LOUISVILLE, Ky. (Nov. 13, 2001) - Ventas, Inc. (NYSE: VTR - ``Ventas'' or the ``Company'') announced today that third quarter 2001 Funds From Operations (``FFO'') totaled $19.3 million, or $0.28 per diluted share. FFO for the comparable period in 2000 totaled $19.1 million, or $0.28 per diluted share. Net income for the three months ended September 30, 2001 was $9.2 million, or $0.13 per diluted share. Net income for the three months ended September 30, 2000 was $8.6 million, or $0.13 per diluted share.
FFO for the nine months ended September 30, 2001 totaled $59.0 million, or $0.85 per diluted share. FFO for the comparable period in 2000 totaled $54.7 million, or $0.80 per diluted share. Net income for the nine months ended September 30, 2001 was $27.8 million, or $0.40 per diluted share. Net income for the nine months ended September 30, 2000 was $18.8 million, or $0.28 per diluted share (after an extraordinary loss of $4.2 million, or $0.06 per diluted share).
``Our focus during the third quarter has been on exploring options for reducing our borrowing costs. Despite uncertainty in the markets, we remain optimistic about achieving our goals and enhancing shareholder value,'' Ventas President and CEO, Debra A. Cafaro, said.
THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
Recent highlights include:
- Ventas engaged investment banking firms to assist with a proposed offering of floating-rate, investment grade mortgaged-backed bonds as part of the Company's goal to lower its borrowing costs and increase FFO.
- Ventas is offering for sale 83,300 shares of common stock of its primary tenant Kindred Healthcare, Inc. (NASDAQ:KIND - news; ``Kindred''). At closing, Ventas expects to receive approximately $3.6 million of net proceeds from the sale. The proceeds will be used to pay down Ventas' outstanding debt. Ventas owns 1,498,500 shares of Kindred stock received on April 20, 2001 when Kindred's reorganization plan became effective and Kindred emerged from bankruptcy.
- Kindred's shelf registration became effective on November 7, 2001, which registers the balance of the Company's Kindred shares for sale or other disposition on or after February 6, 2002.
- Ventas elected Health Net Inc. President and CEO, Jay Gellert, and Harrahs' Entertainment, Inc. President and COO, Gary Loveman, to its Board of Directors.
- NAREIT elected Debra A. Cafaro to its Board of Governors.
THIRD QUARTER RESULTS
Rental income for the three months ended September 30, 2001 was $46.4 million, of which $45.9 million resulted from leases with Kindred. The rental income from Kindred includes $0.6 million related to the amortization of the deferred revenue recorded as a result of the receipt of (a) Kindred equity and (b) a $4.5 million cash payment received from Kindred on the Kindred Effective Date as additional future rent under the Amended Master Leases. Interest income totaled approximately $0.9 million and was primarily the result of earnings from investment of cash reserves during the quarter. Interest income is expected to decline during the remainder of 2001 due to lower cash balances and declining interest rates.
Expenses for the quarter totaled $38.0 million, and included $10.5 million of depreciation and $22.1 million of interest expense on the Company's Amended Credit Agreement. General and administrative expenses for the three months ended September 30, 2001 totaled $2.6 million. Professional fees for the quarter totaled $0.7 million.
The third quarter results include interest charges for financial reporting purposes of $1.6 million related to the DOJ settlement, which payment began in the second quarter. Cash interest for the period was $1.0 million.
Third quarter results include a $0.5 million provision for income taxes based on the Company's estimates of 2001 taxable net income for the third quarter.
NINE-MONTH RESULTS
Rental income for the nine months ended September 30, 2001 was $138.8 million, of which $137.0 million resulted from leases with Kindred. The rental income from Kindred includes $1.0 million related to the amortization of the deferred revenue recorded as a result of the receipt of (a) Kindred equity and (b) a $4.5 million cash payment received from Kindred on the Kindred Effective Date as additional future rent under the Amended Master Leases. Interest income totaled approximately $3.5 million and was primarily the result of earnings from investment of cash reserves during the nine months ended September 30, 2001.
