VENTAS REPORTS THIRD QUARTER 1999 RESULTS
LOUISVILLE, Ky. (November 15, 1999) -- Ventas, Inc. (NYSE:VTR) (the "Company") announced today the results of its operations for the third quarter of 1999.
RESULTS OF OPERATIONS
Funds from operations ("FFO") for the three months ended September 30, 1999 totaled $23.7 million, or $0.35 per diluted share, compared to $23.7 million, or $.35 per diluted share, for the three months ended September 30, 1998. Net income for the three months ended September 30, 1999 was $13.0 million, or $.19 per diluted share, compared to $12.9 million, or $.19 per diluted share, for the three months ended September 30, 1998.
"Enormous progress was made in the quarter toward future financial stability for our Company with the previously announced contemplated restructuring of Vencor," said Debra A. Cafaro, President and Chief Executive Officer. "In addition, on October 29, 1999 we reached a long term debt restructuring with over 95% of our lenders, another critical element of our rebuilding."
Rental income for the three months ended September 30, 1999 was $57.5 million, of which $56.6 million resulted from leases with Vencor, Inc. (OTC:VCRI), its principal tenant ("Vencor"). Interest and other income totaled approximately $1.5 million, and was primarily the result of earnings from investment of cash reserves during the quarter. The Company realized a gain of approximately $254,000 on the sale of a tract of land pursuant to a pre-existing option.
Included in operating expenses for the third quarter was a charge to earnings of $7.5 million representing a reserve for unpaid rent from Vencor. This $7.5 million charge to earnings represents an amount that approximates the difference for August and September 1999 between the rent due to the Company under current terms of the leases with Vencor and the amount which would be due under leases based on the previously announced contemplated restructuring of Vencor. General and administrative expenses totaled $5.2 million and included approximately $3.2 million in unusual professional fees (legal and financial advisory fees) incurred as a result of ongoing discussions with Vencor and in connection with the previously announced contemplated long-term debt restructuring of the Company's credit facility. 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.
Funds from operations for the nine months ended September 30, 1999 totaled $86.1 million, or $1.27 per diluted share, and net income was $53.5 million, or $0.79 per diluted share. 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 nine month comparable financial results.
Rental income for the nine months ended September 30, 1999 was $171.2 million, of which $168.5 million resulted from leases with Vencor. Interest and other income totaled approximately $2.4 million, and was primarily the result of earnings from investment of cash reserves. Included in operating expenses was a charge to earnings of $7.5 million representing the aforementioned reserve for unpaid rent from Vencor. General and administrative expenses totaled $12.3 million and included approximately $6.7 million in unusual professional fees (legal and financial advisory fees). The Company also incurred $1.3 million in non-recurring employee severance costs in the first quarter of 1999.
In calculating net income and FFO for the three months and nine months ended September 30, 1999, the Company included in its expenses (and thus reduced net income and FFO) the aforementioned non-recurring employee severance costs and unusual legal and financial advisory expenses.
FFO for the three months ended September 30, 1999 and 1998 and the nine months ended September 30, 1999 is summarized in the following table:
Three Months Three Months Nine Months
Ended Ended Ended
Sept 30, 1999 Sept 30, 1998 Sept 30, 1999
Net income $ 13,027 $ 12,877 $ 53,531
Add: Depreciation on real
estate investments 10,944 10,729 32,832
Extraordinary loss on
extinguishment of debt - 81 -
Less: Realized gain on
sale of asset (254) - (254)
-------- -------- --------
Funds from operations $ 23,717 $ 23,687 $ 86,109
======== ======== ========
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.
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 nine-month periods ended September 30, 1999.
Ventas, Inc. is a real estate company whose properties include 45 hospitals, 218 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," "should," "estimate," "expect," "intend," "may," "could" 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. The Company does not undertake any duty to update such forward-looking statements.
