VENTAS REPORTS THIRD QUARTER 2000 RESULTS
Reviews third quarter events and other recent developments
Louisville, Ky. (November 7, 2000) -- Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") announced today the results of its operations for the third quarter of 2000.
THIRD QUARTER RESULTS
Funds from operations ("FFO") for the three months ended September 30, 2000 totaled $19.1 million, or $0.28 per diluted share. FFO for the comparable period in 1999 totaled $23.7 million, or $0.35 per diluted share. Net income for the three months ended September 30, 2000 was $8.6 million, or $0.13 per diluted share. Net income for the three months ended September 30, 1999 was $13.0 million, or $0.19 per diluted share.
Unrestricted cash as of September 30, 2000 was $96.1 million, a decrease of $19.5 million over unrestricted cash of $115.6 million as of June 30, 2000. The Company paid a cash dividend on its common stock of $42.4 million on September 28, 2000 to stockholders of record on September 18, 2000.
Rental income for the three months ended September 30, 2000 was $58.6 million, of which $57.8 million resulted from leases with Vencor, Inc. (OTC/BB:VCRIQ), the Company's principal tenant ("Vencor"). Vencor filed for bankruptcy court protection in mid-September 1999. Interest income totaled approximately $2.3 million and was primarily the result of earnings from investment of cash reserves during the quarter.
Expenses for the quarter totaled $52.3 million, and included $10.5 million of depreciation on real estate assets and $23.7 million of interest expense. Expenses also included a charge to earnings of $12.5 million representing unpaid rents from tenants during the third quarter of 2000.
General and administrative expenses for the three months ended September 30, 2000 totaled $2.6 million. Professional fees totaled $2.7 million and included approximately $2.4 million in unusual professional fees (legal and financial advisory fees) incurred as a result of ongoing discussions 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 these matters is reached, although there can be no assurance that such a resolution will be reached.
THIRD QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS
"Significant events occurred during and after the third quarter, including Vencor's filing of a preliminary plan of reorganization," Ventas President and CEO Debra A. Cafaro said. "We are working with Vencor on the terms of an acceptable and final plan of reorganization, and we continue to believe that a consensual reorganization of Vencor is in the best interests of all constituents."
Highlights included:
- Ventas declared and paid a cash dividend to shareholders of $0.62 per share for 1999. When combined with its first quarter dividend of $0.39 per share, the dividends equaled 95 percent of the Company's reported taxable income for 1999.
- Ventas elected REIT status for the period beginning January 1, 1999.
- On September 29, 2000, Vencor filed a preliminary plan of reorganization to emerge from bankruptcy; Ventas objected to the plan, but negotiations continue to reach a settlement that is acceptable to all parties.
- Vencor also filed the first amendment to its plan, which includes terms of a proposed settlement regarding Medicare billing disputes between Vencor and Ventas and the Department of Justice, acting on behalf of the Health Care Financing Administration and the Department of Health and Human Services' Office of the Inspector General.
- Vencor has stated that it intends to set December 6, 2000 as the disclosure statement hearing date for a Vencor reorganization plan. If the Delaware Bankruptcy Court approves the disclosure statement at that time, it could be mailed to creditors in December 2000, and they could vote on the plan of reorganization in January 2001. There can be no assurance that these dates will not change or that the terms of any Vencor reorganization plan will be acceptable to Ventas or will be approved by all necessary creditor classes.
- On November 1, the Company sold a 99-bed nursing facility for $4.0 million; the facility had been leased to an affiliate of Sun Healthcare Group, Inc.
- Mary L. Smith joined Ventas as Controller and Chief Accounting Officer.
- Ventas said that its founding board member, R. Gene Smith, has resigned from its board of directors so he can commit his full time and attention to his many other business ventures.
"Gene has been a generous board member, giving of his time, experience and intellect," Cafaro said. "We are grateful for all that he has done for us, and we will miss his contributions." A search for a new board member is underway.
NINE MONTHS RESULTS
FFO for the nine months ended September 30, 2000 totaled $54.7 million, or $0.80 per diluted share. FFO for the comparable period in 1999 totaled $86.1 million, or $1.27 per diluted share. Net income for the nine months ended September 30, 2000 was $18.8 million, or $0.28 per diluted share after the extraordinary loss (described below) of $4.2 million, or $0.06 per diluted share. Net income for the nine months ended September 30, 1999 was $53.5 million, or $0.79 per diluted share.
During the nine months ended September 30, 2000, the Company incurred an extraordinary loss of $4.2 million relating to the write-off of unamortized deferred financing fees associated with the Company's 1998 bank credit agreement. The 1998 bank credit agreement was replaced in full with a new $1 billion long-term amended credit agreement (the "Amended Credit Agreement") between the Company and all its lenders, which was consummated on January 31, 2000.
Rental income for the nine months ended September 30, 2000 was $174.3 million, of which $171.8 million resulted from leases with Vencor. Interest income totaled approximately $5.7 million and was primarily the result of earnings from investment of cash reserves during the nine months ended September 30, 2000.
Expenses for the nine months ended September 30, 2000 totaled $156.9 million, and included $31.7 million of depreciation on real estate assets and $71.3 million of interest expense. Expenses also included a charge to earnings of $35.8 million representing unpaid rents from Vencor during the nine months ended September 30, 2000.
General and administrative expenses for the nine months ended September 30, 2000 totaled $7.4 million. Professional fees totaled $9.3 million and included approximately $7.8 million in unusual professional fees (legal and financial advisory fees) incurred as a result of ongoing discussions with Vencor and the evaluation of the Company's business strategy alternatives.