Expenses for the nine months ended September 30, 2001 totaled $112.4 million, and included $31.5 million of depreciation on real estate assets and $65.2 million of interest expense. General and administrative expenses for the nine months ended September 30, 2001 totaled $7.7 million. Professional fees totaled $3.6 million.
Results for the nine months ended September 30, 2001 include interest charges for financial reporting purposes of $3.1 million related to the DOJ settlement, which was completed in the second quarter as part of the Kindred Plan of Reorganization. Cash interest was $1.8 million.
Results for the nine months ended September 30, 2001 include a $2.3 million provision for income taxes based on the Company's estimates of 2001 taxable net income. The tax provision included $0.7 million related to the receipt of the Kindred equity, valued at $18.2 million, of which 100% was taxable income to the Company in the second quarter.
2001 FFO AND DIVIDEND GUIDANCE
The Company continues to expect that it will report 2001 FFO of $1.08 to $1.12 per share. The Company has distributed 2001 quarterly dividends assuming that the total 2001 dividend will equal $0.88 a share. Should taxable net income be higher or lower than the Company's projections, it will likely make a one-time adjustment to the portion of its 2001 dividend expected to be announced in December 2001. The Company added that the dividend for the fourth quarter of 2001 may be satisfied by a distribution of a combination of cash or other property or securities, including the Company's stock in its primary tenant Kindred. Ventas owns 1,498,500 shares of Kindred stock it received on April 20, 2001 when Kindred successfully emerged from bankruptcy.
ASSUMPTIONS
The Company's estimation of its 2001 taxable income and the related quarterly dividends is based on a number of assumptions, including, but not limited to, the following: Kindred performs its obligations under the Amended Master Leases and the ``Spin Agreements;'' no capital transactions occur; the Company's tax positions do not change; the Company does not incur any impact from new accounting rule FASB 133 relating to derivatives; interest rates remain constant; the Company pays 90% of its taxable net income as a dividend for 2001 and provides for the payment of federal income tax on the remaining 10% of its taxable net income; and the Company's issued and outstanding shares are unchanged.
CONFERENCE CALL NOTICE
Ventas will provide an online, real-time Webcast of a conference call to discuss this press release. The live broadcast will be available online today, November 13, at 10:00 a.m. EDT hosted by President and CEO, Debra A. Cafaro, and Vice President, John C. Thompson, through the Ventas website at www.ventasreit.com. An online replay of the Webcast will be available at approximately 12:00 p.m. EDT and will be archived for 30 days.
Ventas, Inc. is a real estate investment trust whose properties
include 44 hospitals, 216 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 Ventas
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 (``REIT''), plans and objectives of management for
future operations and statements that include words such as ``if,''
``anticipate,'' ``believe,'' ``plan,'' ``estimate,'' ``expect,'' ``intend,''
``may,'' ``could,'' ``should,'' ``will'' 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 a 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 (the
``Commission''). Factors that may affect the plans or results of the
Company include, without limitation, (a) the ability and willingness
of Kindred and certain of its affiliates to continue to meet and/or
honor its obligations under its contractual arrangements with the
Company and the Company's wholly owned operating partnership, Ventas
Realty, Limited Partnership (``Ventas Realty''), including without
limitation the various agreements (the ``Spin Agreements'') entered into
by the Company and Kindred at the time of the corporate reorganization
on May 1, 1998 (the ``1998 Spin Off'') pursuant to which the Company was
separated into two publicly held corporations, (b) the ability and
willingness of Kindred to continue to meet and/or honor its 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 Kindred in the 1998 Spin Off, (c) the
ability of Kindred 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) changes in general economic
conditions and/or economic conditions in the markets in which the
Company may, from time to time, compete, (k) the ability of the
Company to pay down, refinance, restructure, and/or extend its
indebtedness as it becomes due, (l) the movement of interest rates and
the resulting impact on the value of the Company's interest rate swap
agreement and the ability of the Company to satisfy its obligation to
post cash collateral if required to do so under such interest rate
swap agreement, (m) the ability and willingness of Atria, Inc.
