 
(500,230
)
 
(443,470
)
 
(422,841
)
 
(404,708
)
 
(404,164
)
Total equity
 
2,885,968

 
2,875,594

 
2,927,325

 
2,888,308

 
2,901,346

 
2,239,409

Total liabilities and equity
 
$
6,104,224

 
$
6,238,866

 
$
6,191,493

 
$
6,133,010

 
$
5,938,886

 
$
5,046,782

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes related accrued interest receivable.

394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 7
 
 
 




SELECTED OPERATING DATA
(UNAUDITED, DOLLARS IN THOUSANDS)
 
 
 
 
 
 
 
 
 
 
 
 
 
2ND QUARTER 2018
 
1ST QUARTER 2018
 
4TH QUARTER 2017
 
3RD QUARTER 2017
 
2ND QUARTER 2017
 
1ST QUARTER 2017
Rental revenue:

 
 
 
 
 
 
 
 
 
 
Entertainment
$
74,640

 
$
74,848

 
$
74,383

 
$
70,621

 
$
69,403

 
$
68,840

Recreation
34,443

 
33,432

 
33,909

 
32,171

 
29,384

 
17,299

Education
25,649

 
22,385

 
12,862

 
21,479

 
22,333

 
22,357

Other
2,287

 
2,259

 
2,292

 
2,290

 
2,290

 
2,290

Mortgage and other financing income:


 
 
 
 
 
 
 
 
 
 
Entertainment
2,100

 
802

 
981

 
1,151

 
1,096

 
1,179

Recreation
57,540

 
13,705

 
13,590

 
14,140

 
13,104

 
7,906

Education (1)
5,562

 
6,907

 
9,106

 
9,023

 
8,868

 
8,549

Other income
646

 
630

 
577

 
522

 
1,304

 
692

Total revenue
$
202,867

 
$
154,968

 
$
147,700

 
$
151,397

 
$
147,782

 
$
129,112

 


 
 
 
 
 
 
 
 
 
 
Property operating expense
7,334

 
7,564

 
12,891

 
6,340

 
6,072

 
6,350

Other expense

 

 
242

 

 

 

General and administrative expense
12,976

 
12,324

 
9,596

 
12,070

 
10,660

 
11,057

Litigation settlement expense
2,090

 

 

 

 

 

Costs associated with loan refinancing or payoff
15

 
31,943

 
58

 
1,477

 
9

 
5

Gain on early extinguishment of debt

 

 

 

 
(977
)
 

Interest expense, net
34,079

 
34,337

 
35,271

 
34,194

 
32,967

 
30,692

Transaction costs
405

 
609

 
135

 
113

 
218

 
57

Impairment charges
16,548

 

 

 

 
10,195

 

Depreciation and amortization
37,582

 
37,684

 
37,027

 
34,694

 
33,148

 
28,077

Income before equity in income in joint ventures and other items
91,838

 
30,507

 
52,480

 
62,509

 
55,490

 
52,874

Equity in (loss) income from joint ventures
(88
)
 
51

 
(14
)
 
35

 
59

 
(8
)
Gain on sale of real estate
473

 

 
13,480

 
997

 
25,461

 
2,004

Income tax expense
(642
)
 
(1,020
)
 
(383
)
 
(587
)
 
(475
)
 
(954
)
Net income
91,581

 
29,538

 
65,563

 
62,954

 
80,535

 
53,916

Preferred dividend requirements
(6,036
)
 
(6,036
)
 
(6,438
)
 
(5,951
)
 
(5,952
)
 
(5,952
)
Preferred share redemption costs

 

 
(4,457
)
 

 

 

Net income available to common shareholders of EPR Properties
$
85,545

 
$
23,502

 
$
54,668

 
$
57,003

 
$
74,583

 
$
47,964

 
 
 
 
 
 
 
 
 
 
 
 
(1) Represents income from owned assets under direct financing leases and 14 mortgage notes receivable.

394420141_image5a05.jpg
 
 
Q2 2018 Supplemental
Page 8
 
 
 




FUNDS FROM OPERATIONS AND FUNDS FROM OPERATIONS AS ADJUSTED
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE INFORMATION)
FUNDS FROM OPERATIONS ("FFO") (1):
 
2ND QUARTER 2018
 
1ST QUARTER 2018
 
4TH QUARTER 2017
 
3RD QUARTER 2017
 
2ND QUARTER 2017
 
1ST QUARTER 2017
Net income available to common shareholders of EPR Properties
 
$
85,545

 
$
23,502

 
$
54,668

 
$
57,003

 
$
74,583

 
$
47,964

Gain on sale of real estate
 
(473
)
 

 
(13,480
)
 
(997
)
 
(25,461
)
 
(2,004
)
Impairment of rental properties
 
16,548

 

 

 

 

 

Impairment of direct financing lease - residual value portion (2)
 

 

 

 

 
2,897

 

Real estate depreciation and amortization
 
37,359

 
37,464

 
36,797

 
34,457

 
32,906

 
27,880

Allocated share of joint venture depreciation
 
58

 
58

 
55

 
55

 
54

 
54

FFO available to common shareholders of EPR Properties
 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

 
$
84,979

 
$
73,894

 
 
 
 
 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

 
$
84,979

 
$
73,894

Add: Preferred dividends for Series C preferred shares
 
1,940

 

 
1,940

 
1,941

 
1,941

 
1,941

Add: Preferred dividends for Series E preferred shares
 

 

 
1,940

 

 

 

Diluted FFO available to common shareholders of EPR Properties
 
$
140,977

 
$
61,024

 
$
81,920

 
$
92,459

 
$
86,920

 
$
75,835

FUNDS FROM OPERATIONS AS ADJUSTED (1):
 
 
 
 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

 
$
84,979

 
$
73,894

Costs associated with loan refinancing or payoff
 
15

 
31,943

 
58

 
1,477

 
9

 
5

Transaction costs
 
405

 
609

 
135

 
113

 
218

 
57

Litigation settlement expense
 
2,090

 

 

 

 

 

Preferred share redemption costs
 

 

 
4,457

 

 

 

Termination fee included in gain on sale
 

 

 
13,275

 
954

 
3,900

 
1,920

Impairment of direct financing lease - allowance for lease loss portion (2)
 

 

 

 

 
7,298

 

Gain on early extinguishment of debt
 

 

 

 

 
(977
)
 

Gain on insurance recovery (included in other income)
 

 

 

 

 
(606
)
 

Deferred income tax expense (benefit)
 
235

 
428

 
(99
)
 
227

 
50

 
634

FFO as adjusted available to common shareholders of EPR Properties
 
$
141,782

 
$
94,004

 
$
95,866

 
$
93,289

 
$
94,871

 
$
76,510

 
 
 
 
 
 
 
 
 
 
 
 
 
FFO as adjusted available to common shareholders of EPR Properties
 
$
141,782

 
$
94,004

 
$
95,866

 
$
93,289

 
$
94,871

 
$
76,510

Add: Preferred dividends for Series C preferred shares
 
1,940

 
1,940

 
1,940

 
1,941

 
1,941

 
1,941

Add: Preferred dividends for Series E preferred shares
 
1,939

 
1,939

 
1,940

 

 

 

Diluted FFO as adjusted available to common shareholders of EPR Properties
 
$
145,661

 
$
97,883

 
$
99,746

 
$
95,230

 
$
96,812