FAD of $67.8 Million
First Quarter Normalized FFO Per Share Rises 24 Percent to $0.68 and FAD Per Share Rises 28 Percent to $0.64
Ventas Revises 2007 Normalized FFO Guidance to $2.55 to $2.65 Per Share
LOUISVILLE, KY (May 8, 2007) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that first quarter 2007 normalized Funds from Operations ("FFO") rose 26 percent to $72.1 million, compared with $57.5 million in the first quarter of 2006. Normalized FFO per diluted share in the first quarter of 2007 increased 24 percent to $0.68, from $0.55 per diluted share for the comparable 2006 period. In the quarter ended March 31, 2007, the Company had 106.8 million weighted average diluted shares outstanding, compared to 104.3 million weighted average diluted shares outstanding a year earlier.
The Company's first quarter 2007 Funds Available for Distribution ("FAD") rose 30 percent to $67.8 million, compared with $52.3 million in the first quarter of 2006. FAD per diluted share in the first quarter of 2007 increased 28 percent to $0.64, from $0.50 per diluted share for the comparable 2006 period.
Results for the quarter ended March 31, 2007 benefited from increased rent resulting from a full quarter of rent from the Company's 2006 acquisitions, the Rent Reset on the 225 healthcare facilities the Company leases to Kindred Healthcare, Inc. (NYSE: KND) ("Kindred") and the Company's strong internal growth rate from its existing leases.
"Our excellent growth this quarter reflects the earnings power we have built into our seniors housing and healthcare portfolio," Ventas Chairman, President and Chief Executive Officer Debra A. Cafaro said. "With the recent addition of 77 high-quality private pay Sunrise assets, the disposition of underperforming Kindred assets and our robust Sunrise development pipeline, we are transforming and upgrading our portfolio while we continue to grow and create shareholder value," she added.
Cafaro stated that, "The truly transformational nature of the Sunrise REIT acquisition is demonstrated by the fact that approximately 40 percent of our annualized revenues at June 30, 2007 should come directly from residents in our private pay seniors housing communities. This transaction creates ideal diversification, stability and granularity in a major portion of our portfolio, similar to that seen in the apartment sector, and should reduce risk in our enterprise going forward. In addition, the fundamentals in private pay seniors housing are very strong and should drive above average internal growth."
GAAP NET INCOME
Net income for the quarter ended March 31, 2007 was $45.1 million, or $0.42 per diluted share, compared with net income for the quarter ended March 31, 2006 of $29.1 million, or $0.28 per diluted share.
FIRST QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
-- Ventas completed its $1.96 billion (or Cdn $2.26 billion) acquisition
of Sunrise Senior Living Real Estate Investment Trust ("Sunrise REIT")
on April 26, 2007. The 77 acquired communities compose the premier
private pay, high-quality seniors housing portfolio in North America
and should operate with the stability similar to apartment assets.
Importantly, the transaction gives Ventas access to an excellent,
exclusive development pipeline and a new important relationship with
the leading seniors housing developer/manager Sunrise Senior Living,
Inc. (NYSE: SRZ) ("Sunrise"). The acquisition also marks Ventas's
first entry into the attractive Canadian senior living market.
-- Ventas and Kindred entered into various cooperative agreements that are
designed to improve the positions of both companies. Among other
things, these agreements provide:
-- Kindred agreed to renew until 2013 the lease term for 64 healthcare
facilities contained in seven "renewal bundles" embedded within the
four Master Leases between Ventas and Kindred. The lease term for
these 56 skilled nursing facilities (SNFs) and eight long-term
acute care hospitals (LTACs) would have expired on April 30, 2008.
-- Ventas agreed to sell to Kindred 22 underperforming assets for
$171.5 million and a $3.5 million lease termination fee,
representing approximately a 6 percent capitalization rate on
May 1, 2007-April 30, 2008 cash rent. Kindred has stated that it
expects to resell those facilities for $80-90 million. Ventas will
use proceeds from the sales to repay a portion of its
interim financing facility used to fund the Sunrise REIT
acquisition and for other corporate purposes.
