Third Quarter Normalized FFO Per Share Rises 15 Percent to $0.54 Per Share
Acquisitions Totaling $154 Million Completed in Third Quarter
LOUISVILLE, KY (October 27, 2005) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that third quarter 2005 normalized Funds from Operations ("FFO") rose 41.5 percent to $56.3 million, compared with $39.8 million in the third quarter of 2004. Normalized FFO per diluted share in the third quarter of 2005 increased 14.9 percent to $0.54 from $0.47 per diluted share for the comparable 2004 period. In the quarter ended September 30, 2005, the Company had 103.9 million weighted average diluted shares outstanding, compared to 84.9 million weighted average diluted shares outstanding a year earlier.
Normalized FFO for the nine months ended September 30, 2005 was $142.9 million, or $1.54 per diluted share, a 28.1 percent increase from $111.6 million, or $1.33 per diluted share, for the comparable 2004 period.
Normalized FFO for the nine-month period excludes a $0.4 million expense relating to fees in connection with a bridge loan commitment obtained by the Company prior to the closing of the acquisition of Provident Senior Living Trust ("Provident"), which was not used by the Company. Results for the third quarter and first nine months of 2005 benefited from increased rent resulting from the Company's accelerated investment activity and increased rent from the escalator clauses contained in its existing leases.
"In the third quarter we continued to successfully execute on our business strategy to deliver reliable growing cash flows and exceptional performance to our shareholders," Ventas President, Chairman and CEO Debra A. Cafaro said. "With more than $1.5 billion in acquisitions completed in 2005, we have a high quality portfolio of seniors housing and healthcare assets and a platform for sustained excellence," she added.
GAAP NET INCOME
Net income for the quarter ended September 30, 2005 was $28.7 million, or $0.28 per diluted share, compared with net income for the quarter ended September 30, 2004 of $25.3 million, or $0.30 per diluted share, after discontinued operations of $0.2 million.
Net income for the nine months ended September 30, 2005 was $83.4 million, or $0.90 per diluted share, compared with net income for the nine months ended September 30, 2004 of $74.2 million, or $0.88 per diluted share, after discontinued operations of $0.6 million.
SETTLEMENT OF LITIGATION AGAINST SULLIVAN & CROMWELL; VENTAS TO ESTABLISH CHARITABLE FOUNDATION
Ventas and Sullivan & Cromwell ("S&C") have reached a settlement (the "S&C Settlement") of the previously disclosed legal malpractice litigation brought by Ventas against S&C in 2002. Under the terms of the S&C Settlement, a $25.5 million payment will be made to Ventas on behalf of S&C in the fourth quarter of 2005. After expenses to be paid by Ventas in connection with the litigation, including to the Company's outside legal counsel, Myron Cherry & Associates, Chicago, Illinois, Ventas should receive approximately $16 million in net proceeds from the S&C Settlement.
With $2 million of these net proceeds of settlement, Ventas intends to establish and fund the Ventas Charitable Foundation. The Ventas Charitable Foundation will be used to support charitable and philanthropic causes important to the communities in which the Company operates and to the Company's employees. The balance of the net proceeds will be used to repay debt and for other corporate purposes.
As a result of these developments, the Company expects its 2005 net income and FFO to increase by approximately $14 million. The amount to be paid on behalf of S&C to Ventas in the S&C Settlement, expenses related thereto, and the contribution to the Ventas Charitable Foundation will be excluded in the Company's normalized FFO results for all periods.
THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
-- During the third quarter, Ventas completed $154 million of transactions
covering a total of 11 private-pay seniors housing facilities. Details
of these investments include:
-- Ventas initiated a new relationship with Capital Senior Living Corp.
(NYSE: CSU) ("Capital Senior") with an $85 million acquisition
completed September 30, 2005. Ventas added six assisted living and
independent living facilities, located in six states, covering a
total of 957 units. Five of the facilities are encumbered with
mortgage debt in the principal amount of $44 million blended with a
rate of 7 percent. The going in cash yield on these investments is
8 percent and the expected unleveraged yield over the life of the
leases is 9 percent. With this acquisition, Ventas expanded its
geographical reach and diversification to 42 states.
