FFO Per Share Increases 22% Over Second Quarter 2001
Issues 2003 Guidance
LOUISVILLE, Ky. (July 23, 2002) - Ventas, Inc. (NYSE:VTR - "Ventas" or the "Company") announced today that normalized Funds From Operations ("FFO") for the second quarter of 2002 totaled $23.0 million or $0.33 per diluted share. FFO for the comparable period in 2001 totaled $18.6 million or $0.27 per diluted share. First quarter 2002 FFO was $22.1 million or $0.32 per diluted share.
Net income for the second quarter ended June 30, 2002 was $26.5 million or $0.38 per diluted share after an extraordinary loss of $6.9 million, or $0.10 per diluted share, related to the extinguishment of debt. Net income for the three months ended June 30, 2001 was $8.1 million or $0.12 per diluted share. First quarter 2002 net income was $12.7 million or $0.18 per diluted share.
Normalized FFO for the first six months of 2002 was $45.0 million or $0.64 per diluted share, compared with $39.6 million or $0.57 per diluted share in the comparable 2001 period. Net income for the six months ended June 30, 2002 was $39.2 million or $0.56 per diluted share after an extraordinary loss of $6.9 million, or $0.10 per diluted share, related to the extinguishment of debt, versus $18.7 million or $0.27 per diluted share for the same period in the prior year.
"We made great progress in the first half of 2002," President and CEO Debra A. Cafaro said. "Our FFO this quarter is up by more than 20 percent over the comparable 2001 period and our cash flow growth is dramatic as the result of our successful refinancing, our rent escalators and our declining debt balances."
SECOND QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
Recent highlights include:
- On June 20, 2002, Ventas completed the sale of its 164-bed hospital in Arlington, Virginia to HCA Corporation for $27.5 million, yielding a $22.4 million gain.
- Through July 1, 2002, Ventas sold 140,000 shares of common stock in its principal tenant, Kindred Healthcare, Inc. (NASDAQ:KIND - News; "Kindred"), generating proceeds of approximately $6.2 million. The average per share sale price was over $44.
- The 253 skilled nursing facilities and hospitals leased to Kindred produced EBITDAR to rent coverage of 1.9x for the twelve month period ended March 31, 2002 (excluding the Arlington Hospital).
- On May 1, 2002, the rent escalator on the Kindred Master Leases took effect, increasing annual rent by $6 million to $186 million (excluding the Arlington Hospital).
- During the second quarter, Ventas completed the refinancing of its balance sheet with the private placement of $400 million of Senior Notes. Additionally, the Company closed its new $350 million secured credit facility.
- The Company reduced its outstanding debt balances to $807 million at June 30, 2002.
- Ventas's $750 million Universal Shelf Registration became effective in July 2002. This will give the Company efficient access to the capital markets as it implements its diversification strategy.
- Morgan Stanley added Ventas to its benchmark REIT index (RMS), effective July 19, 2002.
SECOND QUARTER RESULTS
Rental income for the quarter ended June 30, 2002 was $47.1 million, of which $46.6 million resulted from leases with Kindred. Expenses for the quarter ended June 30, 2002 totaled $40.7 million and included $10.4 million of depreciation expenses; $19.1 million of interest expense on debt financing; and $1.4 million of interest expense on the Company's settlement with the Department of Justice. In addition, the Company reported a one-time $5.4 million net loss on the $350 million swap breakage incurred in connection with the Company's debt refinancing. Professional fees for the quarter ended June 30, 2002 totaled $0.9 million.
During the quarter, the Company reclassified to discontinued operations the results of operations specifically related to assets sold or held for sale on or after January 1, 2002, including the Arlington Hospital. This reclassification, which is required under the newly effective FAS 144, affects the presentation of results for the current and prior periods but does not impact the Company's net income or FFO.
SIX MONTH RESULTS
Rental income for the six months ended June 30, 2002 was $93.2 million, of which $92.1 million resulted from leases with Kindred.
Expenses for the six months ended June 30, 2002 totaled $75.7 million, and included $20.8 million of depreciation on real estate assets, $38.9 million of interest expense and $2.9 million of interest on the United States settlement. In addition, the Company reported a one-time $5.4 million net loss on the $350 million swap breakage incurred in connection with the Company's debt refinancing. Professional fees totaled $1.5 million.
FFO AND DIVIDEND GUIDANCE
The Company reaffirms its 2002 normalized FFO guidance of $1.28 to $1.30 per diluted share as previously announced. The Company expects to report normalized FFO of $1.43 to $1.45 per diluted share in 2003, excluding gains and losses and the impact of capital transactions. The Company expects to maintain an FFO payout ratio of 73% to 75%, which should result in a 2003 dividend of $1.05 to $1.07 per share. The Company's dividend policy and payment remain subject to approval by the Company's Board of Directors. The Company may from time to time update its publicly announced FFO and dividend guidance, but it is not obligated to do so.
