Sunrise Reports Financial Results for Fourth Quarter and Full Year of 2010
MCLEAN, VA - Sunrise Senior Living, Inc. (NYSE: SRZ) today reported financial results and operating data for the fourth quarter and full year of 2010. Sunrise will host a conference call and webcast Friday, February 25, 2011, at 9:00 a.m. ET, to discuss the financial results.
“2010 was a year of strengthening Sunrise and we are now well positioned to take advantage of great opportunities in 2011 and the years to come,” said Mark Ordan, Sunrise’s chief executive officer. “Bottom line 2010 performance is benefitted by outsized gains realized in our restructuring. Our operating results are adversely affected by the reduction of revenue from our restructuring without an equivalent reduction of expenses, and our G&A was adversely affected by non-recurring items. While we are excited by our progress, optimistic and committed to our future, we have in our 10-K and supplemental 8-K provided investors with meaningful additional detail to enable a fuller understanding of both our progress and of the risks we still need to tackle.”
2010 Overview
During 2010, Sunrise sold its nine German communities, executed debt restructuring agreements with its German lenders, sold land parcels, sold its venture interests to Ventas, modified, extended and amended certain venture and management agreements, and entered into management agreement buyouts. Sunrise used the majority of the proceeds from these transactions to reduce outstanding indebtedness. As a result of these management agreement buyouts, the Company now manages 32 fewer communities. Sunrise earned $13.0 million, $17.2 million and $17.7 million of management fees from the 32 terminated communities in 2010, 2009 and 2008, respectively. Sunrise expects to reduce its corporate overhead to partially offset its reduced management fee income.
2010 Annual Results
Sunrise reported total operating revenues of $1.4 billion for the twelve months ended December 31, 2010, as compared to $1.5 billion for the twelve months ended December 31, 2009. Net income was greatly increased by non-recurring factors and was $99.1 million, or $1.72 per fully diluted share, for the twelve months ended 2010. This included $63.3 million of buyout fees and $68.5 million of income from discontinued operations, as compared to net loss of ($133.9) million, or ($2.61) per fully diluted share, for the twelve months ended December 31, 2009. A significant portion of Sunrise’s ongoing management fee income is heavily concentrated with four business partners, as outlined in the Company’s 2010 Form 10-K.
Adjusted income from ongoing operations was $15.6 million for the twelve months ended December 31, 2010, as compared to an adjusted income of $15.9 million for the twelve months ended December 31, 2009. Adjusted EBITDAR for the twelve months ended December 31, 2010, was $117.9 million as compared to $131.1 million for the twelve months ended December 31, 2009. Adjusted income from ongoing operations and Adjusted EBITDAR are measures of operating performance that are 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. These are 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 tables “Adjusted Income from Ongoing Operations” and “Adjusted EBITDAR Reconciliation.”
In the fourth quarter of 2010, Sunrise reported revenues of $319.0 million as compared to $363.0 million for the fourth quarter of 2009. Net income for the fourth quarter of 2010 was $50.0 million or $0.87 per fully diluted share, as compared to net income of $10.4 million, or $0.19 per fully diluted share, for the fourth quarter of 2009. The change between periods was primarily driven by a $10 million buy-out fee paid by HCP and a $25 million gain resulting from the sale of our venture interest to Ventas.
Adjusted income from ongoing operations was $1.6 million in the fourth quarter of 2010 as compared to an adjusted income of $6.3 million in the fourth quarter of 2009. Adjusted EBITDAR for the fourth quarter of 2010 was $25.7 million as compared to $42.1 million for the fourth quarter of 2009.
Cash and Liquidity Update
Sunrise had $66.7 million of unrestricted cash at December 31, 2010. As of December 31, 2010, Sunrise had significantly reduced its consolidated debt to $163.0 million, as compared to $440.2 million at December 31, 2009, a reduction of $277.2 million.
