VENTAS REPORTS 1999 RESULTS
Louisville, Ky. (March 30, 2000) -- Ventas, Inc. (NYSE:VTR) (the "Company") announced today the results of its operations for the year ended December 31, 1999.
RESULTS OF OPERATIONS
Funds from operations ("FFO") for the year ended December 31, 1999 totaled $85.0 million, or $1.25 per diluted share after recording $34.4 million in charges related principally to unpaid rent from Vencor, Inc. (OTC/BB: VCRIQ) ("Vencor"), the Company's principal tenant. Funds from operations for the period from May 1, 1998 to December 31, 1998 totaled $84.7 million, or $1.25 per diluted share. The calculation of FFO for 1998 assumes that the Company qualified to be taxed as a real estate investment trust ("REIT") on May 1, 1998 and the provision for taxes is therefore excluded.
Net income for the year ended December 31, 1999 was $42.5 million, or $.63 per diluted share after recording $34.4 million in charges related principally to unpaid rent from Vencor. Net income for the period from May 1, 1998 to December 31, 1998 was $26.8 million, or $.39 per diluted share. As a result of a corporate reorganization effective April 30, 1998 (the "1998 Spin Off"), for financial reporting purposes, Ventas, Inc. is deemed to have commenced operations on May 1, 1998; therefore, the financial results for the year ended December 31, 1999 are not comparable to the period from May 1, 1998 to December 31, 1998.
Rental income for the year ended December 31, 1999 was $228.6 million, of which $225.1 million resulted from leases with Vencor. Interest and other income totaled approximately $4.6 million and was primarily the result of earnings from investment of cash and cash equivalents during the year.
Expenses for the year ended December 31, 1999 totaled $190.7 million and included $42.7 million of depreciation expense on real estate assets and $88.8 million of interest on and costs relating to the Company's credit facility and other debt. Included in interest expense is amortized deferred financing fees of approximately $6.0 million, which included $1.6 million of amortization for fees incurred in the fourth quarter of 1999 related to the extension of the maturity of the $275 million Bridge Loan facility from October 30, 1999 to February 28, 2000. Expenses also included a charge to earnings of $34.4 million representing a write-off of unpaid rents receivable from tenants. Additionally, an impairment loss of $1.9 million was recorded to write down a single facility, operated by a tenant other than Vencor, to its estimated fair value.
General and administrative expenses totaled $7.8 million. Professional fees totaled approximately $12.5 million and included approximately $10.7 million in unusual professional fees (legal and financial advisory fees) incurred as a result of ongoing negotiations with Vencor and the evaluation of the Company's business strategy alternatives. Substantial legal and financial advisory expenses will continue to be incurred by the Company until a resolution of the Vencor matter is reached, although there can be no assurance that such a resolution will be reached. The Company also incurred $1.3 million in employee severance costs in the first quarter of 1999.
Ventas intends to qualify as a REIT for federal income tax purposes for the year ended December 31, 1999. Accordingly, no provision for federal corporate income taxes has been made for the year ended December 31, 1999. Although the Company currently expects to qualify as REIT, it is possible that economic, market, legal, tax or other considerations may cause the Company to fail or elect not to qualify as a REIT.
FFO for the year ended December 31, 1999 and the period from May 1, 1998 to December 31, 1998 is summarized in the following table. In calculating FFO for the period from May 1, 1998 to December 31, 1998, the Company has added back to net income the $21.2 million of income tax expense to be consistent with the 1999 presentation when no income taxes are assumed to be due because of the Company's intention to qualify as a REIT.
Year Ended For the period
December 31, 1999 May 1, 1998 to
December 31, 1998
(In thousands, except per share amounts)
Net income $ 42,535 $ 26,758
Extraordinary loss on
extinguishment of debt - 8,051
-------- --------
Income before extraordinary loss 42,535 34,809
Provision for income taxes - 21,151
Depreciation on real estate assets 42,742 28,700
Realized gain on sale of asset (254) -
-------- --------
Funds from operations $ 85,023 $ 84,660
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FFO per diluted share $ 1.25 $ 1.25
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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 on real estate assets 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 as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is FFO 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 consolidated financial statements and data included elsewhere in this Press Release.
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' 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," "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.