-- Ventas expanded its relationship with its tenant Summerville Senior
Living with the addition of five properties in transactions valued
at $69 million. The facilities added are four assisted living and
Alzheimer facilities located in Florida with a total of 547 units
and one 149-unit assisted living facility located in Michigan. The
going in cash yield exceeds 8 percent on these facilities and the
expected unleveraged yield over the life of the leases is
11 percent.
-- On October 19, 2005 Ventas acquired an independent and assisted
living facility with 162 units in a transaction valued at
approximately $20 million. The facility is leased to Capital Senior
and the going in cash yield is 8 percent and the expected
unleveraged yield over the life of the lease is 9 percent. This
facility is encumbered with first and second mortgage debt in the
total principal amount of $11 million, with a blended interest rate
of 6.8 percent.
-- With the previously completed acquisitions, annualized rent from
Kindred Healthcare, Inc. (NYSE: KND) ("Kindred") represents
approximately 52 percent of the Company's run rate total revenue,
assuming a full year effect of all closed 2005 acquisitions.
Annualized revenue from market rate, non-government-reimbursed
assets in the Company's portfolio represents approximately
44 percent of the Company's annualized revenue on the same basis.
Assets leased to Kindred now represent approximately 34 percent of
the Company's total real estate assets, measured on a gross book
value basis.
-- The 225 skilled nursing facilities and hospitals leased by the
Company to Kindred produced EBITDAR to rent coverage of 2.0 times
(after management fees) for the trailing twelve-month period ended
June 30, 2005 (the latest date available). Further information
detailing these rent coverages is contained on a schedule attached
to this press release.
-- The Company's debt to total capitalization is approximately 35
percent.
-- The Company delivered a 22 percent total shareholder return for the
year to date period through September 30, 2005.
-- Ventas has a one-time right (the "Reset Right") under each master lease
with Kindred (the "Kindred Master Leases") to increase the base annual
rent to a then fair market rental rate. Ventas currently intends to
give its notice to exercise the Reset Right on January 20, 2006. If
the Reset Right is exercised, the rental increase, if any, would
commence as early as July 19, 2006, and Ventas would pay a reset fee of
up to $4.6 million. If the Reset Right is exercised, the annual rent
escalations under the applicable Kindred Master Leases may be altered,
depending on market conditions at the time. The Company believes that,
based upon information currently available to it, reports of experts
and current conditions, if Ventas were currently entitled to, and did,
exercise the Reset Right, the base rent under the Kindred Master Leases
would increase by at least $35 million per year. However, the value of
the Reset Right is dependent on a variety of factors and market
conditions and is highly speculative, and there can be no assurance
regarding the value of the Reset Right.
-- As part of its existing program of charitable giving, Ventas
contributed $25,000 to the Kindred Hope Fund, to assist Kindred's New
Orleans employees who experienced urgent needs arising out of Hurricane
Katrina.
THIRD QUARTER 2005 RESULTS
Rental revenue for the quarter ended September 30, 2005 was $93.8 million, of which $50.3 million resulted from leases with Kindred. Third quarter 2005 expenses totaled $67.4 million and included $27.7 million of depreciation expense and $32.4 million of interest expense. Combined general, administrative and professional fees totaled $6.1 million, of which $0.9 million relates to the Company's litigation against S&C and consulting fees in connection with the Company's strategic and organizational initiatives. Property-level operating expenses relating to the Company's medical office building portfolio for the period were $0.7 million.
NINE MONTH 2005 RESULTS
Rental revenue for the nine months ended September 30, 2005 was $229.1 million, of which $148.8 million resulted from leases with Kindred. Expenses for the nine months ended September 30, 2005 totaled $151.8 million and included $59.3 million of depreciation expense and $72.5 million of interest expense. Combined general, administrative and professional fees totaled $16.7 million. Property-level operating expenses relating to the Company's medical office building portfolio for the period were $1.9 million.
VENTAS AFFIRMS NORMALIZED FFO GUIDANCE FOR 2005 AND 2006
Ventas affirmed its 2005 normalized FFO guidance of between $2.06 and $2.08 per diluted share and its 2006 normalized FFO guidance of between $2.20 and $2.23 per diluted share.
The Company expects non-cash straight-line rent attributable to its June 2005 acquisition of Provident to approximate $11.0 million in 2005 and $17.1 million in 2006.
