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Press release from Business Wire

Entertainment Properties Trust Reports Second Quarter Results

<p class='bwalignc'> <b>- Announces Increase in 2012 FFO Guidance -</b> </p>

Thursday, July 26, 2012

Entertainment Properties Trust Reports Second Quarter Results16:02 EDT Thursday, July 26, 2012 KANSAS CITY, Mo. (Business Wire) -- Entertainment Properties Trust (NYSE:EPR) today announced operating results for the second quarter and six months ended June 30, 2012. Total revenue was $78.9 million for the second quarter of 2012, representing a 6% increase from $74.4 million for the same quarter in 2011. Net income available to common shareholders was $30.8 million, or $0.65 per diluted common share, for the second quarter of 2012 compared to a loss of $7.5 million, or $0.16 per diluted common share, for the same quarter in 2011. Funds From Operations (FFO) for the second quarter of 2012 was $43.1 million, or $0.92 per diluted common share, compared to $38.7 million, or $0.83 per diluted common share, for the same period in 2011. FFO as adjusted for the second quarter of 2012 was $43.2 million, or $0.92 per diluted common share, compared to $38.8 million, or $0.83 per diluted common share, for the same period in 2011, an increase of 11% per share. Total revenue was $156.8 million for the six months ended June 30, 2012, representing a 6% increase from $148.0 million for the same period in 2011. Net income available to common shareholders was $46.2 million, or $0.98 per diluted common share, for the six months ended June 30, 2012 compared to $26.6 million, or $0.57 per diluted common share, for the same period in 2011. Funds From Operations (FFO) for the six months ended June 30, 2012 was $83.4 million, or $1.77 per diluted common share, compared to $70.1 million, or $1.49 per diluted common share, for the same period in 2011. FFO as adjusted for the six months ended June 30, 2012 was $83.6 million, or $1.77 per diluted common share, compared to $77.8 million, or $1.66 per diluted common share, for the same period in 2011, an increase of 7% per share. David Brain, President and CEO, commented, “As we progress through 2012, operating results are running ahead of our expectations and we have consequently increased our FFO guidance for the year. We have maintained robust investment spending activity across our primary operating segments of Entertainment, Education and Recreation, and have a strong pipeline of new investments for the remainder of the year.” A reconciliation of FFO to FFO as adjusted follows (dollars in thousands, except per share amounts):       Three Months Ended June 30,2012   2011Amount   FFO/shareAmount   FFO/share   FFO $ 43,138 $ 0.92 $ 38,692 $ 0.83 Transaction costs 31   —   76   —   FFO as adjusted $ 43,169   $ 0.92   $ 38,768   $ 0.83     Dividends declared per common share $ 0.75 $ 0.70 FFO payout ratio, as adjusted 82 % 84 %   Six Months Ended June 30,20122011AmountFFO/shareAmountFFO/share   FFO $ 83,409 $ 1.77 $ 70,085 $ 1.49 Costs associated with loan refinancing or payoff — — 6,388 0.14 Transaction costs 189   0.01   1,349   0.03   FFO as adjusted $ 83,598   $ 1.78   $ 77,822   $ 1.66     Dividends declared per common share $ 1.50 $ 1.40 FFO payout ratio, as adjusted 84 % 84 %   Portfolio Update As of June 30, 2012, the Company's real estate portfolio consisted of 113 megaplex theatres (including two joint venture properties) totaling approximately 8.9 million square feet, and restaurant, retail and other destination recreation and specialty properties totaling 4.7 million square feet. The Company also owned 39 public charter schools (including five public charter school properties under construction), five vineyards totaling approximately 529 plantable acres and eight wineries totaling approximately 640,000 square feet. At June 30, 2012, the Company's overall real estate portfolio was 98% occupied. As of June 30, 2012, the Company's real estate mortgage loan portfolio had a carrying value of $403.6 million and included financing provided for entertainment, education and recreation properties, including ten metropolitan ski areas covering approximately 6,100 acres in six states. Additionally, the Company had $40.1 million in property under development and $188.9 million in land held for development. As previously announced, subsequent to quarter end, the Company finalized changes to address potential long term risks regarding three of nine Imagine public charter schools scheduled to lose their charters for the 2012/2013 academic year. These three schools represent a total asset value of $36 million or approximately 50% of the total nine school asset value which is $72 million. The parties have also entered into an agreement to substitute three additional schools subject to underwriting on or before the beginning of the 2012/2013 school year. The schools are included as part of a 27 school master lease that is supported by corporate guarantee and a substantial letter of credit. Accordingly, at this time the Company expects that there will be no monetary default. Investment Update The Company's investment spending in the second quarter of 2012 totaled $78.3 million (bringing the year-to-date investment spending to $148.0 million) and included entertainment investments of $53.1 million, education investments of $18.4 million, recreation investments of $2.4 million and other