-- Ventas and Kindred also agreed to certain amendments of the Kindred
Master Leases that should enhance the value of Ventas's real estate
and provide Kindred with greater operating flexibility to position
the assets more competitively in the market.
-- As previously announced, in January, Ventas purchased one 62,000
square foot medical office building ("MOB") connected to Mercy Hospital
in Cincinnati, Ohio for $9.3 million, or $150 per square foot. The
MOB is 100 percent leased to the hospital and to physicians associated
with the hospital.
-- In March, the Company purchased an interest in a new 81,000
square foot MOB also connected to Mercy Hospital for $16.8 million,
or $207 per square foot.
-- These two Mercy Hospital MOBs were contributed into a joint venture
with a national MOB developer. Ventas owns approximately
88 percent of the venture and expects an initial 7 percent
unlevered return. Ventas's partner will provide management and
leasing services for both properties.
-- In March, Ventas purchased a 70,000 square foot MOB adjacent to
St. Luke's Hospital in Kansas City, Missouri for $13.7 million, or
$196 per square foot. The MOB is currently 90 percent leased. The MOB
was acquired in a joint venture with a national MOB developer, in which
Ventas currently has a 90 percent ownership interest. Ventas's partner
will provide management and leasing services for the property. The
property is expected to generate over a 7 percent going in yield during
the first year of ownership.
-- With this acquisition and divestiture activity, at June 30, 2007,
Ventas expects:
-- annualized revenue from Kindred to represent less than 30 percent of
the Company's annualized total revenues
-- annualized revenue from private pay, non-government-reimbursed assets
to represent over 65 percent of the Company's annualized total
revenues, computed on the same pro forma basis
-- annualized revenue directly from residents of the Company's operating
seniors housing communities (without intervening leases to third
party operators) to represent approximately 40 percent of total
annualized revenues, computed on the same pro forma basis
-- assets leased to Kindred to represent less than 20 percent of the
Company's total real estate assets (measured on a gross book value
basis) on its consolidated balance sheet.
-- On March 30, 2007, Ventas increased to $600 million the borrowing
capacity under its unsecured revolving credit facility (the "Credit
Facility") from $500.0 million. This expanded, attractively priced
Credit Facility provides the Company with low cost debt capital to
support its strategic growth and development plans.
-- At March 31, 2007, the Company had $209 million outstanding under
its Credit Facility, and $391 million of undrawn availability.
-- On February 20, 2007, the Company announced a 20 percent increase in
its quarterly dividend, to an implied annual rate of $1.90 per share.
-- The Company's debt to total capitalization at March 31, 2007 was
approximately 35 percent.
-- As of March 31, 2007, Ventas's enterprise value was approximately
$7 billion.
-- The 225 skilled nursing facilities and hospitals leased by the Company
to Kindred produced EBITDARM to actual cash rent coverage of 2.3 times
for the trailing twelve-month period ended December 31, 2006 (the
latest date available). Further information detailing these rent
coverages, and rent coverages as if $239 million of annual base rent
determined pursuant to the Rent Reset had been due and payable over
such trailing twelve-month period, by Master Lease and by asset class
is contained on a schedule attached to this press release.
FIRST QUARTER 2007 RESULTS
Rental income for the quarter ended March 31, 2007 was $120.8 million, of which $60.3 million resulted from leases with Kindred. First quarter 2007 expenses totaled $76.7 million, which included a gain of $5.8 million from a foreign currency hedge. Depreciation and amortization totaled $33.4 million and interest expense totaled $40.6 million. General, administrative and professional fees totaled $7.6 million and include $2.0 million for non-cash stock-based compensation. Property-level operating expenses relating to the Company's MOB portfolio and other assets for the period were $0.9 million.
UPDATED NORMALIZED FFO GUIDANCE FOR 2007
Ventas currently expects its 2007 normalized FFO per diluted share to be between $2.55-2.65 per diluted share, excluding Sunrise REIT merger costs and the impact of its lease up and development assets, assuming only the Company's announced acquisitions and divestitures, but excluding additional acquisition, divestiture and joint venture activity. The Company's FFO expectation is based on a balanced long-term capital structure. Included within the Company's 2007 normalized FFO range is approximately $7-8 million, or $0.08 per diluted share, of non-cash equity compensation.
