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Press release from Business Wire

EPR Properties Reports Fourth Quarter and 2012 Year-End Results

<p class='bwalignc'> <b>Increases 2013 Earnings and Investment Spending Guidance</b> </p>

Tuesday, February 26, 2013

EPR Properties Reports Fourth Quarter and 2012 Year-End Results16:02 EST Tuesday, February 26, 2013 KANSAS CITY, Mo. (Business Wire) -- EPR Properties (NYSE:EPR) today announced operating results for the fourth quarter and year ended December 31, 2012. Total revenue was $83.4 million for the fourth quarter of 2012, representing an 11% increase from $75.4 million for the same quarter in 2011. Net income available to common shareholders was $18.8 million, or $0.40 per diluted common share, for the fourth quarter of 2012 compared to $31.9 million, or $0.68 per diluted common share, for the same quarter in 2011. Funds From Operations (FFO) for the fourth quarter of 2012 was $41.0 million, or $0.87 per diluted common share, compared to $42.6 million, or $0.91 per diluted common share, for the same period in 2011. FFO as adjusted for the fourth quarter of 2012 was $45.1 million, or $0.96 per diluted common share, compared to $42.4 million, or $0.90 per diluted common share, for the same period in 2011, an increase of 7% per share. Total revenue was $321.8 million for the year ended December 31, 2012, representing an 8% increase from $298.3 million for the year ended December 31, 2011. Net income available to common shareholders was $93.2 million, or $1.98 per diluted common share, for the year ended December 31, 2012 compared to $84.3 million, or $1.80 per diluted common share, for the year ended December 31, 2011. Funds From Operations (FFO) for the year ended December 31, 2012 was $168.8 million, or $3.59 per diluted common share, compared to $150.3 million, or $3.20 per diluted common share, for the year ended December 31, 2011. FFO as adjusted for the year ended December 31, 2012 was $173.8 million, or $3.69 per diluted common share, compared to $160.8 million, or $3.43 per diluted common share, for the year ended December 31, 2011, an increase of 8% per share. David Brain, President and CEO, commented, "The fourth quarter was a continuation of the positive momentum we have been reporting throughout the year, allowing us to deliver an 8% annual increase in FFO as adjusted per share and complete approximately $300 million in total annual investments. We are optimistic about the year ahead as we maintain a strong investment pipeline, and when combined with our strong balance sheet, we believe that we are well-positioned to grow earnings and support our increased dividend level." A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in thousands, except per share amounts):   Three Months Ended December 31,2012   2011Amount   FFO/shareAmount   FFO/share   FFO $ 41,037 $ 0.87 $ 42,595 $ 0.91 Transaction costs 31 — 233 — Costs associated with loan refinancing or payoff, net 150 — (390 ) (0.01 ) Preferred share redemption costs   3,888     0.09     —     —   FFO as adjusted $ 45,106   $ 0.96   $ 42,438   $ 0.90     Dividends declared per common share $ 0.75 $ 0.70 FFO as adjusted payout ratio 78 % 78 %     Year Ended December 31,20122011AmountFFO/shareAmountFFO/share   FFO $ 168,839 $ 3.59 $ 150,291 $ 3.20 Transaction costs 404 0.01 1,730 0.04 Costs associated with loan refinancing or payoff, net 627 0.01 5,998 0.13 Preferred share redemption costs   3,888     0.08     2,769     0.06   FFO as adjusted $ 173,758   $ 3.69   $ 160,788   $ 3.43     Dividends declared per common share $ 3.00 $ 2.80 FFO as adjusted payout ratio 81 % 82 %   Portfolio Update As of December 31, 2012, the Company's portfolio of entertainment properties consisted of 10.7 million square feet and was 98% leased, including 113 megaplex theatres that were 99% leased. The Company's portfolio of education properties consisted of 2.3 million square feet, including 38 public charter schools, and was 100% leased. The Company's portfolio of recreation properties was 100% leased. The combined portfolio consisted of 13.9 million square feet and was 98% leased. As of December 31, 2012, the Company's real estate mortgage loan portfolio had a carrying value of $455.8 million and included financing provided for entertainment, education and recreation properties. Additionally, the Company had $196.2 million in land held for development. Investment Update The Company's investment spending in the fourth quarter of 2012 totaled $95.9 million and included investments in each of its three primary operating segments. Total investment spending for 2012 was $298.1 million. Entertainment investment spending of $35.7 million in the fourth quarter of 2012 related primarily to $22.0 million of financing provided to North Carolina Music Factory, an existing