ANL Amer Land Lease

American Land Lease Announces Fourth Quarter 2004 and Full Year Financial Results 3.5% Increase in Funds from Operations Per Share Over 2003 CLEARWATER, Fla., Feb. 14 /PRNewswire-FirstCall/ -- American Land Lease, Inc. (NYSE:ANL) today released results for fourth quarter and full year 2004 and expectations for full year 2005. 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 Fourth Quarter * Diluted Earnings Per Share ("Diluted EPS") were $0.35 for the three- month period ended December 31, 2004 as compared to $0.27 from the same period one year ago, an increase of 30% on a per share basis. Earnings per share were positively impacted by a $337,000 non-recurring casualty gain and negatively impacted by $210,000 of Hurricane-related expenses. * Funds from Operations ("FFO"; a non-GAAP financial measure defined in the Supplemental Information) were $3.2 million, or $0.38 per diluted common share, for the quarter compared to $2.9 million, or $0.36 per diluted common share from the same period one year ago, an increase of 6% on a per share basis. * Unit volume in home sales was 121 new home closings, including 117 new homes sold on expansion home sites. This compares with 103 new home closings in fourth quarter 2003. * "Same Store" results provided a revenue increase of 9.2%, an expense increase of 8.7% and an increase of 9.4% in Net Operating Income ("NOI"). * "Same Site" results provided a revenue increase of 3.0%, an expense increase of 3.9% and an increase of 3.0% in NOI. * Results include an increased charge of $326,000 for Sarbanes Oxley compliance efforts compared to the fourth quarter 2003. 2004 Year * Diluted EPS were $1.19 for the year ended December 31, 2004 as compared to $1.24 for the year ended December 31, 2003, a decrease of 4% on a per share basis. Earnings per share were positively impacted by a $337,000 non-recurring casualty gain and negatively impacted by $221,000 of Hurricane-related expenses. * FFO was $12.4 million, or $1.50 per diluted common share, for the year compared to $11.6 million, or $1.45 per diluted common share from the same period one year ago, an increase of 3.5% on a per share basis. * Unit volume in home sales was 392 new home closings, including 373 new homes sold on expansion home sites, for 2004 as compared to 414 new home closings in 2003. * "Same Store" results provided a revenue increase of 9.8%, an expense increase of 6.7% and an increase of 11.3% in NOI. * "Same Site" results provided a revenue increase of 3.6%, an expense increase of 3.0% and an increase of 3.9% in NOI. * Physical occupancy at December 31, 2004 was 6,618 sites or 95.5%, as compared to 6,349 sites or 96.5% as of December 31, 2003. * Results include an increased charge of $512,000 for Sarbanes Oxley compliance efforts compared to 2003. 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 strong results for the fourth quarter and full year of 2004. These results reflect continuing better than projected performance of our home sales division, and the resulting positive effect that absorption from home sales is having on our property operations. The strength and stability of our focus in the senior community sector have been demonstrated throughout this year as we have weathered three significant hurricanes." Mr. Blatz added, "2004 demonstrated the resiliency of our home sales business. Despite the low number of closings in third quarter, we were able to end the year with a record number of closings for fourth quarter. Our fourth quarter new home price averaged $105,000 and our full year results reflect an average new home price of $101,000, a 12% increase in average new home price over the 2003's average price of $90,000. As we look at 2005, we forecast continued success in our core property ownership business and continued improvement in our home sales/development business." Dividend Declaration On January 25, 2005, the Board of Directors declared a regular fourth quarter dividend of $0.25 per share payable on February 28, 2005, to stockholders of record on February 14, 2005. 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 shareholders. 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 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 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 -- Fourth Quarter Fourth Quarter Property Operations Fourth quarter revenue from property operations was $7,412,000 as compared to $6,824,000 in the same period one year ago, an 8.6% increase. Fourth quarter property operating expenses totaled $3,119,000 as compared to $2,682,000 in the same period one year ago, a 16.3% increase. The increase in property operating expenses in the fourth quarter of 2004 include $210,000 in casualty expense related to damage from hurricanes that impacted several properties. Additional recoveries from our insurance carriers will be a recovery of these expenses in the period in which the collection is probable. The Company realized significant increases in rental income driven by annual rental rate increases, the absorption of new home sites through its home sales efforts and the acquisition of one community during fourth quarter 2003. In addition to the increase in property operating expenses for the casualty loss, other property operating expenses increased in the fourth quarter 2004 as compared to the same period in the prior year that were driven primarily by increases in labor and benefit costs, the acquisition of one community during the fourth quarter 2003, tenant-related legal costs and utility costs and waste water treatment, offset by decreases in natural gas costs as a result of lower consumption due to conversion of several pool heating systems to heat pumps. The property operating margins before depreciation expense decreased from 60.7% in the prior year's fourth quarter to 57.9%, driven primarily by casualty expenses. Excluding the casualty loss, the combination of increased revenue and expenses resulted in an overall improvement in property operating margins before depreciation expense