Amica Mature Lifestyles Announces First Quarter Fiscal 2014 Results, Quarterly Dividend and Creation

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Amica Mature Lifestyles Announces First Quarter Fiscal 2014 Results, Quarterly Dividend and Creation of New President Position

VANCOUVER, British Columbia--(BUSINESS WIRE)-- (TSX Symbol: ACC) - Amica Mature Lifestyles Inc. ("Amica" or the "Company") is pleased to announce the Company's operating and financial results for the three months ended August 31, 2013.


FIRST QUARTER HIGHLIGHTS

  • Revenues increased 14% to $33.4 million compared to Q1/13;
  • Overall occupancy in mature same communities(1) at August 31, 2013 was 94.1%, compared to 94.4% at May 31, 2013 and 91.1% at August 31, 2012;
  • Overall occupancy in the Company's communities in lease-up at August 31, 2013 was 72.0% (excluding Amica at Aspen Woods which opened August 9, 2013) compared to 70.5% at May 31, 2013 and 61.5% at August 31, 2012;
  • Mature same communitiesMARPAS increased by 5.7% for Q1/14 compared to Q1/13. The Company has experienced monthly year-over-year MARPAS increases in its mature same communities for 44 consecutive months;
  • Diluted FFO per share increased $0.02 per share to $0.12 per share compared to Q1/13;
  • Diluted AFFO per share increased $0.02 per share to $0.12 per share compared to Q1/13;
  • The Board approved fiscal 2014 second quarter dividend of $0.105 per common share; and
  • Created new President position.

"Fiscal 2014 is off to a strong start at Amica with a 14% increase in revenue over the prior year and a $0.02 increase in Funds From Operations diluted per share to $0.12," said Samir Manji, Amica's Chairman, President & CEO. "The re-financings we completed last fiscal year, and at the beginning of Fiscal 2014, have resulted in a 12% decrease in interest costs. Additionally, to-date we have announced our increased ownership in Amica at Erin Mills to 100%, the acquisition of a new development site in Calgary, Alberta, and the Amica at Arbutus Manor redevelopment and new value creation opportunity for Amica and its shareholders. We continue to focus on various initiatives and opportunities that will contribute to our current fiscal year's theme of Driving Internal Growth."

"During the quarter we opened Amica at Aspen Woods, our first retirement residence in Calgary, Alberta, bringing our total operational communities in Canada to 24," said Colin Halliwell, Amica's Chief Operating Officer. "Our communities in lease-up made good progress, achieving 72.0% overall occupancy at August 31, 2013 compared to 70.5% at May 31, 2013 and 61.5% at August 31, 2012 (figures exclude Amica at Aspen Woods). Overall occupancy in our mature same communities was 94.1%, up 3% compared to August 31, 2012 and down slightly from 94.4% at May 31, 2013 due to the slow-down in prospect traffic and move-ins which is typical during the summer months. Overall, we are pleased with the progress we are achieving on the occupancy front and expect to see occupancy performance remain healthy and MARPAS continue to grow steadily over the coming months."

CHANGES IN ACCOUNTING POLICY - IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS ("IFRS 10")

The Company has adopted IFRS 10 effective June 1, 2013 with retroactive application to June 1, 2012. As a result of IFRS 10, the Company has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees.

In accordance with the transitional provisions of IFRS 10, the Company reassessed the control conclusion for its investees at June 1, 2013. All investees that were previously consolidated by the Company, continue to be consolidated under IFRS 10. In addition, under IFRS 10, those investees with operating seniors' residences that were previously either proportionately consolidated or equity accounted are now 100% consolidated. Further details regarding this change in accounting policy and the impact thereof are contained in Note 3 to the Company's condensed consolidated interim financial statements for the three months ended August 31, 2013 which is available on SEDAR at www.sedar.com.

