CORRECTING and REPLACING EPR Properties Reports First Quarter 2019 Results

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    KANSAS CITY, Mo.–(BUSINESS WIRE)–Thirteenth paragraph, second sentence of release should read: The
    Company is confirming its guidance for 2019 FFO as adjusted per diluted
    share of a range of $5.30 to $5.50 and confirming its 2019 investment
    spending guidance of a range of $600.0 million to $800.0 million
    (instead of The Company is increasing its guidance for 2019 FFO as
    adjusted per diluted share to a range of $5.30 to $5.50 and confirming
    its 2019 investment spending guidance of a range of $600.0 million to
    $800.0 million).

    The corrected release reads:

    EPR PROPERTIES REPORTS FIRST QUARTER 2019 RESULTS

    EPR Properties (NYSE:EPR) today announced operating results for the
    first quarter ended March 31, 2019.

    • Total revenue was $164.5 million for the first quarter of 2019,
      representing a 6% increase from $155.0 million for the same quarter in
      2018.
    • Net income available to common shareholders was $59.3 million, or
      $0.79 per diluted common share, for the first quarter of 2019 compared
      to $23.5 million, or $0.32 per diluted common share, for the same
      quarter in 2018.
    • Funds From Operations (FFO) (a non-GAAP financial measure) for the
      first quarter of 2019 was $93.1 million, or $1.23 per diluted common
      share, compared to $61.0 million, or $0.82 per diluted common share,
      for the same quarter in 2018.
    • FFO as adjusted (FFOAA) (a non-GAAP financial measure) for the first
      quarter of 2019 was $102.6 million, or $1.36 per diluted common share,
      compared to $94.0 million, or $1.26 per diluted common share, for the
      same quarter in 2018, representing an 8% increase in per share results.

    “We are pleased with the sustained momentum demonstrated by our first
    quarter results,“ stated Company President and CEO Greg Silvers. “We
    continue to source additional growth opportunities consistent with our
    focus on experiential activities which play directly into the Company’s
    differentiated and deep expertise. With the expected payoff of the
    mortgage associated with the Schlitterbahn water parks, we are
    well-positioned with additional capital for reinvestment. As we further
    expand, we will adhere to our core underwriting principles as we seek
    both accretive initial returns and growth in yield.”

    Portfolio Update

    The Company’s investment portfolio (excluding property under
    development) consisted of the following at March 31, 2019:

    • The Entertainment segment included investments in 157 megaplex theatre
      properties, seven entertainment retail centers (which include seven
      additional megaplex theatre properties) and 11 family entertainment
      centers. The Company’s portfolio of owned entertainment properties
      consisted of 13.7 million square feet and was 99% leased, including
      megaplex theatres that were 100% leased.
    • The Recreation segment included investments in 12 ski areas, 20
      attractions, 34 golf entertainment complexes and 13 other recreation
      facilities. The Company’s portfolio of owned recreation properties was
      100% leased.
    • The Education segment included investments in 56 public charter
      schools, 69 early education centers and 15 private schools. The
      Company’s portfolio of owned education properties consisted of 4.6
      million square feet and was 98% leased.
    • The Other segment consisted primarily of the land under ground lease,
      property under development and land held for development related to
      the Resorts World Catskills project in Sullivan County, New York.

    The Company’s combined owned portfolio consisted of 22.4 million square
    feet and was 99% leased. As of March 31, 2019, the Company also had a
    total of $315.2 million invested in property under development.

    Investment Update

    The Company’s investment spending for the three months ended March 31,
    2019 totaled $174.6 million, and included investments in each of its
    operating segments:

    • Entertainment investment spending during the three months ended
      March 31, 2019 totaled $117.9 million, including spending on the
      acquisition of five megaplex theatres totaling $93.3 million,
      build-to-suit development and redevelopment of megaplex theatres,
      entertainment retail centers and family entertainment centers.
    • Recreation investment spending during the three months ended March 31,
      2019 totaled $44.2 million, including spending on build-to-suit
      development of golf entertainment complexes and attractions.
    • Education investment spending during the three months ended March 31,
      2019 totaled $12.3 million, including spending on build-to-suit
      development and redevelopment of public charter schools, early
      education centers and private schools.
    • Other investment spending during the three months ended March 31, 2019
      totaled $0.2 million, and was related to the Resorts World Catskills
      project in Sullivan County, New York.