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 U.S. generally accepted accounting principals ("GAAP") earnings projections) excludes (a) gains and losses on the sales of assets, (b) the impact of future, unannounced acquisitions, divestitures (including pursuant to tenant options to purchase) and capital transactions, (c) merger-related costs and expenses that are not capitalized under GAAP, including transitional and severance expenses, amortization of fees related to acquisition financing and costs, gains and losses for foreign currency hedge agreements, (d) the impact of 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 and (e) dilution resulting from the Company's convertible notes.
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.
FIRST QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on May 9, 2007, 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. At the date of this press release, Ventas owns 532 seniors housing and healthcare-related properties located in 43 states and two Canadian provinces. Its diverse portfolio includes 249 seniors housing communities, 218 skilled nursing facilities, 43 hospitals and 22 medical office and other properties. 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, acquisitions, investment opportunities, merger integration, 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. These 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 these 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, managers and other third parties, as applicable, 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"), Alterra Healthcare Corporation (together with its subsidiaries, "Alterra") and Sunrise Senior Living, Inc. (together with its subsidiaries, "Sunrise") 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, Alterra and Sunrise; (c) the ability of the Company's operators, tenants, borrowers and managers, as applicable, 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 and managers, as applicable, to deliver high quality services, to attract and retain healthcare personnel and to attract residents and 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, 2006 and for the year ending December 31, 2007; (o) the ability and willingness of the Company's tenants to renew their leases with the Company upon expiration of the leases and the Company's ability to relet its properties on the same or better terms in the event such leases expire and are not renewed by the existing tenants; (p) risks associated with the acquisition of Sunrise Senior Living REIT ("Sunrise REIT"), including the Company's ability to timely and fully realize the expected revenues and cost savings therefrom; (q) factors causing volatility of revenues generated by the properties acquired in connection with the acquisition of Sunrise REIT, including without limitation national and regional economic conditions, costs of materials, energy, labor and services, employee benefit costs and professional and general liability claims; (r) the movement of U.S. and Canadian exchange rates; (s) year-over-year changes in the Consumer Price Index and the effect of those changes on the rent escalators, including the rent escalator for Master Lease 2 with Kindred, and the Company's earnings; and (t) the impact on the liquidity, financial condition and results of operations of the Company's operators, tenants, borrowers and managers, as applicable, resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of the Company's operators, tenants, borrowers and managers to accurately estimate the magnitude of such liabilities. Many of these factors are beyond the control of the Company and its management.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2007, December 31, 2006, September 30, 2006,
June 30, 2006 and March 31, 2006
(In thousands, except per share amounts)
March December September June March
31, 2007 31, 2006 30, 2006 30, 2006 31, 2006
