EXHIBIT 99.1
Ventas, Inc. 10350 Ormsby Park Place, Ste 300 Louisville, Kentucky 40223 (502) 357.9000 (502) 357.9001 Fax
| | |
Contacts: | | Debra A. Cafaro |
| | | Chairman, President and CEO |
| | | or |
| | | Richard A. Schweinhart |
| | | Senior Vice President and CFO |
| | | (502) 357-9000 |
VENTAS THIRD QUARTER NORMALIZED FFO RISES 24 PERCENT TO $39.8 MILLION;
PER SHARE NORMALIZED FFO INCREASES 18 PERCENT TO $0.47 PER SHARE
Company Updates 2004 Normalized FFO Guidance to $1.78 to $1.80 Per Share
Issues 2005 Normalized FFO Guidance of $1.89 to $1.93 Per Share
LOUISVILLE, KY (October 27, 2004) – Ventas, Inc. (NYSE:VTR) (“Ventas” or the “Company”) said today that third quarter 2004 normalized Funds from Operations (“FFO”) rose 24 percent to $39.8 million, compared with $32.2 million in the third quarter 2003. Normalized FFO per diluted share in the third quarter 2004 increased 18 percent to $0.47 from $0.40 per diluted share for the comparable 2003 period. In the third quarter ended September 30, 2004, the Company had 84.9 million weighted average diluted shares outstanding, compared to 80.3 million weighted average diluted shares outstanding a year earlier.
Normalized FFO for the nine months ended September 30, 2004 was $111.6 million, or $1.33 per diluted share, a 22 percent increase from $91.3 million, or $1.14 per diluted share, for the comparable 2003 period.
Normalized FFO for all periods excludes the benefit of a $20.2 million reversal of a previously recorded contingent liability, which increased operating income in the first quarter of 2003, an $8.1 million and a $9.0 million gain on sales of common stock of the Company’s primary tenant, Kindred Healthcare, Inc. (NYSE:KND) (“Kindred”), which the Company realized during the three and nine months ended September 30, 2003, respectively, and a $1.4 million loss on extinguishment of debt recognized during the third quarter of 2004 due to the Company’s refinancing of its credit facility.
The third quarter and first nine months of 2004 benefited from the Company’s recent acquisition activity and increased rent from its master lease agreements with Kindred.
“Our shareholders will benefit from another quarter of excellent growth. Normalized FFO rose 18 percent per share and we improved our future earnings power by completing two important capital markets transactions,” Chairman, President and CEO Debra A. Cafaro said. “With our
Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
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October 27, 2004
new bank facility and senior note offering completed on attractive terms, Ventas has a strong platform to support its further investment in healthcare and senior housing assets and enhance its ability to create long-term value for shareholders.”
GAAP NET INCOME
Ventas reported third quarter 2004 net income of $25.3 million, or $0.30 per diluted share. In the third quarter of 2003, Ventas reported net income of $32.2 million, or $0.40 per diluted share, after discontinued operations of $1.8 million, or $0.02 per diluted share, related to the sale of 27 facilities.
Net income for the nine months ended September 30, 2004 was $74.2 million, or $0.88 per diluted share, compared with net income for the nine months ended September 30, 2003 of $85.6 million, or $1.07 per diluted share, after discontinued operations of $4.2 million, or $0.05 per diluted share.
THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
| | • | Two of Ventas’s wholly owned subsidiaries issued $125 million of 6-5/8 percent unsecured senior notes, maturing on October 15, 2014, locking in the Company’s long-term debt costs and giving it greater capacity to continue its growth and diversification plan. Proceeds were used to pay down borrowings under the Company’s revolving credit facility. |
| | • | Ventas closed its new $300 million secured revolving credit facility initially priced at 125 basis points over LIBOR, significantly better than its previous revolving credit facility which was initially priced at 275 basis points over LIBOR. The improvement reflects upgrades in the Company’s credit ratings, the success of its diversification program, increased cash flows and profits, and lower leverage. Ventas currently has $36.0 million drawn under this facility. |
| | • | Ventas entered into a sale/leaseback transaction with Summerville Senior Living, Inc. on two assisted living facilities located in Ohio and Connecticut containing 166 units. The purchase price was $26.8 million, and cash rent on these investments approximates 9.15 percent, increasing annually by approximately 2.5 percent over the term of the lease. |
| | • | Ventas also invested $15.7 million in the acquisition of five medical office buildings (MOBs), one in Texas and four in Florida. The MOBs are projected to produce a yield in excess of 9 percent. One of these assets was acquired on October 7, 2004. |
| | • | With the completed acquisitions, annualized expected rent from Kindred represents approximately 79 percent of the Company’s annualized expected revenue, assuming a full quarter effect of all acquisitions. Annualized rent from market rate, non-government reimbursed assets in the Company’s portfolio represents 14 percent of the Company’s annualized expected revenue, on the same basis. These assets include independent living facilities, assisted living facilities and medical/office buildings. |
| | • | In addition, assets leased to Kindred now represent 68 percent of the Company’s total assets, measured on a gross book value basis. |
| | • | Ventas said its acquisition pipeline remains active, with approximately $100 million of additional senior housing and healthcare assets under contract and/or nonbinding letters of intent. The anticipated yield on these investments is at least 9 percent. While the Company expects these acquisitions to close, there can be no assurances that these transactions will be completed, or if they are completed, when they might occur. |
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| | • | The Company maintained a strong balance sheet at September 30, 2004, with a third quarter pro forma annualized net debt-to-EBITDA ratio of 3.7 times. |
| | • | Ventas appointed Christopher T. Hannon, Senior Vice President and Chief Financial Officer of Province Healthcare Company (NYSE:PRV), to its Board of Directors, where he will serve on the Company’s Audit and Compliance Committee. Hannon’s election underscores Ventas’s ongoing commitment to an independent, experienced Board of Directors and best practices in corporate governance. |
| | • | The 227 skilled nursing facilities and hospitals leased by the Company to its primary tenant, Kindred, produced EBITDAR to rent coverage of 1.7 times (after management fees) for the trailing twelve month period ended June 30, 2004 (the latest date available). Further information detailing these rent coverages is contained on a schedule attached to this Press Release. |
| | • | Ventas obtained a disbursement of $750,000 from its joint tax escrow with Kindred, which contains proceeds of various refunds for the pre-1999 tax periods. |
THIRD QUARTER 2004 RESULTS
Rental revenue for the quarter ended September 30, 2004 was $60.7 million, of which $49.0 million (or 80.7 percent) resulted from leases with Kindred. Third quarter expenses totaled $36.3 million, and included $13.3 million of depreciation expense and $16.9 million of interest expense. General and administrative and professional expenses for the 2004 third quarter totaled $4.0 million. Property level operating expenses for the period were $0.4 million.
NINE MONTH 2004 RESULTS
Rental revenue for the nine months ended September 30, 2004 was $172.6 million, of which $144.8 million (or 83.9 percent) resulted from leases with Kindred. Expenses for the nine months ended September 30, 2004 totaled $101.4 million and included $36.2 million of depreciation expense, $49.3 million of interest expense and $12.8 million of general and administrative and professional expenses. Property level operating expenses for the period were $0.9 million.
VENTAS UPDATES 2004 NORMALIZED FFO GUIDANCE AND ISSUES 2005 GUIDANCE
Ventas also stated that it expects 2004 normalized FFO to be between $1.78 and $1.80 per diluted share, updated from the previous guidance of $1.75 to $1.79 per diluted share.
The Company also said it expects to achieve 2005 normalized FFO of between $1.89 and $1.93 per diluted share.
