Leisureworld Senior Care Corporation
TSX : LW

Leisureworld Senior Care Corporation

August 14, 2013 17:58 ET

Leisureworld Senior Care Corporation Reports 2013 Second Quarter Results

MARKHAM, ONTARIO--(Marketwired - Aug. 14, 2013) - Leisureworld Senior Care Corporation (TSX:LW) ("Leisureworld" or "the Company") today announced its financial results for the second quarter and six months ended June 30, 2013. Percentage calculations in the following summary of Leisureworld's financial results are based on the numbers in the Financial Statements and/or Management's Discussion and Analysis, which may not correspond to rounded figures presented in this release. Full Financial Statements and Management's Discussion and Analysis are available on the Company's website at www.leisureworld.ca.

Financial Highlights

$000s except per share data Quarter
ended
June 30,
2013
Quarter
ended
June 30,
2012
Six months
ended
June 30,
2013
Six months
ended
June 30,
2012
Average total occupancy (LTC) 99.0 % 98.5 % 98.9 % 98.5 %
Average private occupancy (LTC) 99.4 % 98.1 % 99.0 % 97.8 %
Average occupancy (retirement and independent living)1 76.0 % 73.3 % 73.3 % 70.9 %
Net Loss (968 ) (5,039 ) (2,330 ) (7,648 )
Net Operating Income (NOI)2 15,555 14,061 29,525 25,972
Funds from Operations (FFO)2 6,901 7,261 13,127 12,210
Construction Funding (Principal) 1,533 1,403 3,060 2,798
Maintenance Capex (538 ) (179 ) (877 ) (368 )
Adjusted Funds from Operations (AFFO)23 8,568 9,563 16,748 16,704
Basic AFFO per share $ 0.2924 $ 0.3615 $ 0.5719 $ 0.6565
Dividends declared per share $ 0.2250 $ 0.2124 $ 0.4500 $ 0.4248
Basic AFFO payout ratio 76.9 % 58.8 % 78.6 % 64.7 %
1. Retirement and independent living occupancy rates include the BC Portfolio as of May 24, 2012. One of the BC properties (Royale Astoria) and the Ontario Portfolio (Royale Kingston and Royale Kanata) are currently in lease-up and not yet at stabilized occupancy. The 2012 periods include occupancy at Muskoka, which was closed in September 2012 for renovations and re-opened in April 2013 with 24 licenced LTC beds.
2. Net operating income (loss) ("NOI"), funds from operations ("FFO"), and adjusted funds from operations ("AFFO") are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. NOI, FFO and AFFO are supplemental measures of a company's performance and Leisureworld believes that NOI, FFO and AFFO are relevant measures of its ability to pay dividends on the Company's common shares. The IFRS measurement most directly comparable to NOI, FFO and AFFO is net income (loss).
3. AFFO includes adjustments of: $0, $63, $0 and $52, respectively, for HRIS expenses; $327, $947, $663 and $1,944, respectively, for income support; and $347, $68, $775 and $68, respectively, for deferred share unit plan compensation.

"Our LTC portfolio, which currently generates approximately 88% of revenue and 76% of NOI, continues to perform well, with high total and private occupancy, and steady growth in revenue and NOI," said Lois Cormack, President and CEO of Leisureworld. "While our retirement portfolio has been generating incremental revenue and NOI growth, its performance has been below expectations, primarily due to slower than expected lease-up rates of the Ontario portfolio and the Astoria property in B.C., which were both in lease-up when acquired, as well as an occupancy decline at the Peninsula property in B.C. These factors are hindering our FFO and AFFO growth. We are now addressing them through strategic initiatives and have contracted the retirement team at Specialty Care Inc. to assist us. Operational and service delivery improvements will be implemented in the second half of 2013 and advanced throughout 2014. We look forward to demonstrating our progress in realizing the upside potential of our retirement communities."

"We have made good progress with our integration planning for the Specialty Care acquisition. As stated previously, we expect the transaction to close in the fourth quarter of this year. Once completed, the addition of the Specialty Care assets will increase Leisureworld's total LTC bed count by 28%, and overall percentage of Class A beds to 61% from 54%. Our retirement suites count will increase by 44% and we will add a management services division that will further enhance our internal expertise, and enable us to generate attractive margins and help support our future growth," continued Ms. Cormack. "Another strong growth opportunity for Leisureworld is our Home Care segment. We believe this will become an increasingly important component of Canadian seniors' care for communities, governments and families. We are excited by the opportunities that lie ahead and believe that Leisureworld is well positioned to build value for all of our stakeholders."

