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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): February 25, 2019
 
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 February 25, 2019, the Company announced its results of operations and financial condition for the fourth quarter and year ended December 31, 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 February 25, 2019, the Company made available on its website an investor slide presentation and supplemental operating and financial data for the fourth quarter and year ended December 31, 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 February 25, 2019 issued by EPR Properties announcing its results of operations and financial condition for the fourth quarter and year ended December 31, 2018.
 
 
  
Investor slide presentation for the fourth quarter and year ended December 31, 2018, made available by EPR Properties on February 25, 2019.
 
 
 
 
Supplemental Operating and Financial Data for the fourth quarter and year ended December 31, 2018, made available by EPR Properties on February 25, 2019.







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: February 25, 2019
 




















































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Section 2: EX-99.1 (PRESS RELEASE)

Exhibit
Exhibit 99.1






EPR PROPERTIES REPORTS FOURTH QUARTER AND 2018 YEAR-END RESULTS
Company Reports Record Annual Revenue and Earnings
Introduces Guidance for 2019

Kansas City, MO, February 25, 2019 -- EPR Properties (NYSE:EPR) today announced operating results for the fourth quarter and year ended December 31, 2018.    
    
Three Months Ended December 31, 2018
Total revenue was $166.5 million for the fourth quarter of 2018, representing a 13% increase from $147.7 million for the same quarter in 2017.
Net income available to common shareholders was $48.0 million, or $0.65 per diluted common share, for the fourth quarter of 2018 compared to $54.7 million, or $0.74 per diluted common share, for the same quarter in 2017.
Funds From Operations (FFO) (a non-GAAP financial measure) for the fourth quarter of 2018 was $97.7 million, or $1.30 per diluted common share, compared to $78.0 million, or $1.06 per diluted common share, for the same quarter in 2017.
FFO as adjusted (a non-GAAP financial measure) for the fourth quarter of 2018 was $105.1 million, or $1.39 per diluted common share, compared to $95.9 million, or $1.29 per diluted common share, for the same quarter in 2017, representing an 8% increase in per share results.

Year Ended December 31, 2018
Total revenue was $700.7 million for the year ended December 31, 2018, including $71.3 million in non-education related prepayment fees, representing a 22% increase from $576.0 million for the same period in 2017.
Net income available to common shareholders was $242.8 million, or $3.27 per diluted common share, for the year ended December 31, 2018 compared to $234.2 million, or $3.29 per diluted common share, for the same period in 2017.
FFO (a non-GAAP financial measure) for the year ended December 31, 2018 was $414.3 million, or $5.51 per diluted common share, compared to $327.4 million, or $4.58 per diluted common share, for the same period in 2017.
FFO as adjusted (a non-GAAP financial measure) for the year ended December 31, 2018 was $460.4 million, or $6.10 per diluted common share, compared to $360.5 million, or $5.02 per diluted common share, for the same period in 2017, representing a 22% increase in per share results.


“The fourth quarter of 2018 capped a successful year in which we executed a significant capital recycling strategy, realized very strong returns on our investments and generated robust revenue and earnings growth,” commented Company President and CEO Greg Silvers. “Supported by our healthy balance sheet and liquidity position, we anticipate a reacceleration of our investment activity and portfolio growth in 2019. As the depth and breadth of experiential assets continues to grow, we are seeing increasing opportunities to diversify our asset base and drive accretive growth.”

Portfolio Update

The Company's investment portfolio (excluding property under development) consisted of the following at December 31, 2018:

The Entertainment segment included investments in 152 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 13.4 million square feet and was 98% leased, including megaplex theatres that were 100% leased.
The Recreation segment included investments in 12 ski areas, 21 attractions, 34 golf entertainment complexes and 13 other recreation facilities. The Company’s portfolio of owned recreation properties was 100% leased.



The Education segment included investments in 59 public charter schools, 69 early education centers and 15 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 22.2 million square feet and was 99% leased. As of December 31, 2018, the Company also had a total of $287.5 million invested in property under development.

Investment Update

The Company's investment spending for the three months ended December 31, 2018 totaled $217.0 million (bringing the full year 2018 investment spending to $572.0 million), and included investments in each of its operating segments:

Entertainment investment spending during the three months ended December 31, 2018 totaled $27.2 million, including spending on build-to-suit development and redevelopment of megaplex theatres, entertainment retail centers and family entertainment centers as well as a $14.9 million megaplex theatre acquisition.

Recreation investment spending during the three months ended December 31, 2018 totaled $159.5 million, including spending on build-to-suit development of golf entertainment complexes and attractions, the acquisition of one attraction property and the acquisition of interests in two joint ventures described below.

On December 21, 2018, the Company entered into two joint ventures to acquire two recreation anchored lodging properties located in St. Petersburg, Florida, for a total of approximately $68.5 million ($29.5 million after the Company's pro-rata share of debt at closing), representing a 65% interest in the joint ventures. The Company accounts for these investments under the equity method of accounting.

Education investment spending during the three months ended December 31, 2018 totaled $16.4 million, including spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools.

Other investment spending during the three months ended December 31, 2018 totaled $13.9 million, and was related to the common infrastructure for the Resorts World Catskills casino and resort project in Sullivan County, New York.

