Amica Mature Lifestyles Announces First Quarter Fiscal 2016 Results

VANCOUVER, BC / ACCESSWIRE / October 15, 2015 / Amica Mature Lifestyles Inc. (TSX Symbol: ACC) (“Amica” or the “Company”) is pleased to announce the Company’s operating and financial results for the three months ended August 31, 2015.

FIRST QUARTER HIGHLIGHTS

– FFO increased 25.7% and diluted FFO per share increased $0.034 per share to $0.170 compared to Q1/15;
– AFFO increased 17.1% and diluted AFFO per share increased $0.023 to $0.157 per share compared to Q1/15;
– Revenues increased 5.4% to $37.2 million compared to Q1/15;
– Overall occupancy in mature same communities(1) at August 31, 2015 was 90.2%, compared to 89.8% at August 31, 2014;
– Overall occupancy in the Company’s community in lease-up at August 31, 2015 was 70.3% compared to 57.2% at August 31, 2014;
– Mature same communities MARPAS increased by 4.6% compared to Q1/15; and
– The Company has experienced monthly year-over-year MARPAS increases in its mature same communities for 68 consecutive months.

“Fiscal 2016 is off to a strong start with a 5.4% increase in our first quarter revenues and a 17.1% or $0.023 per share increase in AFFO diluted per share to $0.157,” said Samir Manji, Amica’s Chairman and CEO. “It has been a very busy fiscal year with the announcement last month that Amica has agreed to be acquired by BayBridge Seniors Housing Inc. of which shareholder approval was obtained on October 9, 2015. Just subsequent to the quarter we welcomed our first residents at Amica at Oakville and are very pleased with the momentum we are seeing in our newest Wellness & Vitality(TM) residence.”

“We experienced 13.9% growth in retirement community margin in the first quarter as compared to the prior year, while increasing overall occupancy to 90.2% within our mature communities, up 40 basis points over both the prior quarter and the same quarter last year,” said David Minnett, Amica’s President. “We are very pleased to report these cascading financial improvements driven by a series of operating level initiatives implemented over the course of the last year.”

Financial Highlights

The following table provides operational highlights for the three months ended August 31, 2015 (“Q1/16”) compared to the three months ended August 31, 2014 (“Q1/15”):

(1) 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. See also “DEFINITION AND RECONCILIATION OF NON-IFRS FINANCIAL MEASURES” section of the Company’s MD&A for the three months ended August 31, 2015 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.

(2) EBITDA for Q1/16 includes $1.2 million in transaction costs, excluding these transaction costs EBITDA would have been $10.9 million. See “Transaction costs” below.

Consolidated revenues

Q1/16 revenues increased by 5.4% to $37.2 million compared to $35.3 million in Q1/15. The increase in Q1/16 consolidated revenues is from retirement communities revenue as described below.

Retirement communities revenue, expenses and margin

Q1/16 retirement communities revenue increased 5.4% to $37.2 million (Q1/15: $35.3 million) with a 1.0% increase in retirement communities expenses to $23.5 million (Q1/15: $23.3 million).

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 Q1/16 compared to Q1/15:

In Q1/16, consolidated retirement communities margin increased $1.7 million from $12.0 million in Q1/15. Approximately 85% or $1.4 million of the increase was from mature communities as a group. The overall, consolidated retirement communities margin percentage increased 2.8% to 36.7% in Q1/16 from 33.9% in Q1/15.

Other income

Other income may consist of management fees, design and marketing fees, interest income on loans to non-consolidated co-tenancies, distributions from and gains on disposal of non-consolidated co-tenancies, and deposit interest on consolidated cash balances.

Q1/16 other income was unchanged at less than $0.1 million compared to Q1/15.

Finance costs

Finance costs are summarized as follows:

Interest expense and standby fees decreased by $0.3 million to $4.5 million in Q1/16 principally due to interest rate reductions achieved on mortgage renewals and refinancing’s.

Guarantee fees were unchanged at $0.1 million in Q1/16.

