First Quarter Normalized FFO Per Share Rises 15 Percent to $0.55 Per Share;
Company Increases 2006 Normalized FFO Guidance to $2.23 to $2.25 Per Share
LOUISVILLE, KY (May 1, 2006) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that first quarter 2006 normalized Funds from Operations ("FFO") rose 41 percent to $57.5 million, compared with $40.7 million in the first quarter of 2005. Normalized FFO per diluted share in the first quarter of 2006 increased 15 percent to $0.55 from $0.48 per diluted share for the comparable 2005 period. In the quarter ended March 31, 2006, the Company had 104.3 million weighted average diluted shares outstanding, compared to 85.4 million weighted average diluted shares outstanding a year earlier.
Results for the first quarter benefited from increased rent resulting from the Company's accelerated investment activity in 2005 and increased rent from the escalator clauses contained in its existing leases.
"With a 15 percent increase in normalized FFO for the first quarter and continued execution of our strategic growth and development plan, we feel 2006 is off to an excellent start," Ventas President, Chairman and CEO Debra A. Cafaro said. "We remain focused on our goal of delivering reliable cash flow and superior risk-adjusted returns. As we look ahead to the remainder of the year, we are pleased to increase our guidance for 2006 normalized FFO per share to the higher end of the range of $2.23 to $2.25 per share."
GAAP NET INCOME
Net income for the quarter ended March 31, 2006 was $29.1 million, or $0.28 per diluted share, compared with net income for the quarter ended March 31, 2005 of $27.6 million, or $0.32 per diluted share.
FIRST QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
-- As previously announced, on April 26, 2006, the Company entered into a
$500 million unsecured revolving credit facility initially priced at
75 basis points over LIBOR, significantly better than its previous
$300 million secured revolving credit facility that was priced at
145 basis points over LIBOR. The new credit facility matures in 2009,
subject to a one-year extension at the Company's option.
-- As previously reported, on March 31, 2006, Ventas completed its
purchase of Towne Centre, a 327-unit/bed continuing-care retirement
community (CCRC) located in Indiana, in a transaction valued at
$29 million. Ventas's current tenant, Capital Senior Living
Corporation (NYSE:CSU) (together with its subsidiaries, "Capital
Senior"), was the seller, and Ventas leased the CCRC to Capital Senior
at the closing. The triple-net operating lease with Capital Senior has
an initial cash yield of 8 percent and 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.
-- Also in the first quarter of 2006, Ventas purchased one seniors housing
facility and three Alzheimer's facilities for $19.3 million in two
separate transactions. The assets are located in California and
Florida and contain 194 units/beds. The leases provide Ventas with an
initial cash yield of approximately 8.7 percent and an expected
unlevered yield over the life of the leases of 10.5 percent.
-- Since March 31, 2006, Ventas purchased one seniors housing facility
located in Florida for $6.9 million. The asset contains 160 units/beds.
The lease provides Ventas with an initial cash yield of approximately
8.5 percent and an expected unlevered yield over the life of the lease
of approximately 10 percent.
-- With these completed acquisitions, annualized REIT Revenue from Kindred
represents approximately 51 percent of the Company's run rate total
revenue, assuming a full year effect of all closed 2006 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 33 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 2.5 times for the
trailing twelve-month period ended December 31, 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.
-- As previously announced, on April 7, 2006, the Company filed an
automatic shelf registration statement with the Securities and Exchange
Commission relating to the sale from time to time of various debt and
equity securities, which will provide the Company with greater
flexibility and efficiency in raising debt and/or equity through the
capital markets. The Company has no current intention to issue any
securities.
-- The Company's debt to total capitalization at March 31, 2006 was
approximately 35 percent.
-- As of March 31, 2006, Ventas's enterprise value exceeded $5.3 billion.
-- Ventas expects to file its Form 10-Q for the quarter ended March 31,
2006 on or about May 2, 2006.
FIRST QUARTER 2006 RESULTSRental revenue for the quarter ended March 31, 2006 was $96.5 million, of which $50.3 million resulted from leases with Kindred. First quarter 2006 expenses totaled $68.7 million and included $28.5 million of depreciation expense and $33.0 million of interest expense. General, administrative and professional fees totaled $6.7 million and included $0.8 million for non-cash stock-based compensation. Property-level operating expenses relating to the Company's medical office building portfolio for the period were $0.6 million.