(Unaudited) (Audited) (Unaudited)(Unaudited)(Unaudited)
Assets
Real estate
investments:
Land $ 359,104 $ 357,804 $ 300,384 $ 300,384 $ 298,185
Building and
improvements 3,386,697 3,350,033 2,801,301 2,801,550 2,778,262
3,745,801 3,707,837 3,101,685 3,101,934 3,076,447
Accumulated
depreciation (692,402) (659,584) (627,800) (598,644) (569,675)
Net real
estate
property 3,053,399 3,048,253 2,473,885 2,503,290 2,506,772
Loans receivable,
net 35,554 35,647 192,578 35,800 35,870
Net real
estate
investments 3,088,953 3,083,900 2,666,463 2,539,090 2,542,642
Cash and cash
equivalents - 1,246 1,935 1,932 1,466
Escrow deposits
and restricted
cash 80,039 80,039 52,818 51,227 61,753
Deferred
financing
costs, net 17,984 18,415 18,100 17,667 16,844
Notes receivable-
related parties 2,484 2,466 2,518 2,501 2,859
Other 96,707 67,734 66,581 48,555 36,040
Total assets $3,286,167 $3,253,800 $2,808,415 $2,660,972 $2,661,604
Liabilities
and stockholders'
equity
Liabilities:
Senior notes
payable and
other debt $2,370,418 $2,329,053 $2,007,128 $1,882,909 $1,854,551
Deferred revenue 7,607 8,194 8,780 9,374 9,953
Interest rate
swap agreement 471 429 632 - 577
Accrued dividend - 41,949 - - -
Accrued interest 45,696 19,929 35,460 14,461 34,636
Accounts payable
and other accrued
liabilities 122,667 113,976 82,346 73,838 72,726
Deferred income
taxes 30,394 30,394 30,394 30,394 30,394
Total
liabilities 2,577,253 2,543,924 2,164,740 2,010,976 2,002,837
Commitments and
contingencies
Stockholders'
equity:
Preferred stock,
10,000 shares
authorized,
unissued - - - - -
Common stock,
$0.25 par value,
180,000 shares
authorized; 106,314,
106,137, 104,101,
103,975 and 103,854
shares issued at
March 31, 2007,
December 31, 2006,
September 30, 2006,
June 30, 2006 and
March 31, 2006,
respectively 26,587 26,545 26,036 26,004 25,974
Capital in excess
of par value 771,004 766,470 699,094 696,667 694,531
Accumulated other
comprehensive
income 914 1,037 1,569 1,449 685
Retained earnings
(deficit) (89,591) (84,176) (83,024) (74,124) (62,308)
708,914 709,876 643,675 649,996 658,882
Treasury stock,
0, 0, 0, 0, and
4 shares at
March 31, 2007,
December 31, 2006,
September 30, 2006,
June 30, 2006 and
March 31, 2006,
respectively - - - - (115)
Total
stockholders'
equity 708,914 709,876 643,675 649,996 658,767
Total
liabilities
and
stockholders'
equity $3,286,167 $3,253,800 $2,808,415 $2,660,972 $2,661,604
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2007 and 2006
(In thousands, except per share amounts)
(Unaudited)
2007 2006
Revenues:
Rental income $120,775 $96,505
Interest income from loans receivable 824 968
Interest and other income 249 341
Total revenues 121,848 97,814
Expenses:
Interest 40,569 32,957
Depreciation and amortization 33,433 28,470
Property-level operating expenses 943 622
General, administrative and
professional fees (including non-
cash stock-based
compensation expense of $2,014 and
$758, respectively) 7,583 6,631
Gain on foreign currency hedge (5,786) -
Total expenses 76,742 68,680
Net income $45,106 $29,134
Earnings per common share:
Basic $0.43 $0.28
Diluted $0.42 $0.28
Shares used in computing earnings per
common share:
Basic 106,044 103,751
Diluted 106,775 104,300
Dividends declared per common share $0.475 $0.395
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
First
Quarter 2006 Quarters
2007 Fourth Third Second First
Revenues:
Rental income $120,775 $116,033 $106,816 $99,095 $96,505
Interest income from loans
receivable 824 2,641 2,566 839 968
Interest and other income 249 1,888 285 372 341
Total revenues 121,848 120,562 109,667 100,306 97,814
Expenses:
Interest 40,569 39,497 34,917 33,723 32,957
Depreciation and
amortization 33,433 32,421 29,651 29,111 28,470
Property-level operating
expenses 943 1,168 727 654 622
General, administrative
and professional fees
(including non-cash
stock-based compensation
expense of $2,014, $810,
$751, $727 and $758,
respectively) 7,583 6,679 6,539 6,287 6,631
Gain on foreign currency