In Q1/16, an unrealized loss of $0.9 million was recorded in respect of interest rate swap contracts on floating rate mortgages compared to an unrealized gain of $0.1 million for Q1/15. Assuming the Company holds these mortgages and the interest rate swaps for their full terms, any unrealized gains or losses will reverse and the Company will not realize any gains or losses in respect of these interest rate swaps.

General and administrative (“G&A”) expenses

G&A expense increased by $0.4 million to $2.7 million in Q1/16 (Q1/15 – $2.3 million). Included in G&A expenses in Q1/16 is $0.2 million in consultant costs for a margin improvement initiative which is in the process of being rolled out to the retirement communities. Additionally, a significant contributor to the difference between Q1/15 and Q1/16 G&A expenses is that Q1/15 G&A expense was reduced by $0.3 million in respect of actual vs estimated Fiscal 2014 bonuses whereas Q1/16 G&A expense was increased by $0.1 million in respect of actual vs estimated Fiscal 2015 bonuses.

Transaction costs

Transaction costs in Q1/16 of $1.2 million are in connection with the Company’s announcement last month that Amica has agreed to be acquired by BayBridge Seniors Housing Inc. (Q1/15 – $nil). These costs include legal fees, the fairness opinion fee, other professional fees and due diligence related costs.

Depreciation expense

Depreciation expense for Q1/16 decreased by $1.1 million to $6.3 million compared to Q1/15 as a result of certain assets with a 5 year amortization period becoming substantially depreciated at the end of the prior fiscal year.

Net loss and comprehensive loss

For Q1/16, the net loss was $2.2 million compared to $2.3 million in Q1/15. The decrease in the net loss is primarily attributable to improved retirement community margin and lower depreciation expense. These items were substantially offset by transaction costs, increased G&A expense and an increase in the mark-to-market loss on interest rate swap contracts.

The Q1/16 net loss attributable to Amica shareholders was $1.8 million compared to $1.0 million in Q1/15.

Earnings Before Interest Taxes and Depreciation (EBITDA)

Q1/16 EBITDA remained unchanged at $9.7 million compared to Q1/15. EBITDA for Q1/16 includes the $1.2 million in transaction costs described above, excluding these transaction costs EBITDA would have been $10.9 million.

Funds From Operations (FFO)

Q1/16 FFO increased 25.7% to $5.3 million ($0.170 per share diluted) compared to $4.2 million in Q1/15 ($0.136 per share diluted).

Adjusted Funds From Operations (AFFO)

Q1/16 AFFO increased 17.1% to $4.9 million ($0.157 per share diluted) compared to $4.1 million in Q1/15 ($0.134 per share diluted). Q1/16 maintenance capital expenditures were $0.8 million (Q1/15 – $0.5 million) inclusive of $0.6 million maintenance reserve (Q1/15 – $0.4 million).

COMMUNITY UPDATE

Mature same community MARPAS increased by 4.6% for Q1/16 compared to Q1/15. The Company has experienced monthly year-over-year MARPAS increases in its mature same communities for 68 consecutive months. In addition to the ongoing focus on occupancy and ancillary revenue, the continued success on the MARPAS front is the result of the Company wide efforts to raise rents and rates upon turnover, to more accurately reflect the quality of the services provided by Amica.

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

(1) Amica at Quinte Gardens, Amica at Bayview Gardens and Amica at Windsor became Mature Communities effective February 1, 2015, July 1, 2014 and August 1, 2014 respectively. All occupancy figures in the above table, including comparatives, reflect Amica at Quinte Gardens, Amica at Bayview Gardens and Amica at Windsor to report on a Mature Same Community basis.

Amica experienced increases in traffic in both the Ontario and British Columbia regions during the summer. Overall mature communities finished Q1/16 at 90.2%, up 40 basis points from both the prior quarter and the same quarter last year. Occupancy continued to grow in the mature Ontario communities, finishing Q1/16 at 89.3%, representing an increase of 30 basis points from the prior quarter and 80 basis points from Q1/15. Occupancy within the British Columbia communities improved over the prior quarter, ending Q1/16 at 92.7%, up 50 basis points. Management remains confident that the overall occupancy levels in British Columbia will continue to rebound and return to historical strength given the brand reputation in the region. Management remains focused on increasing occupancy and extracting fair value for the services Amica provides.