VENTAS CREDIT AGREEMENT
Under the Company's Amended Credit Agreement, it is an event of default, subject to defenses that may be available to the Company, if a plan of reorganization for Vencor were not to become effective by December 31, 2000. The Company has initiated discussions with the administrative agent for its lenders under the Amended Credit Agreement to obtain a waiver or amendment of this covenant, which requires the affirmative vote of more than 50 percent in principal amount of the debt. There can be no assurance that Ventas will obtain such a waiver or amendment.
Ventas, Inc. is a real estate investment trust whose properties include 45 hospitals, 217 nursing facilities, 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, continued qualification 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. 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, (a) the treatment of the Company's claims in the chapter 11 cases of its primary tenant, Vencor, and certain of its affiliates, 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 by the Company of Vencor (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 the Company 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 to amend certain provisions of its Amended Credit Agreement that could require the Company to repay all of its indebtedness under the Amended Credit Agreement if Vencor does not emerge from bankruptcy by December 31, 2000, and (m) the ability and willingness of the Company to maintain its qualification as a real estate investment trust due to economic, market, legal, tax or other considerations. Many of such factors are beyond the control of the Company and its management .
VENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
(Unaudited) (Audited)
(In Thousands)
Assets
Real estate investments:
Land $ 120,891 $ 120,891
Building and improvements 1,061,656 1,061,656
----------- -----------
1,182,547 1,182,547
Accumulated depreciation (319,438) (287,756)
----------- -----------
Total real estate investments 863,109 894,791
Cash and cash equivalents 96,138 139,594
Restricted cash - disputed federal,
state and local tax refunds
and accumulated interest 28,223 -
Deferred financing costs, net 11,486 5,702
Notes receivable from employees 3,386 3,611
Recoverable federal income taxes
restricted in 2000 2,350 26,610
Other 1,259 891
---------- ----------
Total assets $ 1,005,951 $ 1,071,199
========== ==========
Liabilities and stockholders' equity
Liabilities:
Notes payable and other debt $ 923,368 $ 974,247
Deferred gain on partial
termination of interest rate
swap Agreement 21,605 21,605
Accounts payable and other
accrued liabilities 13,583 9,886
Other liabilities - disputed federal,
state and local tax refunds
and accumulated interest 30,573 26,610
Deferred income taxes 30,506 30,506
---------- -----------
Total liabilities 1,019,635 1,062,854
---------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, unissued - -
Common stock 18,402 18,402
Capital in excess of par value 132,226 139,723
Unearned compensation on
restricted stock (1,680) (2,080)
Retained earnings (deficit) (17,199) 6,409
---------- -----------
131,749 162,454
Treasury stock (145,433) (154,109)
---------- -----------
Total stockholders' equity (deficit) (13,684) 8,345
---------- -----------
Total liabilities and
stockholders' equity $ 1,005,951 $ 1,071,199
========== ===========
Note - The Condensed Consolidated Balance Sheet at
December 31, 1999 has been derived from the Company's
audited consolidated financial statements for the
year ended December 31, 1999.
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
Revenues:
Rental income $ 58,567 $ 57,544 $ 174,288 $ 171,155
Interest and
other income 2,312 1,767 5,665 2,698
-------- -------- -------- --------
60,879 59,311 179,953 173,853
Expenses:
General and
administrative 2,602 1,416 7,387 4,783
Professional Fees 2,735 3,810 9,328 7,556
Non-recurring employee
severance costs - - 355 1,272
Loss on uncollectible
amounts due
from tenant 12,469 7,500 35,837 7,500
Amortization of
restricted stock
grants 309 216 1,044 1,083
Depreciation on real
estate investments 10,522 10,944 31,682 32,832
Interest 23,661 22,398 71,287 65,296
-------- -------- -------- --------
52,298 46,284 156,920 120,322
======== ======== ======== ========
Income before
extraordinary loss 8,581 13,027 23,033 53,531
Extraordinary loss
on extinguishment of debt - - (4,207) -
Net income $ 8,581 $ 13,027 $ 18,826 $ 53,531
======== ======== ======== ========
Earnings per common share:
Basic:
Income before
extraordinary loss $ 0.13 $ 0.19 $ 0.34 $ 0.79
Extraordinary loss
on extinguishment of debt - - (0.06) -
-------- ------- ------- ------
Net income $ 0.13 $ 0.19 $ 0.28 $ 0.79
======== ======= ======= ======
Diluted:
Income before
extraordinary loss $ 0.13 $ 0.19 $ 0.34 $ 0.79
Extraordinary loss
on extinguishment of debt - - (0.06) -
-------- ------- ------ ------
Net income $ 0.13 $ 0.19 $ 0.28 $ 0.79
======== ======= ====== ======
Shares used in computing earnings per common share:
Basic 68,038 67,773 67,986 67,743
Diluted 68,224 68,002 68,077 68,053
Dividends declared and paid per common share
$ 0.62 $ - $ 0.62 $ 0.39
======== ======= ======= =======
FFO for the three months ended and the nine months ended
September 30, 2000 and September 30, 1999 is
summarized in the following table (in thousands):
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
Net income $ 8,581 $ 13,027 $ 18,826 $ 53,531
Extraordinary loss
on extinguishment of debt - - 4,207 -
-------- -------- -------- --------
Income before extraordinary
loss 8,581 13,027 23,033 53,531
Add: depreciation on
real estate investments 10,522 10,944 31,682 32,832
Less: realized gain on
sale of asset - (254) - (254)
-------- -------- -------- --------
Funds from operations $ 19,103 $ 23,717 $ 54,715 $ 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 accounting principles generally accepted in the United States ("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 condensed consolidated financial statements and data included elsewhere in this Press Release.
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