VENTAS REPORTS SECOND QUARTER 1999 RESULTS
LOUISVILLE, Ky. (August 16, 1999) -- Ventas, Inc. (NYSE:VTR) announced today the results of its operations for the second quarter of 1999.
RESULTS
Rental income for the three months ended June 30, 1999 was $57.2 million, of which $56.3 million resulted from leases with Vencor, Inc. (OTC:VCRI), its principal tenant. General and administrative expenses for the three months totaled $4.6 million and included approximately $2.8 million in unusual professional fees (legal and financial advisory fees). These professional fees were incurred as a result of ongoing discussions with Vencor regarding Vencor=s need to amend its capital structure and its lease arrangements with the Company and in evaluating alternatives to pay down, refinance, restructure and/or extend the $275 million Bridge Loan due October 30, 1999. Substantial legal and financial advisory expenses will continue to be incurred by the Company until a resolution of these matters is reached, although there can be no assurance that such a resolution will be reached. Net income for the three months ended June 30, 1999 was $20.2 million, or $.30 per diluted share.
Rental income for the six months ended June 30, 1999 was $113.6 million, of which $111.8 resulted from leases with Vencor. General and administrative expenses for the six months totaled $7.1 million and included approximately $3.5 million in unusual professional fees (legal and financial advisory fees) as described above. The Company also incurred $1.3 million in non-recurring employee severance costs in the first quarter. Net income for the six months ended June 30, 1999 was $40.5 million, or $.60 per diluted share.
Funds from operations ("FFO") for the three months and six months ended June 30, 1999 totaled $31.1 million and $62.4 million, or $0.46 and $0.92 per diluted share, respectively. In calculating net income and FFO for the three months and six months ended June 30, 1999, the Company included in its expenses (and thus reduced net income and FFO) the aforementioned unusual legal and financial advisory expenses and non-recurring employee severance costs.
The Company considers FFO an appropriate measure of performance of an equity REIT and the Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO. NAREIT defines FFO as net income (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO should be examined in conjunction with net income as presented in the condensed consolidated financial statements and data included elsewhere in this Press Release.
As a result of a corporate reorganization effective April 30, 1998, for financial reporting purposes Ventas, Inc. is deemed to have commenced operations on May 1, 1998 and does not have a full second quarter or six month comparable financial results. Ventas intends to meet the requirements to qualify as a real estate investment trust (REIT) for federal income tax purposes for the tax year beginning January 1, 1999. Accordingly, no provision for income taxes has been made for the three-month and six-month periods ended June 30, 1999.
LIQUIDITY
The Company, together with Merrill Lynch, is reviewing alternatives to pay down, refinance, restructure and/or extend the remaining $275 million principal balance of the original $400 million Bridge Loan due October 30, 1999, on or prior to its maturity. The Company is in discussions with its lenders regarding an extension of the October 30, 1999 maturity date of the Bridge Loan. However, there can be no assurance that an extension will be offered on terms which are acceptable to the Company. Nor can there be any assurances that the Company will be successful in its efforts to pay down, refinance, restructure and/or extend the remaining $275 million principal balance of the Bridge Loan and to meet its other liquidity requirements. The failure of the Company to pay down, refinance, restructure and/or extend the Bridge Loan on or prior to its maturity date would likely have a material adverse effect on the business, financial condition, results of operations and liquidity of the Company.
DIVIDEND
On July 21, 1999, the Company announced that it would not declare or pay a dividend in the third quarter of 1999. The Company expects that it will once again pay a dividend when the uncertainties about Vencor=s continuing ability to make rent payments to the Company are resolved; however, there can be no assurances that Vencor will resolve its financial difficulties and pay the rent due to the Company. The Company will continue to evaluate the timing and amount of dividends in light of developments in Vencor=s financial performance, including ongoing discussions regarding a global restructuring of Vencor=s obligations, and the Company=s business, financial condition, taxable income, results of operations and liquidity. The Company intends to qualify as a REIT for the year ending December 31, 1999. Although such qualification requires the Company to distribute 95% of its taxable income, such distributions are not required to be made quarterly.