The Company’s normalized FFO guidance assumes that all of the Company’s tenants and borrowers continue to meet all of their obligations to the Company and that the Company closes all acquisitions currently subject to contract and/or non-binding letters of intent by March 31, 2005. There can be no assurance that these transactions will occur or when they will occur. Any failure or delay in completing these transactions could reduce the amount of 2004 and 2005 FFO that Ventas actually achieves.
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October 27, 2004
In addition to the previously stated assumptions, the Company’s normalized FFO guidance (and related GAAP earnings projections) for all periods exclude gains and losses on the sales of assets, and the impact of additional, unannounced future acquisitions, divestitures and capital transactions. Its guidance also excludes the future impact of (a) any expense the Company records for non-cash “swap ineffectiveness,” and (b) any expenses related to asset impairment, the write-off of unamortized deferred financing fees or additional costs, expenses or premiums incurred as a result of early debt retirement.
The Company’s normalized FFO guidance is based on a number of other assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results. Reconciliation of the Company’s normalized FFO 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 normalized FFO guidance, but it is not obligated to do so.
THIRD QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on Thursday, October 28, 2004, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The conference call is being web cast by CCBN and can be accessed at the Ventas website atwww.ventasreit.com orwww.fulldisclosure.com. An online replay of the web cast will be available at approximately 11:00 a.m. Eastern Time and will be archived for thirty (30) days.
Ventas, Inc. is a leading healthcare real estate investment trust that owns healthcare and senior housing assets in 39 states. Its properties include 42 hospitals, 201 skilled nursing facilities, 29 assisted and independent living facilities, 8 medical/office buildings and 8 other healthcare assets. More information about Ventas can be found on its website atwww.ventasreit.com.
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding Ventas, Inc.’s (“Ventas” or the “Company”) and its subsidiaries’ expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, expected lease income, continued qualification as a real estate investment trust (“REIT”), plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from the Company’s expectations. The Company does not undertake a duty to update such forward-looking statements.
Actual future results and trends for the Company may differ materially depending on a variety of factors discussed in the Company’s filings with the Securities and Exchange Commission (the “Commission”). Factors that may affect the plans or results of the Company include, without limitation, (a) the ability and willingness of Kindred Healthcare, Inc. (“Kindred”) and certain of its affiliates to continue to meet and/or perform their obligations under their contractual arrangements with the Company and the Company’s subsidiaries, including without limitation the lease agreements and various agreements entered into by the Company and Kindred at the time of the Company’s spin off of Kindred on May 1, 1998 (the “1998 Spin Off”), as such agreements may have been amended and restated in connection with Kindred’s emergence from bankruptcy on April 20, 2001, (b) the ability and willingness of Kindred to continue to meet and/or perform its obligation to indemnify and defend the Company for all litigation and other claims relating to the healthcare operations and other assets and liabilities transferred to Kindred in the 1998 Spin Off, (c) the ability of Kindred and the Company’s other operators, tenants and borrowers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and duties under the leases and other agreements with the Company, and their existing credit agreements, (d) the Company’s success in implementing its business strategy and the Company’s ability to identify, underwrite,
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October 27, 2004
consummate and integrate diversifying acquisitions or investments, (e) the nature and extent of future competition, (f) the extent of future healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates, (g) increases in the cost of borrowing for the Company, (h) the ability of the Company’s operators to deliver high quality care and to attract patients, (i) the results of litigation affecting the Company, (j) changes in general economic conditions and/or economic conditions in the markets in which the Company may, from time to time, compete, (k) the ability of the Company 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 ability and willingness of the Company 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 ending December 31, 2004, (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, and (p) the impact on the liquidity, financial condition and results of operations of Kindred and the Company’s other operators resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of Kindred and the Company’s other operators to accurately estimate the magnitude of such liabilities. Many of such factors are beyond the control of the Company and its management.