VENTAS RAISES NORMALIZED FFO GUIDANCE FOR 2006
Ventas also stated that it expects its 2006 normalized FFO to be between $2.23 and $2.25 per diluted share, increased from its previous guidance of $2.20 to $2.23 per diluted share. If achieved, this projection represents approximately 7 percent growth in normalized FFO per share.
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, including in connection with the replacement of the Company's previous secured revolving credit facility with the new $500 million unsecured revolving credit facility, 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.
FIRST QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on May 2, 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.earnings.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 386 healthcare and seniors housing assets in 42 states. Its diverse portfolio includes 41 hospitals, 200 skilled nursing facilities and 145 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. 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 March 31, 2006, December 31, 2005, September 30, 2005,
June 30, 2005 and March 31, 2005
(In thousands, except per share amounts)
March 31, December 31, September 30, June 30, March 31,
2006 2005 2005 2005 2005
(Unaudited) (Audited) (Unaudited) (Unaudited) (Unaudited)
Assets
Real estate
investments:
Land $298,185 $295,363 $295,017 $277,668 $153,851
Building
and
improve-
ments 2,778,262 2,732,533 2,718,128 2,582,567 1,401,609
3,076,447 3,027,896 3,013,145 2,860,235 1,555,460
Accumulated
deprecia-
tion (569,675) (541,346) (513,098) (485,476) (467,285)
Net real
estate
prop-
erty 2,506,772 2,486,550 2,500,047 2,374,759 1,088,175
Loans
receivable,
net 35,870 39,924 52,588 57,540 38,883
Net real
estate
invest-
ments 2,542,642 2,526,474 2,552,635 2,432,299 1,127,058
Cash and
cash
equivalents 1,466 1,641 5,764 802 1,779
Escrow
deposits and
restricted
cash 61,753 59,667 56,397 51,951 17,764
Deferred
financing
costs, net 16,844 17,581 17,257 18,314 12,928
Subscriptions
receivable - - - 97,020 -
Notes
receivable-
related
parties 2,859 2,841 2,893 2,876 3,234
Other 36,040 30,914 23,184 22,193 11,435
Total
assets $2,661,604 $2,639,118 $2,658,130 $2,625,455 $1,174,198
Liabilities
and
stockholders'
equity
Liabilities:
Senior notes
payable
and other
debt $1,854,551 $1,802,564 $1,811,319 $1,832,684 $877,642
Deferred
revenue 9,953 10,540 11,126 11,713 12,298
Interest
rate swap
agreement 577 1,580 6,177 11,155 9,717
Accrued
dividend - 37,343 37,255 - 30,531
Accrued
interest 34,636 14,418 30,432 13,639 18,871
Accounts
payable and
other
accrued
liabilities 72,726 74,960 77,316 70,710 28,015
Deferred
income
taxes 30,394 30,394 30,394 30,394 30,394
Total
liabil-
ities 2,002,837 1,971,799 2,004,019 1,970,295 1,007,468
Commitments
and
contingencies
Stockholders'
equity:
Preferred
stock,
10,000
shares
authorized,
unissued - - - - -
Common stock,
$0.25 par
value;
180,000
shares
authorized;
103,850,
103,523,
103,226,
99,960 and
85,223
shares issued
at March 31,
2006,
December 31,
2005,
September 30,
2005,
June 30,
2005 and
March 31,
2005,
respectively 25,974 25,927 25,890 25,888 21,306
Capital in
excess of
par value 694,531 692,650 692,676 696,811 210,216
Unearned
compensa-
tion on
restricted
stock - (713) (1,017) (1,301) (1,616)
Accumulated
other
comprehensive
income
(loss) 685 (143) (942) (5,343) (3,327)
Retained
earnings
(deficit) (62,308) (50,402) (60,280) (51,746) (48,255)
658,882 667,319 656,327 664,309 178,324
Treasury stock,
4, 0, 79, 326
and 413 shares
at March 31,
2006,
December 31,
2005,
September 30,
2005,
June 30,
2005 and
March 31,
2005,
respectively (115) - (2,216) (9,149) (11,594)
Total
stock-
holders'
equity 658,767 667,319 654,111 655,160 166,730