Second Quarter Results

For the quarter ended June 30, 2013, Leisureworld's Net Operating Income (NOI) increased 10.6% to $15.6 million, from $14.1 million in the second quarter a year ago. The Company's LTC operations generated NOI of $12.1 million, compared to $11.6 million for the second quarter of 2012. The increased contribution from LTC operations was attributable to the inclusion of $0.2 million in NOI from the Madonna acquisition and improved same property NOI. Leisureworld's retirement portfolio generated NOI of $2.7 million, an increase of approximately $0.9 million from the second quarter of 2012. The BC Portfolio contributed $0.8 million of the increase, and the remaining increase was attributable to the improved performance of the Ontario Portfolio. NOI for the Company's Home Care operations was $0.8 million, an increase of $0.1 million compared to the second quarter a year ago, due to higher contributions from personal support contract volumes.

FFO for the second quarter of 2013 declined 5.0% to $6.9 million, from $7.3 million in the comparable quarter. The decline in FFO resulted primarily from higher administrative expenses (excluding transaction costs), net finance charges and income tax expense. Higher administrative expenses of $1.1 million, excluding transaction costs, in the quarter included: a one-time cost of approximately $0.3 million related to additional fees, in the form of deferred share units issued, to the Chair of the Board for performing the function of Acting President and CEO and approximately $0.2 million in consulting related costs. The $0.6 million increase in financing costs is primarily attributable to: a $0.4 million increase related to the Convertible Debentures, $0.2 million incremental interest on the Madonna property, and approximately $0.4 million of higher interest on the BC Portfolio, partly offset by a $0.2 million reduction in interest charges on the 2015 Notes. The higher interest costs on the Madonna property and BC Portfolio were the result of the timing of the acquisitions in the prior year. Underperformance of the retirement portfolio in relation to higher fixed costs also had a negative impact on FFO in the quarter.

AFFO for the quarter totaled $8.6 million, compared to $9.6 million in the second quarter a year ago. The decline in AFFO resulted from: lower FFO; reduced income support, as the Ontario Portfolio's draws were substantially completed in the second quarter of 2012; and a $0.4 million increase in maintenance capex, primarily as a result of timing differences. In 2012, a majority of the maintenance capex occurred in the second half of the year. Management expects annualized maintenance capex to be in line with 2012 levels on a percentage of revenue basis. The aforementioned factors that resulted in a decline to the Company's AFFO for the second quarter of 2013 were partly offset by the $0.3 million increase in the add-back for deferred share unit compensation.

Dividends declared by Leisureworld in the quarter totaled $0.2250 per share and Basic AFFO per share was $0.2924, representing a quarterly payout ratio of 76.9%. Leisureworld's payout ratio in the second quarter of 2012 was 58.8%.

Leisureworld generated total revenue of $83.2 million for the quarter ended June 30, 2013, an increase of 9.4% from $76.1 million in the second quarter a year ago. LTC revenue increased 7.0% to $72.9 million, partly as a result of the Madonna property acquisition and the conversion of the Muskoka property to an LTC home in April 2013, which contributed $2.8 million and $0.4 million in revenue, respectively.

Retirement residence revenue increased to $6.5 million from $4.4 million in the second quarter a year ago. The increase was primarily a result of the acquisition of the BC Portfolio in May, 2012, which contributed revenue in the current quarter of $3.5 million. The Ontario Portfolio had a $0.1 million increase in revenue in the quarter, generated by increased occupancy at the Royale Kingston and Royale Kanata. This increase was partly offset by the closure of the Muskoka retirement home in the second half of 2012, as it was being converted to a LTC home.

Home Care's revenue increased to $3.9 million from $3.5 million, a 9.0% increase from the second quarter a year ago, primarily due to higher volumes for service contracts.

The Company's net loss was $1.0 million in the second quarter of 2013, compared to a net loss of $5.0 million in the second quarter of 2012. The improvement of $4.1 million was attributable to the favourability of the deferred taxes compared to the prior year of $3.7 million, the non-recurring prior year impairment charge of $2.7 million related to the termination of the Human Resource Information System ("HRIS") project, partly offset by increased charges of $1.3 million for depreciation and amortization in the current year, and higher finance charges of $1.1 million.

Combined average occupancy rates at the end of the quarter for the Ontario Portfolio of retirement properties in Kingston and Kanata were 70.3%, compared to 69.6% in the first quarter of 2013. For the BC Portfolio of Astoria, Pacifica and Peninsula, the average occupancy in the quarter was 58.2%, 94.2% and 80.6%, respectively, compared to average occupancy of 57.5%, 92.6% and 84.2%, respectively, in the first quarter of 2013.