Early Childhood Education Tenant Update

In February 2019, the Company entered into agreements (collectively, the “PSA”) with Children’s Learning Adventure USA (“CLA”) providing for the purchase and sale of certain assets associated with the businesses located at the 21 operating CLA properties whereby the Company can nominate a third party operator to take an assignment and transfer of such assets from CLA and to receive certain beneficial rights under various related ancillary agreements for consideration that includes the release of past due rent obligations, previously fully reserved by the Company, and additional consideration of approximately $15.0 million. The transfers of such assets are expected to close from time to time as closing conditions, including that the replacement tenant has obtained all required licenses and permits, for each transfer are satisfied. CLA has agreed to surrender possession of any of those properties that have not been transferred to a replacement operator prior to March 31, 2020 and has agreed to lease and operate each of the 21 properties for an aggregate of approximately $1.0 million per month of minimum rent until the transfer of each property to the Company’s replacement tenant or surrender of the property.

CLA is required to file a motion this week with the bankruptcy court ("Court") seeking authorization of the sale of certain assets pursuant to the PSA. A condition to the parties’ obligations under the PSA is the Court’s approval of the motion. There can be no assurance that this motion will be approved by the Court or that the Court will not require modifications to the PSA as a condition to its approval.




Also in February, the Company entered into new leases of all of the 21 operating properties previously leased to CLA with a replacement tenant, Crème de la Crème (“Crème”), a premium, national early childhood education operator. These leases are contingent upon EPR delivering possession of the properties and include different financial terms based on whether or not CLA delivers Crème the assets associated with the in-place operations of the school. 

There can be no assurance as to the outcome of the contemplated transaction or whether some or all of the properties will be transferred to Crème with in-place operations. If some or all of the schools are not transferred to Creme with in-place lease operations, there will be a delay in re-opening such schools and a corresponding reduction in near term rents from Crème.

Impairment Discussion

During the fourth quarter of 2018, the Company recognized an impairment charge related to two guarantees of economic development revenue bonds totaling $24.7 million and secured by leasehold interests and improvements at two theatres in Louisiana. The Company determined a portion of its guarantee fees receivable was no longer recoverable and in addition, determined that its future payment on a portion of the bond obligations was probable, resulting in a total impairment charge of $10.7 million. This charge approximated the difference between the estimated fair value of the Company's collateral and the outstanding debt should these assets eventually come onto its balance sheet. The Company has no other off-balance sheet debt guarantees in its portfolio.

Capital Recycling

During the fourth quarter of 2018, the Company received $28.0 million in proceeds, representing payment in full on the remaining mortgage note receivable of $24.0 million that was secured by the observation deck of the John Hancock Tower in Chicago, Illinois plus prepayment fees totaling $4.0 million that are included in mortgage and other financing income. Prior to the fourth quarter, the Company received a partial prepayment on this note of approximately $8.0 million and recognized a prepayment fee totaling $1.4 million.
Additionally, during the fourth quarter of 2018, the Company received $41.4 million in proceeds, representing payment in full on five mortgage notes receivable that were secured by four charter school properties and land located in Arizona. In connection with these prepayments, the Company recognized prepayment fees totaling $3.4 million that are included in mortgage and other financing income.
Disposition proceeds and mortgage note pay-offs (excluding principal amortization and including prepayment fees) totaled $71.7 million and $471.1 million for the three months and year ended December 31, 2018, respectively.
Balance Sheet Update
Excluding prepayment penalties from earnings, the Company had a net debt to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.5x at December 31, 2018. The Company had $5.9 million of unrestricted cash on hand and $30.0 million outstanding under its $1.0 billion unsecured revolving credit facility at December 31, 2018.
Dividend Information

The Company declared regular monthly cash dividends during the fourth quarter of 2018 totaling $1.08 per common share bringing total declared dividends for the year ended December 31, 2018 to $4.32 per common share, an increase of almost 6% over the prior year. The Company also declared fourth 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.

As previously announced, the Company declared a regular monthly cash dividend to common shareholder of $0.375 per common share for each of the months of January and February 2019. This dividend level represents an annualized dividend of $4.50 per common share, an increase of 4.2% over 2018, and would be the Company's ninth consecutive year with a significant annual dividend increase.




2019 Guidance

The Company is introducing its 2019 guidance for net income per diluted share of a range of $3.01 to $3.21 and FFO as adjusted per diluted share of a range of $5.30 to $5.50. In addition, the Company is introducing its 2019 investment spending guidance of a range of $600.0 million to $800.0 million. Disposition proceeds are expected to total $100.0 million to $200.0 million for 2019.

FFO as adjusted guidance for 2019 is based on FFO per diluted share of $4.87 to $5.02 adjusted for estimated transaction costs, termination fees related to public charter schools, deferred income tax expense and the impact of Series C and Series E dilution. FFO per diluted share is based on a net income per diluted share range of $3.01 to $3.21 less estimated gain on sale of real estate of a range of $0.25 to $0.30 and the impact of Series C and Series E dilution of $0.05, plus estimated real estate depreciation of $2.12 and allocated share of joint venture depreciation of $0.04 (in accordance with the NAREIT definition of FFO).