hedge (5,786) - - - -
Rent reset costs - - 7,361 - -
Reversal of contingent
liability - - (1,769) - -
Loss on extinguishment of
debt - - - 1,273 -
Total expenses 76,742 79,765 77,426 71,048 68,680
Net income $45,106 $40,797 $32,241 $29,258 $29,134
Earnings per common share:
Basic $0.43 $0.39 $0.31 $0.28 $0.28
Diluted $0.42 $0.39 $0.31 $0.28 $0.28
Shares used in computing
earnings per common
share:
Basic 106,044 105,155 104,021 103,884 103,751
Diluted 106,775 105,667 104,568 104,374 104,300
Dividends declared per
common share $0.475 $0.395 $0.395 $0.395 $0.395
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2007 and 2006
(In thousands)
(Unaudited)
2007 2006
Cash flows from operating activities:
Net income $45,106 $29,134
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 33,433 28,470
Amortization of deferred financing
costs 1,110 770
Stock-based compensation 2,014 758
Straight-lining of rental income (4,269) (4,950)
Amortization of deferred revenue (604) (603)
Gain on foreign currency hedge (5,786) -
Other 34 (206)
Changes in operating assets and
liabilities:
Increase in escrow deposits and
restricted cash - (2,086)
Increase in other assets (16,536) (376)
Increase in accrued interest 25,748 20,218
Increase (decrease) in accounts
payable and other accrued
liabilities 7,931 (1,973)
Net cash provided by operating
activities 88,181 69,156
Cash flows from investing activities:
Net investment in real estate
property (30,351) (48,354)
Proceeds from sale of securities 5,072 -
Proceeds from loans receivable 110 4,070
Other (95) (231)
Net cash used in investing activities (25,264) (44,515)
Cash flows from financing activities:
Net change in borrowings under
unsecured revolving credit facility 151,500 -
Net change in borrowings under
secured revolving credit facility - 52,600
Proceeds from debt - 2,074
Repayment of debt (117,270) (2,687)
Payment of deferred financing costs (412) (33)
Purchase of foreign currency hedge (8,489) -
Issuance of common stock 361 253
Proceeds from stock option exercises 2,683 1,360
Cash distribution to stockholders (92,471) (78,383)
Other (65) -
Net cash used in financing activities (64,163) (24,816)
Net decrease in cash and cash equivalents (1,246) (175)
Cash and cash equivalents at
beginning of period 1,246 1,641
Cash and cash equivalents at end of period $- $1,466
Supplemental schedule of non-cash
activities:
Assets and liabilities assumed from
acquisitions:
Real estate property investments $7,577 $-
Debt assumed 6,868 -
Other liabilities 709 -
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
First
Quarter 2006 Quarters
2007 Fourth Third Second First
Cash flows from operating
activities:
Net income $45,106 $40,797 $32,241 $29,258 $29,134
Adjustments to reconcile
net income to net cash
provided by
operating activities:
Depreciation and
amortization 33,433 32,421 29,651 29,111 28,470
Amortization of deferred
financing costs 1,110 933 778 772 770
Stock-based compensation 2,014 768 751 727 758
Straight-lining of rental
income (4,269) (5,228) (4,871) (4,914) (4,950)
Amortization of deferred
revenue (604) (603) (611) (595) (603)
Gain on foreign currency
hedge (5,786) - - - -
Reversal of contingent
liability - - (1,769) - -
Loss on extinguishment of
debt - - - 1,273 -
Net gain on sale of
securities - (1,379) - - -
Other 34 (276) 904 37 (206)
Changes in operating
assets and liabilities:
(Increase) decrease in
escrow deposits and
restricted cash - (27,221) (1,591) 1,109 (2,086)
(Increase) decrease in
other assets (16,536) 4,495 (13,964) (2,021) (376)
Increase (decrease) in
accrued interest 25,748 (15,531) 20,999 (20,175) 20,218
Increase (decrease) in
accounts payable and
other accrued
liabilities 7,931 31,445 10,485 1,505 (1,973)
Net cash provided by
operating activities 88,181 60,621 73,003 36,087 69,156
Cash flows from investing
activities:
Net investment in real
estate property (30,351) (426,367) (101) (15,660) (48,354)
Proceeds from sale of