Total
liabilities
and
stock-
holders'
equity $2,661,604 $2,639,118 $2,658,130 $2,625,455 $1,174,198
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2006 and 2005
(In thousands, except per share amounts)
(Unaudited)
For the Three Months
Ended March 31,
2006 2005
Revenues:
Rental income $96,505 $62,536
Interest income from loans receivable 968 652
Interest and other income 341 612
Total revenues 97,814 63,800
Expenses:
Interest 32,957 16,976
Depreciation 28,470 13,220
Property-level operating expenses 622 552
General, administrative and professional fees
(including non-cash stock-based compensation
expense of $758 and $420, respectively) 6,631 5,440
Total expenses 68,680 36,188
Income before discontinued operations 29,134 27,612
Discontinued operations -- (39)
Net income $29,134 $27,573
Earnings per common share:
Basic:
Income before discontinued operations $0.28 $0.33
Net income $0.28 $0.33
Diluted:
Income before discontinued operations $0.28 $0.32
Net income $0.28 $0.32
Shares used in computing earnings per common
share:
Basic 103,751 84,657
Diluted 104,300 85,400
Dividends declared per common share $0.395 $ 0.36
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
First Quarter 2005 Quarters
2006 Fourth Third Second First
Revenues:
Rental income $96,505 $96,274 $93,569 $72,340 $62,536
Interest income from
loans receivable 968 1,284 1,573 1,492 652
Interest and other
income 341 745 791 1,120 612
Total revenues 97,814 98,303 95,933 74,952 63,800
Expenses:
Interest 32,957 33,612 32,263 22,730 16,976
Depreciation 28,470 28,695 27,694 18,239 13,220
Property-level
operating expenses 622 706 677 641 552
General,
administrative and
professional fees
(including non-cash
stock-based
compensation expense
of $758, $574,$471,
$506 and $420,
respectively) 6,631 6,996 6,580 6,059 5,440
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 68,680 56,495 67,214 47,669 36,188
Income before net
loss on real estate
disposals and
discontinued
operations 29,134 41,808 28,719 27,283 27,612
Net loss on real
estate disposals -- -- -- (175) --
Income before
discontinued
operations 29,134 41,808 28,719 27,108 27,612
Discontinued
operations -- 5,413 2 (40) (39)
Net income $29,134 $47,221 $28,721 $27,068 $27,573
Earnings per common
share:
Basic:
Income before
discontinued
operations $0.28 $0.40 $0.28 $0.31 $0.33
Net income $0.28 $0.46 $0.28 $0.31 $0.33
Diluted:
Income before
discontinued
operations $0.28 $0.40 $0.28 $0.30 $0.32
Net income $0.28 $0.45 $0.28 $0.30 $0.32
Shares used in
computing
earnings per
common share:
Basic 103,751 103,542 103,081 88,574 84,657
Diluted 104,300 104,176 103,880 89,350 85,400
Dividends declared
per common share $0.395 $0.36 $0.36 $0.36 $0.36
Discontinued
operations:
Rental income $-- $230 $202 $202 $203
Interest and
other income -- 165 -- -- --
Interest -- 81 154 196 196
Depreciation -- 15 46 46 46
Income (loss)
before gain on
sale of
real estate -- 299 2 (40) (39)
Gain on sale of
real estate -- 5,114 -- -- --
Discontinued
operations $-- $5,413 $ 2 $(40) $(39)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(In thousands)
(Unaudited)
For the Three Months Ended
March 31,
2006 2005
Cash flows from operating activities:
Net income $29,134 $27,573
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation (including amounts in
discontinued operations) 28,470 13,266
Amortization of deferred financing costs 770 890
Stock-based compensation 758 420
Straight-lining of rental income (4,950) (880)
Amortization of deferred revenue (603) (636)
Other (177) (1,046)
Changes in operating assets and liabilities:
(Increase) decrease in escrow deposits and
restricted cash (2,086) 8,194
Increase in other assets (405) (703)
Increase in accrued interest 20,218 10,128