The Company's normalized FFO guidance for all periods assumes that all of the Company's tenants and borrowers continue to meet all of their obligations to the Company. In addition, the Company's normalized FFO guidance (and related GAAP earnings projections) excludes gains and losses on the sales of assets and the impact of future, unannounced acquisitions, divestitures (including pursuant to tenant options to purchase) and capital transactions. Its guidance also excludes the future impact of (a) any rent or other amounts derived from the Reset Right, whether through a negotiated resolution with Kindred or the appraisal process set forth in the Kindred Master Leases, (b) any expense the Company records for non-cash "swap ineffectiveness," (c) the S&C Settlement and related expenses that were unaccrued on or before September 30, 2005, as well as the expense of establishing and funding the Ventas Charitable Foundation and (d) any expenses related to asset impairment, the write-off of unamortized deferred financing fees or additional costs, expenses or premiums incurred as a result of early debt retirement.
The Company's guidance is based on a number of other assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.
Reconciliation of the Company's guidance to the Company's projected GAAP earnings is provided on a schedule attached to this press release. The Company may from time to time update its publicly announced guidance, but it is not obligated to do so.
THIRD QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on Friday, October 28, 2005, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The conference call is being webcast live by CCBN and can be accessed at the Company's website at www.ventasreit.com or www.fulldisclosure.com. An online replay of the webcast will be available at approximately 12:00 p.m. Eastern Time and will be archived for 30 days.
Ventas, Inc. is a leading healthcare real estate investment trust that is the nation's largest owner of seniors housing and long-term care assets. At the date of this press release, Ventas owns 381 healthcare and seniors housing assets in 42 states. Its diverse portfolio includes 41 hospitals, 200 skilled nursing facilities and 140 seniors housing and other assets. More information about Ventas can be found on its website at http://www.ventasreit.com .
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 security holders 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.
The Company's actual future results and trends 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 the Company's operators, tenants, borrowers and other third parties to meet and/or perform the obligations under their various contractual arrangements with the Company; (b) the ability and willingness of Kindred Healthcare, Inc. (together with its subsidiaries, "Kindred"), Brookdale Living Communities, Inc. (together with its subsidiaries, "Brookdale") and Alterra Healthcare Corporation (together with its subsidiaries, "Alterra") to meet and/or perform their obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities under the Company's respective contractual arrangements with Kindred, Brookdale and Alterra; (c) the ability of the Company's operators, tenants and borrowers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities, including without limitation their existing credit facilities; (d) the Company's success in implementing its business strategy and the Company's ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions or investments; (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, procedures and rates; (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 and the accounting for the Company's interest rate swap agreement; (m) the ability and willingness of the Company to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations; (n) final determination of the Company's taxable net income for the year ending December 31, 2005; (o) 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; (p) risks associated with the Company's acquisition of Provident Senior Living Trust, including its ability to timely and fully realize expected revenues and cost savings from the merger; (q) the impact on the liquidity, financial condition and results of operations of the Company's operators resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of the Company's operators to accurately estimate the magnitude of such liabilities; and (r) the value of the Company's rental reset right with Kindred, which is dependent on a variety of factors and is highly speculative. Many of such factors are beyond the control of the Company and its management.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2005 2005 2005 2004 2004
