Aug 5 2010
Sunrise Senior Living, Inc. (NYSE: SRZ) today reported financial results and operating data for the second quarter of 2010. Sunrise will host a conference call and webcast Thursday, August 5, 2010 at 9:00 a.m. ET, to discuss the financial results.
"We believe that the combination of stabilized occupancy and continued rate growth positions Sunrise well in an economic recovery," said Mark Ordan, Sunrise's chief executive officer.
Financial Results for Second-Quarter 2010
Sunrise reported revenues of $349.1 million in the second quarter of 2010 as compared to $359.7 million for the second quarter of 2009. Net income for the second quarter of 2010 was $46.3 million, or $0.81 per fully diluted share, as compared to net loss of ($81.8) million, or ($1.62) per fully diluted share, for the second quarter of 2009. The loss before discontinued operations for the second quarter of 2010 was ($5.2) million as compared to loss before discontinued operations for the second quarter of 2009 of ($19.1) million.
Included in discontinued operations for the second quarter of 2010 is a gain on German debt restructuring of $52.0 million, compared to an impairment loss relating to the nine German communities of ($52.4) million in the second quarter of 2009. Under accounting rules, impairment charges are recorded during the period when the carrying amount of assets are determined to be above fair value. However, the related debt must be carried at historical cost until the debt is modified or extinguished. In the second quarter, Sunrise executed debt restructuring agreements with the lenders to the German communities as discussed more fully below, which triggered this non-cash gain.
For the second quarter of 2010, net loss from operations excluding buyout fees was ($13.4) million, an improvement of $18.1 million as compared to a net loss from operations of ($31.5) million in the second quarter of 2009. Adding back non-cash charges including depreciation and amortization of $8.6 million, allowance for uncollectable receivables from owners of $0.5 million, stock compensation of $1.1 million and impairment of long-lived assets of $2.7 million, as well as non-recurring items including the SEC investigation costs of $0.3 million and restructuring costs of $5.2 million, the adjusted income from ongoing operations was $5.0 million as compared to $4.4 million in the second 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 $42.8 million of unrestricted cash at June 30, 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 June 30, 2010, Sunrise had consolidated debt of $323.9 million, of which $163.1 million of debt is expected to mature in 2010, including $83.6 million of debt, at estimated fair value, on our German communities, which we expect to be repaid upon the closing of the sale of these communities. Also included in consolidated debt that is expected to mature in 2010 is $25.5 million under the Company's bank credit facility, which is due in December 2010. Debt that is in default totals $70.3 million at June 30, 2010. Sunrise is seeking waivers with respect to existing defaults to avoid acceleration of these obligations.
Germany
On June 3, 2010, Sunrise announced that the Company and certain of its affiliates have entered into a purchase and sale agreement with GHS Pflegeresidenzen Grundstucks GmbH and Prudential Real Estate Investors (operating on behalf of investors in a fund managed by its Munich-based business, TMW Pramerica Property Investment GmbH) to sell eight of the Company's nine German assisted living facilities. The aggregate purchase price under this agreement is EUR 60.8 million (approximately US$74.5 million), which, after expenses, shall be paid directly to the respective lenders to the German communities.
The closing, which is subject to certain conditions described in Sunrise's Form 8-K filed on June 3, 2010, is expected to occur no earlier than August 31, 2010. Upon closing, Sunrise will transfer the management of these eight communities to Kursana Seniorenvilla GmbH, a Germany-based senior living provider. Sunrise is continuing to market for sale one remaining property in Germany.
As Sunrise previously announced, in April 2010, the Company and certain affiliates completed the restructure transactions with three of the lenders to its German subsidiaries and had entered into a partial settlement and waiver declaration with a fourth lender. In May 2010, the Company announced that it had entered into a settlement agreement with its fifth lender, and therefore had reached agreements with all of its lenders to its nine German communities.
During the second quarter of 2010, Sunrise recognized a gain of $52 million, which is included in discontinued operations, in connection with the closing of this debt restructuring transaction. Sunrise also expects to record a gain of approximately $2 million in the third quarter of 2010.
SEC Settlement
As previously reported, on July 23, 2010, the Company announced that it, along with two former Company officers, have reached settlements with the U.S. Securities and Exchange Commission (the "SEC") relating to the SEC's previously disclosed investigation of the Company. The settlements are subject to court approval. For additional information, please refer to the Company's Form 8-K filed with the SEC on July 23, 2010.
Comparable Community Operating Data for Second-Quarter 2010
The nine German communities have been excluded from Sunrise's second-quarter 2010 comparable community operating results set forth below because they are considered discontinued operations. The two remaining Fountains communities have also been excluded.
- Comparable community revenues for the second quarter of 2010 increased by 3.9 percent, from $471.3 million for the second quarter of 2009 to $489.6 million for the second quarter of 2010. Excluding the impact of foreign exchange rates in 2010, comparable community revenues for the second quarter of 2010 increased 2.3 percent to $482.2 million year-over-year.
- Average unit occupancy in comparable communities for the second quarter of 2010 was 86.2 percent, which was down 30 basis points from 86.5 percent for the second quarter of 2009, and down 10 basis points as compared to 86.3 percent in the first quarter of 2010.
- Average daily revenue per occupied unit in comparable communities increased 4.3 percent from $194.81 for the second quarter of 2009 to $203.27 for the second quarter of 2010. Excluding the impact of foreign exchange rates in 2010, average daily revenue per occupied unit for the comparable community portfolio increased 2.8 percent to $200.21 for the second quarter of 2010 as compared to the second quarter of 2009.
- Comparable community operating expenses for the second quarter of 2010 increased 3.5 percent over the second quarter of 2009 from $342.9 million to $354.8 million. Excluding the foreign exchange rates in 2010, these operating expenses increased 2.7 percent to $352.2 million in the second quarter of 2010.
- As of June 30, 2010, Sunrise operated 356 communities located in the United States, Canada, the United Kingdom and Germany, with a unit capacity of approximately 35,400 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.
SOURCE Sunrise Senior Living, Inc.