Quarterly and Year-Ended Supplemental

The Company's supplemental information package for the fourth quarter and year ended December 31, 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 December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Rental revenue
$
145,515

 
$
123,446

 
$
556,363

 
$
484,203

Other income
435

 
577

 
2,076

 
3,095

Mortgage and other financing income
20,537

 
23,677

 
142,292

 
88,693

Total revenue
166,487

 
147,700

 
700,731

 
575,991

Property operating expense
8,890

 
12,891

 
30,756

 
31,653

Other expense
325

 
242

 
443

 
242

General and administrative expense
12,165

 
9,596

 
48,889

 
43,383

Severance expense
5,938

 

 
5,938

 

Litigation settlement expense

 

 
2,090

 

Costs associated with loan refinancing or payoff

 
58

 
31,958

 
1,549

Gain on early extinguishment of debt

 

 

 
(977
)
Interest expense, net
33,515

 
35,271

 
135,507

 
133,124

Transaction costs
1,583

 
135

 
3,698

 
523

Impairment charges
10,735

 

 
27,283

 
10,195

Depreciation and amortization
39,541

 
37,027

 
153,430

 
132,946

Income before equity in income from joint ventures and other items
53,795

 
52,480

 
260,739

 
223,353

Equity in (loss) income from joint ventures
(5
)
 
(14
)
 
(22
)
 
72

Gain on sale of real estate
349

 
13,480

 
3,037

 
41,942

Gain on sale of investment in direct financing leases

 

 
5,514

 

Income before income taxes
54,139

 
65,946

 
269,268

 
265,367

Income tax expense
(108
)
 
(383
)
 
(2,285
)
 
(2,399
)
Net income
54,031

 
65,563

 
266,983

 
262,968

Preferred dividend requirements
(6,034
)
 
(6,438
)
 
(24,142
)
 
(24,293
)
Preferred share redemption costs

 
(4,457
)
 

 
(4,457
)
Net income available to common shareholders of EPR Properties
$
47,997

 
$
54,668

 
$
242,841

 
$
234,218

Per share data attributable to EPR Properties common shareholders:
 
 
 
 
 
 
 
Basic earnings per share data:
 
 
 
 
 
 
 
Net income available to common shareholders
$
0.65

 
$
0.74

 
$
3.27

 
$
3.29

Diluted earnings per share data:
 
 
 
 
 
 
 
Net income available to common shareholders
$
0.65

 
$
0.74

 
$
3.27

 
$
3.29

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
74,343

 
73,774

 
74,292

 
71,191

Diluted
74,402

 
73,832

 
74,337

 
71,254










EPR Properties
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands)
 
December 31,
 
2018
 
2017
Assets
 
 
 
Rental properties, net of accumulated depreciation of $883,174 and $741,334 at December 31, 2018 and 2017, respectively
$
5,024,057

 
$
4,604,231

Land held for development
34,177

 
33,692

Property under development
287,546

 
257,629

Mortgage notes and related accrued interest receivable
517,467

 
970,749

Investment in direct financing leases, net
20,558

 
57,903

Investment in joint ventures
34,486

 
5,602

Cash and cash equivalents
5,872

 
41,917

Restricted cash
12,635

 
17,069

Accounts receivable, net
98,369

 
93,693

Other assets
96,223

 
109,008

Total assets
$
6,131,390

 
$
6,191,493

Liabilities and Equity
 
 
 
Accounts payable and accrued liabilities
$
168,463

 
$
136,929

Dividends payable
32,799

 
30,185

Unearned rents and interest
79,051

 
68,227

Debt
2,986,054

 
3,028,827

Total liabilities
3,266,367

 
3,264,168

Total equity
$
2,865,023

 
$
2,927,325

Total liabilities and equity
$
6,131,390

 
$
6,191,493




EPR Properties
Reconciliation of Non-GAAP Financial Measures
(Unaudited, dollars in thousands except per share data)
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
FFO: (A)
 
 
 
 
 
 
 
Net income available to common shareholders of EPR Properties
$
47,997

 
$
54,668

 
$
242,841

 
$
234,218

Gain on sale of real estate
(349
)
 
(13,480
)
 
(3,037
)
 
(41,942
)
Gain on sale of investment in direct financing leases

 

 
(5,514
)
 

Impairment charges
10,735

 

 
27,283

 

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

 

 

 
2,897

Real estate depreciation and amortization
39,297

 
36,797

 
152,508

 
132,040

Allocated share of joint venture depreciation
56

 
55

 
226

 
218

FFO available to common shareholders of EPR Properties
$
97,736

 
$
78,040

 
$
414,307

 
$
327,431

 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
97,736

 
$
78,040

 
$
414,307

 
$
327,431

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

 
1,940

 
7,759

 
7,763

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

 
1,940

 
7,756

 
7,761

Diluted FFO available to common shareholders of EPR Properties
$
101,614

 
$
81,920

 
$
429,822

 
$
342,955

FFOAA: (A)
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
97,736

 
$
78,040

 
414,307

 
$
327,431

Costs associated with loan refinancing or payoff

 
58

 
31,958

 
1,549

Transaction costs
1,583

 
135

 
3,698

 
523

Severance expense
5,938

 

 
5,938

 

Litigation settlement expense

 

 
2,090

 

Preferred share redemption costs

 
4,457

 

 
4,457

Termination fee included in gain on sale

 
13,275

 
1,864

 
20,049

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

 

 

 
7,298

Gain on early extinguishment of debt

 

 

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

 

 

 
(606
)
Deferred income tax (benefit) expense
(182
)
 
(99
)
 
573

 
812

FFOAA available to common shareholders of EPR Properties
$
105,075

 
$
95,866

 
$
460,428

 
$
360,536

 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
105,075

 
$
95,866

 
$
460,428

 
$
360,536

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

 
1,940

 
7,759

 
7,763

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

 
1,940

 
7,756

 
7,761

Diluted FFO available to common shareholders of EPR Properties
$
108,953

 
$
99,746

 
$
475,943

 
$
376,060

FFO per common share:
 
