2005 Normalized FFO Per Share Rises 16 Percent to $2.09 Per Share;
2006 First Quarter Dividend Increases 10 Percent to $0.395 Per Share;
2005 Investment Activity Exceeds $1.5 Billion
LOUISVILLE, KY (February 27, 2006) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that fourth quarter 2005 normalized Funds from Operations ("FFO") rose 42 percent to $57.2 million, compared with $40.1 million in the fourth quarter of 2004. Normalized FFO per diluted share in the fourth quarter of 2005 increased 17 percent to $0.55 from $0.47 per diluted share for the comparable 2004 period. In the quarter ended December 31, 2005, the Company had 104.2 million weighted average diluted shares outstanding, compared to 85.2 million weighted average diluted shares outstanding a year earlier.
Normalized FFO for the year ended December 31, 2005 was $200.1 million, a 32 percent increase from $151.7 million for the comparable 2004 period. Normalized FFO per diluted share grew 16 percent year-over-year to $2.09 in 2005 from $1.80 in 2004.
Normalized FFO for 2005 excludes net proceeds received by Ventas from a previously announced litigation settlement with Sullivan & Cromwell of $15.9 million, a contribution to the Ventas Charitable Foundation of $2.0 million, a net gain on swap breakage of $1.0 million, the write-off of unamortized deferred financing fees of $1.4 million in connection with the payoff of the CMBS loan and $0.4 million in fees for a bridge loan commitment obtained by the Company for the acquisition of Provident Senior Living Trust ("Provident"). Normalized FFO for 2004 excludes the write-off of unamortized deferred financing fees of $1.4 million in connection with the refinancing of the Company's revolving credit facility.
Results for the fourth quarter and full year benefited from increased rent resulting from the Company's accelerated investment activity and increased rent from the escalator clauses contained in its existing leases.
Ventas also said that its Board of Directors voted to increase the Company's first quarter 2006 dividend to $0.395 per share, an increase of 10 percent from the quarterly 2005 dividend of $0.36. The Ventas first quarter dividend is payable March 30, 2006 to stockholders of record on March 7, 2006.
"Ventas had another exceptional year in 2005, delivering Total Shareholder Return (TSR) of 23 percent and completing the transformational acquisition of Provident Senior Living Trust," Ventas President, Chairman and CEO Debra A. Cafaro said. "Over the last few years, we have doubled the size of our Company and diversified our portfolio to include a significant number of high-quality, private-pay independent and assisted living facilities, which now account for about 44 percent of our aggregate annual rental income. Our focused acquisition strategy, balance sheet management and investment in processes and people have created a strong, high performing enterprise that is well positioned to capitalize on opportunities as we move into 2006," she added.
"For the last four years, we have delivered double digit normalized FFO per share growth, and we are once again pleased to share our success with our shareholders by increasing our quarterly dividend by 10 percent. This action by our Board of Directors shows Ventas's ability to increase its dividend by above average rates due to its stable, growing cash flows and excellent portfolio of assets," Cafaro said.
UPDATE ON RESET RIGHT TO INCREASE BASE RENTS UNDER MASTER LEASES WITH KINDRED
Ventas recently announced that it was reviewing the release by the Centers for Medicare & Medicaid Services ("CMS") on January 19, 2006 regarding CMS's proposed 2007 fiscal year payment rule for long-term acute care hospitals ("LTACs"). Among other things, the proposed rule freezes Medicare payment rates for LTACs for fiscal year 2007 and contains a number of proposed changes to current LTAC payment policy that could result in an 11 percent Medicare rate cut to LTACs.
Ventas has an eighteen-month time period, until July 19, 2007, to deliver its notices (the "Reset Notices") to Kindred Healthcare, Inc. (NYSE: KND) ("Kindred") that would initiate Ventas's option (the "Reset Right") contained in its Master Leases with Kindred (the "Master Leases") to potentially increase annual base rents under the Master Leases to "Fair Market Rental" levels. Ventas has not yet given the Reset Notices because it is analyzing the potential impact, if any, of the proposed rule on Kindred and on Ventas's portfolio of 39 Kindred-operated LTACs. Ventas is also assessing the likelihood that CMS's proposed rule for LTAC reimbursement will be adopted in its current form or will be modified as a result of industry comment and review. The final version of the rule is likely to be made public by CMS in the second quarter of 2006.
