Sunrise Senior Living, Inc. (NYSE: SRZ) today reported financial results and operating data for the first quarter of 2010. Sunrise will host a conference call and webcast Tuesday, May 4, 2010 at 8:00 a.m. ET, to discuss the financial results.
"In this quarter we continued our operations and balance sheet restructuring efforts to move us toward strengthening our core business results while reducing corporate risk," said Mark Ordan, Sunrise's chief executive officer. "Our progress in both areas reinforces our optimism about our future."
Financial Results for First-Quarter 2010
Sunrise reported revenues of $355.2 million in the first quarter of 2010 as compared to $374.7 million for the first quarter of 2009. Net loss for the first quarter of 2010 was ($16.0) million, or ($0.29) per fully diluted share, as compared to net loss of ($18.2) million, or ($0.36) per fully diluted share, for the first quarter of 2009.
For the first quarter of 2010, net loss from operations was ($10.6) million, an improvement of $30.4 million as compared to a net loss from operations of ($41.0) million in the first quarter of 2009. Adding back non-cash charges including depreciation and amortization of $8.5 million, provision for doubtful accounts of $1.1 million, stock compensation of $0.9 million and impairment of long-lived assets of $0.7 million, as well as non-recurring items including the SEC investigation costs of $58,000 and restructuring costs of $4.9 million, the adjusted income from ongoing operations was $5.6 million as compared to $3.7 million in the first quarter of 2009. Adjusted income from ongoing operations is a measure of operating performance that is not calculated in accordance with U.S. GAAP and should not be considered as a substitute for income or loss from operations or net income or loss. Adjusted income from ongoing operations is used by management to focus on income generated from the ongoing operations of the Company and to help management assess if adjustments to current spending decisions are needed. For a reconciliation of these items, please refer to the attached table "Adjusted Income from Ongoing Operations."
Cash and Liquidity Update
Sunrise had $46.5 million of unrestricted cash at March 31, 2010. Sunrise has no borrowing availability under its bank credit facility, and has significant scheduled debt maturities in 2010 and significant debt that is in default. As of March 31, 2010, Sunrise had debt of $424.2 million, of which $147.1 million of debt is scheduled to mature in 2010, including $33.4 million under its bank credit facility, which is due in December 2010. Debt that is in default totals $241.3 million, including $187.1 million of debt ($200.4 million face) that is in default as a result of the failure to pay principal and interest to the lenders of Sunrise's German communities and $25.6 million of U.S. debt that is due to one of our German lenders. In April 2010, the German debt was restructured, as discussed below. Sunrise is seeking waivers with respect to existing defaults to avoid acceleration of these obligations.
Germany
On April 29, 2010, Sunrise announced that the Company and certain of its affiliates had completed the previously announced restructure transactions with three of the lenders to its German subsidiaries, Capmark Finance Inc., Natixis London Branch, and Fortis Bank, UK Branch. Sunrise also announced that it has entered into a partial settlement and waiver declaration with Aareal Bank AG, pursuant to which Sunrise will be released from its guarantee obligations with respect to loans previously made by Aareal to certain of Sunrise's German subsidiaries in exchange for, among other things, a cash payment of euro 2.1 million (approximately $2.8 million).
On May 3, 2010, Sunrise announced that the Company has entered into a settlement agreement with Barclays Bank PLC providing for the settlement and release of all existing and potential future claims of Barclays against Sunrise under Sunrise's guarantee obligations with respect to loans previously made by Barclays to certain of Sunrise's German subsidiaries. In exchange, Sunrise shall, among other things, pay Barclays a principal amount of approximately euro 7.5 million (or approximately $9.9 million) without interest (except in the case of default by Sunrise).
Sunrise has now reached agreements with all of its lenders to its nine German communities. Additional details on these agreements have been included in Sunrise's Current Reports on Form 8-K filed on April 29, 2010 and May 3, 2010, respectively. As a result of these transactions, Sunrise expects to recognize a gain of approximately $50 million in the second and third quarters of 2010.
Comparable Community Operating Data for First-Quarter 2010
The nine German communities have been excluded from Sunrise's first-quarter 2010 comparable community operating results set forth below because they are considered discontinued operations. The five remaining Fountains communities have also been excluded as Sunrise will transition from management in the second quarter of 2010. Sixteen communities previously in lease up joined the comparable-community portfolio on January 1, 2010.
- Comparable community revenues for the first quarter of 2010 increased by 2.4 percent, from $483.7 million for the first quarter of 2009 to $495.3 million for the first quarter of 2010. Excluding the impact of foreign exchange rates in 2010, comparable community revenues for the first quarter of 2010 increased 1.3 percent to $489.9 million year-over-year.
- Average unit occupancy in comparable communities for the first quarter of 2010 was 86.2 percent, which was down 150 basis points from 87.7 percent for the first quarter of 2009, and down 50 basis points as compared to 86.7 percent in the fourth quarter of 2009.
- Average daily revenue per occupied unit in comparable communities increased 4.2 percent from $194.99 for the first quarter of 2009 to $203.23 for the first quarter of 2010. Excluding the impact of foreign exchange rates in 2010, average daily revenue per occupied unit for the comparable community portfolio increased 3.1 percent to $201.01 for the first quarter of 2010 as compared to the first quarter of 2009.
- Comparable community operating expenses for the first quarter of 2010 increased 2.1 percent over the first quarter of 2009 from $358.9 million to $366.5 million. Excluding the foreign exchange rates in 2010, these operating expenses increased 1.0 percent to $362.6 million in the first quarter of 2010.
- As of March 31, 2010, Sunrise operated 365 communities located in the United States, Canada, the United Kingdom and Germany, with a unit capacity of approximately 36,600 units.
Sunrise's comparable community portfolio consists of communities that were open and operating as of January 1, 2008, and include consolidated, unconsolidated venture, and managed communities in the United States, Canada and the United Kingdom. Sunrise's management believes that total comparable-community revenues, average daily revenue per occupied unit, average unit occupancy rates and total comparable-community expenses are useful indicators of trends in Sunrise's management business.