Second Quarter Normalized FFO Per Share Rises 12 Percent to $0.57 Per Share;
Company Increases 2006 Normalized FFO Guidance to $2.25 to $2.27 Per Share;
Ventas Debt Rated Investment Grade by Fitch Ratings
LOUISVILLE, KY (July 27, 2006) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that second quarter 2006 normalized Funds from Operations ("FFO") rose 30 percent to $59.5 million, compared with $45.8 million in the second quarter of 2005. Normalized FFO per diluted share in the second quarter of 2006 increased 12 percent to $0.57 from $0.51 per diluted share for the comparable 2005 period. In the quarter ended June 30, 2006, the Company had 104.4 million weighted average diluted shares outstanding, compared to 89.4 million weighted average diluted shares outstanding a year earlier.
Normalized FFO for the six months ended June 30, 2006 was $117.0 million, or $1.12 per diluted share, a 35 percent increase from $86.6 million, or $0.99 per diluted share, for the comparable 2005 period.
Normalized FFO for all periods excludes a $1.3 million expense relating to the write-off of unamortized deferred financing fees in connection with the Company's successful refinancing of its previous secured revolving credit facility with a $500 million unsecured revolving credit facility during the second quarter of 2006. Results for the second quarter and first six months of 2006 benefited from increased rent resulting from the Company's successful implementation of its acquisition program and leading internal growth rate from its existing leases.
"Several important recent developments underscore our dedication to disciplined financial management, our focus on delivering reliable cash flows and superior risk-adjusted returns, and our commitment to operate with transparency and integrity," Ventas Chairman, President and CEO Debra A. Cafaro said. "We were gratified to recently receive our first investment grade rating from Fitch Ratings. Additionally, we kept the Reset Right process with Kindred moving forward. And finally, we remain one of the top performing REITs with our eleven consecutive quarters of double digit normalized FFO per share growth and continued execution of our strategic diversification plan. As we look ahead to the rest of the year, we are pleased to increase our guidance for 2006 normalized FFO per share to $2.25 to $2.27 per share."
GAAP NET INCOME
Net income for the quarter ended June 30, 2006 was $29.3 million, or $0.28 per diluted share, compared with net income for the quarter ended June 30, 2005 of $27.1 million, or $0.30 per diluted share.
Net income for the six months ended June 30, 2006 was $58.4 million, or $0.56 per diluted share, compared with net income for the six months ended June 30, 2005 of $54.6 million, or $0.63 per diluted share.
SECOND QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
-- Kindred Healthcare, Inc. (NYSE: KND) ("Kindred") is required to provide
Ventas with all of the information provided to, consulted or reviewed
by any of Kindred's appraisers in connection with the appraisal reports
prepared on the 225 properties Ventas leases to Kindred, said the
Supreme Court of the State of New York, County of New York.
Furthermore, the Court required Kindred to promptly provide to Ventas
other information relevant to the performance of Ventas's assets,
including intercompany pharmacy and therapy contracts.
-- On July 17, 2006, Ventas requested that the American Arbitration
Association (AAA) select a qualified appraiser to complete the Fair
Market Rental determinations on the Ventas properties in connection
with the Reset Right. Ventas and Kindred also remain in discussions
about agreeing upon a final appraiser to complete these determinations.
-- On July 7, 2006, Fitch Ratings assigned an investment grade rating
(BBB-) to Ventas's unsecured debt, citing the Company's strong and
growing operating cash flow and the liquidity provided by its new $500
million unsecured revolving credit facility, supported by its strong
property operations and continued portfolio diversification.
-- As previously reported, on April 18, 2006, Ventas purchased one seniors
housing facility located in Florida for $6.9 million. The asset
contains 106 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.
-- Also in the second quarter of 2006, Ventas purchased two seniors
housing facilities for $19.1 million. The assets are located in
Minnesota and contain an aggregate of 137 units/beds. The lease
provides Ventas with an initial cash yield of approximately 8 percent
and an expected unlevered yield over the life of the lease of
approximately 9 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 March 31, 2006 (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 was ranked as the best performing healthcare REIT in the Morgan
Stanley REIT Index (RMS) during the twelve month period ended June 30,
2006 with annual total shareholder return of 17.7 percent. It was also
one of the top ten best performing REITs in the RMS for the five year
period ended June 30, 2006 with annual total shareholder return of
33.9 percent.
-- The Company's debt to total capitalization at June 30, 2006 was
approximately 35 percent.
-- As of June 30, 2006, Ventas's enterprise value exceeded $5.4 billion.