    Capital Recycling

    During the first quarter of 2019, pursuant to tenant purchase options,
    the Company completed the sale of two public charter schools located in
    Florida and North Carolina for net proceeds totaling $23.3 million. In
    connection with these sales, the Company recognized a gain on sale of
    $5.4 million.

    During the first quarter of 2019, the Company completed the sale of one
    recreation property and four education properties for net proceeds
    totaling $14.4 million and recognized a net gain on sale of $0.9 million.

    Disposition proceeds totaled $37.7 million for the first quarter of
    2019. Additionally, the Company expects the payoff of the mortgages
    associated with the Schlitterbahn waterparks of approximately $190.0
    million during the second quarter.

    Balance Sheet Update

    Excluding prepayment penalties from earnings, the Company had a net debt
    to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.7x at
    March 31, 2019. The Company had $11.1 million of unrestricted cash on
    hand and $70.0 outstanding balance under its $1.0 billion unsecured
    revolving credit facility at March 31, 2019.

    During the quarter, the Company issued 1,059,656 common shares under its
    Direct Share Purchase Plan (DSPP) for net proceeds of $78.6 million.

    Dividend Information

    The Company declared regular monthly cash dividends during the first
    quarter of 2019 totaling $1.125 per common share. This dividend
    represents an annualized dividend of $4.50 per common share, an increase
    of 4.2% over the prior year, and is the Company’s ninth consecutive year
    with a significant annual dividend increase.

    The Company also declared first quarter cash dividends of $0.359375 per
    share on its 5.75% Series C cumulative convertible preferred shares,
    $0.5625 per share on its 9.00% Series E cumulative convertible preferred
    shares and $0.359375 per share on its 5.75% Series G cumulative
    redeemable preferred shares.

    2019 Guidance

    The Company’s updated 2019 guidance for net income per diluted share is
    $3.10 to $3.30. The Company is confirming its guidance for 2019 FFO as
    adjusted per diluted share of a range of $5.30 to $5.50 and confirming
    its 2019 investment spending guidance of a range of $600.0 million to
    $800.0 million. The Company is increasing its 2019 expected disposition
    proceeds to a range of $300.0 million to $400.0 million from a range of
    $100.0 million to $200.0 million.

    FFO as adjusted guidance for 2019 is based on FFO per diluted share of
    $4.91 to $5.06 adjusted for estimated transaction costs, termination
    fees related to public charter schools, deferred income tax expense and
    the impact of Series C and Series E dilution. FFO per diluted share is
    based on a net income per diluted share range of $3.10 to $3.30 less
    estimated gain on sale of real estate of a range of $0.29 to $0.34 and
    the impact of Series C and Series E dilution of $0.05, plus estimated
    real estate depreciation of $2.11 and allocated share of joint venture
    depreciation of $0.04 (in accordance with the NAREIT definition of FFO).

    Quarterly Supplemental

    The Company’s supplemental information package for the first quarter
    ended March 31, 2019 is available on the Company’s website at http://investors.eprkc.com/earnings-supplementals.

     
    EPR Properties
    Consolidated Statements of Income
    (Unaudited, dollars in thousands except per share data)
     
