SRZ: Q2 2009 Quarterly Report

Sunrise recently came out with quarterly report on August 8,2009.
The following are some of the positive information available in their Q2 filings.

1. In the Conference Call Mark Ordan mentioned about the “Adjusted Income from Ongoing Operations.” which was a positive 10 million. the 8K filing states the following with regards to "Adjusted Income from Ongoing Operations"
Adjusted income from ongoing operations is used by management to focus on liquidity generated from the ongoing operations of the Company and to help management assess if adjustments to current spending decisions are needed.




2. Closer look at the 10Q filing and the cash flow statement we get an even better news. Cash flow from operations is positive 29.20 million "WOW!!!"

3. 10Q filing (also the 8k) state that SRZ has 190 million of debt for the german assets. It has been stated by SRZ in this filing that the debt is partially recourse to SRZ. "Any difference between the recorded amount of the debt and the amount ultimately paid to the lenders to settle the debt will be recorded as gain on the extinguishment of debt at the date the debt is legally satisfied. "
My interpretation is: SRZ does not legally have to fully pay back all the debt for german assets as the debt is partially binding to SRZ and in turn SRZ might have to account for some paper gain in the event that the debt is settled for less than 190 million. sounds good to me as the cash outflow reduces by the same amount.

4. SRZ has close to 614 million of debt. Look at the interest rate on the debt majority of it has interest rate of 3.1%
5. SRZ has Student Loan Auction Rate Securities (SLARS) of Face value 38.4 million and right now they are on the books for 31.38 million. SLARS are 98% guaranteed by the federal govt against default. As the credit market returns back to normal we can expect another 6-7 million in additional assets.
Conslusion: The 29.2 million positive cash flow from operations means we are on the road to recovery. The 29.2 million easily warrants a market cap of 292 million that would be in the range of 5-6 USD for a 1+ billion sales senior living company. I hope going forward in the quarterly report mangement decides to state the "Adjusted Income from Ongoing Operations"
P.N. These are my views about the 10Q and 8K filings available at the SRZ website (Link)