-- Ventas expects to file its Form 10-Q for the quarter ended June 30,
2006 on or about July 28, 2006.
SECOND QUARTER 2006 RESULTSRental revenue for the quarter ended June 30, 2006 was $99.1 million, of which $51.5 million resulted from leases with Kindred. Second quarter 2006 expenses totaled $71.0 million and included $29.1 million of depreciation expense and $33.7 million of interest expense. General, administrative and professional fees totaled $6.3 million and included $0.7 million for non-cash stock-based compensation. Property-level operating expenses relating to the Company's medical office building portfolio for the period were $0.7 million.
SIX MONTH 2006 RESULTS
Rental revenue for the six months ended June 30, 2006 was $195.6 million, of which $101.8 million resulted from leases with Kindred. Expenses for the six months ended June 30, 2006 totaled $139.7 million and included $57.6 million of depreciation expense and $66.7 million of interest expense. Combined general, administrative and professional fees totaled $12.9 million and included $1.5 million for non-cash stock-based compensation. Property- level operating expenses relating to the Company's medical office building portfolio for the period were $1.3 million.
VENTAS RAISES NORMALIZED FFO GUIDANCE FOR 2006
Ventas also stated that it expects its 2006 normalized FFO to be between $2.25 and $2.27 per diluted share, increased from its previous guidance of $2.23 to $2.25 per diluted share. If achieved, this projection represents 8 to 9 percent growth in normalized FFO per share over 2005.
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 (and any expenses related to) the Reset Right, whether through a negotiated resolution with Kindred or the appraisal process set forth in the Master Leases and (b) 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.
A 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.
SECOND QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on July 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.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 388 healthcare and seniors housing assets in 42 states. Its diverse portfolio includes 41 hospitals, 200 skilled nursing facilities and 147 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 to third parties, 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 June 30, 2006, March 31, 2006, December 31, 2005, September 30, 2005,
and June 30, 2005
(In thousands, except per share amounts)
June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited)
Assets
Real estate
investments:
Land $300,384 $298,185 $295,363 $295,017 $277,668
Building
and
improvements 2,801,550 2,778,262 2,732,533 2,718,128 2,582,567
3,101,934 3,076,447 3,027,896 3,013,145 2,860,235
Accumulated
depreciation (598,644) (569,675) (541,346) (513,098) (485,476)
Net real
estate
property 2,503,290 2,506,772 2,486,550 2,500,047 2,374,759
Loans
receivable,
net 35,800 35,870 39,924 52,588 57,540
Net real estate
investments 2,539,090 2,542,642 2,526,474 2,552,635 2,432,299
Cash and cash
equivalents 1,932 1,466 1,641 5,764 802
Escrow deposits
and restricted
cash 51,227 61,753 59,667 56,397 51,951
Deferred financing
costs, net 17,667 16,844 17,581 17,257 18,314
Subscriptions
receivable - - - - 97,020
Notes receivable-
related parties 2,501 2,859 2,841 2,893 2,876
Other 48,555 36,040 30,914 23,184 22,193
Total assets $2,660,972 $2,661,604 $2,639,118 $2,658,130 $2,625,455
Liabilities and
stockholders'
equity
Liabilities:
Senior notes
payable and
other debt $1,882,909 $1,854,551 $1,802,564 $1,811,319 $1,832,684
Deferred
revenue 9,374 9,953 10,540 11,126 11,713
Interest rate
swap agreement - 577 1,580 6,177 11,155
Accrued dividend - - 37,343 37,255 -
Accrued
interest 14,461 34,636 14,418 30,432 13,639
Accounts payable
and accrued and
other
liabilities 73,838 72,726 74,960 77,316 70,710
Deferred income
taxes 30,394 30,394 30,394 30,394 30,394
Total
liabilities 2,010,976 2,002,837 1,971,799 2,004,019 1,970,295
Commitments and contingencies
Stockholders'
equity:
Preferred stock,
10,000 shares
authorized,
unissued - - - - -
Common stock,
$0.25 par value;
180,000 shares
authorized;
103,975, 103,854,
103,523, 103,226
and 99,960 shares
issued at June 30,
2006, March 31,