ASSUMPTIONS
The Company's FFO and dividend guidance are based on a number of assumptions, which are subject to change and many of which are outside the control of the Company. If any of these assumptions vary, the Company's results may change. There can be no assurance that the Company will achieve these results.
SECOND QUARTER CONFERENCE CALL
Ventas Inc. will hold a conference call to discuss this earnings release today, July 23, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The conference call is being web cast by CCBN and can be accessed at the Ventas web site at www.ventasreit.com or www.companyboardroom.com. An online replay of the web cast will be available at approximately 12:00 p.m. Eastern Time and will be archived for thirty (30) days.
Ventas, Inc. is a healthcare real estate investment trust whose properties include 43 hospitals, 215 nursing facilities and eight personal care facilities in 36 states. More information about Ventas can be found on its website at www.ventasreit.com.
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, Inc.'s ("Ventas" or the "Company") 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 "anticipate," "if," "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 Healthcare, Inc. ("Kindred") and certain of its affiliates to continue to meet and/or perform their obligations under their contractual arrangements with the Company and the Company's subsidiaries, including without limitation the lease agreements and various agreements (the "Spin Agreements") entered into by the Company and Kindred at the time of the Company's spin-off of Kindred on May 1, 1998 (the "1998 Spin Off"), as such agreements may have been amended and restated in connection with Kindred's emergence from bankruptcy on April 20, 2001, (b) the ability and willingness of Kindred to continue to meet and/or perform its obligation to indemnify and defend the Company for all litigation and other claims relating to the healthcare 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 healthcare 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 agreements and the ability of the Company to satisfy its obligation to post cash collateral if required to do so under one of these interest rate swap agreements, (m) the ability and willingness of Atria, Inc. ("Atria") to continue to meet and honor its contractual arrangements with the Company and Ventas Realty, Limited Partnership entered into in 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, including without limitation, the risk that the Company may fail to qualify as a REIT due to its ownership of common stock in Kindred, (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 taxable net income for the year ended 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 value of the Company's common stock in Kindred and 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 common stock in Kindred. 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,
2002 2001
(Unaudited) (Audited)
---------------- ----------------
Assets
Real estate investments:
Land $ 116,625 $ 119,771
Building and improvements 1,051,781 1,056,067
---------------- ----------------
1,168,406 1,175,838
Accumulated depreciation (388,066) (369,502)
---------------- ----------------
Total real estate
investments 780,340 806,336
Cash and cash equivalents 3,336 18,596
Restricted cash 19,684 20,773
Deferred financing costs, net 20,732 14,153
Investment in Kindred
Healthcare, Inc. common stock 42,727 55,118
Kindred Healthcare, Inc.
common stock reserved for
distribution -- 17,086
Notes receivable from employees 4,170 3,635
Other 9,880 6,162
---------------- ----------------
Total assets $ 880,869 $ 941,859
================ ================
Liabilities and stockholders' equity
Liabilities:
Notes payable and other debt $ 807,663 $ 848,368
United States Settlement 52,164 54,747
Deferred revenue 19,653 21,027
Interest rate swap agreements 21,810 27,430
Accrued dividend -- 17,910
Accounts payable and other
accrued liabilities 30,049 18,154
Other liabilities--disputed
federal, state and local
tax refunds 14,511 14,903
Deferred income taxes 30,394 30,394
---------------- ----------------
Total liabilities 976,244 1,032,933
---------------- ----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, unissued -- --
Common stock 18,402 18,402
Capital in excess of par value 119,040 122,468
Unearned compensation on
restricted stock (1,348) (1,000)
Accumulated other
comprehensive income 23,604 36,174
Retained earnings (deficit) (127,731) (134,088)
---------------- ----------------
31,967 41,956
Treasury stock (127,342) (133,030)
---------------- ----------------
Total stockholders'
equity (deficit) (95,375) (91,074)
---------------- ----------------
Total liabilities and
stockholders' equity $880,869 $ 941,859
================ ================
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2002 2001 2002 2001
----------- ---------- ----------- ----------
Revenues:
Rental income $47,101 $45,660 $93,154 $90,563
Interest and
other income 323 1,062 665 2,568
Gain on sale of
Kindred Common
Stock 3,822 -- 3,822 --
----------- ---------- ----------- ----------
51,246 46,722 97,641 93,131
----------- ---------- ----------- ----------
