/PRNewswire-FirstCall/ -- Sunrise Senior Living, Inc. SRZ today reported financial results and operating data for the second quarter of 2009. Sunrise will host a conference call and webcast Thursday, August 6, 2009, at 9:00 a.m. ET, to discuss the financial results.
"Our restructuring activities have progressed and we have seen signs of progress in expense controls. In recent weeks we have seen a modest lift in occupancy," said Mark Ordan, Sunrise's chief executive officer. "While we are pleased by these accomplishments, we have much more to do and our organization is fully committed to this task."
Financial Results for Second-Quarter 2009
Sunrise reported revenues of $380.9 million for the second quarter of 2009, as compared to $411.3 million for the second quarter of 2008. Net loss for the second quarter of 2009 was ($81.8) million, or ($1.62) per fully diluted share, as compared to net loss of ($31.8) million, or ($0.63) per fully diluted share, for the second quarter of 2008.
Included in the loss from discontinued operations of ($46.9) million for the three months ended June 30, 2009, is an operating loss of approximately $8 million, as well as an impairment loss of $52.4 million, both relating to Sunrise's nine German communities, which are now considered assets held for sale. Also included in discontinued operations is a $7.1 million gain from the settlement between us and the previous owners of Trinity.
In the second quarter, net loss from operations for the three months ended June 30, 2009, was ($43.2) million. Excluding SEC investigation costs of $1.2 million and restructuring costs of $9.2 million and non-cash charges including depreciation and amortization of $14.4 million, the provision for doubtful accounts of $2.0 million, write-off of capitalized project costs of $1.4 million and impairment of long lived assets of $25.0 million, adjusted income from ongoing operations is $10.0 million. Adjusted income from ongoing operations is a 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 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 table "Income from Ongoing Operations."
Cash and Liquidity Update
As previously announced, on April 28, 2009, Sunrise entered into the Twelfth Amendment to the Bank Credit Facility. Sunrise has reduced outstanding borrowings on its Bank Credit Facility with its $20.8 million from federal tax refunds, $1 million of the proceeds from the sale of its equity interest and receivable from the Aston Gardens venture, and in June 2009, $2.5 million of the proceeds from a settlement agreement with Trinity Hospice's prior owners. On June 30, 2009, Sunrise had under its Bank Credit Facility outstanding borrowings of $69.2 million and outstanding letters of credit of $23.9 million. Sunrise has no borrowing availability under the Bank Credit Facility.
Sunrise had $37.0 million and $29.5 million of unrestricted cash at June 30, 2009 and December 31, 2008, respectively. As of June 30, 2009, Sunrise and its consolidated subsidiaries had debt of $614.5 million, of which $99.1 million of debt is scheduled to mature in 2009, along with $69.2 million of draws on the Bank Credit Facility. Long-term debt that is in default totals $360.4 million, including $190.2 million of debt that is in default as a result of the failure to pay principal and interest to the lenders of Sunrise's German communities, as further described below, and $170.2 million of debt that is in default as a result of Sunrise's failure to meet certain financial covenants. Sunrise has reflected current debt and long-term debt that is in default as a current liability.
Sunrise is engaged in discussions to extend the maturity dates of, and to obtain covenant waivers with respect to, some of its debt. Even if these efforts are successful, additional financing resources will be required to refinance existing indebtedness that comes due within the next 12 months. Sunrise is also engaged in discussions with various venture partners and third parties regarding the sale of certain assets with the purpose of increasing liquidity and reducing its obligations to enable Sunrise to continue its operations. Assuming Sunrise is able to extend or refinance the scheduled maturities and obtain the covenant waivers with respect to the consolidated debt that is in default, Sunrise believes it has adequate cash resources to fund operations and meet its obligations as they come due until the December 2, 2009 maturity date of the Bank Credit Facility.
Germany
As previously announced, Sunrise has standstill agreements with all of the lenders to its German communities, which standstills will generally remain in effect until the
end of August. Sunrise continues its discussions with the lenders to its German communities with the objective of settling their claims against Sunrise, in order to allow Sunrise to exit the German market altogether. In the second quarter of 2009, Sunrise engaged a broker to assist in the sale of its nine German communities and the Company expects a sale to occur within 90 days, although there can be no assurance that the initial bids received will result in the consummation of a sale. If a sale does not occur, Sunrise will proceed with closing the communities and negotiating a settlement with the lenders. Based on the bids the Company has received, Sunrise determined that the book value of the assets was in excess of the fair value less estimated costs to sell, and has therefore recorded an impairment charge of $52.4 million in discontinued operations. Sunrise expects to settle the German debt for an amount that is less than the carrying amount on our consolidated balance sheet of $190.2 million, which was recorded at fair value on September 1, 2008 in connection with the consolidation of the venture, as the debt is only partially recourse to Sunrise. Any difference between the recorded amount of debt and the amount ultimately paid to the lenders as a settlement will be recorded as a gain once the debt is legally satisfied.