 
 
 
 
 
 
Basic
$
1.31

 
$
1.06

 
$
5.58

 
$
4.60

Diluted
1.30

 
1.06

 
5.51

 
4.58

FFOAA per common share:
 
 
 
 
 
 
 
Basic
$
1.41

 
$
1.30

 
$
6.20

 
$
5.06

Diluted
1.39

 
1.29

 
6.10

 
5.02

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
74,343

 
73,774

 
74,292

 
71,191

Diluted
74,402

 
73,832

 
74,337

 
71,254

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding-diluted EPS
74,402

 
73,832

 
74,337

 
71,254

Effect of dilutive Series C preferred shares
2,133

 
2,083

 
2,114

 
2,068

Adjusted weighted average shares outstanding-diluted Series C
76,535

 
75,915

 
76,451

 
73,322

Effect of dilutive Series E preferred shares
1,615

 
1,592

 
1,607

 
1,586

Adjusted weighted average shares outstanding-diluted Series C and Series E
78,150

 
77,507

 
78,058

 
74,908

Other financial information:
 
 
 
 
 
 
 
Straight-lined rental revenue
$
3,216

 
$
(7,085
)
 
$
10,229

 
$
4,332

Dividends per common share
$
1.08

 
$
1.02

 
$
4.32

 
$
4.08

(1)
Impairment charges recognized during the year ended December 31, 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 (FFOAA). Management believes it is useful to provide FFOAA as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFOAA is FFO plus costs (gain) associated with loan refinancing or payoff, transaction costs, 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 FFOAA are non-GAAP financial measures. FFO and FFOAA 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 FFOAA 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 and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO and FFOAA per share for the three months and years ended December 31, 2018 and 2017. Therefore, the additional 2.1 million common shares 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 FFO per share and diluted FFOAA per share for the three months and years ended December 31, 2018 and 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):



 
December 31,
 
2018
 
2017
Net Debt: (B)
 
 
 
Debt
$
2,986,054

 
$
3,028,827

Deferred financing costs, net
33,941

 
32,852

Cash and cash equivalents
(5,872
)
 
(41,917
)
Net Debt
$
3,014,123

 
$
3,019,762

 
 
 
 
 
Three Months Ended December 31,
 
2018
 
2017
EBITDAre and Adjusted EBITDA:
 
 
 
Net income
$
54,031

 
$
65,563

Interest expense, net
33,515

 
35,271

Income tax expense
108

 
383

Depreciation and amortization
39,541

 
37,027

Gain on sale of real estate
(349
)
 
(13,480
)
Impairment charges
10,735

 

Costs associated with loan refinancing or payoff

 
58

Equity in loss from joint ventures
5

 
14

EBITDAre (for the quarter) (C)
$
137,586

 
$
124,836

 
 
 
 
Severance expense
5,938

 

Transaction costs
1,583

 
135

Straight-line rental revenue write-off related to CLA (1)

 
9,010

Bad debt expense related to CLA (2)

 
6,003

Prepayment fees
(7,391
)
 
(834
)
Adjusted EBITDA (for the quarter)
$
137,716

 
$
139,150

 
 
 
 
Adjusted EBITDA (3) (D)
$
550,864

 
$
556,600

 
 
 
 
Net Debt/Adjusted EBITDA Ratio
5.5

 
5.4

 
 
 
 
(1) Included in rental revenue in the accompanying consolidated statements of income. Rental revenue includes the following:
 
Three Months Ended December 31,
 
2018
 
2017
Minimum rent
$
133,258

 
$
123,208

Tenant reimbursements
3,950

 
4,131

Percentage rent
5,005

 
3,108

Straight-line rental revenue
3,216

 
1,925

Straight-line rental revenue write-off related to CLA

 
(9,010
)
Other rental revenue
86

 
84

Rental revenue
$
145,515

 
$
123,446

 
 
 
 
(2) Included in property operating expense in the accompanying consolidated statements of income. Property operating expense includes the following:
 
Three Months Ended December 31,
 
2018
 
2017
Expenses related to the operations of our retail centers and other specialty properties
$
8,397

 
$
6,649

Bad debt expense
493

 
239

Bad debt expense related to CLA

 
6,003

Property operating expense
$
8,890

 
$
12,891

 
 
 
 
(3) 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, 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. For the three months and year ended December 31, 2017, Adjusted EBITDA was further adjusted to reflect zero Adjusted EBITDA related to one of the Company's early education tenants, CLA.

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 approximate $6.9 billion and our primary investment segments are Entertainment, Recreation and Education. We adhere to rigorous underwriting and investing criteria centered on key industry and property level cash flow standards. We believe our focused niche approach provides a competitive advantage, and the potential for higher growth and better yields.




CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to 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)

q42018earningscall
Q4 & YEAR END 2018 EARNINGS CALL FEBRUARY 26, 2019


 
INTRODUCTORY COMMENTS 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. 2


 
HEADLINES 1. Strong Fourth Quarter Caps a Successful Year 3


 
HEADLINES 1. Strong Fourth Quarter Caps a Successful Year 2. Investment Spending Regains Momentum 4


 
HEADLINES 1. Strong Fourth Quarter Caps a Successful Year 2. Investment Spending Regains Momentum 3. Tenant Segments Broadly Strong, New Tenant for CLA Properties 5


 
HEADLINES 1. Strong Fourth Quarter Caps a Successful Year 2. Investment Spending Regains Momentum 3. Tenant Segments Broadly Strong, New Tenant for CLA Properties 4. Monthly Dividend Increase 6


 
HEADLINES 1. Strong Fourth Quarter Caps a Successful Year 2. Investment Spending Regains Momentum 3. Tenant Segments Broadly Strong, New Tenant for CLA Properties 4. Monthly Dividend Increase 5. Introducing 2019 Guidance 7


 
PORTFOLIO UPDATE 8


 
PORTFOLIO STATISTICS $6.8B+ TOTAL INVESTMENTS 394 PROPERTIES IN SERVICE 99% OCCUPANCY $217M Q4 INVESTMENT SPENDING $572M 2018 INVESTMENT SPENDING 1.92X RENT * Coverage is weighted average for the segments. Theatres and Family Entertainment Centers data is COVERAGE* TTM September 2018. Golf Entertainment Complexes and Other Recreation data is TTM September 2018. Ski Area data is TTM April 2018 and Attractions data is TTM August 2018. Public Charter School data is 9 TTM June 2018, Private school data is TTM June 2018 and Early Childhood Education data is TTM September 2018.


 
ENTERTAINMENT SEGMENT HIGHLIGHTS UPDATES − 2018 Box Office revenue was up over 7%* and attendance was up over 6%* − Another strong year expected for Box Office revenue in 2019 with $3.0B a promising lineup of films INVESTED 170 PROPERTIES IN SERVICE 22** OPERATORS MEGAPLEX THEATRES 1.92x RENT COVERAGE $27.2 FAMILY ENTERTAINMENT CENTERS ENTERTAINMENT RETAIL CENTERS Q4 INVESTMENT SPENDING *Source: Box Office Mojo // **Does not include operators at ERCs 10


 
RECREATION SEGMENT UPDATES HIGHLIGHTS – Ski admissions up 13% and revenue up 8% through January – Investment spending $2.3B • Two recreation anchored lodging properties in St. Pete Beach, FL INVESTED • City Museum in St Louis, MO • The Kartrite Resort & Indoor Waterpark in the Catskills 80 PROPERTIES IN SERVICE 3* PROPERTIES UNDER DEVELOPMENT GOLF ENTERTAINMENT COMPLEXES ATTRACTIONS 18 OPERATORS $159.5 Q4 INVESTMENT SPENDING SKI AREAS OTHER RECREATION 2.12x RENT COVERAGE * Properties not yet in service 11


 
RECREATION OTHER RECREATION- RECREATION ANCHORED LODGING St. Pete Beach Acquisitions Two recreation anchored lodging assets which include – Combined 258 rooms and private beachfront on the Gulf of Mexico – Long history with significant food and beverage contribution Facilities upgrade of $24M planned, will introduce new amenities and drive revenue growth 12


 
RECREATION OTHER RECREATION- RECREATION ANCHORED LODGING The Kartrite Resort & Indoor Waterpark Recreation anchored lodging asset, will be New York’s biggest indoor waterpark – 324 suites and multiple dining options – Variety of indoor entertainment activities in addition to waterpark 13


 
RECREATION ATTRACTION City Museum in St. Louis A highly interactive and artistic children’s museum with a 20-year history of delighting guests 14


 
EDUCATION SEGMENT UPDATES HIGHLIGHTS – Received $42.3 million in disposition proceeds – New lease signed in Feb. with Crème de la Crème to take over $1.4B operations at all 21 schools operated by Children’s Learning INVESTED Adventure 143 PROPERTIES IN SERVICE 5* PROPERTIES UNDER DEVELOPMENT PUBLIC CHARTER SCHOOLS 59 OPERATORS $16.4 Q4 INVESTMENT SPENDING PRIVATE SCHOOLS EARLY CHILDHOOD EDUCATION 1.48x RENT COVERAGE *Properties not yet in service 15


 
SUMMARY 2019 INVESTMENT SPENDING GUIDANCE $600M – $800M 2019 DISPOSITION PROCEEDS GUIDANCE $100M – $200M 16


 
FINANCIAL REVIEW 17


 
FINANCIAL HIGHLIGHTS FINANCIAL PERFORMANCE Quarter ended December 31, (In millions except per-share data) 2018 2017 $ CHANGE % CHANGE Total Revenue $166.5 $147.7 $18.8 13% Net Income - Common 48.0 54.7 (6.7) (12%) FFO – Common* 97.7 78.0 19.7 25% FFO as adj. – Common* 105.1 95.9 9.2 10% Net Income/share – Common 0.65 0.74 (0.09) (12%) FFO/share – Common* 1.30 1.06 0.24 23% FFO/share - Common, as adj.* 1.39 1.29 0.10 8% * See investor supplementals for the applicable periods for definitions and calculations of these non- GAAP measures 18


 
FINANCIAL HIGHLIGHTS FINANCIAL PERFORMANCE Year ended December 31, (In millions except per-share data) 2018 2017 $ CHANGE % CHANGE Total Revenue $700.7 $576.0 $124.7 22% Net Income - Common 242.8 234.2 8.6 4% FFO – Common* 414.3 327.4 86.9 27% FFO as adj. – Common* 460.4 360.5 99.9 28% Net Income/share – Common 3.27 3.29 (0.02) (1%) FFO/share – Common* 5.51 4.58 0.93 20% FFO/share - Common, as adj.* 6.10 5.02 1.08 22% * See investor supplementals for the applicable periods for definitions and calculations of these non- GAAP measures 19