(``Atria'') to continue to meet and honor its contractual arrangements
with the Company and Ventas Realty entered into connection with the
Company's spin off of its assisted living operations and related
assets and liabilities to Atria in August 1996, (n) the ability and
willingness of the Company to maintain its qualification as a REIT due
to economic, market, legal, tax or other considerations, (o) the
outcome of the audit being conducted by the Internal Revenue Service
for the Company's tax years ended December 31, 1997 and 1998, (p)
final determination of the Company's net taxable income for the tax
years ended December 31, 2000 and December 31, 2001, (q) the ability
and willingness of the Company's tenants to renew their leases with
the Company upon expiration of the leases and the Company's ability to
relet its properties on the same or better terms in the event such
leases expire and are not renewed by the existing tenants, and (r) the
limitations on the ability of the Company to sell, transfer or
otherwise dispose of its common stock in Kindred arising out of the
securities laws and the Registration Rights Agreement the Company
entered into with Kindred and certain of the holders of the Kindred
common stock. 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,
2001 2000
(Unaudited) (Audited)
------------- ------------
Assets Real estate investments:
Land $ 119,771 $ 120,151
Building and improvements 1,055,992 1,055,992
------------- ------------
1,175,763 1,176,143
Accumulated depreciation (359,023) (327,598)
------------- ------------
Total real estate investments 816,740 848,545
Cash and cash equivalents 23,827 87,401
Restricted cash--held in tax escrow 15,906 26,893
Restricted cash--held as swap
collateral 2,833 --
Recoverable federal income taxes -- 3,211
Deferred financing costs, net 9,039 10,875
Investment in Kindred Healthcare, Inc.
common stock 88,412 --
Notes receivable from employees 3,589 3,422
Other 2,436 798
------------- ------------
Total assets $ 962,782 $ 981,145
============= ============
Liabilities and stockholders' equity Liabilities:
Notes payable and other debt $ 850,016 $ 886,385
United States Settlement 57,262 96,493
Deferred gain on partial termination
of interest rate swap agreement -- 21,605
Deferred revenue 21,655 --
Interest rate hedge 40,942 --
Accrued dividend 15,148 19,846
Accounts payable and other accrued
liabilities 13,700 13,720
Other liabilities--disputed federal,
state and local tax refunds
and accumulated interest 15,183 30,104
Deferred income taxes 30,506 30,506
------------- ------------
Total liabilities 1,044,412 1,098,659
------------- ------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, unissued -- --
Common stock 18,402 18,402
Capital in excess of par value 123,323 132,228
Unearned compensation on restricted
stock (1,446) (1,338)
Accumulated other comprehensive
income 50,875 --
Retained earnings (deficit) (138,899) (121,323)
------------- ------------
52,255 27,969
Treasury stock (133,885) (145,483)
------------ ------------
Total stockholders' equity (deficit) (81,630) (117,514)
------------- ------------
Total liabilities and stock-
holders' equity $ 962,782 $ 981,145
============= ============
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
------------------- -------------------
Revenues:
Rental income $ 46,357 $ 58,567 $ 138,769 $ 174,288
Interest and
other income 939 2,312 3,507 5,665
-------- --------- --------- ---------
47,296 60,879 142,276 179,953
Expenses:
General and
administrative 2,598 2,583 7,740 7,330
Professional fees 699 2,735 3,595 9,328
Non-recurring employee
severance costs -- -- -- 355
Loss on uncollectible
amounts due from
tenant -- 12,469 -- 35,837
Amortization of
restricted stock
grants 444 309 1,286 1,044
Depreciation 10,510 10,541 31,515 31,739
Interest 22,103 23,661 65,181 71,287
Interest on United
States Settlement 1,605 -- 3,053 --
-------- --------- --------- ---------
37,959 52,298 112,370 156,920
-------- --------- --------- ---------
Income before gain
on real estate,
income taxes and
extraordinary loss 9,337 8,581 29,906 23,033
