Exhibit 99.1
Ventas Reports Six Percent Increase in 2nd Quarter 2013 Normalized FFO to $1.01 Per Diluted Share
Company Raises Full Year 2013 Normalized FFO Per Diluted Share Guidance to $4.06 to $4.10
CHICAGO--(BUSINESS WIRE)--July 26, 2013--Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) said today that normalized Funds From Operations (“FFO”) for the quarter ended June 30, 2013 increased seven percent to $298.4 million, from $277.8 million for the comparable 2012 period. Normalized FFO per diluted common share was $1.01 for the quarter ended June 30, 2013, a six percent increase from $0.95 for the comparable 2012 period. Weighted average diluted shares outstanding for the quarter rose by one percent to 295.1 million, compared to 292.6 million in the second quarter of 2012.
“We are pleased to deliver another quarter of excellent results and consistent, superior performance,” Ventas Chairman and Chief Executive Officer Debra A. Cafaro said. “With market-leading growth from our high-quality seniors housing operating portfolio, our total same-store cash flow growth was three percent, we successfully renewed or transitioned all 89 healthcare assets whose leases expired during the quarter, and we began to deploy the attractive capital we sourced earlier in the year in accretive investments,” she added. “We are increasing our full-year outlook, reflecting the strength of our business model and execution.”
The growth in second quarter 2013 normalized FFO per diluted common share compared to the second quarter of 2012 is due primarily to the Company's $2.7 billion of investments in 2012; net operating income increases in its high-quality private pay seniors housing communities managed by Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (“Sunrise”), its triple-net lease portfolio and its medical office building (“MOB”) segment; and lower weighted average interest rates. These benefits were partially offset by higher debt balances; increases in net cash balances during the quarter resulting from capital raises, asset sales and receipt of loan repayments; and an increase in weighted average diluted shares outstanding.
Normalized FFO for the quarter ended June 30, 2013 excludes the net benefit (totaling $6.1 million, or $0.02 per diluted share) from an income tax benefit and net gains on debt extinguishment, offset by merger-related expenses and deal costs (including integration costs) and amortization of other intangibles. Normalized FFO for the quarter ended June 30, 2012 excluded the net expense (totaling $41.8 million, or $0.14 per diluted share) from merger-related expenses and deal costs (including integration costs), loss on extinguishment of debt, and amortization of other intangibles, offset by an income tax benefit.
Normalized FFO for the six months ended June 30, 2013 increased 11 percent to $599.9 million, from $541.7 million for the comparable 2012 period. Normalized FFO per diluted common share was $2.04 for the six months ended June 30, 2013, a ten percent increase from $1.86 for the comparable 2012 period. Normalized FFO for the six months ended June 30, 2013 excludes the net expense (totaling $0.2 million, or $0.00 per diluted share) from merger-related expenses and deal costs (including integration costs) and amortization of other intangibles, offset by an income tax benefit and gains on debt extinguishment. Normalized FFO for the six months ended June 30, 2012 excluded the net expense (totaling $90.9 million, or $0.31 per diluted share) from merger-related expenses and deal costs (including integration costs), loss on extinguishment of debt, non-cash income tax expense and amortization of other intangibles.
Net income attributable to common stockholders for the quarter ended June 30, 2013 was $114.6 million, or $0.39 per diluted common share, including discontinued operations of $(18.1) million. Net income attributable to common stockholders for the quarter ended June 30, 2012 was $74.0 million, or $0.25 per diluted common share, including discontinued operations of $31.3 million. This $40.6 million increase in net income attributable to common stockholders in the second quarter of 2013 over the prior year comparable period is primarily the result of the increases described above for normalized FFO, changes in losses on extinguishment of debt, decreases in merger-related expenses and deal costs (including integration costs) and income tax benefit increases, partially offset by year-over-year changes in discontinued operations.
Net income attributable to common stockholders for the six months ended June 30, 2013 was $226.8 million, or $0.77 per diluted common share, including discontinued operations of $(23.9) million. Net income attributable to common stockholders for the six months ended June 30, 2012 was $164.7 million, or $0.56 per diluted common share, including discontinued operations of $74.6 million. This $62.1 million increase in net income attributable to common stockholders for the six months ended June 30, 2013 over the prior year six-month period is primarily the result of the increases described above for normalized FFO, changes in losses on extinguishment of debt, decreases in merger-related expenses and deal costs (including integration costs) and income tax benefit increases, partially offset by year-over-year changes in discontinued operations and additional depreciation and amortization.
FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), for the quarter ended June 30, 2013 increased 29 percent to $304.4 million, from $236.0 million in the comparable 2012 period. NAREIT FFO per diluted common share for the quarter ended June 30, 2013 increased 27 percent to $1.03, from $0.81 in the second quarter of 2012.
NAREIT FFO for the six months ended June 30, 2013 increased 33 percent to $599.7 million, from $450.8 million in the comparable 2012 period. NAREIT FFO per diluted common share for the six months ended June 30, 2013 increased 32 percent to $2.04, from $1.55 in the six months ended June 30, 2012.
PRIVATE PAY SENIORS HOUSING OPERATING PORTFOLIO
Second Quarter 2013 Same-Store NOI Grows 6.9 Percent Year over Year and Occupancy Rises 160 Basis Points
At June 30, 2013, the Company's seniors housing operating portfolio included 227 communities, seven of which were acquired in the second quarter of 2013: 132 seniors housing communities managed by Atria and 95 seniors housing communities managed by Sunrise. Second quarter 2013 Net Operating Income (“NOI”) after management fees for this portfolio totaled $110.1 million.
For the 196 private pay seniors housing communities owned by the Company for the full second quarters of 2013 and 2012 (“same-store”), average unit occupancy rose 160 basis points to 90.8 percent, NOI after management fees grew 6.9 percent and REVPOR (revenue per occupied room) grew 3.7 percent in the second quarter of 2013 compared to the second quarter of 2012.
SECOND QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
Investments and Dispositions
- Since April 1, 2013, Ventas invested $419 million in private pay seniors housing communities, MOBs and other assets. Atria became the operator of seven of these seniors housing communities at the time of closing. The expected first-year unlevered yield on these investments approximates 6.5 percent. $96 million of these investments occurred following quarter end.
- Since April 1, 2013, Ventas sold assets (including loans) and received final repayments on outstanding loans and investments totaling $160 million. Over $70 million of this activity occurred following quarter end.
- The Company has approximately $400 million of additional investments under contract. However, there can be no assurances as to whether or, if so, when these transactions will close.
Liquidity, Capital Raising and Balance Sheet
- Under its previously established “at-the-market” equity offering program (“ATM”), the Company received aggregate proceeds of approximately $77.4 million from sales of its common stock during the second quarter and none in the third quarter to date.
- The Company's debt to total capitalization at June 30, 2013 was approximately 29 percent. The Company's net debt to Adjusted Pro Forma EBITDA (as defined herein) at June 30, 2013 was 5.3x.
- At June 30, 2013, the Company had $260 million of borrowings outstanding under its unsecured revolving credit facility and $62 million of cash and cash equivalents. Currently, it has $300 million in borrowings outstanding under its unsecured revolving credit facility and approximately $56 million of cash and cash equivalents.
PORTFOLIO UPDATE AND ADDITIONAL INFORMATION
- The Company owned 1,283 properties for the full second quarters of 2013 and 2012 (“same-store”). Cash NOI growth for the Company's total same-store portfolio was approximately three percent in the second quarter of 2013 compared to the second quarter of 2012.
- As previously announced, Ventas entered into lease renewals, new leases or sale contracts for all 89 licensed healthcare facilities leased by Kindred Healthcare, Inc. (NYSE: KND) (“Kindred”) whose lease term was up for renewal May 1, 2013. All transactions and operating transitions were completed on or before July 1, 2013.