The following is a summary of overall occupancy in the Company’s community in lease-up (1):

(1) As of August 31, 2015, there was one community in lease-up: Amica at Aspen Woods. On September 15, 2015 Amica at Oakville became an operational lease-up community.

Overall occupancy for the communities in lease-up (Amica at Aspen Woods and Amica at Oakville) at October 13, 2015 was 47.5%.

Development and pre-development projects

Some site preparation activities commenced in June 2015 for the Amica at Dundas expansion and a term sheet has been received for construction financing. Upon finalizing the construction financing and board approvals, the Company plans to proceed with the Amica at Dundas expansion.

Following a comprehensive review with BayBridge and upon obtaining construction financing, board approvals and required permits, the Company plans to proceed with the Amica at Swan Lake expansion.

The Amica at Aspen Woods expansion and the Amica at Fish Creek development are not expected to commence construction in the next twelve months.

Acquisition of additional ownership interests in a co-tenancy

On June 1, 2015, the Company increased its ownership in Amica at Whitby by 48.75% from 51.25% to 100%. The aggregate cash consideration was $4.1 million. As the Company controlled the property prior to the acquisition of the additional interest, the non-controlling interests were reduced by $2.7 million for the portion that the Company acquired.

FINANCIAL POSITION

The Company’s consolidated cash and cash equivalents balance, as at August 31, 2015, was $3.9 million compared to $3.7 million at May 31, 2015.

On June 1, 2015, the Company completed a refinancing of its previous $20 million demand operating loan facility which had an outstanding balance of $13.5 million at May 31, 2015. The new loan facility includes two components: (i) $21.0 million term loan that matures on June 1, 2020, the interest rate on this component was fixed for its term at 3.31% with an interest rate swap contract; and (ii) $10.0 million demand operating loan facility bearing interest at prime plus 0.25%.

Proceeds of the term loan were used to repay the previous demand operating loan facility as described above, $4.1 million for the acquisition of the additional 48.75% interest in Amica at Whitby and to increase the Company’s cash and working capital positions.

As at August 31, 2015, $8.2 million is available to the Company under its demand operating loan facility (amount available is net of $1.1 million drawn on the loan facility and $0.7 million in letters of credit secured by the loan facility). On October 13, 2015, the balance available on the demand operating loan was approximately $7.6 million.

At August 31, 2015, the Company has a working capital deficiency of $251.7 million (May 31, 2015 – $241.9 million). This working capital deficiency includes:

In the normal course of business, the Company finances its properties in development and lease-up using mortgages payable due on demand and regularly has mortgages on other properties that mature within one year of the balance sheet date (see “Debt Maturities” below) – these mortgages are reported in the current portion of mortgages payable and contribute $224.1 million to the working capital deficiency at August 31, 2015 (May 31, 2015 – $202.5 million).

The Company’s due on demand mortgages payable are primarily on properties that have not achieved stabilized occupancy. The Company monitors property occupancy and income growth for opportunities to seek conventional term mortgage financing to replace the due on demand loans. See “Debt maturities” below for discussion of the Company’s expectations regarding refinancing’s and renewals of mortgages payable.

Amica believes that its funds on hand as at August 31, 2015, combined with funds from: operations; its co-tenancy investments and loan receivables; the demand operating loan facility as described above; proceeds from stock option exercises; opportunities to increase financing on existing properties; and debt financing arrangements, are sufficient to fund its operating and capital expenditures for at least the next twelve months. Under the agreement to be acquired by BayBridge Seniors Housing Inc., the Company may be required to pay a $25 million termination fee in the event the agreement is terminated in certain circumstances. The Company does not currently have the cash resources to pay such a termination fee and thus the Company could be adversely impacted by the requirement to pay the termination fee.