live-performance anchored entertainment retail center in Charlotte, North Carolina, as well as investments in build-to-suit construction of eight megaplex theatres and five other entertainment properties that are subject to long-term triple net leases or mortgages. Education investment spending of $12.8 million in the fourth quarter of 2012 related primarily to investments in build-to-suit construction of nine public charter schools that are subject to long-term triple net leases or mortgages. Recreation investment spending of $42.7 million in the fourth quarter of 2012 related primarily to the purchase of the Wisp ski resort in McHenry, Maryland, and funding mortgage note agreements with Peak Resorts, Inc. (Peak) for additional improvements at existing properties and Peak's acquisition of a metropolitan ski resort in Ohio. Additionally, the Company funded build-to-suit construction of three golf-entertainment complexes for TopGolf that are subject to long-term triple net leases or mortgages. Other investment spending totaled $4.7 million in the fourth quarter of 2012 and related primarily to the land held for development in Sullivan County, New York. The Company continues to progress with the development of a planned casino and resort property in Sullivan County, and the Company obtained important local approvals for its comprehensive development plan subsequent to year-end. Progress on Vineyard and Winery Sales The Company continues to make progress toward selling its remaining vineyard and winery investments. During the fourth quarter of 2012, the Company completed the sale of the remaining vineyard and winery assets at its Buena Vista property and the sale of the Carneros custom crush facility for total proceeds of $32.0 million. The Company recognized a net loss on the sales of $0.7 million. In addition, the Company has two agreements pending for the sale of another leased winery as well as three other unleased vineyard and winery properties. In conjunction with these agreements, the Company recorded impairment charges of $8.0 million during the fourth quarter of 2012. While there is no assurance that these transactions will close, the carrying value of vineyard and winery assets is expected to be down to approximately $28.0 million subsequent to these sales. 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 41% at December 31, 2012. Combined unrestricted cash and credit line capacity at December 31, 2012 was approximately $371.0 million. As previously announced, on October 12, 2012, the Company issued 5.0 million shares of 6.625% Series F cumulative redeemable preferred shares in a registered public offering at a purchase price of $25.00 per share resulting in net proceeds of approximately $120.6 million, after underwriting discounts and expenses. Additionally, on November 5, 2012, the Company redeemed all 4.6 million outstanding shares of its 7.375% Series D cumulative redeemable preferred shares for a total aggregate redemption price of approximately $115.8 million. Dividend Information The Company is announcing a dividend for the first quarter of 2013 of $0.79 per common share. This dividend is payable on April 15, 2013 to shareholders of record as of March 28, 2013 and represents an annualized dividend of $3.16 per common share, a 5.3% increase over the prior year. In addition, our Board has approved the payment of dividends to common shareholders on a monthly basis beginning in the second quarter of 2013. Accordingly, it is expected that the first monthly dividend will be payable on May 15, 2013 to common shareholders of record on April 30, 2013. No changes in timing are anticipated related to dividends on preferred shares. Guidance Update The Company is increasing its 2013 guidance for FFO per diluted share to $3.79 to $3.94, from the previous guidance of $3.77 to $3.92, and increasing its 2013 investment spending guidance to $300 million to $350 million, from the previous guidance of $275 million to $325 million. Approximately one-third of the expected investment spending in 2013 relates to carry-over spending on build-to-suit projects initiated in 2012. Quarterly and Year-End Supplemental The Company's supplemental information package for the fourth quarter and year ended December 31, 2012 is available on the Company's website at www.eprkc.com.   