(Unaudited) (Unaudited)(Unaudited) (Audited) (Unaudited)
Assets
Real estate
investments:
Land $295,017 $277,668 $153,851 $147,327 $140,969
Building and
improvements 2,718,128 2,582,567 1,401,609 1,364,884 1,333,310
3,013,145 2,860,235 1,555,460 1,512,211 1,474,279
Accumulated
depreciation (513,098) (485,476) (467,285) (454,110) (444,859)
Net real
estate
property 2,500,047 2,374,759 1,088,175 1,058,101 1,029,420
Loans receivable,
net 52,588 57,540 38,883 13,031 16,309
Net real
estate
investments 2,552,635 2,432,299 1,127,058 1,071,132 1,045,729
Cash and cash
equivalents 5,764 802 1,779 3,365 3,805
Escrow deposits
and restricted
cash 56,397 51,951 17,764 25,710 16,757
Deferred financing
costs, net 17,257 18,314 12,928 13,550 11,738
Subscriptions
receivable - 97,020 - - -
Other 26,077 25,069 14,669 13,178 13,316
Total
assets $2,658,130 $2,625,455 $1,174,198 $1,126,935 $1,091,345
Liabilities and
stockholders' equity
Liabilities:
Senior notes
payable and
other debt $1,811,319 $1,832,684 $877,642 $843,178 $853,774
Deferred revenue 11,126 11,713 12,298 12,887 13,536
Interest rate
swap agreement 6,177 11,155 9,717 16,550 21,133
Accrued dividend 37,255 - 30,531 27,498 -
Accrued interest 30,432 13,639 18,871 8,743 15,261
Accounts payable
and other accrued
liabilities 77,316 70,710 28,015 27,461 27,074
Deferred income
taxes 30,394 30,394 30,394 30,394 30,394
Total
liabilities 2,004,019 1,970,295 1,007,468 966,711 961,172
Commitments and
contingencies
Stockholders' equity:
Preferred stock,
10,000 shares
authorized,
unissued - - - - -
Common stock,
$0.25 par value;
180,000 shares
authorized;
103,226, 99,960,
85,223, 85,131
and 84,934 shares
issued at September
30, 2005, June 30,
2005, March 31,
2005, December 31,
2004, and September
30, 2004,
respectively 25,890 25,888 21,306 21,283 21,233
Capital in excess
of par value 692,676 696,811 210,216 208,903 204,393
Unearned
compensation on
restricted stock (1,017) (1,301) (1,616) (633) (968)
Accumulated other
comprehensive
loss (942) (5,343) (3,327) (9,114) (13,588)
Retained earnings
(deficit) (60,280) (51,746) (48,255) (45,297) (64,473)
656,327 664,309 178,324 175,142 146,597
Treasury stock,
79, 326, 413,
532 and 586 shares
at September 30,
2005, June 30,
2005, March 31,
2005, December 31,
2004 and September
30, 2004,
respectively (2,216) (9,149) (11,594) (14,918) (16,424)
Total
stockholders'
equity 654,111 655,160 166,730 160,224 130,173
Total
liabilities
and
stockholders'
equity $2,658,130 $2,625,455 $1,174,198 $1,126,935 $1,091,345
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
Revenues:
Rental income $93,771 $60,310 $229,052 $171,584
Interest income from
loans receivable 1,573 763 3,717 2,274
Interest and other income 791 189 2,523 772
Total revenues 96,135 61,262 235,292 174,630
Expenses:
Property-level operating
expenses 677 372 1,870 869
General, administrative
and professional fees 6,109 4,047 16,682 12,801
Restricted stock
amortization 471 321 1,397 871
Depreciation 27,740 13,204 59,291 36,096
Loss on extinguishment
of debt - 1,370 - 1,370
Interest 32,417 16,848 72,515 48,968
Total expenses 67,414 36,162 151,755 100,975
Income before net loss on
real estate disposals and
discontinued operations 28,721 25,100 83,537 73,655
Net loss on real estate
disposals - - (175) -
Income before discontinued
operations 28,721 25,100 83,362 73,655
Discontinued operations - 197 - 571
Net income $28,721 $25,297 $83,362 $74,226
Earnings per common share:
Basic:
Income before
discontinued operations $0.28 $0.30 $0.90 $0.89