2006, December 31,
2005, September 30,
2005 and June 30,
2005,
respectively 26,004 25,974 25,927 25,890 25,888
Capital in excess
of par value 696,667 694,531 692,650 692,676 696,811
Unearned
compensation
on restricted
stock - - (713) (1,017) (1,301)
Accumulated other
comprehensive
income (loss) 1,449 685 (143) (942) (5,343)
Retained earnings
(deficit) (74,124) (62,308) (50,402) (60,280) (51,746)
649,996 658,882 667,319 656,327 664,309
Treasury stock,
0, 4, 0, 79 and
326 shares at
June 30, 2006,
March 31, 2006,
December 31, 2005,
September 30,
2005 and June 30,
2005,
respectively - (115) - (2,216) (9,149)
Total stockholders'
equity 649,996 658,767 667,319 654,111 655,160
Total liabilities
and
stockholders'
equity $2,660,972 $2,661,604 $2,639,118 $2,658,130 $2,625,455
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2006 and 2005
(In thousands, except per share amounts)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
Revenues:
Rental income $99,095 $72,340 $195,600 $134,876
Interest income
from loans receivable 839 1,492 1,807 2,144
Interest and other income 372 1,120 713 1,732
Total revenues 100,306 74,952 198,120 138,752
Expenses:
Interest 33,723 22,730 66,680 39,706
Depreciation 29,111 18,239 57,581 31,459
Property-level
operating expenses 654 641 1,276 1,193
General, administrative
and professional fees
(including non-cash
stock-based compensation
expense of $727 and $506
for the three months
ended 2006 and 2005,
respectively, and $1,485
and $926 for the six months
ended 2006 and 2005,
respectively) 6,287 6,059 12,918 11,499
Loss on extinguishment
of debt 1,273 - 1,273 -
Total expenses 71,048 47,669 139,728 83,857
Income before net loss
on real estate disposals
and discontinued
operations 29,258 27,283 58,392 54,895
Net loss on real
estate disposals - (175) - (175)
Income before
discontinued
operations 29,258 27,108 58,392 54,720
Discontinued operations - (40) - (79)
Net income $29,258 $27,068 $58,392 $54,641
Earnings per common share:
Basic:
Income before
discontinued
operations $0.28 $0.31 $0.56 $0.63
Net income $0.28 $0.31 $0.56 $0.63
Diluted:
Income before
discontinued
operations $0.28 $0.30 $0.56 $0.63
Net income $0.28 $0.30 $0.56 $0.63
Shares used in
computing earnings
per common share:
Basic 103,884 88,574 103,818 86,626
Diluted 104,374 89,350 104,337 87,386
Dividends declared
per common share $0.395 $0.360 $0.790 $0.720
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
2006 Quarters 2005 Quarters
Second First Fourth Third Second
Revenues:
Rental income $99,095 $96,505 $96,274 $93,569 $72,340
Interest income
from loans
receivable 839 968 1,284 1,573 1,492
Interest and
other income 372 341 745 791 1,120
Total
revenues 100,306 97,814 98,303 95,933 74,952
Expenses:
Interest 33,723 32,957 33,612 32,263 22,730
Depreciation 29,111 28,470 28,695 27,694 18,239
Property-level
operating
expenses 654 622 706 677 641
General,
administrative
and professional
fees(including
non-cash stock-
based compensation
expense of $727,
$758, $574, $471
and $506,
respectively) 6,287 6,631 6,996 6,580 6,059
Loss on
extinguishment
of debt 1,273 - 1,376 - -
Net gain on
swap breakage - - (981) - -
Net proceeds
from litigation
settlement - - (15,909) - -
Contribution to
charitable
foundation - - 2,000 - -
Total
expenses 71,048 68,680 56,495 67,214 47,669
Income before net
loss on real estate
disposals and
discontinued
operations 29,258 29,134 41,808 28,719 27,283
Net loss on real
estate disposals - - - - (175)
Income before
discontinued
operations 29,258 29,134 41,808 28,719 27,108
Discontinued
operations - - 5,413 2 (40)
Net income $29,258 $29,134 $47,221 $28,721 $27,068
Earnings per
common share:
Basic:
Income before
discontinued
operations $0.28 $0.28 $0.40 $0.28 $0.31
Net income $0.28 $0.28 $0.46 $0.28 $0.31
Diluted:
Income before
discontinued
operations $0.28 $0.28 $0.40 $0.28 $0.30
Net income $0.28 $0.28 $0.45 $0.28 $0.30
Shares used in
computing
earnings per
common share:
Basic 103,884 103,751 103,542 103,081 88,574
Diluted 104,374 104,300 104,176 103,880 89,350
Dividends declared
per common
share $0.395 $0.395 $0.360 $0.360 $0.360
Discontinued
operations:
Rental income $- $- $230 $202 $202
Interest and
other income - - 165 - -
Interest - - 81 154 196