- The 143 skilled nursing facilities (“SNFs”) and long-term acute care hospitals (“LTACs”) currently master leased by the Company to Kindred produced EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) to actual cash rent coverage of 2.0x for the trailing 12-month period ended March 31, 2013 (the latest date available).
- Supplemental information regarding the Company can be found on the Company's website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/financial-information/supplemental-information.
VENTAS RAISES 2013 NORMALIZED FFO PER DILUTED SHARE GUIDANCE TO $4.06 TO $4.10
Ventas currently expects its 2013 normalized FFO per diluted share to range between $4.06 and $4.10, improving its previously announced 2013 guidance of between $3.99 and $4.07 per diluted share. The Company has included the impact of approximately $400 million of additional acquisitions in its updated guidance. For the full year, Ventas expects average fully diluted shares outstanding to be approximately 295 million.
The Company continues to expect that 2013 NOI from the Atria- and Sunrise-managed seniors housing communities that were included in its original full-year NOI guidance will be $430 million to $440 million. If achieved, this would represent five to eight percent same-store NOI growth.
Excluding non-cash items from normalized FFO (projected to be $0.12 per diluted share), computed consistent with prior periods, the midpoint of the Company's improved guidance range constitutes approximately ten percent per share growth in 2013. A reconciliation of the Company's guidance, and the non-cash items, to the Company's projected GAAP earnings is included elsewhere in this press release.
The Company's normalized FFO guidance (and related GAAP earnings projections) for all periods assumes, with certain immaterial exceptions, 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 excludes, other than as specifically stated, (a) net gains on the sales of real property assets, including gain on re-measurement of equity method investments, (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company's debt, (d) the non-cash effect of income tax benefits or expenses and derivative transactions that have non-cash mark-to-market impacts on the Company's income statement, and (e) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions.
The Company's guidance is based on a number of other assumptions that 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 assurances that the Company will achieve these results. 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 today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in number for the conference call is (857) 244-7319. The participant passcode is “Ventas.” The conference call is being webcast live by Thomson Reuters and can be accessed at the Company’s website at www.ventasreit.com or at www.earnings.com. A replay of the webcast will be available today online, or by calling (617) 801-6888, passcode 58823878, beginning at approximately 12:00 p.m. Eastern Time and will be archived for 28 days.
Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of more than 1,400 assets in 47 states (including the District of Columbia) and two Canadian provinces consists of seniors housing communities, skilled nursing facilities, hospitals, medical office buildings and other properties. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.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 the Company’s or its tenants’, operators’, borrowers’ or managers’ expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, 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 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 from expectations depending on a variety of factors discussed in the Company’s filings with the Securities and Exchange Commission. These factors include without limitation: (a) the ability and willingness of the Company’s tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold harmless the Company from and against various claims, litigation and liabilities; (b) the ability of the Company’s tenants, operators, borrowers and managers 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 and other indebtedness; (c) the Company’s success in implementing its business strategy and the Company’s ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments, including investments in different asset types and outside the United States; (d) macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal budget resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (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 borrowing costs as a result of changes in interest rates and other factors; (h) the ability of the Company’s operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Company’s properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) changes in general economic conditions or economic conditions in the markets in which the Company may, from time to time, compete, and the effect of those changes on the Company’s revenues, earnings and funding sources; (j) the Company’s ability to pay down, refinance, restructure or extend its indebtedness as it becomes due; (k) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (l) final determination of the Company’s taxable net income for the year ended December 31, 2012 and for the year ending December 31, 2013; (m) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration of the leases, the Company’s ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant; (n) risks associated with the Company’s senior living operating portfolio, such as factors that can cause volatility in the Company’s operating income and earnings generated by those properties, including without limitation national and regional economic conditions, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; (o) changes in U.S. and Canadian currency exchange rates; (p) year-over-year changes in the Consumer Price Index and the effect of those changes on the rent escalators contained in the Company’s leases, including the rent escalators for two of the Company’s master lease agreements with Kindred, and the Company’s earnings; (q) the Company’s ability and the ability of its tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers; (r) the impact of increased operating costs and uninsured professional liability claims on the Company’s liquidity, financial condition and results of operations or that of the Company’s tenants, operators, borrowers and managers, and the ability of the Company and the Company’s tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims; (s) risks associated with the Company’s MOB portfolio and operations, including the Company’s ability to successfully design, develop and manage MOBs, to accurately estimate its costs in fixed fee-for-service projects and to retain key personnel; (t) the ability of the hospitals on or near whose campuses the Company’s MOBs are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (u) the Company’s ability to build, maintain and expand its relationships with existing and prospective hospital and health system clients; (v) risks associated with the Company’s investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners’ financial condition; (w) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (x) merger and acquisition activity in the healthcare industry resulting in a change of control of one or more of the Company’s tenants, operators, borrowers or managers or significant changes in the senior management of the Company’s tenants, operators, borrowers or managers; and (y) the impact of litigation or any financial, accounting, legal or regulatory issues that may affect the Company or its tenants, operators, borrowers or managers. Many of these factors are beyond the control of the Company and its management.