"We believe that the Reset Right should deliver significant value for Ventas shareholders, based upon our preliminary review and analysis of the CMS rule and the performance of our Kindred portfolio of skilled nursing facilities and LTACs," Cafaro said. "We will continue our review of the facts and the CMS proposal, and look forward to providing updated guidance to our shareholders that will reflect that review."
The Reset Right is contained in each of the original four Master Leases Ventas entered into with Kindred in April 2001 when Kindred successfully emerged from its Chapter 11 reorganization. Under the Reset Right, Ventas has a one-time right under each Master Lease to increase the base annual rent to a then fair market rental rate. If the Reset Notices are given by Ventas at any time before July 19, 2006, the rental increase, if any, would be effective on July 19, 2006 even if the appraisal process continued beyond that date. If Ventas gives the Reset Notices after July 19, 2006, the rental increase, if any, would be effective on the date the Reset Notices are given. If Ventas exercises the Reset Right under all of the Master Leases, Ventas will pay a one-time reset fee of up to $4.6 million. If Ventas exercises the Reset Right under fewer than all of the Master Leases, the reset fee will be prorated. If the Reset Right is exercised, the annual rent escalations under the applicable Master Leases may be altered, depending on market conditions at the time. 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.
"Our aggregate annual base rent can only increase and never decrease under the Reset Right process, giving us maximum flexibility," Cafaro said. "As in prior situations where unexpected events have altered the landscape, we intend to work creatively and tenaciously to seek a positive outcome for our shareholders."
GAAP NET INCOME
Net income for the quarter ended December 31, 2005 was $47.2 million, or $0.45 per diluted share, compared with net income for the quarter ended December 31, 2004 of $46.7 million, or $0.55 per diluted share, after income from discontinued operations of $5.4 million and $20.2 million in 2005 and 2004, respectively.
Net income for the year ended December 31, 2005 was $130.6 million, or $1.36 per diluted share, compared with net income for the year ended December 31, 2004 of $120.9 million, or $1.43 per diluted share, after income from discontinued operations of $5.3 million and $20.7 million in 2005 and 2004, respectively.
FOURTH QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
-- Standard and Poor's Ratings Services raised Ventas's rating to BB+
from BB, and Moody's Investors Service upgraded Ventas's rating to Ba2
from Ba3, each with a stable outlook.
-- Ventas issued $200 million of unsecured senior notes with an annual
interest rate of 6.5 percent maturing on June 1, 2016. Proceeds were
used to repay the CMBS loan.
-- Chief Financial Officer Richard A. Schweinhart and Chief Investment
Officer Raymond J. Lewis were both promoted to Executive Vice
Presidents in January 2006. They had been Senior Vice Presidents.
-- Ventas named Robert J. Brehl Chief Accounting Officer and Controller.
-- During 2005, Ventas invested over $1.5 billion in healthcare and
seniors housing assets. The investments consist of 91 seniors housing
facilities (68 acquired from Provident), one hospital, three medical
office buildings and six first mortgages secured by seniors housing
assets.
-- As previously announced, 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 Living Corporation (NYSE: CSU; together with
its subsidiaries, "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.
-- Ventas recorded a gain of $5.1 million during the fourth quarter of
2005 from the sale of a seniors housing facility pursuant to an option
to purchase held by the tenant.
-- With the previously completed acquisitions and dispositions,
annualized rent from Kindred represents approximately 52 percent of
the Company's run rate total revenue, assuming a full year effect of
all closed 2005 acquisitions and disposition. 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 EBITDARM to rent coverage of 2.6 times for the
trailing twelve-month period ended September 30, 2005 (the latest date
available). Further information detailing these rent coverages by
Master Lease and by asset class is contained on a schedule attached
to this press release.