        Three Months Ended March 31,
    2019     2018
    Rental revenue $ 150,723 $ 132,924
    Other income 344 630
    Mortgage and other financing income 13,475   21,414  
    Total revenue 164,542 154,968
    Property operating expense 15,793 7,564
    General and administrative expense 12,130 12,324
    Costs associated with loan refinancing or payoff 31,943
    Interest expense, net 33,826 34,337
    Transaction costs 5,123 609
    Depreciation and amortization 39,743   37,684  
    Income before equity in income from joint ventures and other items 57,927 30,507
    Equity in income from joint ventures 489 51
    Gain on sale of real estate 6,328    
    Income before income taxes 64,744 30,558
    Income tax benefit (expense) 605   (1,020 )
    Net income 65,349 29,538
    Preferred dividend requirements (6,034 ) (6,036 )
    Net income available to common shareholders of EPR Properties $ 59,315   $ 23,502  
    Per share data attributable to EPR Properties common shareholders:
    Basic earnings per share data:
    Net income available to common shareholders $ 0.79   $ 0.32  
    Diluted earnings per share data:
    Net income available to common shareholders $ 0.79   $ 0.32  
    Shares used for computation (in thousands):
    Basic 74,679 74,146
    Diluted 74,725 74,180
     
    EPR Properties
    Condensed Consolidated Balance Sheets
    (Unaudited, dollars in thousands)
     
           

        March 31, 2019    

        December 31, 2018
    Assets
    Rental properties, net of accumulated depreciation of $920,409 and
    $883,174 at March 31, 2019 and December 31, 2018, respectively
    $ 5,072,298 $ 5,024,057
    Land held for development 28,080 34,177
    Property under development 315,237 287,546
    Operating lease right-of-use assets 211,299
    Mortgage notes and related accrued interest receivable 527,627 517,467
    Investment in direct financing leases, net 20,616 20,558
    Investment in joint ventures 35,188 34,486
    Cash and cash equivalents 11,116 5,872
    Restricted cash 11,166 12,635
    Accounts receivable 111,146 98,369
    Other assets 87,458   96,223
    Total assets $ 6,431,231   $ 6,131,390
    Liabilities and Equity
    Accounts payable and accrued liabilities $ 117,746 $ 168,463
    Operating lease liabilities 235,612
    Dividends payable 34,340 32,799
    Unearned rents and interest 85,012 79,051
    Debt 3,045,742   2,986,054
    Total liabilities 3,518,452   3,266,367
    Total equity $ 2,912,779   $ 2,865,023
    Total liabilities and equity $ 6,431,231   $ 6,131,390
     
    EPR Properties
    Reconciliation of Non-GAAP Financial Measures
    (Unaudited, dollars in thousands except per share data)
     
        Three Months Ended March 31,
    2019     2018

    FFO: (A)

    Net income available to common shareholders of EPR Properties $ 59,315 $ 23,502
    Gain on sale of real estate (6,328 )
    Real estate depreciation and amortization 39,514 37,464
    Allocated share of joint venture depreciation 555   58
    FFO available to common shareholders of EPR Properties $ 93,056   $ 61,024
     
    FFO available to common shareholders of EPR Properties $ 93,056 $ 61,024
    Add: Preferred dividends for Series C preferred shares 1,939
    Add: Preferred dividends for Series E preferred shares 1,939  
    Diluted FFO available to common shareholders of EPR Properties $ 96,934   $ 61,024
     

    FFOAA: (A)

    FFO available to common shareholders of EPR Properties $ 93,056 $ 61,024
    Costs associated with loan refinancing or payoff 31,943
    Transaction costs 5,123 609
    Termination fee included in gain on sale 5,001
    Deferred income tax (benefit) expense (609 ) 428
    FFOAA available to common shareholders of EPR Properties $ 102,571   $ 94,004
     
    FFOAA available to common shareholders of EPR Properties $ 102,571 $ 94,004
    Add: Preferred dividends for Series C preferred shares 1,939 1,940
    Add: Preferred dividends for Series E preferred shares 1,939   1,939
    Diluted FFOAA available to common shareholders of EPR Properties $ 106,449   $ 97,883
     
    FFO per common share:
    Basic $ 1.25 $ 0.82
    Diluted 1.23 0.82
    FFOAA per common share:
    Basic $ 1.37 $ 1.27
    Diluted 1.36 1.26
    Shares used for computation (in thousands):
    Basic 74,679 74,146
    Diluted 74,725 74,180
     