| |
| CONSOLIDATED BALANCE SHEETS |
| As of June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012 |
| (In thousands, except per share amounts) |
| | | | | | | | | | |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| | 2013 | | 2013 | | 2012 | | 2012 | | 2012 |
| | | | | | | | | | |
| Assets | | | | | | | | | | |
| Real estate investments: | | | | | | | | | | |
| Land and improvements | | $ | 1,783,664 | | | $ | 1,764,208 | | | $ | 1,772,417 | | | $ | 1,754,826 | | | $ | 1,744,752 | |
| Buildings and improvements | | 17,238,843 | | | 16,977,860 | | | 16,920,821 | | | 16,552,534 | | | 16,181,392 | |
| Construction in progress | | 99,947 | | | 72,714 | | | 70,665 | | | 93,992 | | | 133,890 | |
| Acquired lease intangibles | | 990,548 | | | 984,023 | | | 981,704 | | | 965,500 | | | 920,116 | |
| | 20,113,002 | | | 19,798,805 | | | 19,745,607 | | | 19,366,852 | | | 18,980,150 | |
| Accumulated depreciation and amortization | | (2,977,154 | ) | | (2,803,068 | ) | | (2,634,075 | ) | | (2,447,175 | ) | | (2,256,197 | ) |
| Net real estate property | | 17,135,848 | | | 16,995,737 | | | 17,111,532 | | | 16,919,677 | | | 16,723,953 | |
| Secured loans receivable and investments, net | | 470,441 | | | 490,107 | | | 635,002 | | | 215,775 | | | 213,193 | |
| Investments in unconsolidated entities | | 93,155 | | | 94,257 | | | 95,409 | | | 90,992 | | | 104,636 | |
| Net real estate investments | | 17,699,444 | | | 17,580,101 | | | 17,841,943 | | | 17,226,444 | | | 17,041,782 | |
| Cash and cash equivalents | | 62,421 | | | 57,690 | | | 67,908 | | | 58,530 | | | 52,803 | |
| Escrow deposits and restricted cash | | 94,492 | | | 99,225 | | | 105,913 | | | 76,908 | | | 114,883 | |
| Deferred financing costs, net | | 50,821 | | | 54,079 | | | 42,551 | | | 25,426 | | | 25,750 | |
| Other assets | | 889,404 | | | 915,826 | | | 921,685 | | | 1,053,591 | | | 987,043 | |
| Total assets | | $ | 18,796,582 | | | $ | 18,706,921 | | | $ | 18,980,000 | | | $ | 18,440,899 | | | $ | 18,222,261 | |
| | | | | | | | | | |
| Liabilities and equity | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Senior notes payable and other debt | | $ | 8,420,073 | | | $ | 8,295,908 | | | $ | 8,413,646 | | | $ | 7,494,774 | | | $ | 7,204,727 | |
| Accrued interest | | 50,860 | | | 58,086 | | | 47,565 | | | 56,326 | | | 47,842 | |
| Accounts payable and other liabilities | | 887,314 | | | 910,692 | | | 995,156 | | | 1,049,043 | | | 1,059,385 | |
| Deferred income taxes | | 247,591 | | | 261,122 | | | 259,715 | | | 265,116 | | | 271,066 | |
| Total liabilities | | 9,605,838 | | | 9,525,808 | | | 9,716,082 | | | 8,865,259 | | | 8,583,020 | |
| | | | | | | | | | |
| Redeemable OP unitholder and noncontrolling interests | | 184,217 | | | 194,302 | | | 174,555 | | | 113,908 | | | 116,635 | |
| | | | | | | | | | |
| Commitments and contingencies | | | | | | | | | | |
| | | | | | | | | | |
| Equity: | | | | | | | | | | |
| Ventas stockholders' equity: | | | | | | | | | | |
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued | | — | | | — | | | — | | | — | | | — | |
Common stock, $0.25 par value; 296,940, 295,823, 295,565, 295,534 and 295,370 shares issued at June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, respectively | | 74,248 | | | 73,969 | | | 73,904 | | | 73,896 | | | 73,855 | |
| Capital in excess of par value | | 9,996,095 | | | 9,904,694 | | | 9,920,962 | | | 9,941,030 | | | 9,932,839 | |
| Accumulated other comprehensive income | | 19,752 | | | 21,828 | | | 23,354 | | | 23,626 | | | 21,404 | |
| Retained earnings (deficit) | | (943,384 | ) | | (861,434 | ) | | (777,927 | ) | | (680,888 | ) | | (609,487 | ) |
Treasury stock, 3,698, 3,736, 3,699, 0 and 0 shares at June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, respectively | | (221,129 | ) | | (223,709 | ) | | (221,165 | ) | | — | | | — | |
| Total Ventas stockholders' equity | | 8,925,582 | | | 8,915,348 | | | 9,019,128 | | | 9,357,664 | | | 9,418,611 | |
| Noncontrolling interest | | 80,945 | | | 71,463 | | | 70,235 | | | 104,068 | | | 103,995 | |
| Total equity | | 9,006,527 | | | 8,986,811 | | | 9,089,363 | | | 9,461,732 | | | 9,522,606 | |
| Total liabilities and equity | | $ | 18,796,582 | | | $ | 18,706,921 | | | $ | 18,980,000 | | | $ | 18,440,899 | | | $ | 18,222,261 | |
| | | | | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME |
| For the three and six months ended June 30, 2013 and 2012 |
| (In thousands, except per share amounts) |
| | | | | | | | |
| | For the Three Months | | For the Six Months |
| | Ended June 30, | | Ended June 30, |
| | | | | | | | |
| | 2013 | | 2012 | | 2013 | | 2012 |
| Revenues: | | | | | | | | |
| Rental income: | | | | | | | | |
| Triple-net leased | | $ | 214,239 | | | $ | 204,561 | | | $ | 427,760 | | | $ | 407,798 | |
| Medical office buildings | | 110,946 | | | 89,110 | | | 222,092 | | | 153,075 | |
| | 325,185 | | | 293,671 | | | 649,852 | | | 560,873 | |
| Resident fees and services | | 341,594 | | | 303,437 | | | 680,764 | | | 588,630 | |
| Medical office building and other services revenue | | 3,537 | | | 6,639 | | | 7,185 | | | 12,247 | |
| Income from loans and investments | | 14,733 | | | 8,152 | | | 30,836 | | | 16,188 | |
| Interest and other income | | 797 | | | 65 | | | 1,835 | | | 112 | |
| Total revenues | | 685,846 | | | 611,964 | | | 1,370,472 | | | 1,178,050 | |
| | | | | | | | |
| Expenses: | | | | | | | | |
| Interest | | 83,046 | | | 72,767 | | | 162,452 | | | 140,678 | |
| Depreciation and amortization | | 172,706 | | | 187,367 | | | 351,495 | | | 347,563 | |
| Property-level operating expenses: | | | | | | | | |
| Senior living | | 231,337 | | | 207,031 | | | 462,245 | | | 402,165 | |
| Medical office buildings | | 38,401 | | | 29,621 | | | 74,942 | | | 50,324 | |
| | 269,738 | | | 236,652 | | | 537,187 | | | 452,489 | |
| Medical office building services costs | | 1,667 | | | 3,839 | | | 3,306 | | | 6,827 | |
| General, administrative and professional fees | | 27,327 | | | 26,423 | | | 56,101 | | | 48,621 | |
| (Gain) loss on extinguishment of debt, net | | (720 | ) | | 9,989 | | | (720 | ) | | 39,533 | |
| Merger-related expenses and deal costs | | 6,667 | | | 36,668 | | | 10,929 | | | 44,649 | |
