American Land Lease (NYSE:ANL)
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American Land Lease Announces Second Quarter 2004 Financial
Results; 8.7% Increase in Funds From Operations per Share Over 2003
CLEARWATER, Fla., Aug. 5 /PRNewswire-FirstCall/ -- American Land Lease, Inc.
(NYSE:ANL) today released results for second quarter 2004.
Please refer to the Supplemental Information which the Company also released
today for definitions of measures of performance not determined in accordance
with generally accepted accounting principles ("non-GAAP") and reconciliation
of non-GAAP measures to measures determined in accordance with generally
accepted accounting principles ("GAAP").
Summary Financial Results
Second Quarter
* Diluted Earnings Per Share ("Diluted EPS") were $0.29 for the three- month
period ended June 30, 2004 as compared to $0.26 from the same period one year
ago, an increase of 9.2% on a per share basis.
* Funds from Operations ("FFO"; a non-GAAP financial measure defined in the
Supplemental Information) were $3.1 million, or $0.38 per diluted common share,
for the quarter compared to $2.8 million, or $0.35 per diluted common share
from the same period one year ago, an increase of 8.7% on a per share basis.
* Unit volume in home sales was 103 new home closings, including 94 new homes
sold on expansion home sites. This compares with 88 new home closings in
second quarter 2003, including 87 new homes sold on expansion sites.
* "Same Store" results provided a revenue increase of 9.0%, an expense increase
of 3.4% and an increase of 11.8% in Net Operating Income ("NOI").
* "Same Site" results provided a revenue increase of 3.1%, an expense increase
of 2.1% and an increase of 3.7% in NOI.
Supplemental Information
The full text of this press release and Supplemental Information are available
upon request or through the Company's web site at
http://www.americanlandlease.com/.
Management Comments
Bob Blatz, President of American Land Lease, commented, "We are pleased to
report results for the second quarter 2004. The impact of newly leased sites
continues to drive the outperformance of our same store growth rate while our
focus on senior communities continues to provide stable growth in our core
business."
"Our home sales unit volume increased as compared to second quarter 2003 and
revenue growth in home sales was 25% primarily driven by an increase from
$85,000 to $92,000 in average selling price. Our backlog is up 15% over the
prior year to 189 homes, so we continue to see growth in the volume and quality
of our home sales as a driver for improved results. Our partnership with home
manufacturers continues to yield product improvements, including longer lead
times, and a better quality home product that commands a higher sales price
The better quality homes are a welcome addition to our communities as they
increase the overall community value."
Dividend Declaration
On July 28, 2004, the Board of Directors declared a regular second quarter
dividend of $0.25 per share, payable on August 26, 2004, to stockholders of
record on August 9, 2004. The Company continues to suspend its dividend
reinvestment plan until further notice.
The Board of Directors reviews the dividend policy quarterly. The Company's
dividend is set quarterly and is subject to change or elimination at any time.
The Company's primary financial objective is to maximize long term, risk
adjusted returns on investment for stockholders. While the dividend policy is
considered within the context of this objective, maintenance of past dividend
levels is not a primary investment objective of the Company and the dividend
policy is subject to numerous factors including, the Company's profitability,
capital expenditure plans, obligations related to principal payments and
capitalized interest, and the availability of debt and equity capital at terms
deemed attractive by the Company to finance these expenditures. The Company's
net operating loss carryforward may be used to offset all or a portion of its
real estate investment trust ("REIT") taxable income, which may allow the
Company to reduce or eliminate its dividends and still maintain its REIT
status.
Operational Results
Second Quarter Property Operations
Second quarter revenue from property operations was $7,247,000 as compared to
$6,540,000 in the same period one year ago, a 10.8% increase. Second quarter
property operating expenses totaled $2,764,000 as compared to $2,616,000 in the
same period one year ago, a 5.7% increase. The Company realized significant
increases in rental income driven by annual rental rate increases, the
absorption of new home sites as a result of its home sales efforts and the
acquisition of one community during fourth quarter 2003. Property operating
expenses increased in the second quarter 2004 as compared to the same period in
the prior year driven primarily by increases in labor and benefit costs, the
acquisition of one community during the fourth quarter 2003, and utility costs,
offset by decreases in offsite management and tenant related legal costs. The
combination of increased revenue and expenses resulted in an overall
improvement in property operating margins before depreciation expense from
60.0% in the prior year's second quarter to 61.9% in the second quarter 2004.