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 treatment of the Company's claims in the chapter 11 cases of its primary tenant, Vencor and certain of its affiliates (collectively referred to in this paragraph as "Vencor"), as well as certain of its other tenants, (b) the ability and willingness of Vencor to continue to meet and/or honor its obligations under the agreements the Company and Vencor entered into in connection with the 1998 Spin Off, including, without limitation, the obligation to indemnify and defend the Company for all litigation and other claims relating to the health care operations and other assets and liabilities transferred to Vencor in the 1998 Spin Off, (c) the ability of Vencor and the Company's other operators to maintain the financial strength and liquidity necessary to satisfy their respective obligations and duties under the leases and other agreements with the Company, and their existing credit agreements, (d) the Company's success in implementing its business strategy, (e) the nature and extent of future competition, (f) the extent of future health care reform and regulation, including cost containment measures and changes in reimbursement policies and procedures, (g) increases in the cost of borrowing for the Company, (h) the ability of the Company's operators to deliver high quality care and to attract patients, (i) the results of litigation affecting the Company, (j) the results of the settlement discussions Vencor and Ventas have been engaged in with the federal government seeking to resolve federal civil and administrative claims against them arising from the participation of Vencor facilities in various federal health benefit programs, (k) changes in general economic conditions and/or economic conditions in the markets in which the Company may, from time to time, compete, (l) the ability of the Company to pay down, refinance, restructure, and/or extend its indebtedness as it becomes due, and (m) the ability of the Company to qualify as a real estate investment trust. Many of such factors are beyond the control of the Company and its management.
VENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Year Ended December 31, 1999 and the Period From
May 1, 1998 to December 31, 1998
(In Thousands, except per share amounts)
1999 1998
Assets
Real estate investments:
Land $ 120,891 $ 120,928
Building and improvements 1,061,656 1,065,041
----------- -----------
1,182,547 1,185,969
Accumulated depreciation (287,756) (246,509)
----------- -----------
Total real estate investments 894,791 939,460
Cash and cash equivalents 139,594 338
Deferred financing costs, net 5,702 8,816
Due from Vencor, Inc., net - 6,967
Notes receivable from employees 3,611 4,027
Recoverable federal income taxes 26,610 -
Other 891 98
----------- -----------
Total assets $ 1,071,199 $ 959,706
=========== ===========
Liabilities and stockholders' equity (deficit)
Liabilities:
Notes payable and other debt $ 974,247 $ 931,127
Deferred gain on partial
termination of interest
rate swap agreement 21,605 -
Accounts payable and accrued
liabilities 9,886 7,082
Other liabilities 26,610 -
Deferred income taxes 30,506 30,506
----------- ----------
Total liabilities 1,062,854 968,715
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 10,000 shares
authorized, unissued - -
Common stock, $0.25 par value;
authorized 180,000 shares;
issued 73,608 shares in 99 & 98 18,402 18,402
Capital in excess of par value 139,723 140,103
Unearned compensation on
restricted stock (2,080) (1,962)
Retained earnings (deficit) 6,409 (9,637)
----------- ----------
162,454 146,906
Treasury stock - 5,619 shares in
1999 and 5,759 in 1998 (154,109) (155,915)
----------- ----------
Total stockholders' equity (deficit) 8,345 (9,009)
----------- ----------
Total liabilities and
stockholders' equity $ 1,071,199 $ 959,706
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VENTAS, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 1999 and the Period From
May 1, 1998 to December 31, 1998
(In thousands, except per share amounts)
For the period
1999 May 1, 1998 to
December 31, 1998
Revenues:
Rental income $228,600 $149,933
Interest and other income 4,645 201
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Total revenues 233,245 150,134
Expenses:
General and administrative 7,767 4,190
Professional fees 12,527 1,507
Non-recurring employee
severance costs 1,272 -
Loss on uncollectible amounts
due from tenants 34,418 -
Loss on impairment of assets 1,927 -
Amortization of restricted
stock grants 1,304 349
Depreciation on real estate
investments 42,742 28,700
Interest 88,753 59,428
-------- --------
Total expenses 190,710 94,174
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Income before provision for
income taxes and
extraordinary loss 42,535 55,960
Provision for income taxes - 21,151
-------- --------
Income before extraordinary loss 42,535 34,809
Extraordinary loss on extinguishment
of debt, net of income
tax benefit of $4,935 - (8,051)
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Net income $ 42,535 $ 26,758
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Earnings per common share:
Basic:
Income before extraordinary loss $ 0.63 $ 0.51
Extraordinary loss on
extinguishment of debt - (0.12)
-------- --------
Net income $ 0.63 $ 0.39
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Diluted:
Income before extraordinary loss $ 0.63 $ 0.51
Extraordinary loss on
extinguishment of debt - (0.12)
-------- --------
Net income $ 0.63 $ 0.39
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Weighted average number of
shares outstanding, basic 67,754 67,681
Weighted average number of
shares outstanding, diluted 67,989 67,865
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