 
FINANCIAL HIGHLIGHTS KEY RATIOS Quarter ended December 31, 2018 2017 Fixed charge coverage 3.3x 3.1x Debt service coverage 3.8x 3.6x Interest coverage 3.8x 3.6x Net debt to Adjusted EBITDA 5.5x 5.4x FFO as adjusted payout 78% 79% *See investor supplementals for the applicable periods for definitions and calculations for these non-GAAP measures. Ratios exclude all termination and prepayment fees except FFO as adjusted payout percentage. 20


 
CAPITAL MARKETS & LIQUIDITY UPDATE 21


 
CAPITAL MARKETS UPDATE TOTAL DEBT IS $3.0B AT 12/31/18 • $2.9B is fixed rate or fixed through interest rate swaps, wtd. avg. = 4.6% • $30M outstanding on $1B revolver at 12/31/18; $5.9M unrestricted cash • Weighted average debt maturity of ~7 years; No debt maturities until 2022 LOW COST EQUITY ISSUANCE • Subsequent to year-end, issued 490 thousand common shares under our DSPP for net proceeds of $35.6M. 22


 
INTRODUCING 2019 GUIDANCE 2019 GUIDANCE FF0 AS ADJUSTED PER SHARE Guidance $5.30 - $5.50 INVESTMENT SPENDING Guidance $600M - $800M DISPOSITION PROCEEDS Guidance $100M - $200M 23


 
FFOAA PER SHARE RECONCILIATION ANNUALIZED Q4 RESULTS VS. 2019 GUIDANCE MIDPOINT Q4 2018 FFOAA/share* $1.39 Annualization x4 Annualized FFOAA/share* $5.56 Lower term/prepayment fees vs. Q4 annualized (.16) Lower % rent/participating interest vs. Q4 annualized (.13) Kartrite results (primarily lower cap. int. vs. Q4 annualized) (.08) Lower G&A vs. Q4 annualized .04 Net investing activity, rent bumps, financing & other .17 2019 Estimated FFOAA/share* (midpoint) $5.40 *See investor supplementals for the definition of this non-GAAP measure 24


 
CLOSING COMMENTS 25


 
EPR Properties 909 Walnut Street, Suite 200 Kansas City, MO 64106 www.eprkc.com 816-472-1700 info@eprkc.com


 
(Back To Top)

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

Exhibit



Exhibit 99.3


396866762_eprsupplementalcoverva06.jpg




396866762_image0a16.jpg                
Supplemental Operating and Financial Data
Fourth Quarter and Year Ended December 31, 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


396866762_image5a07.jpg
 
 
Q4 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.



396866762_image5a07.jpg
 
 
Q4 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.

 
396866762_eprsegmentsv2a03.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



396866762_image5a07.jpg
 
 
Q4 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
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
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.

396866762_image5a07.jpg
 
 
Q4 2018 Supplemental
Page 5
 
 
 




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

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED DECEMBER 31,
 
YEAR ENDED DECEMBER 31,
Operating Information:
2018
 
2017
 
2018
 
2017
Revenue
$
166,487

 
$
147,700

 
$
700,731

 
$
575,991

Net income available to common shareholders of EPR Properties
47,997

 
54,668

 
242,841

 
234,218

EBITDAre (1)
137,586

 
124,836

 
608,917

 
492,892

Adjusted EBITDA (1)
137,716

 
139,150

 
545,933

 
506,888

Interest expense, net
33,515

 
35,271

 
135,507

 
133,124

Recurring principal payments

 
197

 

 
3,241

Capitalized interest
2,669

 
2,046

 
9,904

 
9,879

Straight-lined rental revenue
3,216

 
(7,085
)
 
10,229

 
4,332

Dividends declared on preferred shares
6,034

 
6,438

 
24,142

 
24,293

Dividends declared on common shares
80,292

 
75,297

 
321,119

 
291,179

General and administrative expense
12,165

 
9,596

 
48,889

 
43,383

 
 
 
 
 
 
 
 
 
DECEMBER 31,
 
 
 
 
Balance Sheet Information:
2018
 
2017
 
 
 
 
Total assets
$
6,131,390

 
$
6,191,493

 
 
 
 
Accumulated depreciation
883,174

 
741,334

 
 
 
 
Total assets before accumulated depreciation (gross assets)
7,014,564

 
6,932,827

 
 
 
 
Cash and cash equivalents
5,872

 
41,917

 
 
 
 
Debt
2,986,054

 
3,028,827

 
 
 
 
Deferred financing costs, net
33,941

 
32,852

 
 
 
 
Net debt (1)
3,014,123

 
3,019,762

 
 
 
 
Equity
2,865,023

 
2,927,325

 
 
 
 
Common shares outstanding
74,348

 
74,125

 
 
 
 
Total market capitalization (using EOP closing price)
8,145,652

 
8,243,194

 
 
 
 
Net debt/total market capitalization
37
%
 
37
%
 
 
 
 
Net debt/gross assets
43
%
 
44
%
 
 
 
 
Net debt/Adjusted EBITDA (2)
5.5

 
5.4

 
 
 
 
Adjusted net debt/Annualized adjusted EBITDA (1)(3)(4)
5.4

 
5.4

 
 
 
 
 
 
 
 
 
 
 
 
(1) See pages 31 through 33 for definitions. See calculation on page 40.
(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.