Second Quarter "Same Store" Results
Second quarter "same store" results reflect the results of operations for
properties and golf courses owned for both the second quarter of 2004 and the
same period in the prior year. The same store properties account for 98% of
the property operating revenues for the second quarter of 2004. We believe
that same store information provides insight as to the changes in profitability
for properties owned during both reporting periods that could not be obtained
from a review of the consolidated income statement in periods where properties
are acquired. A reconciliation of "same store" operating results reported
below to total property revenues and property expenses, as determined under
GAAP, can be found in the Supplemental Information, page 27.
The same store increases are as follows:
2Q04
Revenue 9.0 %
Expense 3.4 %
Net Operating Income 11.8 %
We derive our increase in property revenue (i) from increases in rental rates
and other charges at our properties and (ii) through the origination of leases
on expansion home sites ("absorption"). "Same site" results reflect the
results of operations excluding those sites leased subsequent to the beginning
of the prior year period. We believe that "same site" information provides the
ability to understand the changes in profitability without the growth related
to the newly leased sites. Our presentation of same site results is a non-GAAP
measure and should not be considered in isolation from, and is not intended to
represent an alternative measure to, operating income or cash flow or any other
measure of performance as determined in accordance with GAAP.
We calculate absorption revenues as the rental revenue recognized on sites
leased subsequent to the beginning of the prior year period. We estimate that
50% of the increase in expenses over the prior year period is attributable to
newly leased sites in our calculation of same site results. We believe that
the allocation of expenses between same site and absorption is an appropriate
allocation between fixed and variable costs of operating our properties.
Our same site, absorption, same site golf operations and total same store
results for second quarter 2004 are as follows:
Same Site Rental Absorption Same Site Golf Same Store
Revenue 3.1 % 5.8 % 0.1 % 9.0 %
Expense 2.1 % 2.0 % (0.7%) 3.4 %
NOI 3.7 % 7.7 % 0.4 % 11.8 %
A reconciliation of same site and same store operating results used in the
above calculations to total property revenues and property expenses, as
determined under GAAP, for the three months ended June 30, 2004 and 2003 can be
found in the Supplemental Information, page 27.
Second Quarter Home Sales Operations
Second quarter 2004 new home sales unit volume was 103 closings, a 17% increase
from the 88 closings in the same period in the prior year. Average selling
price per home was $92,000 as compared to $85,000 in the same period in the
prior year, an 8.2% increase. The increase in closings compared to the same
period in the prior year was balanced across the Company's expansion
communities, with increases in nine communities and decreases in seven
communities. Brokerage profits were up 85% as compared with the same period in
the prior year driven by an 89% increase in the number of transactions. Selling
gross margins, excluding brokerage activities, improved to 33% in the quarter
as compared to 29% in the same period in the prior year. This increase was
driven by increased selling prices, increased manufacturer rebates associated
with higher purchasing volumes, and sales of upgrades to base home models. The
increases in revenue and cost savings were offset by increases in the cost of
homes purchased. Selling costs as a percentage of sales revenue increased from
20.6% in the prior year's period to 25.3% in the second quarter of 2004,
reflecting additional investments in personnel and advertising/marketing in
support of a higher operating level for the business. The backlog of contracts
for closing stood at 189 home sales, an increase of 24 contracts from the same
period in the prior year.
The Company remains committed to its program of generating revenue growth
through new lease originations in its existing portfolio. The home sales
business continues to provide the Company with additional earning home sites
that have a greater return on investment than is currently available through
the purchase of occupied communities.