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Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
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October 27, 2004
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2004, June 30, 2004, March 31, 2004 and December 31, 2003
(In thousands)
| | | | | | | | | | | | | | | | |
| | | September 30,
2004
| | | June 30,
2004
| | | March 31,
2004
| | | December 31,
2003
| |
| | | (Unaudited)
| | | (Unaudited)
| | | (Unaudited)
| | | (Audited)
| |
Assets | | | | | | | | | | | | | | | | |
Real estate investments: | | | | | | | | | | | | | | | | |
Land | | $ | 140,969 | | | $ | 136,634 | | | $ | 132,433 | | | $ | 104,300 | |
Building and improvements | | | 1,333,310 | | | | 1,299,660 | | | | 1,233,827 | | | | 985,881 | |
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|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | 1,474,279 | | | | 1,436,294 | | | | 1,366,260 | | | | 1,090,181 | |
Accumulated depreciation | | | (444,859 | ) | | | (431,707 | ) | | | (419,664 | ) | | | (408,891 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total net real estate property | | | 1,029,420 | | | | 1,004,587 | | | | 946,596 | | | | 681,290 | |
Loan receivable, net | | | 16,309 | | | | 16,423 | | | | 16,437 | | | | 16,455 | |
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| |
|
|
| |
|
|
| |
|
|
|
Total net real estate investments | | | 1,045,729 | | | | 1,021,010 | | | | 963,033 | | | | 697,745 | |
Cash and cash equivalents | | | 3,805 | | | | 8,880 | | | | 1,723 | | | | 82,104 | |
Restricted cash | | | 16,757 | | | | 18,358 | | | | 18,984 | | | | 7,575 | |
Deferred financing costs, net | | | 11,738 | | | | 11,423 | | | | 12,443 | | | | 13,465 | |
Notes receivable from employees | | | 3,269 | | | | 3,251 | | | | 3,609 | | | | 3,772 | |
Other | | | 10,047 | | | | 10,081 | | | | 7,527 | | | | 8,189 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total assets | | $ | 1,091,345 | | | $ | 1,073,003 | | | $ | 1,007,319 | | | $ | 812,850 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Senior Notes payable and other debt | | $ | 853,774 | | | $ | 851,675 | | | $ | 782,362 | | | $ | 640,562 | |
Deferred revenue | | | 13,536 | | | | 14,204 | | | | 14,718 | | | | 15,308 | |
Interest rate swap agreements | | | 21,133 | | | | 18,251 | | | | 32,041 | | | | 27,868 | |
Accrued dividend | | | — | | | | — | | | | — | | | | 21,614 | |
Accrued interest | | | 15,261 | | | | 6,718 | | | | 14,525 | | | | 5,821 | |
Accounts payable and other accrued liabilities | | | 27,074 | | | | 22,133 | | | | 19,386 | | | | 14,968 | |
Deferred income taxes | | | 30,394 | | | | 30,394 | | | | 30,394 | | | | 30,394 | |
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|
|
| |
|
|
| |
|
|
| |
|
|
|
Total liabilities | | | 961,172 | | | | 943,375 | | | | 893,426 | | | | 756,535 | |
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|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | |
Commitments and contingencies | | | | | | | | | | | | | | | | |
| | | | |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Preferred stock, 10,000 shares authorized, unissued | | | — | | | | — | | | | — | | | | — | |
Common stock, $0.25 par value; authorized 180,000 shares; 84,934 shares issued at September 30, 2004 | | | 21,233 | | | | 21,190 | | | | 21,157 | | | | 20,652 | |
Capital in excess of par value | | | 204,393 | | | | 201,482 | | | | 199,945 | | | | 162,466 | |
Unearned compensation on restricted stock | | | (968 | ) | | | (1,235 | ) | | | (1,339 | ) | | | (748 | ) |
Accumulated other comprehensive loss | | | (13,588 | ) | | | (10,129 | ) | | | (23,341 | ) | | | (18,294 | ) |
Retained earnings (deficit) | | | (64,473 | ) | | | (62,377 | ) | | | (60,740 | ) | | | (56,790 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | 146,597 | | | | 148,931 | | | | 135,682 | | | | 107,286 | |