Net income $0.28 $0.30 $0.90 $0.89
Diluted:
Income before
discontinued operations $0.28 $0.30 $0.90 $0.88
Net income $0.28 $0.30 $0.90 $0.88
Shares used in computing
earnings per common share:
Basic 103,081 84,073 92,172 83,202
Diluted 103,880 84,889 92,944 84,074
Dividends declared per
common share $0.36 $0.325 $1.08 $0.975
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net income $83,362 $74,226
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation (including discontinued
operations) 59,291 36,249
Amortization of deferred
financing costs 2,893 3,016
Amortization of restricted stock 1,397 871
Straight-lining of rental income (8,392) (1,728)
Amortization of deferred revenue (2,463) (1,886)
Loss on extinguishment of debt - 1,370
Other (2,025) (1,907)
Changes in operating assets and liabilities:
Decrease (increase) in escrows
deposits and restricted cash 3,126 (12)
Increase in other assets (4,066) (829)
Increase in accrued interest 21,689 9,440
Increase in accounts payable and accrued
and other liabilities 16,750 5,745
Net cash provided by operating
activities 171,562 124,555
Cash flows from investing activities:
Net investment in real estate property (579,961) (280,666)
Investment in loans receivable (47,333) -
Proceeds from loans receivable 7,190 260
Other 1,839 333
Net cash used in investing activities (618,265) (280,073)
Cash flows from financing activities:
Net change in borrowings under revolving
credit facility 56,900 173,500
Proceeds from debt 400,000 -
Repayment of debt (19,165) (65,915)
Issuance of common stock 101,838 58,903
Proceeds from stock option exercises 4,717 16,913
Cash distribution to stockholders (88,588) (103,523)
Other (6,600) (2,659)
Net cash provided by financing
activities 449,102 77,219
Net increase (decrease) in cash and
cash equivalents 2,399 (78,299)
Cash and cash equivalents at beginning of period 3,365 82,104
Cash and cash equivalents at end of period $5,764 $3,805
Supplemental schedule of non-cash activities:
Assets and liabilities assumed
from acquisitions:
Real estate property investments $920,973 $103,432
Escrow deposits and restricted cash 33,813 9,170
Other assets acquired 1,560 206
Debt assumed 530,406 105,627
Other liabilities 33,114 7,181
Issuance of common stock 392,826 -
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
2004 Quarters 2005 Quarters
Third Fourth First Second Third
Revenues:
Rental income $60,310 $61,327 $62,739 $72,542 $93,771
Interest income
from loans receivable 763 684 652 1,492 1,573
Interest and other
income 189 215 612 1,120 791
Total revenues 61,262 62,226 64,003 75,154 96,135
Expenses:
Property-level
operating expenses 372 468 552 641 677
General, administrative
and professional fees 4,047 4,116 5,020 5,553 6,109
Restricted stock
amortization 321 336 420 506 471
Depreciation 13,204 12,939 13,266 18,285 27,740
Loss on extinguishment
of debt 1,370 - - - -
Interest 16,848 17,849 17,172 22,926 32,417
Total expenses 36,162 35,708 36,430 47,911 67,414
Income before net loss
on real estate disposals
and discontinued
operations 25,100 26,518 27,573 27,243 28,721
Net loss on real
estate disposals - - - (175) -
Income before
discontinued
operations 25,100 26,518 27,573 27,068 28,721
Discontinued operations 197 20,156 - - -
Net income $25,297 $46,674 $27,573 $27,068 $28,721
Earnings per common share:
Basic:
Income before
discontinued
operations $0.30 $0.32 $0.33 $0.31 $0.28
Net income $0.30 $0.56 $0.33 $0.31 $0.28
Diluted:
Income before
discontinued
operations $0.30 $0.31 $0.32 $0.30 $0.28
Net income $0.30 $0.55 $0.32 $0.30 $0.28
Shares used in
computing earnings
per common share:
Basic 84,073 84,532 84,657 88,574 103,081
Diluted 84,889 85,180 85,400 89,350 103,880
Dividends declared
per common share $0.325 $0.325 $0.36 $0.36 $0.36
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
2004 Quarters 2005 Quarters
Third Fourth First Second Third
Cash flows from
operating activities:
Net income $25,297 $46,674 $27,573 $27,068 $28,721
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation
(including discontinued
operations) 13,255 12,989 13,266 18,285 27,740
Amortization of
deferred financing