investment spending of $4.4 million. Investment spending to date of $148.0 million combined with the outlook for spending over the remainder of the year puts the Company well on track toward delivering its expected total 2012 investment spending of $250.0 million to $300.0 million. Investment spending for entertainment included two investments with Frank Theaters including the sale-leaseback of a 10-screen theatre in Southern Pines, North Carolina for $6.5 million as well as the development of a theatre located in Ranson, West Virginia with an initial investment of $1.4 million with commitments to fund an additional $7.4 million in development costs. Also during the quarter, the Company entered into agreements with Regal Theatres to develop a theatre in Albuquerque, New Mexico for a total investment of $11.7 million and with Southern Theatres to develop a theatre in Kenner, Louisiana for a total investment of $8.0 million. Additionally, on June 28, 2012, the Company closed on a $36.0 million mortgage investment related to the John Hancock Observatory in Chicago with Montparnasse 56 USA, a global leader in observation deck management. The John Hancock Observatory has been in existence for over 40 years with over 500,000 visitors annually and is consistent with the Company's strategic focus on “admissions and concessions” entertainment venues. Investment spending for education included two new development properties in Buckeye and Queen Creek, Arizona with Portfolio Charter Investments that had an initial investment of $2.8 million. The Company's investment spending also included $15.6 million in funding for public charter school development projects in process that have been previously announced. The Company continues to make progress toward selling its remaining vineyard and winery investments. During the second quarter of 2012, the Company closed on the sale of a portion of its Buena Vista vineyard property in Sonoma County, California for a purchase price of $13.0 million and recognized a gain on sale of $0.4 million. Balance Sheet Update The Company's balance sheet remains strong with a debt to gross assets ratio (defined as total long-term debt to total assets plus accumulated depreciation) of 40% at June 30, 2012. Combined unrestricted cash and credit line capacity at June 30, 2012 was approximately $300.0 million. Dividend Information On June 15, 2012, the Company declared a regular quarterly cash dividend of $0.75 per common share, which was paid on July 16, 2012 to common shareholders of record on June 29, 2012. This dividend represents an annualized dividend of $3.00 per common share, an increase of 7% over the prior year. The Company also declared and paid second quarter cash dividends of $0.3594 per share on the 5.75% Series C Convertible Preferred Shares, $0.4609 per share on the 7.375% Series D Preferred Shares and $0.5625 per share on the 9.00% Series E Convertible Preferred Shares. Guidance Update The Company is maintaining its 2012 investment spending guidance of $250.0 million to $300.0 million. The Company is increasing its 2012 guidance for FFO as adjusted per diluted share to $3.57 to $3.67, from the previous guidance of $3.50 to $3.70. Quarterly Supplemental The Company's supplemental information package for the second quarter and six months ended June 30, 2012 is available on the Company's website at www.eprkc.com.         ENTERTAINMENT PROPERTIES TRUSTConsolidated Statements of Income(Unaudited)(Dollars in thousands except per share data)   Three Months Ended June 30,Six Months Ended June 30,2012     20112012     2011 Rental revenue $ 59,211 $ 56,024 $ 117,494   $ 111,406 Tenant reimbursements 4,365 4,515 9,186 9,176 Other income 107 131 133 155 Mortgage and other financing income 15,256   13,747   29,976   27,262   Total revenue 78,939 74,417 156,789 147,999 Property operating expense 5,245 6,579 11,419 12,769 Other expense 431 677 916 1,157 General and administrative expense 5,821 5,105 12,288 10,573 Costs associated with loan refinancing or payoff — — — 5,339 Interest expense, net 18,459 17,287 36,600 36,031 Transaction costs 31 76 189 1,349 Impairment charges — 24,298 8,195 24,298 Depreciation and amortization 12,791   11,782   25,073   23,455   Income before equity in income from jointventures and discontinued operations 36,161 8,613 62,109 33,028 Equity in income from joint ventures 278   781   324   1,555   Income from continuing operations $ 36,439 $ 9,394 $ 62,433 $ 34,583 Discontinued operations: Income (loss) from discontinued operations (59 ) 566 (297 ) 1,666 Impairment charges — (9,958 ) (4,648 ) (11,758 ) Costs associated with loan refinancing or payoff — — — (1,049 ) Gain on sale or acquisition of real estate 438   —   720   18,293   Net income 36,818 2 58,208 41,735 Add: Net income attributable to noncontrolling interests (19 ) —   (37 ) (2 ) Net income attributable to EntertainmentProperties Trust 36,799 2 58,171 41,733 Preferred dividend requirements (6,002 ) (7,551 ) (12,003 ) (15,103 ) Net income (loss) available to commonshareholders of Entertainment Properties Trust $ 30,797   $ (7,549 ) $ 46,168   $ 26,630   Per share data attributable to Entertainment Properties Trustcommon shareholders: Basic earnings per share data: Income from continuing operations $ 0.65 $ 0.04 $ 1.08 $ 0.42 Income (loss) from discontinued operations 0.01   (0.20 ) (0.09 ) 0.15   Net income (loss) available to common