from 60.7% in the prior year's fourth quarter to 60.8% in the fourth quarter 2004. Fourth Quarter "Same Store" Results Fourth quarter "same store" results reflect the results of operations for properties and golf courses owned for both the fourth quarter of 2004 and the prior year periods. The same store properties account for 95% of the property operating revenues for the fourth quarter of 2004. We believe that same store information provides the ability to understand 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 29. The same store % change results are as follows: 4Q04 Revenue 9.2 % Expense 8.7 % Net Operating Income 9.4 % 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, golf operations and total same store results for fourth quarter are as follows: Same Site Rental Absorption Same Site Golf Same Store Revenue 3.0 % 5.7 % 0.5 % 9.2 % Expense 3.9 % 3.9 % 1.0 % 8.7 % NOI 3.0 % 6.6 % (0.2)% 9.4 % 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 December 31, 2004 and 2003 can be found in the Supplemental Information, page 29. Fourth Quarter Home Sales Operations Fourth quarter 2004 new home sales volume was 121 closings, a 17.5% increase from the 103 closings in the same period in the prior year. Average selling price per home was $105,000 as compared to $95,000 in the same period in the prior year, a 10.5% 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 eight communities, level sales in two communities and decreases in three communities. Brokerage profits were down 19% as compared with the same period in the prior year. Selling gross margins, excluding brokerage activities, improved to 32.7% in the quarter as compared to 29.7% 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 the sale of higher margin finishes and features. These increases in revenue and cost savings were offset by increases in cost of homes purchased. Selling costs as a percentage of sales revenue decreased from 21.8% in the prior year's period to 20.2% in the fourth quarter of 2004, reflecting additional investments in personnel and advertising in support of a higher operating level for the business. The backlog of contracts for closing stood at 88 home sales, a decrease of 1 contract from the same period in the prior year. The Company remains committed to its program of generating continued 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 December 31, 2004 December 31, 2003 New home closings 121 103 New home contracts 65 76 Home resales 3 7 Brokered home sales 55 51 New home contract backlog 88 89 Operational Results -- 2004 Year 2004 Property Operations 2004 revenue from property operations was $29,221,000 as compared to $26,416,000 in 2003, a 10.6% increase. 2004 property operating expenses totaled $11,410,000 as compared to $10,440,000 in 2003, a 9.3% increase. The increase in property operating expenses in 2004 includes $221,000 in casualty expense related to damage from hurricanes that impacted several properties. Additional recoveries from our insurance carriers will be a recovery of these expenses in the period in which the collection is probable. The Company realized significant increases in rental income driven by annual rental rate increases, the absorption of new home sites through its home sales efforts and the acquisition of one community during fourth quarter 2004. Property operating expenses increased in 2004 as compared to 2003 driven primarily by increases in labor and benefit costs, property tax expense, utility costs, including water and waste water treatment, and tenant legal costs, offset by decreases in property management overhead. The property operating margins before depreciation expense increased from 60.5% in the prior year to 61.0% in 2004. Excluding the impact of hurricane casualty expenses, the combination of increased revenue and expenses resulted in an overall improvement in property operating margins before depreciation expense from 60.5% in the prior year to 61.7% in 2004. 2004 "Same Store" Results 2004 "same store" results reflect the results of operations for properties and golf courses owned for both 2004 and 2003. The same store properties account for 95% of the property operating revenues for 2004. We believe that same store information provides the ability to understand 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 30. The same store % change results are as follows: 2004 Revenue 9.8 % Expense 6.7 % Net Operating Income 11.3 % 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"). We believe that "same site" information provides the ability to understand the changes in profitability related to the newly leased sites. "Same site" results reflect the results of operations excluding those sites leased subsequent to the beginning of the prior year period. 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. We estimate that 50% of the increase in expenses over the prior year 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, golf operations and total same store results for 2004 are as follows: Same Site Rental Absorption Same Site Golf Same Store Revenue 3.6 % 5.8 % 0.4 % 9.8 % Expense 3.0 % 3.7 % 0.0 % 6.7 % NOI 3.9 % 6.9 % 0.5 % 11.3 % 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 years ended December 31, 2004 and 2003 can be found in Supplemental Information, page 30. 