-- Ventas has entered into an agreement to purchase Towne Centre, a 327-
unit continuing-care retirement community (CCRC) located in Indiana,
in a transaction valued at $29 million. Ventas's current tenant,
Capital Senior, is the seller, and Ventas will lease the CCRC to
Capital Senior at the closing. The triple-net operating lease with
Capital Senior will have an initial cash yield of 8 percent, which is
expected to escalate at an average of 2.5 percent per year over the
life of the lease. If these annual escalations are achieved,
Ventas's unlevered yield will be 9 percent over the initial ten-year
base term of the lease. Capital Senior Living Properties, Inc. will
guarantee the lease. Although Ventas expects to complete the
transaction in the first quarter of 2006, there can be no assurance
that the transaction will occur or, if so, when the closing will
occur. Capital Senior has operated the facility since 1991.
-- The Company's debt to total capitalization at December 31, 2005 was
approximately 35 percent.
-- The Company delivered a 23 percent TSR for the year ended December 31,
2005 and a 51 percent compound annual TSR for the five years ended
December 31, 2005, during which period it was the best performing REIT
in the Morgan Stanley REIT Index (RMS).
-- As of December 31, 2005, Ventas's enterprise value exceeded
$5.1 billion.
-- Ventas expects to file its 2005 Form 10-K on or about February 28,
2006, including unqualified management certifications and an
unqualified auditor opinion under section 404 of the Sarbanes-Oxley
Act of 2002.
FOURTH QUARTER 2005 RESULTS
Rental revenue for the quarter ended December 31, 2005 was $96.3 million, of which $50.3 million resulted from leases with Kindred. Fourth quarter 2005 expenses totaled $56.5 million and included $28.7 million of depreciation expense and $33.6 million of interest expense, offset by Ventas's receipt of net proceeds from litigation settlement of $15.9 million. General, administrative and professional fees totaled $8.4 million, including a $2.0 million contribution to the Ventas Charitable Foundation. Property-level operating expenses relating to the Company's medical office building portfolio for the period were $0.7 million.
FULL YEAR 2005 RESULTS
Rental revenue for the year ended December 31, 2005 was $324.7 million, of which $199.1 million resulted from leases with Kindred. Expenses for the year ended December 31, 2005 totaled $207.6 million and included $87.8 million of depreciation expense and $105.6 million of interest expense, offset by Ventas's receipt of net proceeds from litigation settlement of $15.9 million. General, administrative and professional fees totaled $25.1 million, including a $2.0 million contribution to the Ventas Charitable Foundation. Property- level operating expenses relating to the Company's medical office building portfolio for the period were $2.6 million.
VENTAS AFFIRMS NORMALIZED FFO GUIDANCE FOR 2006
Ventas affirmed its 2006 normalized FFO guidance of between $2.20 and $2.23 per diluted share. If achieved, this "steady state" projection represents 6 to 7 percent core growth in normalized FFO per share.
The Company expects non-cash straight-line rent attributable to its 2005 acquisition of Provident to approximate $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 Master Leases, (b) any expense the Company records for non-cash "swap ineffectiveness" and (c) 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.
FOURTH QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on Tuesday, February 28, 2006, 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 http://www.ventasreit.com or http://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 380 healthcare and seniors housing assets in 42 states. Its diverse portfolio includes 41 hospitals, 200 skilled nursing facilities and 139 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, which speak only as of the date on which they are made.