Treasury stock, 586 shares at September 30, 2004 | | | (16,424 | ) | | | (19,303 | ) | | | (21,789 | ) | | | (50,971 | ) |
| | |
|
|
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|
|
| |
|
|
| |
|
|
|
Total stockholders’ equity | | | 130,173 | | | | 129,628 | | | | 113,893 | | | | 56,315 | |
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|
|
| |
|
|
| |
|
|
| |
|
|
|
Total liabilities and stockholders’ equity. | | $ | 1,091,345 | | | $ | 1,073,003 | | | $ | 1,007,319 | | | $ | 812,850 | |
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|
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October 27, 2004
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2004 and 2003
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
| |
| | | 2004
| | 2003
| | 2004
| | 2003
| |
Revenues: | | | | | | | | | | | | | |
Rental income | | $ | 60,656 | | $ | 49,355 | | $ | 172,606 | | $ | 141,824 | |
Interest income from loan receivable | | | 763 | | | 766 | | | 2,274 | | | 2,271 | |
Interest and other income | | | 189 | | | 280 | | | 772 | | | 1,325 | |
| | |
|
| |
|
| |
|
| |
|
|
|
Total revenues | | | 61,608 | | | 50,401 | | | 175,652 | | | 145,420 | |
Expenses: | | | | | | | | | | | | | |
Property level operating expenses | | | 372 | | | — | | | 869 | | | — | |
General and administrative | | | 3,563 | | | 3,136 | | | 10,947 | | | 9,356 | |
Professional fees | | | 484 | | | 416 | | | 1,854 | | | 1,878 | |
Reversal of contingent liability | | | — | | | — | | | — | | | (20,164 | ) |
Amortization of restricted stock grants | | | 321 | | | 309 | | | 871 | | | 910 | |
Depreciation | | | 13,255 | | | 9,952 | | | 36,249 | | | 29,805 | |
Interest | | | 16,946 | | | 14,313 | | | 49,266 | | | 45,907 | |
Loss on extinguishment of debt | | | 1,370 | | | — | | | 1,370 | | | — | |
Swap ineffectiveness | | | — | | | — | | | — | | | 369 | |
Interest on United States Settlement | | | — | | | — | | | — | | | 4,943 | |
| | |
|
| |
|
| |
|
| |
|
|
|
Total expenses | | | 36,311 | | | 28,126 | | | 101,426 | | | 73,004 | |
| | |
|
| |
|
| |
|
| |
|
|
|
| | | | |
Operating income | | | 25,297 | | | 22,275 | | | 74,226 | | | 72,416 | |
Gain on sale of Kindred common stock | | | — | | | 8,117 | | | — | | | 9,039 | |
| | |
|
| |
|
| |
|
| |
|
|
|
Income before discontinued operations | | | 25,297 | | | 30,392 | | | 74,226 | | | 81,455 | |
Discontinued operations | | | — | | | 1,820 | | | — | | | 4,174 | |
| | |
|
| |
|
| |
|
| |
|
|
|
Net income | | $ | 25,297 | | $ | 32,212 | | $ | 74,226 | | $ | 85,629 | |
| | |
|
| |
|
| |
|
| |
|
|
|
| | | | |
Earnings per common share: | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | |
Income before discontinued operations | | $ | 0.30 | | $ | 0.38 | | $ | 0.89 | | $ | 1.03 | |
Net income | | $ | 0.30 | | $ | 0.41 | | $ | 0.89 | | $ | 1.08 | |
Diluted: | | | | | | | | | | | | | |
Income before discontinued operations | | $ | 0.30 | | $ | 0.38 | | $ | 0.88 | | $ | 1.02 | |
Net income | | $ | 0.30 | | $ | 0.40 | | $ | 0.88 | | $ | 1.07 | |
| | | | |
Shares used in computing earnings per common share: | | | | | | | | | | | | | |
Basic | | | 84,073 | | | 79,389 | | | 83,202 | | | 79,055 | |
Diluted | | | 84,889 | | | 80,258 | | | 84,074 | | | 79,711 | |
| | | | |
Dividend declared per common share | | $ | 0.3250 | | $ | 0.2675 | | $ | 0.9750 | | $ | 0.8025 | |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2004 and 2003
(In thousands)
(Unaudited)
| | | | | | | | |
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 74,226 | | | $ | 85,629 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation (including discontinued operations) | | | 36,249 | | | | 31,837 | |
Amortization of deferred financing costs | | | 3,016 | | | | 3,068 | |
Amortization of restricted stock grants | | | 871 | | | | 910 | |
Reversal of contingent liability | | | — | | | | (20,164 | ) |
Normalized rents | | | (1,728 | ) | | | (115 | ) |