Summary of home sales activity:
Quarter ended Quarter ended
June 30, 2004 June 30, 2003
New home closings 103 88
New home contracts 144 105
Home resales 5 11
Brokered home sales 83 44
New home contract backlog 189 165
Outlook for 2004
The table below summarizes the Company's projected financial outlook for 2004
as of the date of this release and is based on the estimates and assumptions
disclosed in this and previous press releases:
Full Year 2004
Projected
FFO $1.40 to $1.60
AFFO $1.28 to $1.44
Diluted EPS $1.03 to $1.24
Same Store Sales
Revenue Growth 5.0% to 9.0%
Expense Growth 4.5% to 7.5%
NOI Growth 6.0% to 9.5%
Home Sales Operating Income $2,000,000 to
$3,250,000
General and Administrative Expenses $3,200,000 to
$3,700,000
Other Income $210,000 to
$280,000
Capital Replacements (per site) $115 to $135
Depreciation $2,900,000 to
$3,200,000
A portion of the Company's earnings is from the sale of new homes on expansion
home sites in its developing communities. The earnings from the new home sales
are subject to greater volatility than the earnings from rental property
activities. The Company's earnings estimates would be impacted positively by
increases in the unit volume of new home sales or increases in the gross
margins from new home sales. Conversely, decreases in the unit volume of new
home sales or decreases in the gross margins from new home sales would
negatively impact the Company's earnings estimates. Home sales volume is
dependent upon a number of factors, including consumer confidence and consumer
access to financing sources for home purchases and the sale of their current
home.
The Company's projected results for 2004 include increased corporate governance
costs based upon current estimates of the cost of compliance. Non- employee
director compensation continues to be paid in stock and all stock based
compensation is expensed within the 2004 projections. The Company's earnings
estimates would be adversely impacted by the increased cost of compliance with
regulations and laws applicable to public companies and financial reporting.
The financial and operating projections provided in this release are the result
of management's consideration of past operating performance, current and
anticipated market conditions and other factors that management considers
relevant from its past experience.
Development Activity
The Company continued its development activity at Savanna Club and will be
selling into its "Eagles Retreat" subdivision throughout the third quarter.
This subdivision represents Phase VII of VIII.
At Riverside Club, "The Bluffs" is in its closeout phase -- with less than 10
homesites not under contract. While the next Phase -- "The Fairways" -- is not
scheduled for completion until the end of third quarter, the Company has begun
pre-selling into that phase as of August 1st. In its current pre-sale phase,
only 48 of the 148 home sites are available to be placed under contract for a
home and future lease. As that phase sells out the company will open another
section of the subdivision, which is expected in Q105first quarter 2005.
Construction neared completion for the subdivisions at the Royal Palm and
Brentwood communities that will provide an additional 162 home sites for
immediate occupancy in third quarter 2004. Planning and permitting a
subdivision at an additional community continued during the quarter.
Financing Activity
During the quarter, the Company negotiated a 1% reduction in floor interest
rate on three variable rate loans with an outstanding balance of $10.6 million
as of June 30, 2004. This reduction in floor rate became effective July 1,
2004. With respect to these three loans, the Company achieved occupancy
targets at three properties that provided additional advances under committed
non-recourse credit facilities totaling $2.13 million.
During the quarter, the Company increased the size of its floor plan credit
facility used to finance its inventory of homes to $20 million.
American Land Lease, Inc. is a REIT that holds interests in 29 manufactured
home communities with 6,754 operational home sites, 976 developed expansion
sites, 1,268 undeveloped expansion sites and 129 recreational vehicle sites.
Some of the statements in this press release, as well as oral statements made
by the Company's officials to analysts and stockholders in the course of
presentations about the Company and conference calls following quarterly
earnings releases, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements may
include projections of the Company's cash flow, dividends and anticipated
returns on real estate investments. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
the forward-looking statements. Such factors include: general economic and
business conditions; interest rate changes, financing and refinancing risks;
risks inherent in owning real estate; future development rate of home sites;
competition; the availability of real estate assets at prices which meet the
Company's investment criteria; the Company's ability to reduce expense levels,
implement rent increases, use leverage and other risks set forth in the
Company's Securities and Exchange Commission filings.
Management will hold a teleconference call, Thursday, August 5, 2004 at 4:00
p.m. Eastern Daylight Time to discuss second quarter 2004 results. You can
participate in the conference call by dialing, toll-free, (800) 374-5458
approximately five minutes before the conference call is scheduled to begin and
indicating that you wish to join the American Land Lease first quarter 2004
results conference call. If you are unable to participate at the scheduled
time, this information will be available for recorded playback from 5:30 p.m.
EDT, August 5, 2004 until midnight on August 12, 2004. To access the replay,
dial toll free, (800) 642-1687 and request information from conference ID
9106803.
DATASOURCE: American Land Lease
CONTACT: Robert G. Blatz, President, or Shannon E. Smith, Chief
Financial Officer, both of American Land Lease, +1-727-726-8868
Web site: http://www.americanlandlease.com/