    Weighted average shares outstanding-diluted EPS 74,725 74,180
    Effect of dilutive Series C preferred shares 2,145   2,098
    Adjusted weighted average shares outstanding-diluted Series C 76,870 76,278
    Effect of dilutive Series E preferred shares 1,622   1,598
    Adjusted weighted average shares outstanding-diluted Series C and
    Series E
    78,492   77,876
     
    Other financial information:
    Straight-lined rental revenue $ 2,414 $ 1,874
    Dividends per common share $ 1.125 $ 1.080
    (A)   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, the Company calculates FFO as net income available to
    common shareholders, computed in accordance with GAAP, excluding
    gains and losses from disposition of real estate and impairment
    losses on 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. The Company has calculated FFO for
    all periods presented in accordance with this definition. In
    addition to FFO, the Company presents FFO as adjusted (FFOAA).
    Management believes it is useful to provide FFOAA as a supplemental
    measure to GAAP net income available to common shareholders and
    earnings per share. FFOAA is FFO plus costs (gain) associated with
    loan refinancing or payoff, transaction costs, severance expense,
    litigation settlement expense, preferred share redemption costs,
    termination fees associated with tenants’ exercises of education
    properties buy-out options, impairment of direct financing lease
    (allowance for lease loss portion) and provision for loan losses,
    and by subtracting gain on early extinguishment of debt, gain on
    insurance recovery and deferred tax benefit (expense). FFO and FFOAA
    are non-GAAP financial measures. FFO and FFOAA do not represent cash
    flows from operations as defined by GAAP and are not indicative that
    cash flows are adequate to fund all cash needs and are 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. It should also be noted that not
    all REITs calculate FFO or FFOAA the same way so comparisons of each
    of these non-GAAP measures with other REITs may not be meaningful.
     

    The conversion of the 5.75% Series C cumulative convertible preferred
    shares and the 9.00% Series E cumulative convertible preferred shares
    would be dilutive to FFO and FFOAA per share for the three months ended
    March 31, 2019. Therefore, the additional 2.1 million common shares and
    1.6 million common shares that would result from the conversion and the
    corresponding add-back of the preferred dividends declared on those
    shares are included in the calculation of diluted FFO per share and
    diluted FFOAA per share for the three months ended March 31, 2019.

    The effect of the conversion of the 5.75% Series C cumulative
    convertible preferred shares and the 9.00% Series E cumulative
    convertible preferred shares do not result in more dilution to per share
    results and are therefore not included in the calculation of diluted FFO
    per share data for the three months ended March 31, 2018. The conversion
    of the 5.75% Series C cumulative convertible preferred shares and the
    9.00% Series E cumulative convertible preferred shares would be dilutive
    to FFOAA per share for the three months ended March 31, 2018. Therefore,
    the additional 2.1 million and 1.6 million common shares that would
    result from the conversion and the corresponding add-back of the
    preferred dividends declared on those shares are included in the
    calculation of diluted FFOAA per share for the three months ended March
    31, 2018.

    Net Debt to Adjusted EBITDA Ratio

    Net Debt to Adjusted EBITDA Ratio is a supplemental measure derived from
    non-GAAP financial measures the Company uses to evaluate its capital
    structure and the magnitude of its debt against its operating
    performance. The Company believes that investors commonly use versions
    of this ratio in a similar manner. In addition, financial institutions
    use versions of this ratio in connection with debt agreements to set
    pricing and covenant limitations. The Company’s method of calculating
    Net Debt to Adjusted EBITDA Ratio may be different from methods used by
    other REITs and, accordingly, may not be comparable to such other REITs.
    Reconciliations of debt and net income (both reported in accordance with
    GAAP) to Net Debt, EBITDAre, Adjusted EBITDA, and Net Debt to Adjusted
    EBITDA Ratio (each of which is a non-GAAP financial measure) are
    included in the following tables (unaudited, in thousands):

            March 31,
    2019     2018

    Net Debt: (B)

    Debt $ 3,045,742 $ 3,131,437
    Deferred financing costs, net 32,838 28,558
    Cash and cash equivalents (11,116 ) (24,514 )
    Net Debt $ 3,067,464   $ 3,135,481  
     