Gain on sale of Kindred common stock | | | — | | | | (9,039 | ) |
Loss on extinguishment of debt | | | 1,370 | | | | — | |
Loss on sale of real estate assets (included in discontinued operations) | | | — | | | | 3,189 | |
Loss on impairment of asset (included in discontinued operations) | | | — | | | | 845 | |
Amortization of deferred revenue | | | (1,886 | ) | | | (2,671 | ) |
Non-cash interest on the United States Settlement | | | — | | | | 2,655 | |
Other | | | (1,907 | ) | | | (2,437 | ) |
Changes in operating assets and liabilities: | | | | | | | | |
(Increase) decrease in restricted cash | | | (12 | ) | | | 11,923 | |
Increase in other assets | | | (829 | ) | | | (586 | ) |
Increase in accrued interest | | | 9,440 | | | | 6,718 | |
Increase (decrease) in accounts payable and accrued and other Liabilities | | | 5,745 | | | | (3,914 | ) |
| | |
|
|
| |
|
|
|
Net cash provided by operating activities | | | 124,555 | | | | 107,848 | |
Cash flows from investing activities: | | | | | | | | |
Net investment in real estate property | | | (280,666 | ) | | | — | |
Net proceeds from sale of real estate | | | — | | | | 61,159 | |
Proceeds from sale of Kindred common stock | | | — | | | | 20,223 | |
Proceeds from loan receivable | | | 260 | | | | 151 | |
Purchase of furniture and equipment | | | (170 | ) | | | (258 | ) |
Decrease in proceeds from notes receivable from employees | | | 503 | | | | 317 | |
| | |
|
|
| |
|
|
|
Net cash (used in) provided by investing activities | | | (280,073 | ) | | | 81,592 | |
Cash flows from financing activities: | | | | | | | | |
Net change in borrowings under revolving line of credit facility | | | 173,500 | | | | (26,450 | ) |
Purchase of Senior Notes | | | — | | | | (37,366 | ) |
Repayment of debt | | | (65,915 | ) | | | (1,897 | ) |
Payment on the United States Settlement | | | — | | | | (46,647 | ) |
Payment of deferred financing costs | | | (2,659 | ) | | | (40 | ) |
Issuance of common stock | | | 58,903 | | | | 10,847 | |
Proceeds from stock option exercises | | | 16,913 | | | | — | |
Cash dividends to stockholders | | | (103,523 | ) | | | (80,247 | ) |
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|
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|
Net cash provided by (used in) financing activities | | | 77,219 | | | | (181,800 | ) |
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|
|
| |
|
|
|
Net (decrease) increase in cash and cash equivalents | | | (78,299 | ) | | | 7,640 | |
Cash and cash equivalents at beginning of period | | | 82,104 | | | | 2,455 | |
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|
|
| |
|
|
|
Cash and cash equivalents at end of period | | $ | 3,805 | | | $ | 10,095 | |
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|
|
| |
|
|
|
Supplemental schedule of noncash activities: | | | | | | | | |
Assets and liabilities assumed from acquisitions: | | | | | | | | |
Real estate investments | | $ | 103,432 | | | $ | — | |
Restricted cash | | | 9,170 | | | | — | |
Other assets acquired | | | 206 | | | | — | |
Debt | | | 105,627 | | | | — | |
Other liabilities assumed | | | 7,181 | | | | — | |
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Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
Page 9
October 27, 2004
SUPPLEMENTAL DATA
Funds from Operations
FFO and normalized FFO for the three and nine months ended September 30, 2004 and 2003 (in thousands, except per share amounts):
| | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | 2003
| | | 2004
| | 2003
| |
Net income | | $ | 25,297 | | $ | 32,212 | | | $ | 74,226 | | $ | 85,629 | |
Adjustments: | | | | | | | | | | | | | �� | |
Depreciation on real estate assets | | | 13,153 | | | 9,878 | | | | 35,968 | | | 29,603 | |
Other items: | | | | | | | | | | | | | | |
Discontinued operations: | | | | | | | | | | | | | | |
Depreciation on real estate assets | | | — | | | 286 | | | | — | | | 2,032 | |