(Decrease) increase in accounts payable
and accrued and other liabilities (1,973) 859
Net cash provided by operating activities 69,156 58,065
Cash flows from investing activities:
Net investment in real estate property (48,354) (31,139)
Investment in loans receivable -- (27,818)
Proceeds from loans receivable 4,070 997
Other (231) 966
Net cash used in investing activities (44,515) (56,994)
Cash flows from financing activities:
Net change in borrowings under revolving
credit facility 52,600 23,300
Proceeds from debt 2,074 --
Repayment of debt (2,687) (1,145)
Issuance of common stock 253 2,255
Proceeds from stock option exercises 1,360 699
Cash distribution to stockholders (78,383) (27,498)
Other (33) (268)
Net cash used in financing activities (24,816) (2,657)
Net decrease in cash and cash equivalents (175) (1,586)
Cash and cash equivalents at beginning of period 1,641 3,365
Cash and cash equivalents at end of period $1,466 $1,779
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate property investments $-- $12,110
Escrow deposits and restricted cash -- 248
Debt assumed -- 12,309
Other liabilities -- 49
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
First Quarter 2005 Quarters
2006 Fourth Third Second First
Cash flows from
operating
activities:
Net income $29,134 $47,221 $28,721 $27,068 $27,573
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation
(including
amounts in
discontinued
operations) 28,470 28,710 27,740 18,286 13,266
Amortization
of deferred
financing
costs 770 998 1,058 945 890
Stock-based
compensation 758 574 471 506 420
Straight-lining
of rental
income (4,950) (5,895) (5,558) (1,954) (880)
Amortization
of deferred
revenue (603) (1,034) (1,143) (684) (636)
Loss on
extinguish-
ment of
debt -- 1,358 -- -- --
(Gain) loss
on sale
of assets
(including
amounts in
discontinued
operations) -- (5,114) -- 175 --
Net gain on
swap breakage -- (981) -- -- --
Other (177) (497) (577) (578) (1,046)
Changes in
operating assets
and liabilities:
(Increase)
decrease in
escrows
deposits and
restricted
cash (2,086) 6,994 (3,085) (1,983) 8,194
(Increase)
decrease in
other assets (405) (1,330) 5,197 (8,560) (703)
Increase
(decrease) in
accrued
interest 20,218 (16,014) 17,232 (5,671) 10,128
(Decrease)
increase in
accounts
payable and
accrued and
other
liabilities (1,973) (2,788) 1,324 14,567 859
Net cash
provided by
operating
activities 69,156 52,202 71,380 42,117 58,065
Cash flows from
investing
activities:
Net investment
in real
estate
property (48,354) (9,592) (98,181) (450,641) (31,139)
Proceeds
from real
estate
disposals -- 295 -- 1,121 --
Investment
in loans
receivable -- -- -- (19,515) (27,818)
Proceeds
from loans
receivable 4,070 13,084 5,431 762 997
Other (231) (563) (671) 423 966
Net cash
(used in)
provided
by
investing
activities (44,515) 3,224 (93,421) (467,850) (56,994)
Cash flows
from
financing
activities:
Net change
in
borrowings
under
revolving
credit
facility 52,600 (6,700) (60,500) 94,100 23,300
Proceeds
from debt 2,074 200,000 -- 400,000 --
Repayment
of debt (2,687) (212,823) (12,321) (5,699) (1,145)
Issuance of
common stock 253 126 97,144 2,439 2,255
Proceeds from
stock option
exercises 1,360 2,102 2,681 1,337 699
Cash
distribution
to
stock-
holders (78,383) (37,255) -- (61,090) (27,498)
Payment of
swap
breakage fee -- (2,320) -- -- --
Other (33) (2,679) (1) (6,331) (268)
Net cash
(used in)
provided
by
financing
activ-
ities (24,816) (59,549) 27,003 424,756 (2,657)
Net (decrease)
increase in
cash and
cash
equivalents (175) (4,123) 4,962 (977) (1,586)
Cash and cash
equivalents
at beginning
of period 1,641 5,764 802 1,779 3,365
Cash and cash
equivalents
at end of
period $1,466 $1,641 $5,764 $802 $1,779
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