| Other | | 4,385 | | | 1,510 | | | 8,972 | | | 3,086 | |
| Total expenses | | 564,816 | | | 575,215 | | | 1,129,722 | | | 1,083,446 | |
| | | | | | | | |
Income before income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest | | 121,030 | | | 36,749 | | | 240,750 | | | 94,604 | |
| (Loss) income from unconsolidated entities | | (506 | ) | | 514 | | | 423 | | | 831 | |
| Income tax benefit (expense) | | 12,064 | | | 5,179 | | | 10,320 | | | (6,159 | ) |
| Income from continuing operations | | 132,588 | | | 42,442 | | | 251,493 | | | 89,276 | |
| Discontinued operations | | (18,055 | ) | | 31,294 | | | (23,862 | ) | | 74,552 | |
| Net income | | 114,533 | | | 73,736 | | | 227,631 | | | 163,828 | |
| Net (loss) income attributable to noncontrolling interest | | (47 | ) | | (289 | ) | | 858 | | | (823 | ) |
| Net income attributable to common stockholders | | $ | 114,580 | | | $ | 74,025 | | | $ | 226,773 | | | $ | 164,651 | |
| | | | | | | | |
| Earnings per common share: | | | | | | | | |
| Basic: | | | | | | | | |
Income from continuing operations attributable to common stockholders | | $ | 0.45 | | | $ | 0.15 | | | $ | 0.86 | | | $ | 0.31 | |
| Discontinued operations | | (0.06 | ) | | 0.11 | | | (0.08 | ) | | 0.26 | |
| Net income attributable to common stockholders | | $ | 0.39 | | | $ | 0.26 | | | $ | 0.78 | | | $ | 0.57 | |
| Diluted: | | | | | | | | |
Income from continuing operations attributable to common stockholders | | $ | 0.45 | | | $ | 0.14 | | | $ | 0.85 | | | $ | 0.30 | |
| Discontinued operations | | (0.06 | ) | | 0.11 | | | (0.08 | ) | | 0.26 | |
| Net income attributable to common stockholders | | $ | 0.39 | | | $ | 0.25 | | | $ | 0.77 | | | $ | 0.56 | |
| | | | | | | | |
| Weighted average shares used in computing earnings per common share: | | | | | | | | |
| Basic | | 292,635 | | | 290,170 | | | 292,049 | | | 289,281 | |
| Diluted | | 295,123 | | | 292,592 | | | 294,584 | | | 291,711 | |
| | | | | | | | |
| Dividends declared per common share | | $ | 0.67 | | | $ | 0.62 | | | $ | 1.34 | | | $ | 1.24 | |
| | | | | | | | | | | | | | | | |
| QUARTERLY CONSOLIDATED STATEMENTS OF INCOME |
| (In thousands, except per share amounts) |
| | | | | | | | | | |
| | 2013 Quarters | | 2012 Quarters |
| | Second | | First | | Fourth | | Third | | Second |
| | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Rental income: | | | | | | | | | | |
| Triple-net leased | | $ | 214,239 | | | $ | 213,521 | | | $ | 207,570 | | | $ | 207,975 | | | $ | 204,561 | |
| Medical office buildings | | 110,946 | | | 111,146 | | | 108,951 | | | 100,814 | | | 89,110 | |
| | 325,185 | | | 324,667 | | | 316,521 | | | 308,789 | | | 293,671 | |
| Resident fees and services | | 341,594 | | | 339,170 | | | 321,933 | | | 316,560 | | | 303,437 | |
| Medical office building and other services revenue | | 3,537 | | | 3,648 | | | 3,950 | | | 4,544 | | | 6,639 | |
| Income from loans and investments | | 14,733 | | | 16,103 | | | 14,690 | | | 9,035 | | | 8,152 | |
| Interest and other income | | 797 | | | 1,038 | | | 665 | | | 330 | | | 65 | |
| Total revenues | | 685,846 | | | 684,626 | | | 657,759 | | | 639,258 | | | 611,964 | |
| | | | | | | | | | |
| Expenses: | | | | | | | | | | |
| Interest | | 83,046 | | | 79,406 | | | 76,166 | | | 74,357 | | | 72,767 | |
| Depreciation and amortization | | 172,706 | | | 178,789 | | | 182,668 | | | 189,052 | | | 187,367 | |
| Property-level operating expenses: | | | | | | | | | | |
| Senior living | | 231,337 | | | 230,908 | | | 222,551 | | | 216,306 | | | 207,031 | |
| Medical office buildings | | 38,401 | | | 36,541 | | | 39,684 | | | 36,144 | | | 29,621 | |
| | 269,738 | | | 267,449 | | | 262,235 | | | 252,450 | | | 236,652 | |
| Medical office building services costs | | 1,667 | | | 1,639 | | | 1,569 | | | 1,487 | | | 3,839 | |
| General, administrative and professional fees | | 27,327 | | | 28,774 | | | 23,022 | | | 26,867 | | | 26,423 | |
| (Gain) loss on extinguishment of debt, net | | (720 | ) | | — | | | (699 | ) | | (1,194 | ) | | 9,989 | |
| Merger-related expenses and deal costs | | 6,667 | | | 4,262 | | | 13,617 | | | 4,917 | | | 36,668 | |
| Other | | 4,385 | | | 4,587 | | | 1,887 | | | 1,966 | | | 1,510 | |
| Total expenses | | 564,816 | | | 564,906 | | | 560,465 | | | 549,902 | | | 575,215 | |
| | | | | | | | | | |
| | | | | | | | | | |
Income before income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest | | 121,030 | | | 119,720 | | | 97,294 | | | 89,356 | | | 36,749 | |
| (Loss) income from unconsolidated entities | | (506 | ) | | 929 | | | 249 | | | 17,074 | | | 514 | |
| Income tax benefit (expense) | | 12,064 | | | (1,744 | ) | | 3,555 | | | 8,886 | | | 5,179 | |
| Income from continuing operations | | 132,588 | | | 118,905 | | | 101,098 | | | 115,316 | | | 42,442 | |
| Discontinued operations | | (18,055 | ) | | (5,807 | ) | | (14,972 | ) | | (3,495 | ) | | 31,294 | |
| Net income | | 114,533 | | | 113,098 | | | 86,126 | | | 111,821 | | | 73,736 | |
| Net (loss) income attributable to noncontrolling interest | | (47 | ) | | 905 | | | (141 | ) | | (61 | ) | | (289 | ) |
| Net income attributable to common stockholders | | $ | 114,580 | | | $ | 112,193 | | | $ | 86,267 | | | $ | 111,882 | | | $ | 74,025 | |
| | | | | | | | | | |
| Earnings per common share: | | | | | | | | | | |
| Basic: | | | | | | | | | | |
Income from continuing operations attributable to common stockholders | | $ | 0.45 | | | $ | 0.40 | | | $ | 0.34 | | | $ | 0.39 | | | $ | 0.15 | |
| Discontinued operations | | (0.06 | ) | | (0.02 | ) | | (0.05 | ) | | (0.01 | ) | | 0.11 | |
| Net income attributable to common stockholders | | $ | 0.39 | | | $ | 0.38 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.26 | |
| Diluted: | | | | | | | | | | |
Income from continuing operations attributable to common stockholders | | $ | 0.45 | | | $ | 0.40 | | | $ | 0.34 | | | $ | 0.39 | | | $ | 0.14 | |
| Discontinued operations | | (0.06 | ) | | (0.02 | ) | | (0.05 | ) | | (0.01 | ) | | 0.11 | |
| Net income attributable to common stockholders | | $ | 0.39 | | | $ | 0.38 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.25 | |
| | | | | | | | | | |
Weighted average shares used in computing earnings per common share: | | | | | | | | | | |
| Basic | | 292,635 | | | 291,455 | | | 294,704 | | | 294,928 | | | 290,170 | |
| Diluted | | 295,123 | | | 293,924 | | | 297,089 | | | 297,407 | | | 292,592 | |
| | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the six months ended June 30, 2013 and 2012 |
| (In thousands) |
| | 2013 | | 2012 |
| Cash flows from operating activities: | | | | |
| Net income | | $ | 227,631 | | | $ | 163,828 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation and amortization (including amounts in discontinued operations) | | 380,932 | | | 366,405 | |
| Amortization of deferred revenue and lease intangibles, net | | (7,003 | ) | | (8,829 | ) |
| Other non-cash amortization | | (9,401 | ) | | (21,185 | ) |
| Stock-based compensation | | 10,800 | | | 11,086 | |