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 Company's plans or results 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 obligations under 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, including those in different asset types and outside the United States; (e) the nature and extent of future competition; (f) the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company's cost of borrowing; (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 Company's ability 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 Company's ability and willingness 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 ended December 31, 2005 and for the year ending December 31, 2006; (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) the impact on the liquidity, financial condition and results of operations of the Company's operators, borrowers and tenants resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of the Company's operators, borrowers and tenants to accurately estimate the magnitude of such liabilities; and (q) 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
As of December 31, 2005, September 30, 2005, June 30, 2005, March 31, 2005 and December 31, 2004
(In thousands, except per share amounts)
December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
(Audited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Assets
Real estate
investments:
Land $295,363 $295,017 $277,668 $153,851 $147,327
Building
and
improve-
ments 2,732,533 2,718,128 2,582,567 1,401,609 1,364,884
3,027,896 3,013,145 2,860,235 1,555,460 1,512,211
Accumulated
deprec-
iation (541,346) (513,098) (485,476) (467,285) (454,110)
Net real
estate
prop-
erty 2,486,550 2,500,047 2,374,759 1,088,175 1,058,101
Loans
receivable,
net 39,924 52,588 57,540 38,883 13,031
Net real
estate
invest-
ments 2,526,474 2,552,635 2,432,299 1,127,058 1,071,132
Cash and cash
equivalents 1,641 5,764 802 1,779 3,365
Escrow
deposits and
restricted
cash 59,667 56,397 51,951 17,764 25,710
Deferred
financing
costs, net 17,581 17,257 18,314 12,928 13,550
Subscriptions
receivable - - 97,020 - -
Notes
receivable-related
parties 2,841 2,893 2,876 3,234 3,216
Other 30,914 23,184 22,193 11,435 9,962
Total
assets $2,639,118 $2,658,130 $2,625,455 $1,174,198 $1,126,935
Liabilities and
stockholders'
equity
Liabilities:
Senior
notes
payable and
other
debt $1,802,564 $1,811,319 $1,832,684 $877,642 $843,178
Deferred
revenue 10,540 11,126 11,713 12,298 12,887
Interest
rate swap
agreement 1,580 6,177 11,155 9,717 16,550
Accrued
dividend 37,343 37,255 - 30,531 27,498
Accrued
interest 14,418 30,432 13,639 18,871 8,743
Accounts
payable
and other
accrued
liabilities 74,960 77,316 70,710 28,015 27,461
Deferred
income taxes 30,394 30,394 30,394 30,394 30,394
Total
liabil-
ities 1,971,799 2,004,019 1,970,295 1,007,468 966,711
Commitments
and
contingencies
Stockholders'
equity:
Preferred
stock, 10,000
shares
authorized,
unissued - - - - -
Common stock,
$0.25 par
value; 180,000
shares
authorized;
103,523,
103,226,
99,960,
85,223 and
85,131 shares
issued at
December 31,
2005,
September 30,
2005,
June 30,
2005,
March 31,
2005 and
December 31,
2004,
respectively 25,927 25,890 25,888 21,306 21,283
Capital in
excess of
par value 692,650 692,676 696,811 210,216 208,903
Unearned
compensation
on restricted
stock (713) (1,017) (1,301) (1,616) (633)
Accumulated
other
comprehensive
loss (143) (942) (5,343) (3,327) (9,114)
Retained
earnings
(deficit) (50,402) (60,280) (51,746) (48,255) (45,297)
667,319 656,327 664,309 178,324 175,142
Treasury
stock, 0, 79,
326, 413 and
532 shares
at December 31,
2005,
September 30,
2005,
June 30,
2005,
March 31,
2005 and
December 31,
2004,
respectively - (2,216) (9,149) (11,594) (14,918)
Total
stockholders'
equity 667,319 654,111 655,160 166,730 160,224
Total
liabilities