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
liabil-
ities -- 161 4,688 28,377 49
Issuance
of common
stock -- -- -- 392,826 --
FUNDS FROM OPERATIONS AND NORMALIZED FFO
(In thousands, except per share amounts)
First Quarter 2005 Quarters
2006 Fourth Third Second First
Net income $29,134 $47,221 $28,721 $27,068 $ 27,573
Adjustments:
Depreciation
on real
estate
assets 28,329 28,557 27,576 18,144 13,129
Loss on real
estate
disposals - - - 175 -
Other items:
Discontinued
operations:
Gain on sale
of real
estate - (5,114) - - -
Depreciation
on real
estate
assets - 15 46 46 46
FFO 57,463 70,679 56,343 45,433 40,748
Loss on
extinguishment
of debt - 1,376 - - -
Contribution
to charitable
foundation - 2,000 - - -
Net proceeds
from litigation
settlement - (15,909) - - -
Net gain on
swap breakage - (981) - - -
Bridge loan
commitment fee - - - 402 -
Normalized
FFO $57,463 $57,165 $56,343 $45,835 $40,748
Per diluted
share:
Net income $0.28 $0.45 $0.28 $0.30 $0.32
Adjustments:
Depreciation
on real
estate
assets 0.27 0.28 0.26 0.21 0.16
Loss on real
estate
disposals - - - - -
Other items:
Discontinued
operations:
Gain on sale
of real
estate - (0.05) - - -
Depreciation
on real
estate
assets - - - - -
FFO 0.55 0.68 0.54 0.51 0.48
Loss on
extinguishment
of debt - 0.01 - - -
Contribution to
charitable
foundation - 0.02 - - -
Net proceeds
from litigation
settlement - (0.15) - - -
Net gain on
swap breakage - (0.01) - - -
Bridge loan
commitment fee - - - - -
Normalized FFO $0.55 $0.55 $0.54 $0.51 $0.48
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 U.S. generally accepted accounting principles ("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 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 elsewhere in this press release.
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 $1.14 - $1.16
Adjustments:
Depreciation on real estate assets 1.08 - 1.08
FFO $2.22 - $2.24
Loss on extinguishment of debt 0.01 - 0.01
Normalized FFO $2.23 - $2.25
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 trailing twelve months ended March 31, 2006, 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 trailing
twelve months ended March 31, 2006 $126,501
Add back:
Pro forma interest 142,574
Pro forma depreciation 117,290
Net gain on real estate disposals (4,939)
Loss on extinguishment of debt 1,376
Net gain on swap breakage (981)
Stock-based compensation 2,309
Pro forma EBITDA $384,130
As of March 31, 2006:
Debt $1,854,551
Cash (1,466)
Restricted cash pertaining to debt (7,531)
Escrow deposits pertaining to Section 1031
exchange (10,075)
Net debt $1,835,479
Net debt to pro forma EBITDA 4.8x
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 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 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 March 31,
2006 (in thousands):
As of
March 31,
2006
2006 $13,010
2007 157,471
2008 33,020
2009 315,623
2010 265,805
Thereafter 1,069,622
Total $1,854,551
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:
Kindred Master Lease Facility TTM(1) EBITDARM TTM(1) EBITDAR
Count Coverage(2,4) Coverage(3,4)
1 91 2.5x 1.9x
2 46 2.8x 2.2x
3 43 2.2x 1.5x
4 45 2.3x 1.7x
Portfolio 225 2.5x 1.9x
Kindred Asset Class Facility TTM(1) EBITDARM TTM(1) EBITDAR
Count Coverage(2,4) Coverage(3,4)
Hospitals 39 3.6x 2.9x
Nursing Homes 186 1.8x 1.2x
Portfolio 225 2.5x 1.9x
(1) Trailing twelve months EBITDARM and EBITDAR for the period ended
December 31, 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 December 31, 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 December 31, 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 in the second quarter of 2005.
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