2004 Home Sales Operations 2004 new home sales volume was 392 closings, a 5% decrease from the 414 closings in the prior year. Average selling price per home in 2004 was $101,000 as compared to $90,000 in the prior year, a 12% increase. The decrease in closings compared to the prior year was balanced across the Company's expansion communities, with increases in six communities and decreases in seven communities. Brokerage profits were up 12% as compared with the prior year's results. Selling gross margins, excluding brokerage activities, improved to 32.6% for 2004 as compared to 28.3% for 2003. This increase was driven by increased selling prices, increased manufacturer rebates associated with higher purchasing volumes, the initial impact of cost savings efforts in home construction and the sale of higher margin finishes and features. These increases in revenue and cost savings were offset by increases in cost of homes purchased. Selling costs as a percentage of sales revenue increased from 20.2% in the prior year to 23.9% in 2004, reflecting additional marketing costs for new subdivisions in advance of sales. The backlog of contracts for closing stood at 88 home sales, a decrease of 1 contract from the same period in the prior year. The Company remains committed to its program of generating continued 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: Year ended Year ended December 31, 2004 December 31, 2003 New home closings 392 414 Home resales 23 41 Brokered home sales 265 193 New home contract backlog 88 89 Outlook for 2005 The table below summarizes the Company's projected financial outlook for 2005 as of the date of this release and is based on the estimates and assumptions disclosed in this and previous press releases: Full Year 2005 Projected FFO $1.45 to $1.75 AFFO $1.32 to $1.61 Diluted EPS $1.06 to $1.35 Same Store Sales Revenue Growth 5.0% to 9.0% Expense Growth 5.5% to 8.0% NOI Growth 6.0% to 9.5% $2,800,000 to Home Sales Operating Income $6,000,000 $4,000,000 to General and Administrative Expenses $5,000,000 $50,000 to Other Income $150,000 Capital Replacements (per site) $125 to $145 $3,200,000 to Depreciation $3,700,000 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 2005 include a reduction in 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 2005 projections. In addition, the projected results include the expense for performance-based restricted stock. 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. However, no assurance can be provided as to the achievement of these projections and actual results will vary, perhaps materially. Land Acquisition As previously announced, on February 4, 2005 the Company acquired a 260- acre tract of land in Micco, Florida, south of Melbourne, Florida for an aggregate price of $15.5 million. The land will be used to develop a new senior community for the company -- Savanna Club North at Crystal Bay. Savanna Club North at Crystal Bay will be a 533 home site community incorporating the high-value homes and the country club-style living that are characteristic of the company's Savanna Club and Riverside Club communities. Situated across US-1 from the inter-coastal waterway leading to the Atlantic Ocean, the purchase includes frontage on US-1 for a new home information and sales center and a small tract of land on the inter-coastal that will be used by the community's residents for access to boating and other water activities. The company intends to use its current sales and community development team from the successful Savanna Club Community to expand its sales activities into this new community as sales activities at Savanna Club close down in 2006. Construction will begin in second quarter on infrastructure, site development and new home sales are projected for 2007. Casualty Event Several of the Company's properties were impacted by the hurricanes that challenged the state of Florida during the 2004 season. During the fourth quarter, the Company recognized $210,000 in expense associated with these storms. In addition, the Company recognized a gain of $337,000 from the amount by which insurance proceeds exceeded the net book value of assets destroyed in the storms. While the Company expects to recover additional amounts from its insurance carriers, it will recognize these additional amounts as additional gain or a recovery of expense in the period the collection becomes probable. Financing Activity During fourth quarter 2004, the Company renewed and extended its corporate line of credit, which now matures December 31, 2006. The Company modified its floor plan facility used to finance the Company's inventory of homes. The credit facility was increased to $20 million and the advances were modified to include amounts above the invoice cost from the manufacturer to fund construction costs. Development Activity The Company completed development of several new subdivisions during the quarter. * at Savanna Club, "Eagles Retreat," that provides an additional 216 developed home sites available for immediate occupancy * at Riverside Club, "the Fairways," that provides 148 developed home sites available for immediate occupancy * at Royal Palm, an additional 114 developed home sites available for immediate occupancy * at Brentwood, an additional 48 developed home sites available for immediate occupancy Construction commenced at the Company's Blue Heron community on a new subdivision of 65 home sites. Construction continued on the last phase of the Company's Savanna Club project that will provide an additional 192 home sites. Planning and permitting for subdivisions at two additional communities continued during the quarter. American Land Lease, Inc. is a REIT that holds interests in 28 manufactured home communities with 6,931 operational home sites, 1,101 developed expansion sites, 958 undeveloped expansion sites and 129 recreational vehicle sites as of December 31, 2004. 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, but not limited to: 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. We assume no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements. Management will hold a teleconference call, Monday, February 14, 2005 at 4:00 p.m. Eastern Standard Time to discuss fourth 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 fourth 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. EST, February 14, 2005 until midnight on February 21, 2005. To access the replay, dial toll free, (800) 642-1687 and request information from conference ID 3720446. DATASOURCE: American Land Lease, Inc. CONTACT: Robert G. Blatz, President, or Shannon E. Smith, Chief Financial Officer, +1-727-726-8868, both of American Land Lease Web site: http://www.americanlandlease.com/

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