FINANCIAL HIGHLIGHTS

The following table provides operational highlights for the three months ended August 31, 2013 ("Q1/14") compared to the three months ended August 31, 2012 ("Q1/13"):

(Expressed in thousands of Canadian dollars, except per share and share amounts)
        
Q1/13
     Q1/14  Restated(1)  Change
     $  $  $
Revenues    33,413  29,253  4,160
Net loss and comprehensive loss attributable to:
Amica shareholders(329)(1,622)1,293
Non-controlling interests    (2,151)  (2,563)  412
     (2,480)  (4,185)  1,705
Basic and diluted loss per share attributable to:
Amica shareholders:    (0.01)  (0.05)  0.04
EBITDA(2)    8,361  7,751  610
 
FFO(2)3,8532,974879
Diluted per share    0.12  0.10  0.02
 
AFFO(2)3,8033,016787
Diluted per share    0.12  0.10  0.02
Weighted average number of shares (000's):
Basic30,75830,462
Diluted    30,969  30,821   
 
  (1) Figures restated on adoption of IFRS 10.
(2)This is a Non-IFRS Financial Measure used by the Company in evaluating its operating and financial performance. Please refer to the cautionary statements under the heading "NON-IFRS FINANCIAL MEASURES" in this news release. The definition of AFFO was changed during the quarter. See "DEFINITION AND RECONCILIATION OF NON-IFRS FINANCIAL MEASURES" section of the MD&A which is available on SEDAR at www.sedar.com for additional information on Non-IFRS Financial Measures including reconciliations thereof to net income/loss and comprehensive income/loss and the impact of the change in the definition of AFFO.
 
 

CONSOLIDATED REVENUES

Q1/14 revenues increased by 14% to $33.4 million compared to $29.3 million in Q1/13, as described below.

Revenues

Q1/14 retirement communities revenue increased 15% to $33.2 million compared to $28.9 million in Q1/13 as follows:

Mature Communities:

  • $1.4 million due to revenue increases on a same community basis; and
  • $1.0 million due to the consolidation of an additional community in Q1/14 compared to Q1/13;

Lease-up Communities:

  • $1.4 million due to the consolidation of two additional communities in Q1/14 compared to Q1/13; and
  • $0.6 million due to revenue increases on a same community basis

EXPENSES AND OTHER ITEMS

Q1/14 expenses and other items before income taxes increased to $36.9 million from $34.2 million in Q1/13 as described below.

Retirement communities expenses

In Q1/14, retirement communities expenses increased by 16% to $22.8 million compared to $19.6 million in Q1/13 as follows:

Mature Communities:

  • $0.5 million due to expense increases on a same community basis; and
  • $0.8 million due to the consolidation of an additional community in Q1/14 compared to Q1/13;

Lease-up Communities:

  • $1.5 million due to the consolidation of two additional communities in Q1/14 compared to Q1/13; and
  • $0.3 million due to expense increases on a same community basis.

Retirement communities margin

The following table summarizes the Company's consolidated retirement communities margin (retirement communities revenues less retirement communities expenses before finance costs and depreciation expense) on a mature community and lease-up community basis for Q1/14 compared to Q1/13:

             
    Q1/14  Q1/13  Change  Q1/14  Q1/13  Change
    $  $  $  %  %  %
Mature communities9,5248,4901,03435.134.30.8
Lease-up communities   923  776  147  15.2  18.9  (3.7)
Consolidated communities   10,447  9,266  1,181  31.4  32.1  (0.7)
 

Consolidated retirement communities margin increased $1.2 million, principally due to $0.8 million increase in mature communities margin on a same community basis.

Consolidated retirement communities margin as a percentage of retirement communities revenues decreased from 32.1% in Q1/13 to 31.4% in Q1/14. This decrease was principally due to the margin reduction in lease-up communities including the opening of Amica at Aspen Woods. Excluding Amica at Aspen Woods, the lease-up communities margin would have increased to 22.2% and the consolidated retirement community margin would have increased to 32.7%.

Finance costs

Finance costs for Q1/14 and Q1/13 are summarized as follows:

        
     Q1/14  Q1/13  Change
(Expressed in thousands of Canadian dollars)    $  $  $
 
Interest expense and standby fees4,6244,908(284)
Amortization and accretion, net383283100
Change in fair value of interest rate swaps    (568)  (189)  (379)
     4,439  5,002  (563)
 
 

Interest expense and standby fees decreased by $0.3 million to $4.6 million in Q1/14 (Q1/13 - $4.9 million) principally due to interest rate reductions seen on mortgage renewals and refinancings, partially offset by additional interest expense of $0.3 million due to the consolidation of Amica at Whitby (no finance costs are included for this community in Q1/13 as it was consolidated in Q3/13). Excluding Amica at Whitby interest expense and standby fees decreased by $0.6 million or 12%.

NET LOSS AND COMPREHENSIVE LOSS

For Q1/14, the net loss was $2.5 million compared to $4.2 million in Q1/13. The primary reasons for the decreased loss are the increased retirement communities margin, lower depreciation expense and lower finance costs.