shareholders $ 0.66   $ (0.16 ) $ 0.99   $ 0.57   Diluted earnings per share data: Income from continuing operations $ 0.64 $ 0.04 $ 1.07 $ 0.42 Income (loss) from discontinued operations 0.01   (0.20 ) (0.09 ) 0.15   Net income (loss) available to common shareholders $ 0.65   $ (0.16 ) $ 0.98   $ 0.57   Shares used for computation (in thousands): Basic 46,826 46,648 46,751 46,576 Diluted 47,068 46,956 47,006 46,880           ENTERTAINMENT PROPERTIES TRUSTReconciliation of Net Income Available to Common Shareholdersto Funds From Operations (FFO) (A)(Unaudited, dollars in thousands except per share data)   Three Months Ended June 30,Six Months Ended June 30,2012     20112012     2011 Net income (loss) available to commonshareholders of Entertainment Properties Trust $ 30,797 $ (7,549 ) $ 46,168 $ 26,630 Gain on sale or acquisition of real estate (438 ) — (720 ) (18,293 ) Real estate depreciation and amortization 12,635 11,873 24,832 25,471 Allocated share of joint venture depreciation 144 112 286 221 Impairment charges —   34,256   12,843     36,056   FFO available to common shareholders ofEntertainment Properties Trust $ 43,138   $ 38,692   $ 83,409     $ 70,085   FFO per common share attributable toEntertainment Properties Trust: Basic $ 0.92 $ 0.83 $ 1.78 $ 1.50 Diluted 0.92 0.83 1.77 1.49 Shares used for computation (in thousands): Basic 46,826 46,648 46,751 46,576 Diluted 47,068 46,956 47,006 46,880 Other financial information: Straight-lined rental revenue $ 493 $ 58 $ 881 $ 576 Dividends per common share $ 0.75 $ 0.70 $ 1.50 $ 1.40   (A)   The National Association of Real Estate Investment Trusts (“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, we calculate FFO as net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from sales or acquisitions 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. We have calculated FFO for all periods presented in accordance with this definition. FFO is a non-GAAP financial measure. FFO does not represent cash flows 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 our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO the same way so comparisons with other REITs may not be meaningful. In addition to FFO, we present FFO as adjusted. Management believes it is useful to provide it here as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO as adjusted is FFO plus charges for loan losses, costs (gain) associated with loan refinancing or payoff, net, preferred share redemption costs and transaction costs, less gain on acquisitions. FFO as adjusted is a non-GAAP financial measure. FFO as adjusted does not represent cash flows 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, cash flows or liquidity as defined by GAAP. The additional 1.9 million common shares that would result from the conversion of the Company's 5.75% Series C cumulative convertible preferred shares and the additional 1.6 million common shares that would result from the conversion of the Company's 9.00% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted earnings per share and FFO per share for the three and six months ended June 30, 2012 because the effect is anti-dilutive.     ENTERTAINMENT PROPERTIES TRUSTCondensed Consolidated Balance Sheets(Dollars in thousands)   June 30, 2012     December 31, 2011Assets (unaudited) Rental properties, net of accumulated depreciation of $355,945 and  $335,116 at June 30, 2012 and December 31, 2011, respectively $ 1,833,893 $ 1,819,176 Rental properties held for sale, net 3,895 4,696 Land held for development 188,874 184,457 Property under development 40,141 22,761 Mortgage notes and related accrued interest receivable, net 403,619 325,097 Investment in a direct financing lease, net 236,157 233,619 Investment in joint ventures 10,577 25,053 Cash and cash equivalents 12,739 14,625 Restricted cash 19,165 19,312 Intangible assets, net 3,871 4,485 Deferred financing costs, net 18,452 18,527 Accounts receivable, net 33,138 35,005 Notes and related accrued interest receivable, net 5,007 5,015 Other assets 24,139   22,167 Total assets $ 2,833,667   $ 2,733,995 Liabilities and Equity Accounts payable and accrued liabilities $ 37,485 $ 36,036 Dividends payable 41,130 38,711 Unearned rents and interest 11,982 6,850 Long-term debt 1,270,560   1,154,295 Total liabilities 1,361,157 1,235,892 Entertainment Properties Trust shareholders' equity 1,472,204 1,470,049 Noncontrolling interests 306   28,054 Equity 1,472,510   1,498,103 Total liabilities and equity $ 2,833,667   $ 2,733,995   About Entertainment Properties Trust Entertainment Properties Trust 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 $3 billion and our primary investment segments are Entertainment, Education and Recreation. 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. Further information is available at www.eprkc.com or from Brian Moriarty at 888-EPR-REIT. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTSWith 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 ouracquisition or disposition of properties, our capital resources, future expenditures for development projects, and our results of operations.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,” “expects,” “pipeline,” “anticipates,” “estimates,” “offers,” “plans,” “would,” “may” 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. 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.Entertainment Properties TrustBrian Moriarty, 888-EPR-REIT