| Straight-lining of rental income, net | | (14,330 | ) | | (10,470 | ) |
| (Gain) loss on extinguishment of debt, net | | (873 | ) | | 39,533 | |
| Gain on real estate dispositions, net (including amounts in discontinued operations) | | (2,195 | ) | | (78,791 | ) |
| Gain on real estate loan investments | | (1,099 | ) | | 559 | |
| Gain on sale of marketable securities | | (856 | ) | | — | |
| Income tax (benefit) expense (including amounts in discontinued operations) | | (10,320 | ) | | 6,138 | |
| Loss (income) from unconsolidated entities | | 818 | | | (831 | ) |
| Gain on re-measurement of equity interest upon acquisition, net | | (1,241 | ) | | — | |
| Other | | 3,872 | | | 5,990 | |
| Changes in operating assets and liabilities: | | | | |
| (Increase) decrease in other assets | | (16,415 | ) | | 861 | |
| Increase in accrued interest | | 3,315 | | | 10,259 | |
| Decrease in accounts payable and other liabilities | | (55,947 | ) | | (23,745 | ) |
| Net cash provided by operating activities | | 507,688 | | | 460,808 | |
| Cash flows from investing activities: | | | | |
| Net investment in real estate property | | (283,622 | ) | | (899,404 | ) |
| Purchase of noncontrolling interest | | (6,124 | ) | | (3,934 | ) |
| Investment in loans receivable and other | | (32,332 | ) | | (27,260 | ) |
| Proceeds from real estate disposals | | 24,290 | | | 8,847 | |
| Proceeds from loans receivable | | 218,043 | | | 33,223 | |
| Proceeds from sale or maturity of marketable securities | | 5,493 | | | — | |
| Funds held in escrow for future development expenditures | | 11,816 | | | — | |
| Development project expenditures | | (48,284 | ) | | (60,561 | ) |
| Capital expenditures | | (32,459 | ) | | (23,812 | ) |
| Other | | (411 | ) | | (2,150 | ) |
| Net cash used in investing activities | | (143,590 | ) | | (975,051 | ) |
| Cash flows from financing activities: | | | | |
| Net change in borrowings under revolving credit facility | | (280,926 | ) | | (88,654 | ) |
| Proceeds from debt | | 918,455 | | | 1,269,315 | |
| Repayment of debt | | (685,518 | ) | | (645,722 | ) |
| Payment of deferred financing costs | | (12,997 | ) | | (2,980 | ) |
| Issuance of common stock, net | | 82,384 | | | 342,469 | |
| Cash distribution to common stockholders | | (392,230 | ) | | (361,957 | ) |
| Cash distribution to redeemable OP unitholders | | (2,313 | ) | | (2,241 | ) |
| Purchases of redeemable OP units | | (208 | ) | | (611 | ) |
| Contributions from noncontrolling interest | | 2,094 | | | — | |
| Distributions to noncontrolling interest | | (5,045 | ) | | (2,907 | ) |
| Other | | 6,808 | | | 14,509 | |
| Net cash (used in) provided by financing activities | | (369,496 | ) | | 521,221 | |
| Net (decrease) increase in cash and cash equivalents | | (5,398 | ) | | 6,978 | |
| Effect of foreign currency translation on cash and cash equivalents | | (89 | ) | | 18 | |
| Cash and cash equivalents at beginning of period | | 67,908 | | | 45,807 | |
| Cash and cash equivalents at end of period | | $ | 62,421 | | | $ | 52,803 | |
| | | | |
| Supplemental schedule of non-cash activities: | | | | |
| Assets and liabilities assumed from acquisitions: | | | | |
| Real estate investments | | $ | 90,020 | | | $ | 364,883 | |
| Utilization of funds held for an Internal Revenue Code Section 1031 exchange | | — | | | (134,003 | ) |
| Other assets acquired | | 2,562 | | | 81,509 | |
| Debt assumed | | 68,602 | | | 250,363 | |
| Other liabilities | | 10,493 | | | 26,639 | |
| Deferred income tax liability | | 1,794 | | | 5,895 | |
| Noncontrolling interests | | 11,693 | | | 25,166 | |
| Equity issued | | — | | | 4,326 | |
| Debt transferred on the sale of assets | | — | | | 14,535 | |
| | | | | | |
| QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands) |
| | | | | | | | | | |
| | 2013 Quarters | | 2012 Quarters |
| | Second | | First | | Fourth | | Third | | Second |
| Cash flows from operating activities: | | | | | | | | | | |
| Net income | | $ | 114,533 | | | $ | 113,098 | | | $ | 86,126 | | | $ | 111,821 | | | $ | 73,736 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | |
| Depreciation and amortization (including amounts in discontinued operations) | | 193,989 | | | 186,943 | | | 201,748 | | | 196,622 | | | 201,769 | |
| Amortization of deferred revenue and lease intangibles, net | | (3,693 | ) | | (3,310 | ) | | (4,153 | ) | | (4,136 | ) | | (3,669 | ) |
| Other non-cash amortization | | (4,072 | ) | | (5,329 | ) | | (8,617 | ) | | (10,141 | ) | | (11,077 | ) |
| Stock-based compensation | | 5,138 | | | 5,662 | | | 4,255 | | | 5,443 | | | 6,252 | |
| Straight-lining of rental income, net | | (6,465 | ) | | (7,865 | ) | | (7,330 | ) | | (6,242 | ) | | (5,580 | ) |
| (Gain) loss on extinguishment of debt, net | | (873 | ) | | — | | | (699 | ) | | (1,194 | ) | | 9,989 | |
| Gain on real estate dispositions, net (including amounts in discontinued operations) | | (1,718 | ) | | (477 | ) | | (1,804 | ) | | (357 | ) | | (38,558 | ) |
| Gain on real estate loan investments | | (759 | ) | | (340 | ) | | (5,789 | ) | | — | | | — | |
| Gain on sale of marketable securities | | (856 | ) | | — | | | — | | | — | | | — | |
| Income tax (benefit) expense (including amounts in discontinued operations) | | (12,064 | ) | | 1,744 | | | (3,555 | ) | | (8,869 | ) | | (5,167 | ) |
| Loss (income) from unconsolidated entities | | 506 | | | 312 | | | (249 | ) | | (429 | ) | | (514 | ) |
| Gain on re-measurement of equity interest upon acquisition, net | | — | | | (1,241 | ) | | — | | | (16,645 | ) | | — | |
| Other | | 967 | | | 2,905 | | | 3,942 | | | 482 | | | 2,908 | |
| Changes in operating assets and liabilities: | | | | | | | | | | |
| (Increase) decrease in other assets | | (5,956 | ) | | (10,459 | ) | | 15,686 | | | (12,791 | ) | | (414 | ) |
| (Decrease) increase in accrued interest | | (7,215 | ) | | 10,530 | | | (8,761 | ) | | 8,471 | | | (10,193 | ) |
| Increase (decrease) in accounts payable and other liabilities | | 5,921 | | | (61,868 | ) | | 12,697 | | | (13,524 | ) | | (3,635 | ) |
| Net cash provided by operating activities | | 277,383 | | | 230,305 | | | 283,497 | | | 248,511 | | | 215,847 | |
| Cash flows from investing activities: | | | | | | | | | | |
| Net investment in real estate property | | (227,447 | ) | | (56,175 | ) | | (298,153 | ) | | (255,508 | ) | | (898,904 | ) |
| Purchase of private investment funds | | — | | | — | | | (276,419 | ) | | — | | | — | |
| Purchase of noncontrolling interest | | (2,938 | ) | | (3,186 | ) | | — | | | — | | | (3,934 | ) |
| Investment in loans receivable and other | | (29,543 | ) | | (2,789 | ) | | (422,035 | ) | | (3,263 | ) | | (4,787 | ) |
| Proceeds from real estate disposals | | 13,040 | | | 11,250 | | | 73,900 | | | 66,298 | | | — | |
| Proceeds from loans receivable | | 71,649 | | | 146,394 | | | 8,402 | | | 1,594 | | | 15,979 | |
| Proceeds from sale or maturity of marketable securities | | 5,493 | | | — | | | 37,500 | | | — | | | — | |