2013 First Half Results Summary

For the six months ended June 30, 2013, NOI increased 13.7% to $29.5 million, compared to $26.0 million in the corresponding period in 2012. The LTC portfolio generated $22.5 million in NOI during the period, reflecting increased same property NOI, and a $0.4 million NOI contribution from the Madonna property acquisition. The retirement portfolio generated $5.4 million in NOI in the first half of 2013, a $2.6 million increase from the same period a year ago, primarily as a result of the timing of the Company's BC Portfolio acquisition last year. Home Care NOI increased 17.3% to $1.6 million in the first half of 2013.

AFFO for the first six months of 2013 was $16.7 million, consistent with levels achieved last year. Increased FFO of $13.1 million for the current year period, compared to $12.2 million in the first half of 2012, was offset by: the $1.3 million decrease in income support, as the Ontario Portfolio income support draw was substantially completed in the second quarter of 2012; and a $0.5 million increase in maintenance capex compared to the prior year period. AFFO for the first half of 2013 was also positively impacted by a $0.7 million incremental add-back for deferred share unit compensation and a $0.2 million increase in construction funding received. Dividends declared by Leisureworld in the first six months of 2013 totaled $0.4500 per share and Basic AFFO per share was $0.5719, representing a payout ratio of 78.7% for the period.

As at June 30, 2013, the Company's debt to gross book value ratio was 58.3%. The debt of $547.6 million is represented by:

  • $294.3 million of 4.814% Series A Senior Secured Notes due November 24, 2015, rated "A-(negative)" by Standard & Poor's Rating Services and "A (stable)" by Dominion Bond Rating Service Limited;
  • $46.0 million drawn from the $61.5 million available under a revolving credit facility, maturing April 2014;
  • $46.0 million in convertible debentures, with an initial maturity date of January 2, 2014, which will be extended to June 30, 2018 upon the closing of the Specialty Care transaction;
  • An $18.0 million CMHC insured first mortgage, maturing June, 2023;
  • a $26.0 million term loan, maturing May, 2015;
  • a $23.1 million mortgage maturing January, 2017;
  • a $15.4 million mortgage, maturing April, 2029; and
  • $78.8 million in subscription receipts, held in escrow

Leisureworld had cash and cash equivalents at quarter end totaling $34.6 million and a further committed undrawn revolving credit facility with a Canadian chartered bank of $10.0 million for working capital purposes. As at June 30, 2013, Leisureworld had 29,321,387 common shares issued and outstanding.

Conference Call

Lois Cormack, President and CEO, and Manny DiFilippo, CFO, will host a conference call for the investment community on Thursday, August 15, 2013 at 10:00 a.m. (ET). The call-in numbers for participants are 416-340-2216 or 866-226-1792. A webcast of the call will be accessible via Leisureworld's website at: www.leisureworld.ca/Investors/Events-Presentations.aspx.

A replay of the call will be available until August 29, 2013. To access the replay, dial 905-694-9451 or 800-408-3053 (pass code: 1284272). The webcast will be archived on Leisureworld's website.

About Leisureworld

Leisureworld Senior Care Corporation is one of Canada's largest operators of seniors' housing and the third largest licensed long-term care (LTC) provider in Ontario. Leisureworld owns and operates 27 LTC homes across Ontario with 4,498 beds. The Company also owns and operates five retirement residences and one independent living residence, representing 739 suites, in Ontario and British Columbia. Leisureworld subsidiaries include: Preferred Health Care Services, an accredited provider of professional nursing and personal support services; and Ontario Long Term Care, a provider of purchasing services, and dietary, social work, and other regulated health professional services. For more information, please visit the Company's website at www.leisureworld.ca.

Forward-Looking Statements

Certain of the statements contained in this news release are forward-looking statements and are provided for the purpose of presenting information about management's current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements generally use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "estimate", "believe" or other similar words and include, among other things, statements related to the Company's financial results or strategic plans. These statements are subject to significant known and unknown risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions, including the funding of long-term care facilities by government entities. Other material factors or assumptions that were applied in formulating the forward-looking statements contained herein include the assumption that the business and economic conditions affecting Leisureworld's operations will continue substantially in their current state, including, with respect to industry conditions, general levels of economic activity and government regulations.

Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of Leisureworld as at the date of this news release and speak only as at the date of this news release. Leisureworld does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.

Contact Information

  • Leisureworld Senior Care Corporation
    Manny DiFilippo
    Chief Financial Officer
    (905) 489-0787

    Leisureworld Senior Care Corporation
    Bruce Wigle
    Investor Relations
    (416) 447-4740 ext. 232
    www.leisureworld.ca