costs 974 879 890 945 1,058
Amortization of
restricted stock 321 336 420 506 471
Straight-lining of
rental income (578) (734) (880) (1,954) (5,558)
Amortization of
deferred revenue (631) (691) (636) (684) (1,143)
Loss on extinguishment
of debt 1,370 - - - -
Gain on sale of
assets (including
discontinued
operations) - (19,428) - - -
Other (547) (109) (1,046) (402) (577)
Changes in operating
assets and liabilities:
Decrease (increase)
in escrows deposits and
restricted cash 1,741 (8,953) 8,194 (1,983) (3,085)
Decrease (increase)
in other assets 599 727 (703) (8,560) 5,197
Increase (decrease)
in accrued interest 8,543 (6,518) 10,128 (5,671) 17,232
Increase in accounts
payable and accrued
and other
liabilities 3,686 231 859 14,567 1,324
Net cash provided
by operating
activities 54,030 25,403 58,065 42,117 71,380
Cash flows from investing activities:
Net investment in
real estate
property (34,445) (43,095) (31,139) (450,641) (98,181)
Investment in loans
receivable - - (27,818) (19,515) -
Proceeds from loans
receivable 153 3,320 997 762 5,431
Sale of real estate
properties - 21,100 - - -
Other (18) 53 966 1,544 (671)
Net cash used in
investing
activities (34,310) (18,622) (56,994) (467,850) (93,421)
Cash flows from financing activities:
Net change in
borrowings under
revolving credit
facility 59,500 (134,500) 23,300 94,100 (60,500)
Proceeds from debt - 125,000 - 400,000 -
Repayment of debt (60,020) (1,096) (1,145) (5,699) (12,321)
Issuance of common
stock 4,370 5,303 2,255 2,439 97,144
Proceeds from stock
option exercises 1,407 763 699 1,337 2,681
Cash distribution
to stockholders (27,393) - (27,498) (61,090) -
Other (2,659) (2,691) (268) (6,331) (1)
Net cash
(used in)
provided by
financing
activities (24,795) (7,221) (2,657) 424,756 27,003
Net (decrease)
increase in cash and
cash equivalents (5,075) (440) (1,586) (977) 4,962
Cash and cash
equivalents at
beginning of period 8,880 3,805 3,365 1,779 802
Cash and cash
equivalents at end
of period $3,805 $3,365 $1,779 $802 $5,764
Supplemental schedule
of non-cash activities:
Assets and liabilities
assumed from acquisitions:
Real estate
property
investments $3,704 $171 $12,110 $854,134 $54,729
Escrow deposits
and restricted cash 140 - 248 32,204 1,361
Other assets acquired 2 - - 1,506 54
Debt assumed 2,619 - 12,309 466,641 51,456
Other liabilities 1,227 171 49 28,377 4,688
Issuance of common
stock - - - 392,826 -
Funds from Operations
(In thousands, except per share amounts)
2004 Quarters 2005 Quarters
Third Fourth First Second Third
Net income $25,297 $46,674 $27,573 $27,068 $28,721
Adjustments:
Depreciation on
real estate assets 13,102 12,832 13,175 18,190 27,622
Other items:
Loss on sale of
real estate - (19,428) - 175 -
Discontinued operations:
Depreciation on
real estate assets 51 50 - - -
FFO 38,450 40,128 40,748 45,433 56,343
Loss on extinguishment
of debt 1,370 - - - -
Bridge loan commitment
fee - - - 402 -
Normalized FFO $39,820 $40,128 $40,748 $45,835 $56,343
Per diluted share:
Net income $0.30 $0.55 $0.32 $0.30 $ 0.28
Adjustments:
Depreciation on real
estate assets 0.15 0.15 0.16 0.20 0.26
Other items:
Loss on sale of
real estate - (0.23) - 0.01 -
Discontinued operations:
Depreciation on real
estate assets - - - - -
FFO 0.45 0.47 0.48 0.51 0.54
Loss on extinguishment
of debt 0.02 - - - -
Bridge loan commitment
fee - - - - -
Normalized FFO $0.47 $0.47 $0.48 $0.51 $0.54
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this problem, the Company considers FFO an appropriate measure of performance of an equity REIT. 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 sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
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, as an alternative to cash flow from operating activities (determined in accordance with GAAP) or 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 elsewhere in this press release.
Projected FFO Per Diluted Share for the Years Ending December 31, 2005 and 2006
The following table illustrates the Company's projected FFO per diluted share guidance for the years ending December 31, 2005 and 2006, excluding any impact from the S&C Settlement.
