Macerich's (MAC) CEO Art Coppola on Q2 2017 Results

Executives

Jean Wood – Vice President, Investor Relations

Art Coppola – Chief Executive Officer and Chairman

Tom O’Hern – Senior Executive Vice President and Chief Financial Officer

Robert Perlmutter – Senior Executive Vice President and Chief Operating Officer

John Perry – Senior Vice President, Investor Relations

Analysts

Craig Schmidt – Bank of America

Michael Bilerman – Citi

Alexander Goldfarb – Sandler O’Neill

Jim Sullivan – BTIG

Michael Mueller – JPMorgan

Todd Thomas – KeyBanc Capital Market

Vincent Chao – Deutsche Bank

Wes Golladay – RBC Capital Markets

Haendel St. Juste – Mizuho

Rich Hill – Morgan Stanley

Greg McGinniss – UBS

Tayo Okusanya – Jefferies

Operator

Article Summary show

Good day, and welcome to The Macerich Company’s

Second Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to show the meeting over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Jean Wood

Thank you, everyone, for joining us on our 2nd region 2017 profits name. During the route of this call, management may additionally make certain statements that perhaps deemed forward-searching inside the means of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Actual results might also fluctuate materially due to various dangers, uncertainties, and other elements. We refer you to nowadays’s press launch and SEC filings for an in-depth dialogue of ahead-looking statements. Reconciliations of non-GAAP economic measures to the most at once similar GAAP measures are covered within the income launch and supplemental filed on Form eight-K with the SEC, posted within the Investors phase of the employer’s internet site at www.Macerich.Com.

Joining us nowadays are Art Coppola, CEO and Chairman; Tom O’Hern, Senior Executive Vice President and Chief Financial Officer; Robert Perlmutter, Senior Executive Vice President and Chief Operating Officer; and John Perry, Senior Vice President of investor Relations.

CEO

With that, I would like to show the decision over to Tom.

Tom O’Hern

Thank you, Jean, and welcome all and sundry. Macerich’s second CEO region pondered Coppola persevered stable operating outcomes as evidenced by the maximum of our portfolio’s key working metrics. For the quarter, FFO changed to $zero.98 in keeping with the share of $1.02 for the sector ended June 30, 2016. This was above our steering variety and consensus, which became general due to the timing of hire termination revenues. Same-center increase and internetworking earnings, apart from straight-line rents and SFAS 141 profits, become up 3.3% for the region. Lease termination costs for the zone had been $nine.One million compared to $5.9 million within the 2nd quarter of the ultimate 12 months. The biggest period charges came in from Bebe at $3 million and Sperry at $2 million.

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Year-to-date rent period revenue is ready $12 million, including our steering assumptions; we revised that to as much as $17 million for the year, but that’s nonetheless much less than we saw in 2016 while we had an actual term–lease period revenue of about $21 million. The gross running margin for the quarter was 70.4%, up barely compared to 70.3% in the second region closing year. Bad debt cost for the zone was $2.5 million, up incredibly from the $1.7 million we incurred in the 2nd sector of the ultimate year. Year-to-date, terrible debt expense is ready at $4.2 million; for this reason, we have increased our steering for bad debt for the year to $6—5 million, up from $5 million.

Here, within the 2D sector, the common hobby rate becomes 3.6%, compared to 52% a year in the past. Bringing out the balance sheet, the balance sheet continues to be in the right form. At one end, the debt-to-marketplace cap turned to 46%. The interest insurance ratio became a very wholesome 3.3x. The average debt maturity, simply underneath six years, may be very sturdy and needs to improve over the next 12 months as we finish financings within the 2nd 1/2 of the year. Forward debt-to-EBITDA, 7.8x, and our floating charge debt were at 17% of our total debt. However, – based on our financing sports in the 2d 1/2, this needs to go down to shut to 10% with the aid of or stop.

Installing QuickBooks Online (without converting QuickBooks for Mac files to QuickBooks online files) is relatively easy. However, it gets a bit complicated when you need to convert an existing QuickBooks for Mac file to a QuickBooks Online file. Intuit does a reasonably good job of facilitating the online installation.

Manually converting your QuickBooks for Mac file to QuickBooks Online is not that difficult, as long as you carefully follow the instructions, and it generally takes about 30 minutes. You cannot directly convert your QuickBooks for Mac file to QuickBooks Online. An intermediate step requires converting your QB Mac file to a QB Windows file and beginning with the QuickBooks Mac drop-down menu. The process starts by selecting the File menu and then selecting “Back up to QuickBooks for Windows” within the QuickBooks for Mac software.

Upon completing this process, the file is sent to QuickBooks, and you receive a notification when the process for converting the QuickBooks Mac to QuickBooks Online is completed. Initially, I was surprised to observe that this process is performed at the Intuit level rather than in real time. A suggestion to facilitate this process is that in the event you do not receive timely notification of completion from Intuit.

I suggest that you contact tech support and ask them to look into the status of your conversion and request that they expedite it for you. Generally, I have called tech support; they are very accommodating. Although they typically do not give any time guarantee and attribute the potential delay to their busy servers, they will facilitate the process.

Overall, the manual conversion process takes approximately 30 minutes (excluding the Intuit conversion), and my clients have been happy with QBO. One client was disappointed that the vendor-type classifications are unavailable in QuickBooks Online. The workaround for this is to use one of the fields in the vendor profile as the vendor type. So far, my clients are happy to have multi-user access, the ability to work from anywhere, and unattended and automatic backups despite a slightly sluggish performance attributable to the web connection.

Two words of caution, the first of which is that QuickBooks Online currently does not support inventory applications, and the second is that the conversion may require the services of your accountant or CPA to affect a smooth and orderly transition to the QuickBooks Online platform. As long as you understand up front the limitations of QBO, then you should find the QBO platform acceptable and, more importantly, a helpful financial tool to run and monitor your business.

Sandor Lenner, CPA, has provided accounting services for companies for 35 years. He is also a Certified QuickBooks ProAdvisor and provides QuickBooks support and small business accounting services while working as a part-time consultant with Susan Missal Lenner, P.A. Our Mission Statement is to help small businesses become self-sufficient, make correct business decisions, and effectively compete with larger companies on a local, regional and global basis through the use of state of the art accounting technology and the internet.