| Funds held in escrow for future development expenditures | | 6,376 | | | 5,440 | | | (28,050 | ) | | — | | | — | |
| Development project expenditures | | (26,696 | ) | | (21,588 | ) | | (23,883 | ) | | (29,558 | ) | | (29,287 | ) |
| Capital expenditures | | (12,664 | ) | | (19,795 | ) | | (27,160 | ) | | (18,458 | ) | | (13,793 | ) |
| Other | | (333 | ) | | (78 | ) | | 115 | | | 40 | | | (13 | ) |
| Net cash (used in) provided by investing activities | | (203,063 | ) | | 59,473 | | | (955,783 | ) | | (238,855 | ) | | (934,739 | ) |
| Cash flows from financing activities: | | | | | | | | | | |
| Net change in borrowings under revolving credit facility | | 94,990 | | | (375,916 | ) | | (163,983 | ) | | 337,575 | | | 293,744 | |
| Proceeds from debt | | 1,584 | | | 916,871 | | | 1,142,023 | | | 299,067 | | | 601,985 | |
| Repayment of debt | | (49,725 | ) | | (635,793 | ) | | (90,023 | ) | | (457,278 | ) | | (346,921 | ) |
| Payment of deferred financing costs | | 811 | | | (13,808 | ) | | (19,513 | ) | | (1,277 | ) | | (1,187 | ) |
| Issuance of common stock, net | | 77,334 | | | 5,050 | | | — | | | — | | | 342,469 | |
| Cash distribution to common stockholders | | (196,530 | ) | | (195,700 | ) | | (183,306 | ) | | (183,283 | ) | | (182,704 | ) |
| Cash distribution to redeemable OP unitholders | | (1,162 | ) | | (1,151 | ) | | (1,088 | ) | | (1,117 | ) | | (1,129 | ) |
| Purchases of redeemable OP units | | (100 | ) | | (108 | ) | | (2,841 | ) | | (1,149 | ) | | (378 | ) |
| Contributions from noncontrolling interest | | 2,094 | | | — | | | — | | | — | | | — | |
| Distributions to noncontrolling interest | | (3,595 | ) | | (1,450 | ) | | (1,180 | ) | | (1,128 | ) | | (1,315 | ) |
| Other | | 4,750 | | | 2,058 | | | 1,573 | | | 4,621 | | | 13,944 | |
| Net cash (used in) provided by financing activities | | (69,549 | ) | | (299,947 | ) | | 681,662 | | | (3,969 | ) | | 718,508 | |
| Net increase (decrease) in cash and cash equivalents | | 4,771 | | | (10,169 | ) | | 9,376 | | | 5,687 | | | (384 | ) |
| Effect of foreign currency translation on cash and cash equivalents | | (40 | ) | | (49 | ) | | 2 | | | 40 | | | (37 | ) |
| Cash and cash equivalents at beginning of period | | 57,690 | | | 67,908 | | | 58,530 | | | 52,803 | | | 53,224 | |
| Cash and cash equivalents at end of period | | $ | 62,421 | | | $ | 57,690 | | | $ | 67,908 | | | $ | 58,530 | | | $ | 52,803 | |
| | | | | | | | | | |
| Supplemental schedule of non-cash activities: | | | | | | | | | | |
| Assets and liabilities assumed from acquisitions: | | | | | | | | | | |
| Real estate investments | | $ | 81,181 | | | $ | 8,839 | | | $ | 84,939 | | | $ | 132,872 | | | $ | 310,002 | |
| Utilization of funds held for an Internal Revenue Code Section 1031 exchange | | — | | | — | | | — | | | — | | | (96,204 | ) |
| Other assets acquired | | 1,894 | | | 668 | | | (22,159 | ) | | 18,380 | | | 86,635 | |
| Debt assumed | | 68,602 | | | — | | | 44,923 | | | 117,539 | | | 232,629 | |
| Other liabilities | | 4,071 | | | 6,422 | | | 9,707 | | | 34,045 | | | 33,628 | |
| Deferred income tax liability | | 262 | | | 1,532 | | | — | | | (1,596 | ) | | 5,895 | |
| Noncontrolling interests | | 10,140 | | | 1,553 | | | 8,150 | | | 1,264 | | | 28,281 | |
| Equity issued | | — | | | — | | | — | | | — | | | — | |
| Debt transferred on the sale of assets | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURES RECONCILIATION |
Funds From Operations (FFO) Including and Excluding Non-Cash Items1 |
| (Dollars in thousands, except per share amounts) |
| |
| | | | | | | | | | | | | | Tentative Estimates | | |
| | | | | | | | | | | | | | Preliminary and | | |
| | | | | | | | | | | | | | Subject to Change | | YOY |
| | 2012 | | | | 2013 | | FY2013 - Guidance | | Growth (2) |
| | Q2 | | Q3 | | Q4 | | FY | | Q1 | | Q2 | | Low | | High | | '12-'13E |
| Net income attributable to common stockholders | | $ | 74,025 | | | $ | 111,882 | | | $ | 86,267 | | | $ | 362,800 | | | $ | 112,193 | | | $ | 114,580 | | | $ | 455,729 | | | $ | 495,029 | | | |
| Net income attributable to common stockholders per share | | $ | 0.25 | | | $ | 0.38 | | | $ | 0.29 | | | $ | 1.23 | | | $ | 0.38 | | | $ | 0.39 | | | $ | 1.54 | | | $ | 1.68 | | | |
| | | | | | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization on real estate assets | | 186,366 | | | 187,800 | | | 181,400 | | | 714,860 | | | 177,511 | | | 171,290 | | | 699,679 | | | 689,679 | | | |
Depreciation on real estate assets related to noncontrolling interest | | (2,336 | ) | | (2,221 | ) | | (2,435 | ) | | (8,503 | ) | | (2,502 | ) | | (2,617 | ) | | (9,373 | ) | | (11,373 | ) | | |
Depreciation on real estate assets related to unconsolidated entities | | 2,131 | | | 1,700 | | | 1,510 | | | 7,516 | | | 1,646 | | | 1,622 | | | 7,035 | | | 6,035 | | | |
Gain on re-measurement of equity interest upon acquisition, net | | — | | | (16,645 | ) | | — | | | (16,645 | ) | | (1,241 | ) | | — | | | (1,241 | ) | | (1,241 | ) | | |
| Discontinued operations: | | | | | | | | | | | | | | | | | | |
| (Gain) loss on real estate dispositions, net | | (38,558 | ) | | (357 | ) | | (1,804 | ) | | (80,952 | ) | | (477 | ) | | (1,718 | ) | | (195 | ) | | (4,195 | ) | | |
| Depreciation and amortization on real estate assets | | 14,402 | | | 7,570 | | | 19,079 | | | 45,491 | | | 8,154 | | | 21,284 | | | 32,000 | | | 30,000 | | | |
| Subtotal: funds from operations add-backs | | 162,005 | | | 177,847 | | | 197,750 | | | 661,767 | | | 183,091 | | | 189,861 | | | 727,905 | | | 708,905 | | | |
| Subtotal: funds from operations add-backs per share | | $ | 0.55 | | | $ | 0.60 | | | $ | 0.67 | | | $ | 2.25 | | | $ | 0.62 | | | $ | 0.64 | | | $ | 2.47 | | | $ | 2.40 | | | |
| Funds From Operations | | $ | 236,030 | | | $ | 289,729 | | | $ | 284,017 | | | $ | 1,024,567 | | | $ | 295,284 | | | $ | 304,441 | | | $ | 1,183,634 | | | $ | 1,203,934 | | | 17 | % |
| Funds From Operations per share | | $ | 0.81 | | | $ | 0.97 | | | $ | 0.96 | | | $ | 3.48 | | | $ | 1.00 | | | $ | 1.03 | | | $ | 4.01 | | | $ | 4.08 | | | 16 | % |
| | | | | | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
| Merger-related expenses and deal costs | | 36,668 | | | 4,917 | | | 13,617 | | | 63,183 | | | 4,262 | | | 6,592 | | | 15,000 | | | 20,000 | | | |
| Income tax expense (benefit) | | (5,166 | ) | | (8,870 | ) | | (3,555 | ) | | (6,286 | ) | | 1,744 | | | (12,064 | ) | | (7,500 | ) | | (10,000 | ) | | |
| Loss (gain) on extinguishment of debt | | 9,989 | | | (1,194 | ) | | (699 | ) | | 37,640 | | | — | | | (873 | ) | | 5,000 | | | (5,000 | ) | | |
| Change in fair value of financial instruments | | 60 | | | 58 | | | (52 | ) | | 99 | | | 25 | | | — | | | 25 | | | 25 | | | |
| Amortization of other intangibles | | 255 | | | 256 | | | 255 | | | 1,022 | | | 256 | | | 255 | | | 1,522 | | | 522 | | | |
| Subtotal: normalized funds from operations add-backs | | 41,806 | | | (4,833 | ) | | 9,566 | | | 95,658 | | | 6,287 | | | (6,090 | ) | | 14,047 | | | 5,547 | | | |