Depreciation - - 15 46 46
Income (loss)
before gain
on sale of
real estate - - 299 2 (40)
Gain on sale
of real estate - - 5,114 - -
Discontinued
operations $- $- $5,413 $2 $(40)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(In thousands)
(Unaudited)
For the Six Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net income $58,392 $54,641
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation (including amounts in
discontinued operations) 57,581 31,551
Amortization of deferred financing costs 1,542 1,835
Stock-based compensation 1,485 926
Straight-lining of rental income (9,864) (2,834)
Amortization of deferred revenue (1,198) (1,320)
Loss on extinguishment of debt 1,273 -
Other (140) (1,448)
Changes in operating assets and liabilities:
(Increase) decrease in escrow deposits and
restricted cash (977) 6,211
Increase in other assets (2,426) (9,263)
Increase in accrued interest 43 4,457
(Decrease) increase in accounts payable and
accrued and other liabilities (468) 15,426
Net cash provided by operating activities 105,243 100,182
Cash flows from investing activities:
Net investment in real estate property (64,211) (481,780)
Investment in loans receivable - (47,333)
Proceeds from loans receivable 4,156 1,759
Escrow funds returned from an Internal
Revenue Code Section 1031 exchange 9,902 -
Other (5,246) 2,510
Net cash used in investing activities (55,399) (524,844)
Cash flows from financing activities:
Net change in borrowings under unsecured
revolving credit facility 167,000 -
Net change in borrowings under secured
revolving credit facility (89,200) 117,400
Proceeds from debt 2,074 400,000
Repayment of debt (10,377) (6,844)
Payment of deferred financing costs (2,901) (6,599)
Issuance of common stock 428 4,694
Proceeds from stock option exercises 2,880 2,036
Cash distribution to stockholders (119,457) (88,588)
Net cash (used in) provided by financing
activities (49,553) 422,099
Net increase (decrease) in cash and cash
equivalents 291 (2,563)
Cash and cash equivalents at beginning of period 1,641 3,365
Cash and cash equivalents at end of period $1,932 $802
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate property investments $9,827 $866,244
Escrow deposits and restricted cash 485 32,452
Other assets acquired - 1,506
Debt assumed 10,848 478,950
Other liabilities (536) 28,426
Issuance of common stock - 392,826
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
2006 Quarters 2005 Quarters
Second First Fourth Third Second
Cash flows from
operating
activities:
Net income $29,258 $29,134 $47,221 $28,721 $27,068
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation
(including
amounts in
discontinued
operations) 29,111 28,470 28,710 27,740 18,286
Amortization
of deferred
financing
costs 772 770 998 1,058 945
Stock-based
compensation 727 758 574 471 506
Straight-lining
of rental
income (4,914) (4,950) (5,895) (5,558) (1,954)
Amortization of
deferred
revenue (595) (603) (1,034) (1,143) (684)
Loss on
extinguishment
of debt 1,273 - 1,358 - -
(Gain) loss on
sale of
assets
(including
amounts in
discontinued
operations) - - (5,114) - 175
Net gain on
swap breakage - - (981) - -
Other 37 (177) (497) (577) (578)
Changes in operating
assets and
liabilities:
Decrease (increase)
in escrows
deposits and
restricted
cash 1,109 (2,086) 6,994 (3,085) (1,983)
(Increase)
decrease in
other
assets (2,021) (405) (1,330) 5,197 (8,560)
(Decrease)
increase in
accrued
interest (20,175) 20,218 (16,014) 17,232 (5,671)
Increase
(decrease)
in accounts
payable and
accrued and
other
liabilities 1,505 (1,973) (2,788) 1,324 14,567
Net cash
provided by
operating
activities 36,087 69,156 52,202 71,380 42,117
Cash flows from
investing
activities:
Net investment
in real estate
property (15,660) (48,354) (9,592) (98,181) (450,641)
Proceeds from
real estate
disposals - - 295 - 1,121
Investment in
loans receivable - - - - (19,515)
Proceeds from
loans receivable 86 4,070 13,084 5,431 762
Escrow funds
returned from
an Internal
Revenue Code
Section 1031
exchange 9,902 - - - -
Other (5,212) (231) (563) (671) 423
Net cash (used
in) provided
by investing
activities (10,884) (44,515) 3,224 (93,421) (467,850)
Cash flows from
financing activities:
Net change in
borrowings under
unsecured
revolving
credit