New Venture Transaction
As previously announced, on January 10, 2011, Sunrise closed on the purchase and sale agreement with a wholly owned subsidiary of CNL Lifestyle Properties and an affiliate of Arcapita, which was Sunrise’s joint venture partner in 29 Sunrise-managed communities. As part of the agreement, Sunrise contributed its 10-percent ownership interest in the existing venture for a 40-percent ownership interest in a new venture. The portfolio was valued at approximately $630 million (excluding transaction costs). As part of the Company’s new venture agreement with a wholly owned subsidiary of CNL Lifestyle Properties, Sunrise will have the option to purchase CNL’s interest in the venture beginning from the start of year three to the end of year six. Sunrise’s share of the transaction costs is approximately $5.7 million (excluding the funding of escrows), which was expensed as incurred ($1.5 million in the fourth quarter of 2010 and $4.2 million in January 2011).
Ventas
Effective December 1, 2010, Sunrise closed on the previously disclosed purchase and sale agreements with Ventas, Inc. and certain of its affiliates to sell to Ventas all of Sunrise’s joint venture interests in nine limited liability companies in the U.S. and two limited partnerships in Canada, which collectively own 58 communities managed by Sunrise. The aggregate purchase price for the venture interests was approximately $41.5 million. Sunrise used the proceeds from the transaction, after expenses, to pay down its debt obligations and for working capital. In connection with this transaction, Sunrise recorded a $25.0 million gain on the sale of its venture interests.
Sunrise continues to manage the 58 senior living communities, together with the other 21 senior living communities in the Ventas portfolio that are already wholly owned by Ventas, pursuant to amended and restated master and management agreements entered into in connection with the purchase and sale transaction.
Operating Data for Fourth-Quarter 2010
• Comparable community revenues for the fourth quarter of 2010 increased by 4.8 percent, from $442.8 million for the fourth quarter of 2009 to $464.0 million for the fourth quarter of 2010. Excluding the impact of foreign exchange rates in 2010, comparable community revenues for the fourth quarter of 2010 increased 4.8 percent to $463.9 million year-over-year.
• Average unit occupancy in comparable communities for the fourth quarter of 2010 was 88.3 percent, which was up 80 basis points from 87.5 percent for the fourth quarter of 2009, and up 60 basis points as compared to 87.7 percent in the third quarter of 2010.
• Average daily revenue per occupied unit in comparable communities increased 3.7 percent from $198.92 for the fourth quarter of 2009 to $206.32 for the fourth quarter of 2010. Excluding the impact of foreign exchange rates in 2010, average daily revenue per occupied unit for the comparable community portfolio increased 3.7 percent to $206.27 for the fourth quarter of 2010 as compared to the fourth quarter of 2009.
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-------------------------------------------------------------------------------- • Comparable community operating expenses for the fourth quarter of 2010 increased 0.3 percent from $326.0 million to $327.1 million. Foreign exchange rates in 2010 did not significantly impact these operating expense results in the fourth quarter of 2010.
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.
Supplemental Information
For additional details on Sunrise’s comparable-community data, please refer to the Supplemental Information attached. Also, additional supplemental information has been furnished to the Securities and Exchange Commission in a Form 8-K, and can also be found on the Supplemental Data link on the Investor Relations section of the Company’s Web site at http://suppdata.sunriseseniorliving.com/
Conference Call and Webcast
Sunrise will host a conference call and webcast at 9:00 a.m. ET on Friday, February 25, 2011, to discuss the financial results for the fourth quarter and full year of 2010 and the other matters discussed in this press release. The call-in number for the conference call is 888-554-1431 or 719-325-2196 (from outside the U.S.). Callers should reference the “Sunrise Senior Living Q4 Earnings Call” or the participant passcode: 5721106. Those interested may also go to the Investor Relations section of the Company’s Web site ( http://www.sunriseseniorliving.com ) to listen to the earnings call. A telephone replay of the call will be available until March 11, 2011 at 1 p.m. ET, by dialing 888-203-1112 or 719-457-0820 (passcode: 5721106); a replay will also be available on Sunrise’s Web site during that period.
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