396866762_image5a07.jpg
 
 
Q4 2018 Supplemental
Page 6
 
 
 




SELECTED BALANCE SHEET INFORMATION
(UNAUDITED, DOLLARS IN THOUSANDS)
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
4TH QUARTER 2018
 
3RD QUARTER 2018
 
2ND QUARTER 2018
 
1ST QUARTER 2018
 
4TH QUARTER 2017
 
3RD QUARTER 2017
Rental properties:
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment
 
$
2,909,024

 
$
2,875,959

 
$
2,854,274

 
$
2,812,120

 
$
2,762,801

 
$
2,696,125

Recreation
 
1,614,100

 
1,502,639

 
1,476,759

 
1,452,087

 
1,420,690

 
1,361,445

Education
 
1,209,393

 
1,204,851

 
1,175,973

 
1,170,548

 
1,005,340

 
1,033,149

Other
 
174,714

 
156,786

 
156,786

 
156,786

 
156,734

 
156,659

Less: accumulated depreciation
 
(883,174
)
 
(848,280
)
 
(810,604
)
 
(776,404
)
 
(741,334
)
 
(711,384
)
Land held for development
 
34,177

 
31,076

 
31,076

 
33,693

 
33,692

 
33,674

Property under development
 
287,546

 
289,228

 
268,090

 
249,931

 
257,629

 
284,211

Mortgage notes receivable: (1)
 
 
 


 
 
 
 
 
 
 
 
Entertainment
 

 
23,327

 
23,321

 
31,061

 
31,105

 
39,679

Recreation
 
368,655

 
365,100

 
439,759

 
614,405

 
602,145

 
602,701

Education
 
148,812

 
184,273

 
178,348

 
174,371

 
337,499

 
329,991

Investment in direct financing leases, net
 
20,558

 
20,495

 
58,305

 
58,101

 
57,903

 
57,698

Investment in joint ventures
 
34,486

 
5,018

 
4,999

 
5,538

 
5,602

 
5,616

Cash and cash equivalents
 
5,872

 
74,153

 
3,017

 
24,514

 
41,917

 
11,412

Restricted cash
 
12,635

 
22,031

 
11,283

 
15,640

 
17,069

 
24,323

Accounts receivable, net
 
98,369

 
104,757

 
97,804

 
88,750

 
93,693

 
99,213

Other assets
 
96,223

 
102,657

 
135,034

 
127,725

 
109,008

 
108,498

Total assets
 
$
6,131,390

 
$
6,114,070

 
$
6,104,224

 
$
6,238,866

 
$
6,191,493

 
$
6,133,010

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
168,463

 
$
138,829

 
$
122,359

 
$
117,583

 
$
136,929

 
$
140,582

Common dividends payable
 
26,765

 
26,761

 
26,765

 
26,755

 
25,203

 
25,046

Preferred dividends payable
 
6,034

 
6,036

 
6,036

 
6,036

 
4,982

 
5,951

Unearned rents and interest
 
79,051

 
90,287

 
79,121

 
81,461

 
68,227

 
85,198

Line of credit
 
30,000

 

 
30,000

 
570,000

 
210,000

 
170,000

Deferred financing costs, net
 
(33,941
)
 
(35,033
)
 
(36,020
)
 
(28,558
)
 
(32,852
)
 
(33,951
)
Other debt
 
2,989,995

 
2,989,995

 
2,989,995

 
2,589,995

 
2,851,679

 
2,851,876

Total liabilities
 
3,266,367

 
3,216,875

 
3,218,256

 
3,363,272

 
3,264,168

 
3,244,702

Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and additional paid-in- capital
 
3,505,266

 
3,497,055

 
3,492,333

 
3,487,902

 
3,479,755

 
3,421,631

Preferred stock at par value
 
148

 
148

 
148

 
148

 
148

 
138

Treasury stock
 
(130,728
)
 
(129,801
)
 
(129,048
)
 
(128,707
)
 
(121,591
)
 
(121,539
)
Accumulated other comprehensive income
 
12,085

 
19,246

 
17,497

 
16,481

 
12,483

 
10,919

Distributions in excess of net income
 
(521,748
)
 
(489,453
)
 
(494,962
)
 
(500,230
)
 
(443,470
)
 
(422,841
)
Total equity
 
2,865,023

 
2,897,195

 
2,885,968

 
2,875,594

 
2,927,325

 
2,888,308

Total liabilities and equity
 
$
6,131,390

 
$
6,114,070

 
$
6,104,224

 
$
6,238,866

 
$
6,191,493

 
$
6,133,010

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes related accrued interest receivable.