and
stockholders'
equity $2,639,118 $2,658,130 $2,625,455 $1,174,198 $1,126,935
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Years Ended December 31, 2005 and 2004
(In thousands, except per share amounts)
For the Three Months For the Year
Ended December 31, Ended December 31,
2005 2004 2005 2004
(Unaudited) (Audited)
Revenues:
Rental income $96,274 $61,031 $324,719 $232,076
Interest income
from loans
receivable 1,284 684 5,001 2,958
Interest and other
income 745 215 3,268 987
Total revenues 98,303 61,930 332,988 236,021
Expenses:
Interest 33,612 17,653 105,581 66,105
Depreciation 28,695 12,892 87,848 48,865
Property-level
operating expenses 706 468 2,576 1,337
General,
administrative and
professional fees 6,422 4,002 23,104 16,460
Stock-based
compensation 574 450 1,971 1,664
Loss on extinguishment
of debt 1,376 - 1,376 1,370
Net gain on swap
breakage (981) - (981) -
Net proceeds from
litigation
settlement (15,909) - (15,909) -
Contribution to
charitable
foundation 2,000 - 2,000 -
Total expenses 56,495 35,465 207,566 135,801
Income before net loss
on real estate
disposals and
discontinued
operations 41,808 26,465 125,422 100,220
Net loss on real
estate disposals - - (175) -
Income before
discontinued
operations 41,808 26,465 125,247 100,220
Discontinued operations 5,413 20,209 5,336 20,680
Net income $47,221 $46,674 $130,583 $120,900
Earnings per common share:
Basic:
Income before
discontinued
operations $0.40 $0.31 $1.32 $1.20
Net income $0.46 $0.55 $1.37 $1.45
Diluted:
Income before
discontinued
operations $0.40 $0.31 $1.31 $1.19
Net income $0.45 $0.55 $1.36 $1.43
Shares used in
computing earnings
per common share:
Basic 103,542 84,532 95,037 83,491
Diluted 104,176 85,180 95,775 84,352
Dividends declared per
common share $0.36 $0.325 $1.44 $1.30
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
2005 Quarters
Fourth
Quarter
Fourth Third Second First 2004
Revenues:
Rental
income $96,274 $93,569 $72,340 $62,536 $61,031
Interest
income
from loans
receivable 1,284 1,573 1,492 652 684
Interest and
other income 745 791 1,120 612 215
Total
revenues 98,303 95,933 74,952 63,800 61,930
Expenses:
Interest 33,612 32,263 22,730 16,976 17,653
Depreciation 28,695 27,694 18,239 13,220 12,892
Property-
level
operating
expenses 706 677 641 552 468
General,
administrative
and
professional
fees 6,422 6,109 5,553 5,020 4,002
Stock-based
compensation 574 471 506 420 450
Loss on
extinguishment
of debt 1,376 - - - -
Net gain on
swap breakage (981) - - - -
Net proceeds
from
litigation
settlement (15,909) - - - -
Contribution
to
charitable
foundation 2,000 - - - -
Total
expenses 56,495 67,214 47,669 36,188 35,465
Income before
net loss on
real estate
disposals and
discontinued
operations 41,808 28,719 27,283 27,612 26,465
Net loss on
real estate
disposals - - (175) - -
Income before
discontinued
operations 41,808 28,719 27,108 27,612 26,465
Discontinued
operations 5,413 2 (40) (39) 20,209
Net income $47,221 $28,721 $27,068 $27,573 $46,674
Earnings per
common share:
Basic:
Income
before
discon-
tinued
opera-
tions $0.40 $0.28 $0.31 $0.33 $0.31
Net
income $0.46 $0.28 $0.31 $0.33 $0.55
Diluted:
Income
before
discon-
tinued
opera-
tions $0.40 $0.28 $0.30 $0.32 $0.31
Net
income $0.45 $0.28 $0.30 $0.32 $0.55
Shares used
in
computing
earnings
per
common
share:
Basic 103,542 103,081 88,574 84,657 84,532
Diluted 104,176 103,880 89,350 85,400 85,180
Dividends
declared per
common share $0.36 $0.36 $0.36 $0.36 $0.325
Discontinued
operations:
Rental
income $230 $202 $202 $203 $666
Interest and
other income 165 - - - 500
Interest 81 154 196 196 288
Depreciation 15 46 46 46 97
Income (loss)
before gain on
sale of real
estate 299 2 (40) (39) 781
Gain on sale
of real
estate 5,114 - - - 19,428
Discontinued
operations $5,413 $2 $(40) $(39) $20,209