(Gain) loss on sale of real estate | | | — | | | (2,065 | ) | | | — | | | 3,189 | |
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|
| |
|
|
| |
|
| |
|
|
|
FFO | | | 38,450 | | | 40,311 | | | | 110,194 | | | 120,453 | |
| | | | |
Realized gain on sale of Kindred common stock | | | — | | | (8,117 | ) | | | — | | | (9,039 | ) |
Reversal of contingent liability | | | — | | | — | | | | — | | | (20,164 | ) |
Loss on extinguishment of debt | | | 1,370 | | | — | | | | 1,370 | | | — | |
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|
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|
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|
|
Normalized FFO | | $ | 39,820 | | $ | 32,194 | | | $ | 111,564 | | $ | 91,250 | |
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|
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|
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| | | | |
Per diluted share: | | | | | | | | | | | | | | |
Net income | | $ | 0.30 | | $ | 0.40 | | | $ | 0.88 | | $ | 1.07 | |
Adjustments: | | | | | | | | | | | | | | |
Depreciation on real estate assets | | | 0.15 | | | 0.12 | | | | 0.43 | | | 0.37 | |
Other items: | | | | | | | | | | | | | | |
Discontinued operations: | | | | | | | | | | | | | | |
Depreciation on real estate assets | | | — | | | 0.01 | | | | — | | | 0.03 | |
(Gain) loss on sale of real estate | | | — | | | (0.03 | ) | | | — | | | 0.04 | |
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|
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|
| |
|
| |
|
|
|
FFO | | | 0.45 | | | 0.50 | | | | 1.31 | | | 1.51 | |
| | | | |
Realized gain on sale of Kindred common stock | | | — | | | (0.10 | ) | | | — | | | (0.11 | ) |
Reversal of contingent liability | | | — | | | — | | | | — | | | (0.26 | ) |
Loss on extinguishment of debt | | | 0.02 | | | — | | | | 0.02 | | | — | |
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|
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|
| |
|
|
|
Normalized FFO | | $ | 0.47 | | $ | 0.40 | | | $ | 1.33 | | $ | 1.14 | |
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Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
Page 10
October 27, 2004
Projected FFO per diluted share for the year ended:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | NEW GUIDANCE
| | PRIOR
GUIDANCE
| | GUIDANCE
|
| | | December 31, 2004
| | December 31, 2004
| | December 31, 2005
|
Net income | | $ | 1.18 | | – | | $ | 1.20 | | $ | 1.18 | | – | | $ | 1.22 | | $ | 1.25 | | – | | $ | 1.28 |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation on real estate assets | | | 0.58 | | – | | | 0.58 | | | 0.57 | | – | | | 0.57 | | | 0.64 | | – | | | 0.65 |
| | |
|
| | | |
|
| |
|
| | | |
|
| |
|
| | | |
|
|
FFO | | | 1.76 | | – | | | 1.78 | | | 1.75 | | – | | | 1.79 | | | 1.89 | | – | | | 1.93 |
Loss on extinguishment of debt | | | 0.02 | | – | | | 0.02 | | | — | | – | | | — | | | — | | – | | | — |
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| | | |
|
|
Normalized FFO | | $ | 1.78 | | – | | $ | 1.80 | | $ | 1.75 | | – | | $ | 1.79 | | $ | 1.89 | | – | | $ | 1.93 |
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Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this problem, the Company considers FFO an appropriate measure of performance of an equity REIT and uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as net income, computed in accordance with accounting principles generally accepted in the United States (“GAAP”), excluding gains (or losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP), as an indicator of the Company’s financial performance, as an alternative to cash flow from operating activities (determined in accordance with GAAP) or as a measure of the Company’s liquidity, nor is FFO necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO should be examined in conjunction with net income as presented elsewhere in this Press Release.