The Q1/14 net loss attributable to Amica shareholders was $0.3 million compared to $1.6 million in Q1/13.

FUNDS FROM OPERATIONS

Q1/14 FFO increased 30% to $3.9 million ($0.12 per share diluted) compared to $3.0 million in Q1/13 ($0.10 per share diluted).

ADJUSTED FUNDS FROM OPERATIONS

During the quarter, the company changed its definition of AFFO - see "DEFINITION AND RECONCILIATION OF NON-IFRS FINANCIAL MEASURES" section of the MD&A which is available on SEDAR at www.sedar.com. Q1/14 AFFO increased 26% to $3.8 million ($0.12 per share diluted) compared to $3.0 million in Q1/13 ($0.10 per share diluted). Q1/14 maintenance capital expenditures were $0.7 million (Q1/13 - $0.6 million) inclusive of a $0.4 million maintenance reserve during the quarter (Q1/13 - $0.5 million).

COMMUNITY UPDATE

The following is a summary of occupancy in the Company's mature same communities:

 
Mature Same Community Occupancy
   Overall*  Ontario*  British Columbia
August 31, 2013  94.1%  92.6%  97.0%
May 31, 201394.4%93.6%95.9%
August 31, 2012  91.1%  88.7%  95.6%

*All figures include Amica at Westboro Park, Amica at Thornhill and Amica at London to report on a same community basis.

 

Despite the typical slow-down of prospect traffic during the summer months, the Company is pleased with the increase in occupancy in its British Columbia communities. This is attributable to most of the Lower Mainland communities maintaining 100% occupancy and an improvement in occupancy in all of the Vancouver Island communities. In the Ontario communities, the 1% decrease in occupancy to 92.6% at Q1/14 from 93.6% at Q4/13 was the result of a few communities that experienced slower prospect traffic during the summer months. On a year-over-year basis, overall occupancy in Ontario communities increased by 3.9% from 88.7% at Q1/13. This increase demonstrates excellent progress made in the Ontario market in the last twelve months. Both British Columbia and Ontario communities are now in the strong leasing months of the Fall and the Company anticipates healthy demand for its quality residences.

The following is a summary of overall occupancy in the Company's communities in lease-up:

 
Lease-up Community Occupancy(1)
     With Aspen Woods    Without Aspen Woods
October 7, 2013     63.1%(2)    72.8%(2)
August 31, 201360.7%72.0%
May 31, 2013N/A70.5%
August 31, 2012     N/A    61.5%
  (1) There are five communities currently in lease-up: Amica at Aspen Woods, Amica at Bayview Gardens, Amica at Whitby, Amica at Windsor, and Amica at Quinte Gardens. Amica at Aspen Woods became a lease-up Community starting August 9, 2013.
(2)Anticipated to increase to 69.3% (77.4% excluding Aspen Woods) following an additional 52 (32 excluding Aspen Woods) net pending move-ins which reflect suites that have been reserved with a deposit made for the reservation, less suites for which notice of termination has been received.
 
 

Construction Updates and Expansion Projects

Amica at Aspen Woods, the Company's first project in Calgary, Alberta, was under construction during Fiscal 2013 and opened on August 9, 2013. Construction was completed under budget.

Amica at Oakville, in Ontario, commenced construction in the three months ended November 30, 2012 ("Q2/13") and is expected to open in early calendar 2015.

The Company continues to advance the design and planning for the Amica at Dundas expansion. Upon obtaining construction financing and a building permit the Company plans to proceed with the Amica at Swan Lake expansion and renovations.

Acquisition of Additional Ownership Interests in Other Co-Tenancies

On June 3, 2013, the Company acquired an additional 0.63% ownership interest in Amica at Windsor for cash consideration of under $0.1 million, increasing the Company's ownership position to 49.13% from 48.5%.

Subsequent to Q1/14, on September 1, 2013, the Company acquired an additional 50% ownership interest in Amica at Erin Mills for $10.5 million, bringing the Company's ownership position to 100%.

Land Purchase in Calgary, Alberta

On September 3, 2013, Amica announced that it had purchased a 3.43 acre development land site located in Calgary, Alberta. The Company anticipates developing the land in two phases with the first phase being an Amica branded luxury Wellness & Vitality™ rental retirement residence. The project will be called Amica at Fish Creek and the Company currently estimates approximately 150 suites for the first phase. Amica does not expect the construction phase to commence before Fiscal 2015. The total purchase price paid for the land was $4.25 million and was funded using all cash with no debt financing. Amica plans to form a co-tenancy for this project and to bring on investors thereby reducing the Company's current investment in the project and raising additional funds for the project.