securities 5,072 - - - -
Investment in loans
receivable - (34,219) (156,849) - -
Proceeds from loans
receivable 110 191,167 88 86 4,070
Escrow funds returned
from an Internal Revenue
Code Section
1031 exchange - - - 9,902 -
Purchase of securities - - - (5,530) -
Other (95) (85) (209) 318 (231)
Net cash used in
investing activities (25,264) (269,504) (157,071) (10,884) (44,515)
Cash flows from financing
activities:
Net change in borrowings
under unsecured
revolving credit
facility 151,500 (15,300) (94,700) 167,000 -
Net change in borrowings
under secured revolving
credit facility - - - (141,800) 52,600
Proceeds from debt - 225,400 221,531 - 2,074
Repayment of debt (117,270) (3,087) (2,620) (7,690) (2,687)
Payment of deferred
financing costs (412) (1,122) (853) (2,868) (33)
Purchase of foreign
currency hedge (8,489) - - - -
Issuance of common stock 361 135 268 175 253
Proceeds from stock
option exercises 2,683 2,168 1,586 1,520 1,360
Cash distribution to
stockholders (92,471) - (41,141) (41,074) (78,383)
Other (65) - - - -
Net cash (used in)
provided by financing
activities (64,163) 208,194 84,071 (24,737) (24,816)
Net (decrease) increase
in cash and cash
equivalents (1,246) (689) 3 466 (175)
Cash and cash equivalents
at beginning of period 1,246 1,935 1,932 1,466 1,641
Cash and cash equivalents
at end of period $- $1,246 $1,935 $1,932 $1,466
Supplemental schedule of
non-cash activities:
Assets and liabilities
assumed from
acquisitions:
Real estate property
investments $7,577 $179,785 $(350) $9,827 $-
Escrow deposits and
restricted cash - - - 485 -
Other assets acquired - - 350 - -
Debt assumed 6,868 114,785 - 10,848 -
Other liabilities 709 65,000 - (536) -
FUNDS FROM OPERATIONS, NORMALIZED FFO AND FUNDS AVAILABLE
FOR DISTRIBUTION
(In thousands, except per share amounts)
First
Quarter 2006 Quarters
2007 Fourth Third Second First
Net income $45,106 $40,797 $32,241 $29,258 $29,134
Adjustments:
Depreciation on real estate
assets 32,818 31,784 29,156 28,969 28,329
FFO 77,924 72,581 61,397 58,227 57,463
Gain on foreign currency
hedge (5,786) - - - -
Rent reset costs - - 7,361 - -
Reversal of contingent
liability - - (1,769) - -
Loss on extinguishment of
debt - - - 1,273 -
Gain on sale of securities - (1,379) - - -
Normalized FFO 72,138 71,202 66,989 59,500 57,463
Straight-lining of rental
income (4,269) (5,228) (4,871) (4,914) (4,950)
Capital expenditures (36) (89) (46) (36) (197)
FAD $67,833 $65,885 $62,072 $54,550 $52,316
Per diluted share:
Net income $0.42 $0.39 $0.31 $0.28 $0.28
Adjustments:
Depreciation on real estate
assets 0.31 0.30 0.28 0.28 0.27
FFO 0.73 0.69 0.59 0.56 0.55
Gain on foreign currency
hedge (0.05) - - - -
Rent reset costs - - 0.07 - -
Reversal of contingent
liability - - (0.02) - -
Loss on extinguishment of
debt - - - 0.01 -
Gain on sale of securities - (0.01) - - -
Normalized FFO 0.68 0.67 0.64 0.57 0.55
Straight-lining of rental
income (0.04) (0.05) (0.05) (0.05) (0.05)
Capital expenditures (0.00) (0.00) (0.00) (0.00) (0.00)
FAD $0.64 $0.62 $0.59 $0.52 $0.50
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 and FAD appropriate measures 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 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. FAD represents normalized FFO excluding straight-line rental adjustments and capital expenditures.
FFO and FAD presented herein are not necessarily comparable to FFO and FAD presented by other real estate companies due to the fact that not all real estate companies use the same definitions. Neither FFO nor FAD should 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 or FAD 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 and FAD should be examined in conjunction with net income as presented elsewhere in this press release.
Normalized FFO Guidance for the Period Ending December 31, 2007
The following table illustrates the Company's normalized FFO guidance per diluted share for the period ending December 31, 2007.