Debt Maturities

In August 2015, the Company renewed a $1.5 million due on demand, third mortgage bearing interest at a fixed rate of 6%. The renewed loan matures on July 31, 2016.

In October 2015, the Company renewed a $5.0 million, second mortgage bearing interest at a fixed rate of 6%. The renewed loan matures on October 1, 2016.

The Company anticipates that it will be able to renew or replace all of its mortgages payable which mature in the period ending August 31, 2016, which includes the following loans:

The Company currently has term sheets for the renewal or refinancing of $87.4 million of the above loans and anticipates completing these renewals and refinancing’s in the next two months.

Current 5 and 10 year CMHC insured loan interest rates are approximately 2.0% and 2.7% respectively. Current 5 and 10 year non-CMHC loan interest rates are approximately 3.2% and 3.9% respectively.

Capital expenditures

In Q1/16, the Company incurred $2.5 million (Q1/15 – $1.6 million) in capital expenditures on its consolidated properties and corporate operations and $0.2 million (Q1/15 – $0.1 million) are classified as maintenance capital expenditures on real estate assets and deducted from FFO in calculating AFFO.

Capital expenditures for consolidated communities and corporate operations for Fiscal 2016 are budgeted at $7.4 million before development properties, of which $3.9 million are maintenance capital expenditures (Amica’s proportionate share of these budgeted maintenance capital expenditures is $3.0 million). Amica is committed to investing in its properties to maintain the high standard it has set in luxury retirement living.

Results Conference Call

Amica has scheduled a conference call to discuss the results on Thursday, October 15, 2015 at 10:00 am Pacific Time (1:00 pm Eastern Time).

To access the call, dial:
1-416-260-0113 (Local/International access)
1-800-524-8950 (Toll-free access)

Note: This is an audio conference call only, no webcast.

The Company’s unaudited condensed consolidated interim financial statements for the three months ended August 31, 2015 and the management’s discussion and analysis are available on SEDAR at www.sedar.com and available on the Company’s website at www.amica.ca.

Forward-Looking Information

This news release contains “forward-looking information” within the meaning of applicable securities laws (“forward-looking statements”).