Listing of Amica at Arbutus Manor

On September 9, 2013, the Company announced that it has engaged CBRE Limited to act on its behalf and advise on the redevelopment of Amica at Arbutus Manor. The Company is undertaking initial efforts towards a structured transaction for the prospective sale and redevelopment of Amica at Arbutus Manor, including the Arbutus Manor lands. Amica will provide an update on this initiative as this project progresses.

FINANCIAL POSITION

The Company's consolidated cash and cash equivalents balance as at August 31, 2013 was $4.1 million.

The Company has a $20 million demand operating loan facility secured by a 100% Company owned community. As at August 31, 2013, $18.3 million is available to the Company under this loan facility (amount available is net of $1.0 million in letters of credit secured by the loan facility and $0.7 million drawn on the loan facility).

The following is a summary of the Fiscal 2014 debt maturities (both those already re-financed and remaining maturities):

Refinanced/Renewed in Fiscal 2014

  • $20.4 million CMHC loan with a June 1, 2013 maturity date was renewed for seven years at 2.32% down from 4.34%;
  • $20.7 million CMHC loan with a June 1, 2013 maturity date was renewed for five years at 2.155% down from 4.34%;
  • $10.5 million CMHC loan with a November 1, 2013 maturity date is rate locked for
    five year renewal at 2.77% (currently at 4.56%);

Remaining Maturities in Fiscal 2014

  • $33.3 million in four CMHC mortgages which the Company plans to renew (interest rates on these mortgages range from 3.22% to 4.7%); and
  • $107.4 million in non-CMHC mortgages (including $91.6 million in mortgages payable due on demand) which the Company plans to renew or replace (interest rates on these mortgages range from 3.41% to 6.0%).

SECOND QUARTER DIVIDEND

The Company's Board of Directors (the "Board") has approved a quarterly dividend of $0.105 per common share on all issued and outstanding common shares which will be payable on December 13, 2013, to shareholders of the Company (the "Shareholders") of record on November 29, 2013.

CREATION OF NEW PRESIDENT POSITION

As part of the Company's focus on building and further strengthening the Amica executive and senior management team, Amica has commenced a recruiting process to hire a President. Korn Ferry, a highly respected executive search firm, has been engaged to lead the process. Mr. Charles van der Lee, Chair of Amica's Compensation and Corporate Governance Committee stated, "We are commencing this search as part of our commitment to create shareholder value while at the same time ensuring that we have a good succession plan in place. The President position will report to Mr. Samir Manji who will retain his Chairman and CEO roles. We are looking for an experienced leader who has a strong history and track record in business and also possesses the skills and qualities that we believe are necessary for such an important office and position." Mr. Samir Manji added, "We are very proud of the Amica brand and we are confident that bringing the right individual on board will enable us to achieve our goal of continuing to build a great Company and brand."

RESULTS CONFERENCE CALL

Amica has scheduled a conference call to discuss the results on Tuesday, October 15, 2013 at 10:00 am Pacific Time (1:00 pm Eastern Time). To access the call, dial (416) 644-3414 (Local/International access) or 1-800-814-4859 (North American toll-free access). A slide presentation to accompany management's comments during the conference call will be available. To view the slides, access Amica's website at www.amica.ca and click on "Investor Relations" - "Presentations & Webcasts". Please log on at least 15 minutes before the call commences.

The Company's unaudited condensed consolidated interim financial statements for the three months ended August 31, 2013 and the management's discussion and analysis are available on SEDAR atwww.sedar.comand available on the Company's website atwww.amica.ca.

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION HIGHLIGHTS

(Expressed in thousands of Canadian dollars)

(Unaudited)

 
  

August 31,
2013

  

May 31, 2013
Restated (1)

  $  $
ASSETS
Current
Cash and cash equivalents4,1078,794
Other 6,210  4,915
  10,317  13,709
Non-current
Deposits and other assets1,4302,492
Loans receivable from associates2,5654,144
Investments in associates5,5408,636
Property and equipment 675,265  639,008
  684,800  654,280
Total assets 695,117  667,989
 
LIABILITIES
Current
Mortgages payable272,321292,044
Other 24,302  22,075
  296,623  314,119
Non-current
Mortgages payable227,031183,760