NEW PRIOR
GUIDANCE GUIDANCE
For the Year For the Year
Ending Ending
December 31, December 31,
2007 2007(1)
Net income $2.13 - $2.23 $1.42 - $1.47
Adjustments:
Depreciation on real estate assets
and gain on sale of real
estate assets, net 0.51 - 0.51 1.28 - 1.28
FFO 2.64 - 2.74 2.70 - 2.75
Merger-related items:
Gain on foreign currency hedge,
merger-related expenses and
development and lease-up assets, net (0.09)- (0.09) - - -
Normalized FFO 2.55 - 2.65 2.70 - 2.75
Straight-lining of rental
income and capital expenditures (0.19)- (0.19) (0.15)- (0.15)
FAD $2.36 - $2.46 $2.55 - $2.60
(1) Per guidance issued on October 26, 2006.
Net Debt to Pro Forma EBITDA
The 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 March 31, 2007, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma annualized earnings before interest, income taxes, depreciation and amortization ("EBITDA") (dollars in thousands):
Pro forma net income for
three months
ended March 31, 2007 $44,947
Add back:
Pro forma interest 40,877
Pro forma depreciation and
amortization 33,702
Stock-based compensation 2,014
Gain on foreign currency
hedge (5,786)
Pro forma EBITDA $115,754
Pro forma annualized EBITDA $463,016
As of March 31, 2007:
Debt $2,370,418
Cash -
Restricted cash pertaining
to debt (8,306)
Net debt $2,362,112
Net debt to pro forma
EBITDA 5.1x
The Company considers EBITDA a profitability measure which indicates the Company's ability to service debt. The Company considers the net debt to pro forma 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 (in thousands):
As of
March 31,
2007
2007 $13,008
2008 33,219
2009 524,333
2010 266,029
2011 273,881
Thereafter 1,267,616
Total maturities 2,378,086
Less unamortized discounts (7,668)
Senior notes payable and
other debt $2,370,418
Ventas - Kindred Portfolio - 225 Properties
The following is based on data provided by Kindred to the Company or obtained from Kindred's public filings. The information in the tables below reflects Kindred's EBITDARM coverage by Master Lease and by asset class, using Kindred's actual cash rent for the period:
TTM
Ventas - Kindred Facility EBITDARM
Master Lease Count Coverage(1,3,4)
1 91 2.3x
2 46 2.5x
3 43 2.2x
4 45 2.4x
Portfolio 225 2.3x
TTM
Ventas - Kindred Facility EBITDARM
Asset Class Count Coverage(1,3,4)
Hospitals 39 3.3x
Skilled Nursing Facilities 186 1.8x
Portfolio 225 2.3x
The information in the tables below reflects Kindred's EBITDARM coverage by Master Lease and by asset class, as if Kindred's actual cash rent for the period was $239 million. Actual future results may vary based upon changes in EBITDARM at the facilities and annual rent increases, and there can be no assurance that future EBITDARM to rent coverages will equal these levels:
Annualized
Post-Reset
Base Rent
TTM Through
Ventas - Kindred Facility EBITDARM April 30,
Master Lease Count Coverage(2,3,4) 2007(5)
1 91 2.1x $98.5
2 46 2.2x 55.8
3 43 2.0x 41.9
4 45 2.2x 42.7
Portfolio 225 2.1x $239.0
Annualized
Post-Reset
Base Rent
TTM Through
Ventas - Kindred Facility EBITDARM April 30,
Asset Class Count Coverage(2,3,4) 2007(5)
Hospitals 39 3.1x $84.7
Skilled Nursing
Facilities 186 1.6x 154.2
Portfolio 225 2.1x $239.0
(1) Trailing twelve months EBITDARM for the period ended December 31,
2006 (the latest available data provided by Kindred) to the Company's
trailing twelve months cash rental revenue.
(2) Trailing twelve months EBITDARM for the period ended December 31,
2006 (the latest available data provided by Kindred) to $239 million
in aggregate annual base rent.
(3) 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, 2006 has
been eliminated from purchased ancillary expenses within the Ventas
portfolio.
(4) Nursing center salary, wage and benefit expenses for 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.
(5) Numbers in millions and may not add due to rounding.
- END -
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