EPR PropertiesConsolidated Statements of Income(Unaudited, dollars in thousands except per share data)     Three Months Ended December 31,Year Ended December 31,2012   20112012   2011 Rental revenue $ 61,031 $ 57,025 $ 238,440 $ 224,253 Tenant reimbursements 4,780 4,370 18,575 17,965 Other income 434 106 769 427 Mortgage and other financing income 17,117   13,947   64,002   55,633   Total revenue 83,362 75,448 321,786 298,278 Property operating expense 6,915 5,647 25,283 24,216 Other expense 408 390 1,681 1,947 General and administrative expense 5,396 5,045 23,170 20,173 Costs associated with loan refinancing or payoff, net 150 (390 ) 627 3,700 Interest expense, net 20,062 17,658 76,656 71,481 Transaction costs 31 233 404 1,727 Impairment charges 6,872 — 10,870 18,684 Depreciation and amortization 13,192   11,527   50,254   45,755   Income before equity in income from joint ventures and discontinued operations 30,336 35,338 132,841 110,595 Equity in income from joint ventures 358   616   1,025   2,847   Income from continuing operations $ 30,694 $ 35,954 $ 133,866 $ 113,442 Discontinued operations: Income (loss) from discontinued operations 441 778 864 (346 ) Impairment charges (1,107 ) — (13,039 ) (17,372 ) Transaction costs — — — (3 ) Gain (loss) on sale or acquisition of real estate (747 ) 1,236   (27 ) 19,545   Net income 29,281 37,968 121,664 115,266 Add: Net income attributable to noncontrolling interests (47 ) (25 ) (108 ) (38 ) Net income attributable to EPR Properties 29,234 37,943 121,556 115,228 Preferred dividend requirements (6,503 ) (6,003 ) (24,508 ) (28,140 ) Preferred share redemption costs (3,888 ) —   (3,888 ) (2,769 ) Net income available to common shareholders of EPR Properties $ 18,843   $ 31,940   $ 93,160   $ 84,319   Per share data attributable to EPR Properties common shareholders: Basic earnings per share data: Income from continuing operations $ 0.43 $ 0.64 $ 2.25 $ 1.77 Income (loss) from discontinued operations (0.03 ) 0.04   (0.26 ) 0.04   Net income available to common shareholders $ 0.40   $ 0.68   $ 1.99   $ 1.81   Diluted earnings per share data: Income from continuing operations $ 0.43 $ 0.64 $ 2.24 $ 1.76 Income (loss) from discontinued operations (0.03 ) 0.04   (0.26 ) 0.04   Net income available to common shareholders $ 0.40   $ 0.68   $ 1.98   $ 1.80   Shares used for computation (in thousands): Basic 46,850 46,726 46,798 46,640 Diluted 47,090 46,967 47,049 46,901     EPR PropertiesReconciliation of Net Income Available to Common Shareholdersto Funds From Operations (FFO) (A)(Unaudited, dollars in thousands except per share data)     Three Months Ended December 31,Year Ended December 31,2012   20112012   2011 Net income available to common shareholders of EPR Properties $ 18,843 $ 31,940 $ 93,160 $ 84,319 Loss (gain) on sale or acquisition of property 747 (1,236 ) 27 (19,545 ) Real estate depreciation and amortization 13,318 11,773 51,162 49,009 Allocated share of joint venture depreciation 150 118 581 452 Impairment charges 7,979   —   23,909   36,056   FFO available to common shareholders of EPR Properties $ 41,037   $ 42,595   $ 168,839     $ 150,291   FFO per common share attributable to EPR Properties: Basic $ 0.88 $ 0.91 $ 3.61 $ 3.22 Diluted 0.87 0.91 3.59 3.20 Shares used for computation (in thousands): Basic 46,850 46,726 46,798 46,640 Diluted 47,090 46,967 47,049 46,901 Other financial information: Straight-lined rental revenue $ 927 $ 298 $ 4,632 $ 966 Dividends per common share $ 0.75 $ 0.70 $ 3.00 $ 2.80   (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 months and years ended December 31, 2012 and 2011 because the effect is anti-dilutive.   EPR PropertiesCondensed Consolidated Balance Sheets(Dollars in thousands)   December 31,2012   2011Assets Rental properties, net of accumulated depreciation of $375,684 and $335,116 at December 31, 2012 and 2011, respectively $ 1,885,093 $ 1,819,176 Rental properties held for sale, net 2,788 4,696 Land held for development 196,177 184,457 Property under development 29,376 22,761 Mortgage notes and related accrued interest receivable, net 455,752 325,097 Investment in a direct financing lease, net 234,089 233,619 Investment in joint ventures 11,971 25,053 Cash and cash equivalents 10,664 14,625 Restricted cash 23,991 19,312 Deferred financing costs, net 19,679 18,527 Accounts receivable, net 38,738 35,005 Other assets 38,412   31,667 Total assets $ 2,946,732   $ 2,733,997 Liabilities and Equity Accounts payable and accrued liabilities $ 65,481 $ 36,036 Dividends payable 41,186 38,711 Unearned rents and interest 11,333 6,850 Long-term debt 1,368,832   1,154,295 Total liabilities 1,486,832 1,235,892 EPR Properties shareholders' equity 1,459,521 1,470,049 Noncontrolling interests 377   28,054 Equity 1,459,898   1,498,103 Total liabilities and equity $ 2,946,730   $ 2,733,995   About EPR Properties EPR Properties is a specialty real estate investment trust (REIT) that invests in properties in select market segments which require unique industry knowledge, while offering the potential for stable and attractive returns. Our total investments exceed $3.2 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. 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” 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.EPR PropertiesBrian Moriarty, 888-EPR-REIT