GUIDANCE GUIDANCE
For the Year For the Year
Ending Ending
December 31, 2006 December 31, 2005
Net income $1.11 - $1.14 $1.19 - $1.21
Adjustments:
Depreciation on real estate assets 1.09 - 1.09 0.87 - 0.87
FFO $2.20 - $2.23 $2.06 - $2.08
Normalized FFO $2.20 - $2.23 $2.06 - $2.08
Net Debt to Pro Forma EBITDAThe following pro forma information considers the effect on net income, interest and depreciation of the Company's investments and other capital transactions that were completed during the three months ended September 30, 2005, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the three months ended September 30, 2005 (dollars in thousands):
For the Three
Months Ended
September 30,
2005
Pro forma net income $28,426
Add back:
Pro forma interest 34,051
Pro forma depreciation 28,573
Restricted stock amortization 471
Pro forma EBITDA $91,521
Pro forma annualized EBITDA $366,084
Debt $1,811,319
Cash (5,764)
Restricted cash pertaining to debt (12,038)
Net debt $1,793,517
Net debt to pro forma annualized EBITDA 4.9x
The Company considers EBITDA a profitability measure which indicates the Company's ability to service debt. The Company considers the net debt to EBITDA ratio a useful measure to evaluate the Company's ability to pay its indebtedness. EBITDA presented herein is not necessarily comparable to EBITDA presented by other companies due to the fact that not all companies use the same definition. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indicator of the Company's financial performance, as an alternative to cash flow from operating activities (determined in accordance with GAAP) or as a measure of the Company's liquidity, nor is EBITDA 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, EBITDA should be examined in conjunction with net income as presented elsewhere in this press release.
Portfolio of Properties
The following information provides an overview of the Company's portfolio
of properties as of and for the nine months ended September 30, 2005 (dollars
in thousands):
As of and For the Nine Months Ended September 30, 2005
Percent of
# of # of Total # of
Portfolio by Type Properties Beds/Units Revenue Revenues(1) States
Healthcare properties:
Skilled nursing
facilities 200 25,518 $105,808 45.0% 30
Hospitals 41 3,893 55,784 23.7 19
Seniors housing
facilities 120 13,032 61,806 26.3 29
Other facilities 19 122 5,654 2.3 5
Total 380 42,565 $229,052 97.3% 42
Other real estate
investments:
Loans receivable 33 2,586 $3,717
(1) The remainder of our total revenues is interest income from loans
receivable and interest and other income.
Kindred Coverage Ratios
The following is based on data provided by Kindred to the Company or obtained from Kindred's public filings. This information reflects Kindred's EBITDARM and EBITDAR coverage by Master Lease:
TTM(1) TTM(1)
Master Lease EBITDARM EBITDAR
Coverage(2,4) Coverage(3,4)
1 3.0 2.4
2 2.9 2.3
3 2.3 1.7
4 2.4 1.8
5 2.0 1.5
Portfolio 2.6 2.0
(1) Trailing Twelve Months EBITDARM and EBITDAR for the period ended
June 30, 2005 (the latest available data provided by Kindred) to the
Company's Trailing Twelve Months cash rental revenue.
(2) Coverage reflects the ratio of Kindred's EBITDARM to rent. EBITDARM
is defined as earnings before interest, income taxes, depreciation,
amortization, rent and management fees. In the calculation of Trailing
Twelve Months EBITDARM, intercompany profit pertaining to services
provided by Kindred's PeopleFirst Rehabilitation and Pharmacy
Divisions for the twelve months ended June 30, 2005 has been
eliminated from purchased ancillary expenses within the Ventas
portfolio.
(3) Coverage reflects the ratio of Kindred's EBITDAR to rent. EBITDAR is
defined as earnings before interest, income taxes, depreciation,
amortization and rent but after deducting a five percent management
fee. In the calculation of Trailing Twelve Months EBITDAR,
intercompany profit pertaining to Kindred's PeopleFirst Rehabilitation
and Pharmacy Divisions for the twelve months ended June 30, 2005 has
been eliminated from purchased ancillary expenses within the Ventas
portfolio.
(4) Coverage excludes the portion of a one-time $55.0 million Medicare
reimbursement settlement and a corresponding one-time special employee
recognition payment of $15.0 million allocated by Kindred to the
Ventas facilities.
Scheduled Maturities of Borrowing Arrangements
The Company's indebtedness has the following maturities as of September
30, 2005 (in thousands):
As of
September 30,
2005
2005 $3,271
2006 225,000
2007 135,506
2008 36,627
2009 314,784
Thereafter 1,096,131
Total $1,811,319
- END -
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