396866762_image5a07.jpg
 
 
Q4 2018 Supplemental
Page 7
 
 
 




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

 
 
 
 
 
 
 
 
 
 
Entertainment
$
76,742

 
$
75,552

 
$
74,640

 
$
74,848

 
$
74,383

 
$
70,621

Recreation
38,732

 
36,215

 
34,443

 
33,432

 
33,909

 
32,171

Education
27,757

 
26,851

 
25,649

 
22,385

 
12,862

 
21,479

Other
2,284

 
2,287

 
2,287

 
2,259

 
2,292

 
2,290

Mortgage and other financing income:


 
 
 
 
 
 
 
 
 
 
Entertainment
4,457

 
612

 
2,100

 
802

 
981

 
1,151

Recreation
8,277

 
29,678

 
57,540

 
13,705

 
13,590

 
14,140

Education
7,803

 
4,849

 
5,562

 
6,907

 
9,106

 
9,023

Other income
435

 
365

 
646

 
630

 
577

 
522

Total revenue
$
166,487

 
$
176,409

 
$
202,867

 
$
154,968

 
$
147,700

 
$
151,397

 


 
 
 
 
 
 
 
 
 
 
Property operating expense
8,890

 
6,968

 
7,334

 
7,564

 
12,891

 
6,340

Other expense
325

 
118

 

 

 
242

 

General and administrative expense
12,165

 
11,424

 
12,976

 
12,324

 
9,596

 
12,070

Severance expense
5,938

 

 

 

 

 

Litigation settlement expense

 

 
2,090

 

 

 

Costs associated with loan refinancing or payoff

 

 
15

 
31,943

 
58

 
1,477

Interest expense, net
33,515

 
33,576

 
34,079

 
34,337

 
35,271

 
34,194

Transaction costs
1,583

 
1,101

 
405

 
609

 
135

 
113

Impairment charges
10,735

 

 
16,548

 

 

 

Depreciation and amortization
39,541

 
38,623

 
37,582

 
37,684

 
37,027

 
34,694

Income before equity in income in joint ventures and other items
53,795

 
84,599

 
91,838

 
30,507

 
52,480

 
62,509

Equity in (loss) income from joint ventures
(5
)
 
20

 
(88
)
 
51

 
(14
)
 
35

Gain on sale of real estate
349

 
2,215

 
473

 

 
13,480

 
997

Gain on sale of investment in direct financing leases

 
5,514

 

 

 

 

Income tax expense
(108
)
 
(515
)
 
(642
)
 
(1,020
)
 
(383
)
 
(587
)
Net income
54,031

 
91,833

 
91,581

 
29,538

 
65,563

 
62,954

Preferred dividend requirements
(6,034
)
 
(6,036
)
 
(6,036
)
 
(6,036
)
 
(6,438
)
 
(5,951
)
Preferred share redemption costs

 

 

 

 
(4,457
)
 

Net income available to common shareholders of EPR Properties
$
47,997

 
$
85,797

 
$
85,545

 
$
23,502

 
$
54,668

 
$
57,003

 
 
 
 
 
 
 
 
 
 
 
 

396866762_image5a07.jpg
 
 
Q4 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):
 
4TH QUARTER 2018
 
3RD QUARTER 2018
 
2ND QUARTER 2018
 
1ST QUARTER 2018
 
4TH QUARTER 2017
 
3RD QUARTER 2017
Net income available to common shareholders of EPR Properties
 
$
47,997

 
$
85,797

 
$
85,545

 
$
23,502

 
$
54,668

 
$
57,003

Gain on sale of real estate
 
(349
)
 
(2,215
)
 
(473
)
 

 
(13,480
)
 
(997
)
Gain on sale of investment in direct financing leases
 

 
(5,514
)
 

 

 

 

Impairment of charges
 
10,735

 

 
16,548

 

 

 

Real estate depreciation and amortization
 
39,297

 
38,388

 
37,359

 
37,464

 
36,797

 
34,457

Allocated share of joint venture depreciation
 
56

 
54

 
58

 
58

 
55

 
55

FFO available to common shareholders of EPR Properties
 
$
97,736

 
$
116,510

 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

FFO available to common shareholders of EPR Properties
 
$
97,736

 
$
116,510

 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

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

 
1,940

 
1,940

 

 
1,940

 
1,941

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

 
1,939

 

 

 
1,940

 

Diluted FFO available to common shareholders of EPR Properties
 
$
101,614

 
$
120,389

 
$
140,977

 
$
61,024

 
$
81,920

 
$
92,459

 
 
 
 
 
 
 
 
 
 
 
 
 
FUNDS FROM OPERATIONS AS ADJUSTED (1):
 
 
 
 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
 
$
97,736

 
$
116,510

 
$
139,037

 
$
61,024

 
$
78,040

 
$
90,518

Costs associated with loan refinancing or payoff
 

 

 
15

 
31,943

 
58

 
1,477

Transaction costs
 
1,583

 
1,101

 
405

 
609

 
135

 
113

Severance expense
 
5,938

 

 

 

 

 

Litigation settlement expense
 

 

 
2,090

 

 

 

Preferred share redemption costs
 

 

 

 

 
4,457

 

Termination fee included in gain on sale
 

 
1,864

 

 

 
13,275

 
954

Deferred income tax (benefit) expense
 
(182
)
 
92

 
235

 
428

 
(99
)
 
227

FFO as adjusted available to common shareholders of EPR Properties
 
$
105,075

 
$
119,567

 
$
141,782

 
$
94,004

 
$
95,866

 
$
93,289

 
 
 
 
 
 
 
 
 
 
 
 
 
FFO as adjusted available to common shareholders of EPR Properties
 
$
105,075

 
$
119,567

 
$
141,782

 
$
94,004

 
$
95,866

 
$
93,289

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

 
1,940

 
1,940

 
1,940

 
1,940

 
1,941

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

 
1,939

 
1,939

 
1,939

 
1,940

 

Diluted FFO as adjusted available to common shareholders of EPR Properties
 
$
108,953

 
$
123,446

 
$
145,661

 
$
97,883

 
$
99,746
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