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Audited)
For the Year Ended
December 31,
2005 2004
Cash flows from operating activities:
Net income $130,583 $120,900
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation (including amounts in
discontinued operations) 88,002 49,238
Amortization of deferred financing costs 3,891 3,895
Stock-based compensation 1,971 1,664
Straight-lining of rental income (14,287) (2,462)
Amortization of deferred revenue (3,497) (2,577)
Loss on extinguishment of debt 1,358 1,370
Gain on sale of assets (including
amounts in discontinued operations) (4,939) (19,428)
Net gain on swap breakage (981) -
Other (2,698) (2,016)
Changes in operating assets and liabilities:
Decrease (increase) in escrows deposits and
restricted cash 10,120 (8,965)
Increase in other assets (5,396) (102)
Increase in accrued interest 5,675 2,922
Increase in accounts payable and accrued
and other liabilities 13,962 5,519
Net cash provided by operating
activities 223,764 149,958
Cash flows from investing activities:
Net investment in real estate property (589,552) (323,931)
Proceeds from real estate disposals 1,416 21,100
Investment in loans receivable (47,333) -
Proceeds from loans receivable 20,274 3,580
Other 154 556
Net cash used in investing activities (615,041) (298,695)
Cash flows from financing activities:
Net change in borrowings under revolving
credit facility 50,200 39,000
Proceeds from debt 600,000 125,000
Repayment of debt (231,988) (67,011)
Issuance of common stock 101,964 64,206
Proceeds from stock option exercises 6,819 17,676
Cash distribution to stockholders (125,843) (103,523)
Payment of swap breakage fee (2,320) -
Other (9,279) (5,350)
Net cash provided by financing
activities 389,553 69,998
Net decrease in cash and cash equivalents (1,724) (78,739)
Cash and cash equivalents at beginning of period 3,365 82,104
Cash and cash equivalents at end of period $1,641 $3,365
Supplemental schedule of non-cash activities:
Assets and liabilities assumed
from acquisitions:
Real estate property investments $931,571 $103,603
Escrow deposits and restricted cash 34,144 9,170
Other assets acquired 1,560 206
Debt assumed 541,174 105,627
Other liabilities 33,275 7,352
Issuance of common stock 392,826 -
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
2005 Quarters
Fourth
Quarter
Fourth Third Second First 2004
Cash flows
from
operating
activities:
Net income $47,221 $28,721 $27,068 $27,573 $46,674
Adjustments
to reconcile
net income
to net cash
provided by
operating
activities:
Depreciation
(including
amounts in
discontinued
opera-
tions) 28,710 27,740 18,286 13,266 12,989
Amortization
of deferred
financing
costs 998 1,058 945 890 879
Stock-based
compens-
ation 574 471 506 420 450
Straight-lining
of rental
income (5,895) (5,558) (1,954) (880) (734)
Amortization
of deferred
revenue (1,034) (1,143) (684) (636) (691)
Loss on
extinguishment
of debt 1,358 - - - -
(Gain) loss
on sale of
assets
(including
amounts in
discontinued
opera-
tions) (5,114) - 175 - (19,428)
Net gain on
swap
breakage (981) - - - -
Other (497) (577) (578) (1,046) (109)
Changes in
operating assets
and liabilities:
Decrease
(increase) in
escrows
deposits and
restricted
cash 6,994 (3,085) (1,983) 8,194 (8,953)
(Increase)
decrease in
other
assets (1,330) 5,197 (8,560) (703) 727
(Decrease)
increase in
accrued
interest (16,014) 17,232 (5,671) 10,128 (6,518)
(Decrease)
increase in
accounts
payable and
accrued and
other
liabil-
ities (2,788) 1,324 14,567 859 117
Net cash
provided
by operating
activ-
ities 52,202 71,380 42,117 58,065 25,403
Cash flows from
investing
activities:
Net investment
in real
estate
property (9,592) (98,181) (450,641) (31,139) (43,095)
Proceeds from
real estate
disposals 295 - 1,121 - 21,100
Investment in
loans receivable - - (19,515) (27,818) -
Proceeds from
loans