Trinity Hospice Settlement
During the second quarter of 2009, Sunrise received approximately $9.8 million as part of a settlement agreement with the former majority stockholders of its wholly owned subsidiary, Trinity Hospice. Sunrise received a release all claims and causes of action against it as part of the settlement agreement.
Putative Class Action and Shareholder Litigation Settlements
On June 26, 2009, the U.S. District Court for the District of Columbia granted final approval of the settlement of the two previously disclosed federal securities and shareholder class action lawsuits entitled In Re: Sunrise Senior Living Systems Securities Litigation and In re Sunrise Senior Living Derivative Litigation, Inc., respectively. Under the settlements, all claims against the Company and the individual defendants have been dismissed with prejudice, in exchange for, among other things, payment to the class of $13.5 million, of which $13.4 million has been paid by insurance proceeds and $100,000 has been paid by the Company.
EdenCare Portfolio Transition
As the Company previously disclosed, Sunrise could be terminated in 2009 from management of a portfolio of communities owned by HCP, Inc. for failure to meet performance thresholds. On June 18, 2009, HCP announced that this termination right had been exercised. Sunrise's management, which earned fees totaling $3.0 million in 2008, is expected to transition to another manager by October 2009.
Operating Data for Second-Quarter 2009
The nine German communities have been excluded from Sunrise's 2009 second quarter operating results set forth below because they are considered discontinued operations.
* Comparable community revenues for the second quarter of 2009 decreased by 1.4 percent, from $553.3 million for the second quarter of 2008 to $545.3 million for the second quarter of 2009. Excluding the impact of foreign exchange rates, comparable community revenues for the second quarter of 2009 remained flat year over year. Sunrise's comparable community portfolio consists of communities that were open and operating as of January 1, 2007, and include consolidated, unconsolidated venture, and managed communities in the United States, Canada and the United Kingdom.
* Average unit occupancy in comparable communities for the second quarter of 2009 was 86.9 percent, which was down from 89.6 percent for the second quarter of 2008. Pricing incentives were conservative in the first half of 2009. Toward the end of the second quarter, Sunrise implemented focused initiatives to build census, and is beginning to see positive results in the third quarter of 2009.
* Average daily revenue per occupied unit increased 2.0 percent from $181.42 for the second quarter of 2008 to $185.04 for the second quarter of 2009. Excluding the impact of foreign exchange rates, average daily revenue per occupied unit for the comparable community portfolio increased 3.5 percent for the second quarter of 2009 as compared to the second quarter of 2008.
* Comparable community operating expenses for the second quarter of 2009 decreased 1.8 percent over the second-quarter of 2008 from $412.7 million to $405.3 million. Excluding a $5 million health and dental credit experienced in the second quarter of 2008, and excluding the impact of foreign exchange rates, comparable community operating expenses decreased 1.7 percent. Comparable community operating expense results for the quarter continue to demonstrate Sunrise's system-wide focus on aggressively managing all operating expenses, without compromising quality of care, to reflect current occupancy levels and to maximize community profitability.
* In the second quarter of 2009, Sunrise opened five new communities, with a combined capacity of 587 units. As of June 30, 2009, Sunrise had nine communities under construction, with capacity for an additional 745 units.
* As of June 30, 2009, Sunrise operated 415 communities located in the United States, Canada, the United Kingdom and Germany, with a unit capacity of approximately 42,750 units.
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. For additional details on Sunrise's comparable-community operations data, please refer to the Supplemental Information attached.
Conference Call and Webcast
Sunrise will host a conference call and webcast at 9:00 a.m. ET on Thursday, August 6, 2009, to discuss the financial results for the second quarter of 2009 and the other matters discussed in this press release. The call-in number for the conference call is 888-298-3451 and 719-457-1529 (from outside the U.S.). Callers should reference the "Sunrise Senior Living Q2 Earnings Call" or the participant passcode: 4727771. Those interested may also go to the Investor Relations section of Sunrise's Web site (
http://www.sunriseseniorliving.com) to listen to the earnings call. A telephone replay of the call will be available until August 20, 2009 at 12 p.m. ET, by dialing 888-203-1112 or 719-457-0820 (passcode: 4727771); a replay will also be available on Sunrise's Web site during that period.