facility 167,000 - - - -
Net change in
borrowings under
secured revolving
credit
facility (141,800) 52,600 (6,700) (60,500) 94,100
Proceeds from
debt - 2,074 200,000 - 400,000
Repayment of
debt (7,690) (2,687) (212,823) (12,321) (5,699)
Issuance of
common stock 175 253 126 97,144 2,439
Proceeds from
stock option
exercises 1,520 1,360 2,102 2,681 1,337
Cash distribution
to
stockholders (41,074) (78,383) (37,255) - (61,090)
Payment of swap
breakage fee - - (2,320) - -
Payment of
deferred financing
costs (2,868) (33) (2,679) (1) (6,331)
Net cash (used
in) provided
by financing
activities (24,737) (24,816) (59,549) 27,003 424,756
Net increase
(decrease) in
cash and cash
equivalents 466 (175) (4,123) 4,962 (977)
Cash and cash
equivalents at
beginning of
period 1,466 1,641 5,764 802 1,779
Cash and cash
equivalents at
end of period $1,932 $1,466 $1,641 $5,764 $802
Supplemental
schedule of
non-cash activities:
Assets and
liabilities
assumed from
acquisitions:
Real estate
property
investments $9,827 $- $10,598 $54,729 $854,134
Escrow deposits
and restricted
cash 485 - 331 1,361 32,204
Other assets
acquired - - - 54 1,506
Debt assumed 10,848 - 10,768 51,456 466,641
Other
liabilities (536) - 161 4,688 28,377
Issuance of
common stock - - - - 392,826
FUNDS FROM OPERATIONS AND NORMALIZED FFO
(In thousands, except per share amounts)
2006 Quarters 2005 Quarters
Second First Fourth Third Second
Net income $29,258 $29,134 $47,221 $28,721 $27,068
Adjustments:
Depreciation on
real estate
assets 28,969 28,329 28,557 27,576 18,144
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
FFO 58,227 57,463 70,679 56,343 45,433
Loss on extinguishment
of debt 1,273 - 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 $59,500 $57,463 $57,165 $56,343 $45,835
Per diluted share:
Net income $0.28 $0.28 $0.45 $0.28 $0.30
Adjustments:
Depreciation on
real estate assets 0.28 0.27 0.28 0.26 0.21
Loss on real estate
disposals - - - - -
Other items:
Discontinued operations:
Gain on sale of
real estate - - (0.05) - -
Depreciation on real
estate assets - - - - -
FFO 0.56 0.55 0.68 0.54 0.51
Loss on extinguishment
of debt 0.01 - 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 $0.57 $0.55 $0.55 $0.54 $0.51
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 $1.16 - $1.18
Adjustments:
Depreciation on real estate assets 1.08 - 1.08
FFO $2.24 - $2.26
Loss on extinguishment of debt 0.01 - 0.01
Normalized FFO $2.25 - $2.27
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 June 30, 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 June 30, 2006 $ 131,801
Add back:
Pro forma interest 138,946
Pro forma depreciation 117,647
Net gain on real estate disposals (5,114)
Loss on extinguishment of debt 2,649
Net gain on swap breakage (981)
Stock-based compensation 2,530
Pro forma EBITDA $ 387,478
As of June 30, 2006:
Debt $1,882,909
Cash (1,932)
Restricted cash pertaining to debt (7,730)
Net debt $1,873,247
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 proforma 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 June 30,
2006 (in thousands):
As of
June 30,
2006
2006 $5,346
2007 15,778
2008 33,117
2009 482,726
2010 265,915
Thereafter 1,080,027
Total $1,882,909
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:
TTM(1) TTM(1)
Facility EBITDARM EBITDAR
Kindred Master Lease Count Coverage(2,4,5) Coverage(3,4,5)
1 91 2.4x 1.9x
2 46 2.8x 2.2x
3 43 2.4x 1.7x
4 45 2.3x 1.7x
Portfolio 225 2.5x 1.9x
TTM(1) TTM(1)
Facility EBITDARM EBITDAR
Kindred Asset Class Count Coverage(2,4,5) Coverage(3,4,5)
Hospitals 39 3.6x 2.9x
Nursing Homes 186 1.8x 1.3x
Portfolio 225 2.5x 1.9x
(1) Trailing twelve months EBITDARM and EBITDAR for the period ended
March 31, 2006 (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 March 31, 2006 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 5 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
March 31, 2006 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.
(5) Nursing center salary, wage and benefit expenses for fourth quarter
2005 and first quarter 2006 have been normalized in order to
eliminate certain unusual costs related to the implementation of RUGs
refinement which went into effect on January 1, 2006.
- END -
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