Expenses:
General and
administrative 2,601 2,593 4,912 5,142
Professional
fees 936 1,097 1,501 2,896
Amortization of
restricted
stock grants 715 439 1,137 842
Depreciation 10,390 10,420 20,772 20,832
Net loss on
swap breakage 5,407 -- 5,407 --
Swap
effectiveness 180 -- 180 --
Interest 19,079 21,957 38,939 43,078
Interest on
United States
Settlement 1,402 1,448 2,873 1,448
----------- ---------- ----------- ----------
Total
expenses 40,710 37,954 75,721 74,238
----------- ---------- ----------- ----------
Income before income
taxes, discontinued
operations and
extraordinary loss 10,536 8,768 21,920 18,893
Provision for income
taxes -- 1,184 -- 1,804
----------- ---------- ----------- ----------
Income before
discontinued
operations and
extraordinary loss 10,536 7,584 21,920 17,089
Discontinued
operations
(including gain on
sale of asset) 22,851 521 24,168 1,595
----------- ---------- ----------- ----------
Income before
extraordinary loss 33,387 8,105 46,088 18,684
Extraordinary loss
on extinguishment
of debt (6,919) -- (6,919) --
----------- ---------- ----------- ----------
Net income $26,468 $ 8,105 $39,169 $18,684
=========== ========== =========== ==========
Earnings Per Share:
Basic:
Income before
discontinued
operations and
extraordinary
loss $ 0.15 $ 0.11 $ 0.32 $ 0.25
=========== ========== =========== ==========
Net income $ 0.38 $ 0.12 $ 0.57 $ 0.27
=========== ========== =========== ==========
Diluted:
Income before
discontinued
operations and
extraordinary
loss $ 0.15 $ 0.11 $ 0.31 $ 0.25
=========== ========== =========== ==========
Net income $ 0.38 $ 0.12 $ 0.56 $ 0.27
=========== ========== =========== ==========
Shares used in
computing earnings
per common share:
Basic 68,850 68,409 68,792 68,316
Diluted 70,002 69,307 69,941 69,090
Dividend declared
and paid per common
share $0.2375 $ 0.22 $ 0.475 $ 0.22
=========== ========== =========== ==========
VENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
------------------------
June 30, June 30,
2002 2001
------------ ----------
Cash flows from operating activities:
Net income $ 39,169 $ 18,684
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation (including discontinued
operations) 20,918 21,005
Amortization of deferred financing costs 1,642 1,222
Amortization of restricted stock grants 1,137 842
Normalized rents (96) 7
Extraordinary loss on extinguishment of
debt 6,919 --
Gain on sale of assets ($23.5 million
included in discontinued operations) (27,272) --
Amortization of deferred revenue (1,374) (418)
Net loss on swap breakage 5,407 --
Other 74 --
Changes in operating assets and liabilities:
Decrease in restricted cash 1,089 12,530
Increase and other assets (5,188) (1,452)
Increase (decrease) in accounts payable
and accrued and other liabilities 14,038 (8,967)
----------- ----------
Net cash provided by operating activities 56,463 43,453
Cash flows from investing activities:
Proceeds from sale of real estate 28,620 --
Proceeds from sale of Kindred common stock 5,273 --
Purchase of furniture and equipment (135) (169)
Increase in notes receivable from employees (535) (121)
----------- ----------
Net cash provided by (used in)
investing activities 33,223 (290)
Cash flows from financing activities:
Net change in borrowings under Revolving
Credit Facility (36,500) --
Proceeds from Senior Notes Offering and
Revolving Credit Facility 620,300 --
Repayment of long-term debt (17,399) (35,965)
Repayment of long-term debt through
refinancing (607,106) --
Payment of deferred financing costs (15,139) --
Payment of swap breakage fee (12,837) --
Payment on United States Settlement (2,583) (36,782)
Proceeds from (cost of) issuance of stock (45) 537
Cash dividends to stockholders (33,637) (34,970)
----------- ----------
Net cash used in financing activities (104,946) (107,180)
----------- ----------
Decrease in cash and cash equivalents (15,260) (64,017)
Cash and cash equivalents--beginning of period 18,596 87,401
----------- ----------
Cash and cash equivalents--end of period $ 3,336 $ 23,384
=========== ==========
Funds from Operations
FFO for the three months and six months ended June 30, 2002
and 2001 is summarized in the following table (in thousands):
Three Months Ended Six Months Ended
------------------------------------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income $26,468 $ 8,105 $39,169 $18,684
Depreciation on real
estate investments 10,401 10,476 20,825 20,951
Extraordinary loss
on extinguishment
of debt 6,919 -- 6,919 --
Gain on sale of
assets (22,393) -- (23,450) --
----------- ---------- ----------- ----------
FFO 21,395 18,581 43,463 39,635
Gain on sale of
Kindred Common
Stock (3,822) -- (3,822) --
Net loss on swap
breakage 5,407 -- 5,407 --
----------- ---------- ----------- ----------
Normalized FFO $22,980 $18,581 $45,048 $39,635
=========== ========== =========== ==========
The Company considers FFO an appropriate measure of performance of an equity REIT, and the Company uses the National Association of Real Estate Investment Trust's, or NAREIT's, 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 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 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 -
Click here to listen to the webcast archive