| Subtotal: normalized funds from operations add-backs per share | | $ | 0.14 | | | $ | (0.02 | ) | | $ | 0.03 | | | $ | 0.32 | | | $ | 0.02 | | | $ | (0.02 | ) | | $ | 0.05 | | | $ | 0.02 | | | |
| Normalized Funds From Operations | | $ | 277,836 | | | $ | 284,896 | | | $ | 293,583 | | | $ | 1,120,225 | | | $ | 301,571 | | | $ | 298,351 | | | $ | 1,197,681 | | | $ | 1,209,481 | | | 7 | % |
| Normalized Funds From Operations per share | | $ | 0.95 | | | $ | 0.96 | | | $ | 0.99 | | | $ | 3.80 | | | $ | 1.03 | | | $ | 1.01 | | | $ | 4.06 | | | $ | 4.10 | | | 7 | % |
| | | | | | | | | | | | | | | | | | |
| Non-cash items included in normalized FFO: | | | | | | | | | | | | | | | | | | |
| Amortization of deferred revenue and | | | | | | | | | | | | | | | | | | |
| lease intangibles, net | | (3,669 | ) | | (4,136 | ) | | (4,153 | ) | | (17,118 | ) | | (3,310 | ) | | (3,693 | ) | | (14,386 | ) | | (14,386 | ) | | |
Other non-cash amortization, including fair market value of debt | | (11,077 | ) | | (10,141 | ) | | (8,617 | ) | | (39,943 | ) | | (5,329 | ) | | (4,072 | ) | | (16,169 | ) | | (17,169 | ) | | |
| Stock-based compensation | | 6,252 | | | 5,443 | | | 4,255 | | | 20,784 | | | 5,662 | | | 5,138 | | | 20,457 | | | 21,457 | | | |
| Straight-lining of rental income, net | | (5,580 | ) | | (6,242 | ) | | (7,330 | ) | | (24,042 | ) | | (7,865 | ) | | (6,465 | ) | | (26,034 | ) | | (26,534 | ) | | |
| Subtotal: non-cash items included in normalized FFO | | (14,074 | ) | | (15,076 | ) | | (15,845 | ) | | (60,319 | ) | | (10,842 | ) | | (9,092 | ) | | (36,132 | ) | | (36,632 | ) | | |
| Subtotal: normalized funds from operations add-backs per share | | $ | (0.05 | ) | | $ | (0.05 | ) | | $ | (0.05 | ) | | $ | (0.20 | ) | | $ | (0.04 | ) | | $ | (0.03 | ) | | $ | (0.12 | ) | | $ | (0.12 | ) | | |
| Normalized FFO, excluding non-cash items | | $ | 263,762 | | | $ | 269,820 | | | $ | 277,738 | | | $ | 1,059,906 | | | $ | 290,729 | | | $ | 289,259 | | | $ | 1,161,549 | | | $ | 1,172,849 | | | 10 | % |
| Normalized FFO, excluding non-cash items per share | | $ | 0.90 | | | $ | 0.91 | | | $ | 0.93 | | | $ | 3.60 | | | $ | 0.99 | | | $ | 0.98 | | | $ | 3.94 | | | $ | 3.98 | | | 10 | % |
| Weighted average diluted shares | | 292,592 | | | 297,407 | | | 297,089 | | | 294,488 | | | 293,924 | | | 295,123 | | | 294,995 | | | 294,995 | | | |
| | | | | | | | | | | | | | | | | | |
1 Totals and per share amounts may not add due to rounding. Per share quarterly amounts may not add to annual per share amounts due to material changes in the Company’s weighted average diluted share count, if any. |
| 2 2012-2013E growth assumes the midpoint of 2013 guidance. |
| |
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 normalized FFO appropriate measures of operating performance of an equity REIT. Moreover, the Company believes that normalized FFO provides useful information because it allows investors, analysts and Company management to compare the Company’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items such as transactions and litigation.
The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of real estate property, including gain on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, 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. The Company defines normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) net gains on the sales of real property assets, including gain on re-measurement of equity method investments; (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (d) the non-cash effect of income tax benefits or expenses and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement; (e) except as specifically stated in the case of guidance, the impact of future acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f) the financial impact of contingent consideration; (g) charitable donations made to the Ventas Charitable Foundation; and (h) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments.
FFO and normalized FFO presented herein may not be identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO and normalized FFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of the Company’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are FFO and normalized 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 and normalized FFO should be examined in conjunction with net income as presented elsewhere herein.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Debt to Adjusted Pro Forma EBITDA
The following information considers the pro forma effect on net income, interest and depreciation of the Company’s investments and other capital transactions that were completed during the three months ended June 30, 2013, 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, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, merger-related expenses and deal costs, net gains on real estate activity and changes in the fair value of financial instruments (including amounts in discontinued operations) (“Adjusted Pro Forma EBITDA”) (dollars in thousands):
| Net income attributable to common stockholders | | $ | 114,580 | | |
| Pro forma adjustments for current period investments, capital | | | |
| transactions and dispositions | | 4,808 | | |
| Pro forma net income for the three months ended June 30, 2013 | | 119,388 | | |
| Add back: | | | |
| Pro forma interest (including discontinued operations) | | 85,388 | | |
| Pro forma depreciation and amortization (including discontinued operations) | | 194,124 | | |
| Stock-based compensation | | 5,138 | | |
| Gain on real estate dispositions, net | | (1,718 | ) | |
| Gain on extinguishment of debt, net | | (873 | ) | |
| Income tax benefit | | (12,064 | ) | |
| Other taxes | | 1,197 | | |
| Merger-related expenses and deal costs | | 4,431 | | |
| Adjusted Pro Forma EBITDA | | $ | 395,011 | | |
| Adjusted Pro Forma EBITDA annualized | | $ | 1,580,044 | | |
| | | |
| | | |
| As of June 30, 2013: | | | |
| Debt | | $ | 8,420,073 | | |
| Cash, including cash escrows pertaining to debt | | (95,345 | ) | |
| Net debt | | $ | 8,324,728 | | |
| | | |
| Net debt to Adjusted Pro Forma EBITDA | | 5.3 | | x |
| | | | |
| Non-GAAP Financial Measures Reconciliation |
| (In thousands, except per share amounts) |
| | | | |
| | For the Six Months |
| | Ended June 30, |
| | 2013 | | 2012 |
| | | | |
| Net income attributable to common stockholders | | $ | 226,773 | | | $ | 164,651 | |
| Adjustments: | | | | |
| Depreciation and amortization on real estate assets | | 348,801 | | | 345,660 | |
| Depreciation on real estate assets related to noncontrolling interest | | (5,119 | ) | | (3,847 | ) |
| Depreciation on real estate assets related to unconsolidated entities | | 3,268 | | | 4,306 | |
Gain on re-measurement of equity interest upon acquisition, net | | (1,241 | ) | | — | |
| Discontinued operations: | | | | |
| Gain on real estate dispositions, net | | (2,195 | ) | | (78,791 | ) |
| Depreciation and amortization on real estate assets | | 29,438 | | | 18,842 | |
| FFO | | 599,725 | | | 450,821 | |
| Merger-related expenses and deal costs | | 10,854 | | | 44,649 | |