These forward-looking statements are made as of the date of this news release and the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as otherwise required by law. Users of forward-looking statements are cautioned that actual results may vary from forward-looking statements contained herein. Forward-looking statements include, but are not limited to, statements regarding future occupancy rates; occupancy continuing to rebound and return to historical strength in British Columbia communities; anticipated future revenues, revenue and margin growth/enhancement, financial results and operating performance; increasing occupancy and extracting value for the services Amica provides in conjunction with effective expense control, ensuring those gains flow to the bottom line; unlocking unrealized potential within our existing portfolio; future services that will be provided by the Company; future growth and value for shareholders; Amica’s Fiscal 2016 goals and objectives; future MARPAS growth; interest rate savings on future re‑financings and renewals; expected future financing opportunities and construction financing requirements; the ability of the Company to re-finance or extend mortgages and do so on favorable terms; anticipated ability to renew, refinancing of maturing loans; anticipated ability to refinance due on demand mortgages with conventional term mortgages upon the properties nearing or after achieving stabilized occupancy; the Company’s expectations that the demand operating loan and the mortgages payable due on demand will be available for their term and will not be called; holding interest rate swaps for their full term; the potential to increase debt on certain communities to generate additional cash resources; the Company’s ability to fund operating and capital expenditures for at least 12 months; management of cash resources; advancing the development of new and expanded Amica residences; the number of new developments the Company will undertake; acquisition/development of further Amica communities; obtaining new development sites; the Company increasing its ownership in existing Amica communities; the opportunity to acquire existing qualified residences and the Company making such acquisitions; Fiscal 2016 capital expenditures of $7.4 million before development properties with Amica’s proportionate share of maintenance capital expenditures being $3.0 million; the timing for payment of contractual obligations and commitments; the creation of long term shareholder value; the Company’s growth prospects; dividends and other similar statements concerning anticipated future events, conditions or results that are not historical facts. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. While the Company has based these forward-looking statements on its expectations about future events as at the date that such statements were prepared, the statements are not a guarantee of the Company’s future performance and are subject to risks, uncertainties, assumptions and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such factors and assumptions include, amongst others, the effects of general economic and market conditions; actions by government authorities, including the granting of zoning and other approvals and permits; uncertainties associated with potential legal proceedings and negotiations, including negotiations with respect to construction financing and debt refinancing; and misjudgements in the course of preparing forward-looking statements. In addition, there are known and unknown risk factors which could cause the 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. Known risk factors include, among others, risks related to dependence on the ability of Amica’s co-tenancy participants to meet their obligations; interest rate volatility in the marketplace; job actions including strikes and labour stoppages; possible liability under environmental laws and regulations, relating to removal or remediation of hazardous or toxic substances on properties owned or operated by Amica; risks associated with new developments, including cost overruns and start-up losses; the ability of seniors to pay for Amica’s services; regulatory changes; risks inherent in the ownership of real property; operational risks inherent in owning and operating residences; the risks associated with global events such as infectious diseases, extreme weather conditions and natural disasters; the availability of capital to finance growth or refinance debt as it comes due; Amica’s ability to attract seniors with its services and keep pace with changing consumer preferences, as well as those factors discussed in the “Risks and Uncertainties” section of the Company’s Management’s Discussion and Analysis for the three months ended August 31, 2015, and in the “Risk Factors” section of the Company’s Annual Information Form dated August 27, 2015 and the “Risk Factors Related to the Arrangement” section of the Company’s Management Information Circular dated September 11, 2015, filed with the Canadian Securities Administrators and available at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements, or the material factors or assumptions used to develop such forward looking statements, will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements.

Non-IFRS Financial Measures

This news release makes reference to the following terms: “Earnings Before Interest, Taxes, Depreciation and Amortization” (or “EBITDA”), “Funds From Operations” (or “FFO”), “Adjusted Funds From Operations” (or “AFFO”), “Monthly Average Revenue Per Available Suite” (or “MARPAS”) and “Retirement Communities Margin” (collectively the “Non-IFRS Financial Measures”). These Non-IFRS Financial Measures are not recognized under IFRS and do not have standardized meanings prescribed by IFRS. The Company considers these Non-IFRS Financial Measures relevant in evaluating the operating and financial performance of the Company, along with IFRS measures such as net earnings (loss) and comprehensive income (loss), basic and diluted earnings (loss) per share and cash provided by (used in) operations. Definitions and detailed descriptions of these terms are contained in the MD&A.

Mature Same Communities: Effective June 1, 2011, mature same communities was defined by the Company to be mature communities that are classified as income-producing properties for thirteen months after the earlier of reaching 90% occupancy or 36 months of operation, with the exception of Amica at Quinte Gardens. Amica at Quinte Gardens was classified as a mature community thirteen months after the earlier of reaching 90% occupancy or two years post-acquisition by the Company.

About Amica Mature Lifestyles Inc.

Amica Mature Lifestyles Inc., a Vancouver based public company, is a leader in the management, marketing, design, development and ownership of luxury seniors residences. There are 25 Amica Wellness & Vitality(TM) Residences in operation in Ontario, British Columbia and Alberta, Canada. Additionally, Amica has one residence in pre-development in Calgary, Alberta and three existing operational residences have expansions in pre‑development. The common shares of Amica are traded on the TSX under the symbol “ACC”. For more information, visit www.amica.ca.

For further information, please contact:

Art Ayres
Chief Financial Officer
Amica Mature Lifestyles Inc.
(604) 630-3473
a.ayres@amica.ca

Alyssa Barry
Manager, Investor Communications
Amica Mature Lifestyles Inc.
(604) 639-2171
a.barry@amica.ca

SOURCE: Amica Mature Lifestyles Inc.

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