    Three Months Ended March 31,
    2019 2018

    EBITDAre and Adjusted EBITDA:

    Net income $ 65,349 $ 29,538
    Interest expense, net 33,826 34,337
    Income tax (benefit) expense (605 ) 1,020
    Depreciation and amortization 39,743 37,684
    Gain on sale of real estate (6,328 )
    Costs associated with loan refinancing or payoff 31,943
    Equity in income from joint ventures (489 ) (51 )
    EBITDAre (for the quarter) (C) $ 131,496   $ 134,471  
     
    Transaction costs 5,123 609
    Prepayment fees (900 )  
    Adjusted EBITDA (for the quarter) $ 135,719   $ 135,080  
     
    Adjusted EBITDA (1) (D) $ 542,876   $ 540,320  
     
    Net Debt/Adjusted EBITDA Ratio 5.7 5.8
     
    (1) Adjusted EBITDA for the quarter is multiplied by four to
    calculate an annual amount.
     
    (B)   Net Debt represents debt (reported in accordance with GAAP) adjusted
    to exclude deferred financing costs, net and reduced for cash and
    cash equivalents. By excluding deferred financing costs, net and
    reducing debt for cash and cash equivalents on hand, the result
    provides an estimate of the contractual amount of borrowed capital
    to be repaid, net of cash available to repay it. The Company
    believes this calculation constitutes a beneficial supplemental
    non-GAAP financial disclosure to investors in understanding our
    financial condition. The Company’s method of calculating Net Debt
    may be different from methods used by other REITs and, accordingly,
    may not be comparable to such other REITs.
     
    (C) NAREIT developed EBITDAre as a relative non-GAAP financial measure
    of REITs, independent of a company’s capital structure, to provide a
    uniform basis to measure the enterprise value of a company. Pursuant
    to the definition of EBITDAre by the Board of Governors of NAREIT,
    the Company calculates EBITDAre as net income, computed in
    accordance with GAAP, excluding interest expense (net), income tax
    expense (benefit), depreciation and amortization, gains and losses
    from disposition of real estate, impairment losses on real estate,
    costs (gain) associated with loan refinancing or payoff and
    adjustments for unconsolidated partnerships, joint ventures and
    other affiliates.
     
    Management provides EBITDAre herein because it believes this
    information is useful to investors as a supplemental performance
    measure as it can help facilitate comparisons of operating
    performance between periods and with other REITs. EBITDAre does not
    represent cash flow 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 or cash flows or liquidity as defined by GAAP.
     
    (D) Management uses Adjusted EBITDA in its analysis of the performance
    of the business and operations of the Company. Management believes
    Adjusted EBITDA is useful to investors because it excludes various
    items that management believes are not indicative of operating
    performance, and that it is an informative measure to use in
    computing various financial ratios to evaluate the Company. The
    Company defines Adjusted EBITDA as EBITDAre (defined above)
    excluding gain on insurance recovery, severance expense, litigation
    settlement expense, impairment of direct financing lease (allowance
    for lease loss portion), the provision for loan losses, transaction
    costs and prepayment fees, and which is then multiplied by four to
    get an annual amount.
     
    The Company’s method of calculating Adjusted EBITDA may be different
    from methods used by other REITs and, accordingly, may not be
    comparable to such other REITs. Adjusted EBITDA is not a measure of
    performance under GAAP, does not represent cash generated from
    operations as defined by GAAP and is not indicative of cash
    available to fund all cash needs, including distributions. This
    measure should not be considered as an alternative to net income for
    the purpose of evaluating the Company’s performance or to cash flows
    as a measure of liquidity.
     

    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 are nearly $7.0 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.

    CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

    With 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 our
    acquisition or
    disposition of properties, our capital resources, future expenditures
    for development projects, expected dividend payments, and our results of
    operations and financial condition.
    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,” “pipeline,” “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.

    Contacts

    EPR Properties
    Brian Moriarty, 888-EPR-REIT
    www.eprkc.com

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