Income tax (benefit) expense | | (10,320 | ) | | 6,139 | |
| (Gain) loss on extinguishment of debt, net | | (873 | ) | | 39,533 | |
| Change in fair value of financial instruments | | 25 | | | 93 | |
| Amortization of other intangibles | | 511 | | | 511 | |
| Normalized FFO | | $ | 599,922 | | | $ | 541,746 | |
| | | | |
| Per diluted share (1): | | | | |
| Net income attributable to common stockholders | | $ | 0.77 | | | $ | 0.56 | |
| Adjustments: | | | | |
| Depreciation and amortization on real estate assets | | 1.18 | | | 1.18 | |
| Depreciation on real estate assets related to noncontrolling interest | | (0.02 | ) | | (0.01 | ) |
| Depreciation on real estate assets related to unconsolidated entities | | 0.01 | | | 0.01 | |
| Gain on re-measurement of equity interest upon acquisition, net | | 0.00 | | | — | |
| Discontinued operations: | | | | |
| Gain on real estate dispositions, net | | (0.01 | ) | | (0.27 | ) |
| Depreciation and amortization on real estate assets | | 0.10 | | | 0.06 | |
| FFO | | 2.04 | | | 1.55 | |
| Merger-related expenses and deal costs | | 0.04 | | | 0.15 | |
Income tax (benefit) expense | | (0.04 | ) | | 0.02 | |
(Gain) loss on extinguishment of debt, net | | 0.00 | | | 0.14 | |
| Change in fair value of financial instruments | | 0.00 | | | 0.00 | |
| Amortization of other intangibles | | 0.00 | | | 0.00 | |
| Normalized FFO | | $ | 2.04 | | | $ | 1.86 | |
| | | | |
| (1) Per share amounts may not add due to rounding. |
| |
| NON-GAAP FINANCIAL MEASURES RECONCILIATION |
| NOI by Segment |
| (In thousands) |
| | | | | | |
| | 2013 Quarters | | 2012 Quarters |
| | Second | | First | | Fourth | | Third | | Second |
| Revenues | | | | | | | | | | |
| | | | | | | | | | |
| Triple-Net | | | | | | | | | | |
| Triple-Net Rental Income | | $ | 214,239 | | | $ | 213,521 | | | $ | 207,570 | | | $ | 207,975 | | | $ | 204,561 |
| | | | | | | | | | |
| Medical Office Buildings | | | | | | | | | | |
| Medical Office - Stabilized | | 102,083 | | | 102,450 | | | 100,027 | | | 92,458 | | | 80,336 |
| Medical Office - Lease up | | 8,863 | | | 8,696 | | | 8,924 | | | 8,356 | | | 8,774 |
| Total Medical Office Buildings - Rental Income | | 110,946 | | | 111,146 | | | 108,951 | | | 100,814 | | | 89,110 |
| Total Rental Income | | 325,185 | | | 324,667 | | | 316,521 | | | 308,789 | | | 293,671 |
| | | | | | | | | | |
| Medical Office Building Services Revenue | | 2,159 | | | 2,537 | | | 2,840 | | | 3,434 | | | 5,529 |
| Total Medical Office Buildings - Revenue | | 113,105 | | | 113,683 | | | 111,791 | | | 104,248 | | | 94,639 |
| | | | | | | | | | |
| Triple-Net Services Revenue | | 1,115 | | | 1,111 | | | 1,110 | | | 1,110 | | | 1,110 |
| Non-Segment Services Revenue | | 263 | | | — | | | — | | | — | | | — |
| Total Medical Office Building and Other Services Revenue | | 3,537 | | | 3,648 | | | 3,950 | | | 4,544 | | | 6,639 |
| | | | | | | | | | |
| Seniors Housing Operating | | | | | | | | | | |
| Seniors Housing - Stabilized | | 336,754 | | | 334,536 | | | 317,608 | | | 312,241 | | | 299,345 |
| Seniors Housing - Lease up | | 4,114 | | | 3,892 | | | 3,582 | | | 3,579 | | | 3,360 |
| Seniors Housing - Other | | 726 | | | 742 | | | 743 | | | 740 | | | 732 |
| Total Resident Fees and Services | | 341,594 | | | 339,170 | | | 321,933 | | | 316,560 | | | 303,437 |
| | | | | | | | | | |
| Non-Segment Income from Loans and Investments | | 14,733 | | | 16,103 | | | 14,690 | | | 9,035 | | | 8,152 |
| Total Revenues, excluding Interest and Other Income | | 685,049 | | | 683,588 | | | 657,094 | | | 638,928 | | | 611,899 |
| | | | | | | | | | |
| Property-Level Operating Expenses | | | | | | | | | | |
| | | | | | | | | | |
| Medical Office Buildings | | | | | | | | | | |
| Medical Office - Stabilized | | 35,232 | | | 33,723 | | | 36,360 | | | 32,981 | | | 26,401 |
| Medical Office - Lease up | | 3,169 | | | 2,818 | | | 3,324 | | | 3,163 | | | 3,220 |
| Total Medical Office Buildings | | 38,401 | | | 36,541 | | | 39,684 | | | 36,144 | | | 29,621 |
| | | | | | | | | | |
| Seniors Housing Operating | | | | | | | | | | |
| Seniors Housing - Stabilized | | 227,907 | | | 227,456 | | | 218,857 | | | 212,933 | | | 203,770 |
| Seniors Housing - Lease up | | 2,814 | | | 2,839 | | | 3,114 | | | 2,743 | | | 2,657 |
| Seniors Housing - Other | | 616 | | | 613 | | | 580 | | | 630 | | | 604 |
| Total Seniors Housing | | 231,337 | | | 230,908 | | | 222,551 | | | 216,306 | | | 207,031 |
| Total Property-Level Operating Expenses | | 269,738 | | | 267,449 | | | 262,235 | | | 252,450 | | | 236,652 |
| | | | | | | | | | |
| Medical Office Building Services Costs | | 1,667 | | | 1,639 | | | 1,569 | | | 1,487 | | | 3,839 |
| | | | | | | | | | |
| Net Operating Income | | | | | | | | | | |
| | | | | | | | | | |
| Triple-Net | | | | | | | | | | |
| Triple-Net Properties | | 214,239 | | | 213,521 | | | 207,570 | | | 207,975 | | | 204,561 |
| Triple-Net Services Revenue | | 1,115 | | | 1,111 | | | 1,110 | | | 1,110 | | | 1,110 |
| Total Triple-Net | | 215,354 | | | 214,632 | | | 208,680 | | | 209,085 | | | 205,671 |
| | | | | | | | | | |
| Medical Office Buildings | | | | | | | | | | |
| Medical Office - Stabilized | | 66,851 | | | 68,727 | | | 63,667 | | | 59,477 | | | 53,935 |
| Medical Office - Lease up | | 5,694 | | | 5,878 | | | 5,600 | | | 5,193 | | | 5,554 |
| Medical Office Buildings Services | | 492 | | | 898 | | | 1,271 | | | 1,947 | | | 1,690 |
| Total Medical Office Buildings | | 73,037 | | | 75,503 | | | 70,538 | | | 66,617 | | | 61,179 |
| | | | | | | | | | |
| Seniors Housing Operating | | | | | | | | | | |
| Seniors Housing - Stabilized | | 108,847 | | | 107,080 | | | 98,751 | | | 99,308 | | | 95,575 |
| Seniors Housing - Lease up | | 1,300 | | | 1,053 | | | 468 | | | 836 | | | 703 |
| Seniors Housing - Other | | 110 | | | 129 | | | 163 | | | 110 | | | 128 |
| Total Seniors Housing | | 110,257 | | | 108,262 | | | 99,382 | | | 100,254 | | | 96,406 |
| Non-Segment | | 14,996 | | | 16,103 | | | 14,690 | | | 9,035 | | | 8,152 |
| Net Operating Income | | $ | 413,644 | | | $ | 414,500 | | | $ | 393,290 | | | $ | 384,991 | | | $ | 371,408 |
| | | | | | | | | | |
| Note: Amounts above are adjusted to exclude discontinued operations for all periods presented. |
| |
| NON-GAAP FINANCIAL MEASURES RECONCILIATION |
| Total Same-Store Portfolio NOI |
| (Dollars in thousands) |
| | |
| | For the Three Months Ended |
| | June 30, |
| | 2013 | | 2012 |
| | | | |
| Net Operating Income | | $ | 413,644 | | | $ | 371,408 | |
| | | | |
| Less: | | | | |
| NOI Not Included in Same-Store | | 32,048 | | | 7,251 | |
| Straight-Lining of Rental Income | | 6,465 | | | 5,476 | |
| Non-Cash Rental Income | | 2,829 | | | 3,441 | |
| Non-Segment NOI | | 14,996 | | | 8,153 | |
| | 56,338 | | | 24,321 | |
| | | | |
| Same-Store Cash NOI | | $ | 357,306 | | | $ | 347,087 | |
| | | | |
| Percentage Increase | | | | 3 | % |
| | | | | |
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CONTACT:
Ventas, Inc.
Lori B. Wittman, (877) 4-VENTAS
