Sunrise Senior Living CEO Discusses Q3 2010 Results - Earnings Call Transcript

Sunrise Senior Living Inc. (

SRZ

)

Q3 2010 Earnings Call

November 4, 2010 09:00 am ET

Executives

Meghan Lublin - VP, Corporate & Investor Communications

Julie Pangelinan - CFO

Mark Ordan - CEO

Greg Neeb - Chief Investment & Administrative Officer

Analysts

Jerry Doctrow - Stifel Nicolaus

Presentation

Operator

Good day and welcome to the Sunrise Senior Living Third Quarter Earnings Conference Call, today's call is being recorded.

At this time I would like to turn the conference over to Ms. Meghan Lublin, please go ahead ma'am.

Meghan Lublin

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» Sunrise Senior Living Inc Q3 2009 Earnings Call Transcript

Good morning and welcome to Sunrise Senior Living Investor Conference Call, this is Meghan Lublin, Sunrise's Vice President of Investor Relation. Before we begin let me remind you this call is been recorded and that Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.

During the course of this call the company will make various remarks concerning management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those anticipated by these forward-looking statements. Any forward-looking statements reflect management's current view only and the company undertakes no obligation to revise or update such statements in the future.

I will now turn the call over the Julie Pangelinan, Sunrise's Chief Financial Officer.

Julie Pangelinan

Good morning. I'm CFO and I would lay out our financial results for the quarter. Today I am particularly happy to do so. Our occupancy for the third quarter 2010 in our comparable communities was 87%, which was up 80 basis points from comparable communities for the second quarter of 2010 and that’s 40 basis points from the third quarter of 2009. September experienced occupancy of 87.5% which is our highest occupancy level since February of 2009. Including October, we've had five consecutive months of positive occupancy growth.

Excluding the 27 communities owned by HCP on which we will be transitioning management on November 1 our occupancy with 87.8% for the quarter. Our average daily revenue per occupied unit in our comparable communities increased by 2.4% in the third quarter to $202.05 compared to $197.28 in 2009.

As a reminder we share our results with and without the impact of foreign exchange rate to prevent our data in a manner consistent with others in the industry that operate predominantly in the US. If we exclude the impact of foreign exchange rates on our average daily revenue per occupied unit it increased 2.7% year-over-year.

Our comparable community revenue for our 495.1 million for the quarter an increase of 2.9% compared to the prior year period. Excluding the impact of foreign exchange rates our third quarter revenue increased by 3.2% to 496.6 million year-over-year.

Our comparable community expenses were 353.7 million this quarter an increase of 3.3% as compared to the prior year period. Excluding the impact of foreign exchange rates, these operating expenses increased 3.7% year-over-year. The increase in expenses this quarter was primarily driven by utilities and collective labor.

Now I will turn to our financial results for the quarter. We reported revenues of 383.3 million for the third quarter as compared to 351.5 million for the third quarter of 2009. Net income attributable to common shareholders for the third quarter of 2010 was 18.7 million or $0.33 per fully diluted share as compared to a net loss of 44.4 million or $0.88 per fully diluted share for 2009.

The change between period was primarily driven by the $40 million HCP biopsy. We received an additional 10 million when the communities transitioned on November 1, which will be entrusted in our fourth quarter results. Income from operations for the third quarter of 2010 was 24.8 million an improvement of 57.1 million compared to a loss of 32.3 million in 2009.

Excluding the biopsy from HCP which is non-recurring non-cash charges including depreciation and amortization allowance for uncollectible and receivables from owners, stock compensation expense write-off of capitalized project cost and impairment of long-lived assets and also excluding restructuring costs only residual costs with the SEC investigation.

Adjusted income from ongoing operations were 2 million for the quarter compared to a loss of 7.5 million for the same quarter 2009. Adjusted income from ongoing operations is a measure of operating performance that is not calculated in accordance with US GAAP and should not be considered as a substitute for income from operations or net income.

Adjust income from ongoing operations induced by management to focus on cash generated from the ongoing operation of the company and to help management determine if adjustments to current spending decisions are needed.

General and administrative expenses were 31.7 million for the third quarter of 2010 compared to 31 million in 2009. We incurred 4.5 million of costs relating to our transactions with HCP and Ventas them at their quarter, in addition to 1.4 million in severance costs and 900,000 of non-cash compensation expense. With staffing reductions that have already occurred to the end of the third quarter of 2010, annual recurring cash expenditures for general and administrative expenses are on target to be below 100 million. Had 41.5 million and 39.3 million of unrestricted cash of September 30, 2010 and December 31, 2008 respectively.

We had 267.2 million of outstanding debt at September 30, 2010 compared to 440.2 million at December 31, 2009, a reduction of $173 million. Subsequent to quarter end an additional 77.3 million of debt relating to our German communities was repaid and the remaining balance under our bank credit facility was repaid bringing our current outstanding debt balance above 200 million the majority of which is due in 2011 and beyond.

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