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Sunrise Senior Living, Inc Q2 2010 Earnings Conference Call Transcript

Sunrise Senior Living, Inc Q2 2010 Earnings Conference Call Transcript

Sunrise Senior Living, Inc. (SRZ)

Q2 2010 Earnings Call

August 05, 2010 9:00 a.m. ET

Executives

TST Recommends

Meghan Lublin - IR

Julie Pangelinan - CFO

Greg Neeb - CIO

Mark Ordan - CEO

Analysts

Jerry Doctrow - Stifel Nicolaus

Presentation

Operator

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Previous Statements by SRZ
» Sunrise Senior Living, Inc. Q1 2010 Earnings Call Transcript
» Sunrise Senior Living, Inc. Q4 2009 Earnings Call Transcript
» Sunrise Senior Living Inc Q3 2009 Earnings Call Transcript

Please stand by as we are about to begin. Good day and welcome to the Sunrise Senior Living Second Quarter Earnings Conference Call, today's conference is being recorded.

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

Meghan Lublin

Good morning and welcome to Sunrise Senior Living Second Quarter 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 at the Private Securities Litigation Reform Act of 1995 apply to this conference call.

During the course of the 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, our occupancy for the second quarter 2010 in our comparable communities was 86.2%, which was down 10 basis points for comparable communities from the first quarter of 2010 and a decline of 30 basis points from the second quarter of 2009. Our slight decline in occupancy from the first to second quarters of 2010 was primarily driven by a decrease in the month of April.

Our occupancy for the month of June alone was up to 86.5%. Our average daily revenue per occupied unit in our comparable communities increased by 4.3% in the second quarter 2010 to $203.27 as compared to the prior year period. The increase in primarily driven by annual rate increases which for the majority of our occur in January of each year.

As a remainder we share our results with and without the impact of foreign exchange rates to present our data in a manner consistent with others in the industry that operate predominately in the U.S.

If we exclude the impact of foreign exchange rates on our average daily revenue per occupied unit, it was an increase of 2.8% year-over-year.

Our comparable community revenues were 489.6 million this quarter an increase of 3.9% as compared to the prior year period. Excluding the impact of foreign exchange rates, our second quarter revenues increased by 2.3% to 482.2 million year-over-year.

Our comparable communities expenses were 354.8 million this quarter, an increase of 3.5% as compared to the prior year period. Excluding the impact the foreign exchange rates these operating expenses increased 2.7% year-over-year. The increase in expenses in the quarter is primarily driven by an increase in wage rates between periods.

As in the first quarter we continue to experience favorable expense trends in the areas at utilities and bad debt expense.

Now I will turn to our financial results for the quarter. We reported revenues at 349.1 million for the second quarter of 2010 as compared to 359.7 million in the second quarter of 2009.

Net income attributable to common shareholders for 2010 was 46.3 million or $0.81 per fully diluted share as compared to a net loss of 81.8 million or $1.62 per fully diluted share for 2009.

The loss before discontinued operations for the second quarter was $5.2 million compared to $19.1 million in 2009. Included in discontinued operations for the second quarter of 2010 is a gain on German debt restructuring of 52 million compared to an impairment loss relating to our nine German communities of 52.4 million in the second quarter of 2009.

Under accounting rules impairment charges are recorded during the period when the carrying amount of assets are determined to be above fair value. However, the related debt must be carried at historical costs until the debt is modified or extinguished.

Debt restructuring agreements we executed in the second quarter was lenders to eight of our nine German communities triggered this non-cash gain.

Loss from operations excluding buyout fees for the second quarter of 2010 was 13.4 million, an improvement of 18.1 million compared to 31.5 million in 2009. Excluding SEC investigation costs, restructuring costs and non-cash charges including depreciation and amortization, allowance for uncollectible receivables from owners, stock compensation expense and impairment of long-lived assets.

Adjusted income from ongoing operations is 5 million in 2010 compared to 4.4 million in 2009. Adjusted income from ongoing operations is the measure of operating performance that is 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.

Adjusted income from ongoing operations is used by management to focus on cash generated from the ongoing operations is used by management to focus on cash generated from the ongoing operations of the company and to help management assess if adjustments to trend spending decisions are needed.

In the second quarter 2010, management fees was 24.2 million, compared to 29.1 million in 2009, a decrease of 4.9 million. The decrease was driven by management contracts which were terminated in 2009 and expense related to settling certain management agreement disputes with one of our venture partners. In June 2010 we agreed to a termination of four long term management contracts and we recognized 12.5 million in five of these.

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