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, (1) the treatment of the Company's claims in Vencor's Chapter 11 proceedings and the ability of Vencor to successfully reorganize under its Chapter 11 proceedings, (2) the ability of Vencor and the Company's other operators to maintain the financial strength and liquidity necessary to satisfy their obligations and duties under leases and other agreements with the Company and their existing credit agreements, (3) the extent of future healthcare reform and regulation, including cost containment measures and changes in reimbursement policies and procedures, (4) the nature and extent of future competition, (5) the ability of the Company's operators to deliver high quality care and to attract patients, (6) the Company's ability to acquire additional properties, (7) changes in the general economic conditions and/or in the markets in which the Company may, from time to time, compete. (8) increases in the cost of borrowing for the Company, (9) the ability of the Company to implement the restructuring of its indebtedness in the manner set fourth in its Waiver and Extension Agreement of October 29, 1999, and to otherwise pay down, refinance, restructure and/or extend its indebtedness as it becomes due, (10) the results of the ongoing settlement discussions pertaining to the billing disputes and other civil claims against the Company and Vencor by the U.S. Department of Justice and other litigation affecting the Company, (11) the success of the Company in implementing its business strategy, (12) 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, and (13) the ability of the Company to qualify as a REIT. Many of such factors are beyond the control of the Company and its management.
VENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, December 31,
1999 1998
(Unaudited) (Audited)
Assets
Real estate investments:
Land $ 120,897 $ 120,928
Building and improvements 1,064,743 1,065,037
---------- ----------
1,185,640 1,185,965
Accumulated depreciation (279,016) (246,509)
---------- ----------
Total real estate investments 906,624 939,456
Cash and cash equivalents 119,852 338
Deferred financing costs, net 5,164 8,816
Due from Vencor, Inc., net 15,134 6,967
Notes receivable from employees 3,732 4,027
Other 1,491 102
---------- ----------
Total assets $ 1,051,997 $ 959,706
========== ==========
Liabilities and stockholders' equity
Liabilities:
Bank credit facility and other debt $ 975,128 $ 931,127
Deferred gain on partial termination
of interest rate swap agreement 21,605 -
Accounts payable and accrued liabilities 5,638 7,082
Deferred income taxes 30,506 30,506
--------- ----------
Total liabilities 1,032,877 968,715
Commitments and contingencies
Stockholders' equity (deficit):
Common stock 18,402 18,402
Capital in excess of par value 140,143 140,103
Unearned compensation on restricted stock (2,723) (1,962)
Accumulated earnings (deficit) 17,405 (9,637)
-------- ----------
173,227 146,906
Treasury stock (154,107) (155,915)
-------- ----------
Total stockholders' equity (deficit) 19,120 (9,009)
-------- ----------
Total liabilities and
stockholders' equity $ 1,051,997 $ 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 Three Nine
Months Months Months
Ended Ended Ended
September September September
30, 1999 30, 1998 30, 1999
Revenues
Rental income $ 57,544 $ 56,168 $ 171,155
Interest and other income 1,513 31 2,444
Realized gain on sale of asset 254 - 254
-------- -------- ---------
Total revenues 59,311 56,199 173,853
Expenses
General and administrative 5,226 1,761 12,339
Non-recurring employee
severance costs - - 1,272
Provision for reserve on amount
due from Vencor, Inc. 7,500 - 7,500
Depreciation on real estate
investments 10,944 10,729 32,832
Interest on bank credit facility
and other debt 19,668 20,990 56,298
Net payment on interest rate
swap agreement 1,512 486 5,346
Amortization of restricted
stock grants 216 128 1,083
Amortization of deferred
financing costs 1,218 1,204 3,652
-------- ------- --------
Total expenses 46,284 35,298 120,322
-------- ------- --------
Net income 13,027 20,901 53,531
Provision for income taxes - 7,943 -
-------- ------- --------
Income from operations before
extraordinary item 13,027 12,958 53,531
Extraordinary loss on
extinguishment of debt,
net of income tax benefit - (81) -
-------- ------- --------
Net Income $ 13, 027 $ 12,877 $ 53,531
======== ======= ========
Earnings per common share:
Basic:
Income from operations $ .19 $ .19 $ .79
Extraordinary loss on
extinguishment of debt - (.00) -
-------- ------- -------
Net income $ .19 $ .19 $ .79
======== ======= =======
Diluted:
Income from operations $ .19 $ .19 $ .79
Extraordinary loss on
extinguishment of debt - (.00) -
------- ------- -------
Net income $ .19 $ .19 $ .79
======= ======= =======
Funds from operations $ 23,717 $ 23,687 $ 86,109
Funds from operations per common share:
Basic $ .35 $ .35 $ 1.27
Diluted $ .35 $ .35 $ 1.27
Shares used in computing earnings and
funds from operations per
common share:
Basic 67,773 67,688 67,743
Diluted 68,002 68,853 68,053
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