receivable 13,084 5,431 762 997 3,320
Other (563) (671) 423 966 53
Net cash
provided by
(used in)
investing
activ-
ities 3,224 (93,421) (467,850) (56,994) (18,622)
Cash flows from
financing
activities:
Net change in
borrowings
under revolving
credit
facility (6,700) (60,500) 94,100 23,300 (134,500)
Proceeds from
debt 200,000 - 400,000 - 125,000
Repayment of
debt (212,823) (12,321) (5,699) (1,145) (1,096)
Issuance of
common stock 126 97,144 2,439 2,255 5,303
Proceeds from
stock option
exercises 2,102 2,681 1,337 699 763
Cash
distribution
to
stock-
holders (37,255) - (61,090) (27,498) -
Payment of swap
breakage
fee (2,320) - - - -
Other (2,679) (1) (6,331) (268) (2,691)
Net cash
(used in)
provided
by financing
activ-
ities (59,549) 27,003 424,756 (2,657) (7,221)
Net (decrease)
increase in
cash and cash
equivalents (4,123) 4,962 (977) (1,586) (440)
Cash and cash
equivalents at
beginning of
period 5,764 802 1,779 3,365 3,805
Cash and cash
equivalents at
end of period $1,641 $5,764 $802 $1,779 $3,365
Supplemental
schedule of
non-cash
activities:
Assets and
liabilities
assumed from
acquisitions:
Real estate
property
invest-
ments $10,598 $54,729 $854,134 $12,110 $171
Escrow
deposits and
restricted
cash 331 1,361 32,204 248 -
Other assets
acquired - 54 1,506 - -
Debt
assumed 10,768 51,456 466,641 12,309 -
Other
liabilities 161 4,688 28,377 49 171
Issuance of
common stock - - 392,826 - -
FUNDS FROM OPERATIONS AND NORMALIZED FFO
(In thousands, except per share amounts)
2005 Quarters
Fourth Third Second First Year
Net income $47,221 $28,721 $27,068 $27,573 $130,583
Adjustments:
Depreciation
on real
estate
assets 28,557 27,576 18,144 13,129 87,406
Loss on real
estate
disposals - - 175 - 175
Other items:
Discontinued
operations:
Gain on
sale of
real
estate (5,114) - - - (5,114)
Depreciation
on real
estate
assets 15 46 46 46 153
FFO 70,679 56,343 45,433 40,748 213,203
Loss on
extinguishment
of debt 1,376 - - - 1,376
Contribution
to charitable
foundation 2,000 - - - 2,000
Net proceeds
from
litigation
settle-
ment (15,909) - - - (15,909)
Net gain on
swap
breakage (981) - - - (981)
Bridge loan
commitment
fee - - 402 - 402
Normalized
FFO $57,165 $56,343 $45,835 $40,748 $200,091
Per diluted
share:
Net income $0.45 $0.28 $0.30 $0.32 $1.36
Adjustments:
Depreciation
on real
estate
assets 0.28 0.26 0.21 0.16 0.92
Loss on real
estate
disposals - - - - -
Other items:
Discontinued
operations:
Gain on
sale of
real
estate (0.05) - - - (0.05)
Depreciation
on real
estate
assets - - - - -
FFO 0.68 0.54 0.51 0.48 2.23
Loss on
extinguishment
of debt 0.01 - - - 0.01
Contribution
to charitable
foundation 0.02 - - - 0.02
Net proceeds
from litigation
settle-
ment (0.15) - - - (0.16)
Net gain on
swap
breakage (0.01) - - - (0.01)
Bridge loan
commitment
fee - - - - -
Normalized
FFO $0.55 $0.54 $0.51 $0.48 $2.09
FUNDS FROM OPERATIONS AND NORMALIZED FFO
(In thousands, except per share amounts)
2004 Quarters
Fourth Third Second First Year
Net income $46,674 $25,297 $25,654 $23,275 $120,900
Adjustments:
Depreciation
on real
estate
assets 12,785 13,041 11,954 10,697 48,477
Other items:
Discontinued
operations:
Gain on sale
of real
estate (19,428) - - - (19,428)
Depreciation
on real
estate
assets 97 112 88 76 373
FFO 40,128 38,450 37,696 34,048 150,322
Loss on
extinguishment
of debt - 1,370 - - 1,370
Normalized
FFO $40,128 $39,820 $37,696 $34,048 $151,692
Per diluted
share:
Net income $0.55 $0.30 $0.30 $0.28 $1.43
Adjustments:
Depreciation
on real
estate
assets 0.15 0.15 0.15 0.13 0.58
Other items:
Discontinued
operations:
Gain on
sale of
real
estate (0.23) - - - (0.23)
Depreciation
on real
estate
assets - - - - -
FFO 0.47 0.45 0.45 0.41 1.78
Loss on
extinguishment
of debt - 0.02 - - 0.02
Normalized
FFO $0.47 $0.47 $ 0.45 $0.41 $1.80
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.