Ventas, Inc. is a real estate company whose properties include 45 hospitals, 219 nursing centers, and eight personal care facilities in 36 states.
This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements regarding the Company's and its subsidiaries= (including subsidiaries that are limited liability companies and limited partnerships) expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, expected lease income, ability to qualify as a real estate investment trust, plans and objectives of management for future operations and statements that include words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and other similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from the Company's expectations.
Actual future results and trends for the Company may differ materially depending on a variety of factors discussed in the Company's filings with the Securities and Exchange Commission. Factors that may affect the plans or results of the Company include, without limitation, (a) the ability of Vencor to restructure its obligations so that it will have the financial strength and liquidity necessary to satisfy their obligations and duties under leases and other agreements with the Company, (b) the Company=s success in implementing its business strategy, (c) the nature and extent of future competition, (d) the extent of future healthcare reform and regulation, including cost containment measures and changes in reimbursement policies and procedures, (e) increases in the cost of borrowing for the Company, (f) the ability of the Company's operators to deliver high quality care and to attract patients, (g) the results of the ongoing investigation of the Company by the U.S. Department of Justice and other litigation affecting the Company; (h) the Company's ability to acquire additional properties, (i) changes in the general economic conditions and/or in the markets in which the Company may, from time to time, compete, (j) the ability of the Company to pay down, refinance, restructure and/or extend its indebtedness as it becomes due, and (k) the ability of the Company and Vencor and other third parties to replace, modify or upgrade computer systems in ways that adequately address the year 2000 issue. Many of such factors are beyond the control of the Company and its management.
VENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
1999 1998
(Unaudited) (Audited)
Assets:
Real estate investments:
Land $ 120,928 $ 120,928
Building and improvements 1,065,037 1,065,037
--------- ---------
1,185,965 1,185,965
Accumulated depreciation (268,397) (246,509)
--------- ---------
Total real estate investments 917,568 939,456
Cash and cash equivalents 70,070 338
Deferred financing costs, net 6,382 8,816
Due from Vencor, Inc. 18,883 6,967
Notes receivable from employees 4,078 4,027
Other 1,196 102
--------- ---------
Total assets $1,018,177 $ 959,706
========= =========
Liabilities and stockholders' equity:
Liabilities:
Bank credit facility and other debt $ 976,009 $ 931,127
Accounts payable and accrued liabilities 5,785 7,082
Deferred income taxes 30,506 30,506
--------- ---------
Total liabilities 1,012,300 968,715
Commitments and contingencies
Stockholders= equity (deficit):
Common stock 18,402 18,402
Capital in excess of par value 140,139 140,103
Unearned compensation on
restricted stock (2,939) (1,962)
Retained earnings (deficit) 4,378 (9,637)
--------- ---------
159,980 146,906
Treasury stock (154,103) (155,915)
--------- ---------
Total stockholders' equity (deficit) 5,877 (9,009)
--------- ---------
Total liabilities and
stockholders' equity $ 1,018,177 $ 959,706
========== =========
Note--The condensed consolidated balance sheet as of
December 31, 1998 has been derived from the Company=s
audited consolidated financial statements for the
year ended December 31, 1998.
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Six
Months Ended Months Ended
June 30, June 30,
1999 1999
Revenues
Rental income $ 57,175 $113,611
Interest and other income 734 931
-------- ---------
Total revenues 57,909 114,542
Expenses
General and administrative 4,562 7,113
Non-recurring employee severance costs - 1,272
Depreciation on real estate investments 10,944 21,888
Interest on bank credit facility
and other debt 18,565 36,630
Net payment on interest rate
swap agreement 2,241 3,834
Amortization of restricted stock grants 215 867
Amortization of deferred financing costs 1,216 2,434
------- ---------
Total expenses 37,743 74,038
------- ---------
Net income $ 20,166 $ 40,504
======= =========
Earnings per common share:
Basic $ .30 $ .60
Diluted $ .30 $ .60
Funds from operations $ 31,110 $ 62,392
Funds from operations per common share:
Basic $ .46 $ .92
Diluted $ .46 $ .92
Shares used in computing earnings per common share:
Basic 67,811 67,762
Diluted 68,008 68,019
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