Net gain on real estate
disposal 290 -- 290 --
-------- --------- --------- ---------
Income before income
taxes and
extraordinary loss 9,627 8,581 30,196 23,033
Provision for income
taxes 470 -- 2,355 --
-------- --------- --------- ---------
Income before
extraordinary loss 9,157 8,581 27,841 23,033
Extraordinary loss on
extinguishment
of debt -- -- -- (4,207)
-------- --------- --------- ---------
Net income $ 9,157 $ 8,581 $ 27,841 $ 18,826
======== ========= ========= =========
Earnings per common share:
Basic:
Income before
extraordinary loss $ 0.13 $ 0.13 $ 0.41 $ 0.34
Extraordinary loss
on extinguishment
of debt -- -- -- (.06)
-------- --------- --------- ---------
Net income $ 0.13 $ 0.13 $ 0.41 $ 0.28
======== ========= ========= =========
Diluted:
Income before
extraordinary loss $ 0.13 $ 0.13 $ 0.40 $ 0.34
Extraordinary loss
on extinguishment
of debt -- -- -- (.06)
-------- --------- --------- ---------
Net income $ 0.13 $ 0.13 $ 0.40 $ 0.28
======== ========= ========= =========
Shares used in computing earnings per common share:
Basic 68,491 68,037 68,375 67,986
Diluted 69,584 68,224 69,255 68,077
Dividend declared per
common share $ 0.22 $ 0.62 $ 0.66 $ 0.62
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30, September 30,
2001 2000
------------- -------------
Cash flows from operating activities:
Net income $ 27,841 $ 18,826
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation 31,515 31,739
Amortization of deferred
financing costs 1,836 2,625
Amortization of
restricted stock
grants 1,286 1,044
Normalized rents 7 (113)
Extraordinary loss on
extinguishment of debt -- 4,207
Gain on sale of real
estate (290) --
Other 13 --
Amortization of
deferred revenue (1,045) --
Changes in operating assets
and liabilities:
Decrease (increase) in
restricted cash 8,154 (28,223)
Decrease (increase) in
accounts receivable
and other assets (1,513) 23,957
Increase in accounts
payable and accrued
and other
liabilities (6,480) 8,173
------------- -------------
Net cash provided by
operating
activities 61,324 62,235
Cash flows from investing
activities:
Proceeds from sale of real
estate 670 --
Purchase of furniture and
equipment (220) --
Increase in notes receivable
from employees (167) 225
------------- -------------
Net cash used in
investing
activities 283 225
Cash flows from financing activities:
Repayment of long-term debt (36,369) (50,879)
Payment on United States
Settlement (39,231) --
Payment of deferred
financing costs -- (12,616)
Issuance of stock 537 14
Cash dividend to
stockholders (50,118) (42,435)
------------- -------------
Net cash used in
financing
activities (125,181) (105,916)
------------- -------------
Decrease in cash and cash
equivalents (63,574) (43,456)
Cash and cash equivalents --
beginning of period 87,401 139,594
------------- -------------
Cash and cash equivalents --
end of period $ 23,827 $ 96,138
============= =============
Supplemental Schedule of noncash
activities:
Receipt of Kindred
Healthcare, Inc. common
stock $ 18,200 $ --
============= =============
FFO for the three months and nine months ended September 30,
2001 and 2000 is summarized in the following table.
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2001 2000 2001 2000
-------- -------- -------- --------
Net income $ 9,157 $ 8,581 $ 27,841 $ 18,826
Extraordinary loss on
extinguishment of debt -- -- -- 4,207
Income before
extraordinary loss 9,157 8,581 27,841 23,033
Add: depreciation on real
estate investments 10,476 10,522 31,427 31,682
Realized gain on sale of
assets (290) -- (290) --
-------- -------- -------- --------
Funds from operations $ 19,343 $ 19,103 $ 58,978 $ 54,715
======== ======== ======== ========
FFO per diluted share $ 0.28 $ 0.28 $ 0.85 $ 0.80
======== ======== ======== ========
Shares used 69,584 69,224 69,255 68,077
======== ======== ======== ========
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 principals
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 adjustment 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.
- END -
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