2004 QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Fourth Third Second First Year
(Unaudited) (Audited)
Revenues:
Rental
income $61,031 $60,108 $58,166 $52,771 $232,076
Interest
income from
loans
receivable 684 763 755 756 2,958
Interest and
other income 215 189 302 281 987
Total
revenues 61,930 61,060 59,223 53,808 236,021
Expenses:
Interest 17,653 16,650 16,687 15,115 66,105
Depreciation 12,892 13,143 12,048 10,782 48,865
Property-level
operating
expenses 468 372 290 207 1,337
General,
administrative
and professional
fees 4,002 3,933 4,302 4,223 16,460
Stock-based
compensation 450 435 393 386 1,664
Loss on
extinguishment
of debt - 1,370 - - 1,370
Total
expenses 35,465 35,903 33,720 30,713 135,801
Income before
discontinued
operations 26,465 25,157 25,503 23,095 100,220
Discontinued
operations 20,209 140 151 180 20,680
Net income $46,674 $25,297 $25,654 $23,275 $120,900
Earnings per
common share:
Basic:
Income
before
discontinued
operat-
ions $0.31 $0.30 $0.30 $0.28 $1.20
Net income $0.55 $0.30 $0.31 $0.28 $1.45
Diluted:
Income
before
discontinued
operat-
ions $0.31 $0.30 $0.30 $0.28 $1.19
Net income $0.55 $0.30 $0.30 $0.28 $1.43
Shares used in
computing
earnings per
common share:
Basic 84,532 84,073 83,820 81,703 83,491
Diluted 85,180 84,889 84,565 82,760 84,352
Dividends
declared per
common
share $0.325 $0.325 $0.325 $0.325 $1.30
Discontinued
Operations:
Rental
income $666 $548 $544 $469 $2,227
Interest and
other
income 500 - - - 500
Interest 288 296 305 213 1,102
Depreciation 97 112 88 76 373
Income before
gain on sale
of real
estate 781 140 151 180 1,252
Gain on sale
of real
estate 19,428 - - - 19,428
Discontinued
operat-
ions $20,209 $140 $151 $180 $20,680
Projected Normalized FFO Per Diluted Share for the Year Ending December 31, 2006
The following table illustrates the Company's projected FFO per diluted share guidance for the year ending December 31, 2006.
GUIDANCE
For the Year
Ending
December 31, 2006
Net income $1.11 - $1.14
Adjustments:
Depreciation on
real estate assets 1.09 - 1.09
FFO $2.20 - $2.23
Normalized FFO $2.20 - $2.23
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 December 31, 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") (dollars in thousands):
Pro forma net income for the three months
ended December 31, 2005 $47,236
Add back:
Pro forma interest 33,673
Pro forma depreciation 28,695
Net gain on real estate disposals (4,939)
Loss on extinguishment of debt 1,376
Net gain on swap breakage (981)
Stock-based compensation 574
Pro forma EBITDA $105,634
Pro forma annualized EBITDA, including
net proceeds from litigation settlement and
contribution to charitable foundation
not annualized $380,809
As of December 31, 2005:
Debt $1,802,564
Cash (1,641)
Restricted cash pertaining to debt (7,365)
Escrow deposits pertaining to Section 1031
exchange (9,933)
Net debt $1,783,625
Net debt to pro forma annualized EBITDA 4.7 x
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.
Scheduled Maturities of Borrowing Arrangements
The Company's indebtedness has the following maturities as of December 31,
2005 (in thousands):
As of
December 31,
2005
2006 $15,674
2007 104,836
2008 32,983
2009 315,584
2010 265,763
Thereafter 1,067,724
Total $1,802,564
Ventas - Kindred PortfolioThe 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 and by asset class:
Ventas -
Kindred TTM(1) TTM(1)
Master Facility EBITDARM EBITDAR
Lease Count Coverage(2,4) Coverage(3,4)
1 91 2.6x 2.0x
2 46 2.9x 2.3x
3 43 2.4x 1.7x
4 45 2.5x 1.8x
Portfolio 225 2.6x 2.0x
Ventas -
Kindred TTM(1) TTM(1)
Asset EBITDARM EBITDAR
Class Coverage(2,4) Coverage(3,4)
Hospitals 3.7x 3.0x
Nursing
facilities 2.0x 1.4x
Portfolio 2.6x 2.0x
(1) Trailing twelve months EBITDARM and EBITDAR for the period ended
September 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 September 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
September 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.
- END -
Click here to listen to the webcast archive