-MORE-
Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
Page 11
October 27, 2004
Pro Forma Net Debt to EBITDA
The following pro forma information considers the effect on net income, interest and depreciation as if the Company had consummated the acquisition of the six properties during the third quarter 2004 as of the beginning of the three month period ended September 30, 2004. The following table illustrates net debt to pro forma earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the three months ended September 30, 2004 (dollars in thousands):
| | | | |
| | | Three Months
Ended
September 30,
2004
| |
Pro forma net income | | $ | 25,663 | |
Add back: | | | | |
Pro forma interest | | | 17,264 | |
Pro forma depreciation | | | 12,887 | |
Loss on extinguishment of debt | | | 1,370 | |
Amortization of restricted stock grants | | | 321 | |
| | |
|
|
|
Pro forma EBITDA | | $ | 57,505 | |
| | |
|
|
|
Pro forma annualized EBITDA | | $ | 230,020 | |
| | |
|
|
|
| |
Debt | | $ | 853,774 | |
Cash | | | (3,805 | ) |
Restricted cash pertaining to debt | | | (6,992 | ) |
| | |
|
|
|
Net debt | | $ | 842,977 | |
| | |
|
|
|
| |
Net debt to pro forma annualized EBITDA | | | 3.7x | |
The Company considers EBITDA a profitability measure which indicates the Company’s ability to service debt. The Company considers the Net Debt to EBITDA ratio a useful measure to evaluate the Company’s ability to pay its indebtedness. EBITDA presented herein is not necessarily comparable to EBITDA presented by other companies due to the fact that not all companies use the same definition. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indicator of the Company’s financial performance, as an alternative to cash flow from operating activities (determined in accordance with GAAP), 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.
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Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
Page 12
October 27, 2004
Portfolio of Properties
The following information provides an overview of the Company’s portfolio of healthcare properties as of and for the nine months ended September 30, 2004 (dollars in thousands):
| | | | | | | | | | | | |
| | | As of and for the Nine Months Ended September 30, 2004
|
Portfolio by Type
| | # of
Properties
| | # of
Beds/Units
| | Revenue
| | Percent of
Revenue
| | | # of
States
|
Healthcare properties: | | | | | | | | | | | | |
Skilled nursing facilities | | 201 | | 25,551 | | $ | 101,197 | | 58.6 | % | | 31 |
Hospitals | | 42 | | 3,635 | | | 53,713 | | 31.1 | % | | 19 |
Senior housing facilities | | 29 | | 3,463 | | | 14,961 | | 8.7 | % | | 13 |
Other facilities | | 15 | | 122 | | | 2,735 | | 1.6 | % | | 4 |
| | |
| |
| |
|
| |
|
| | |
Total | | 287 | | 32,771 | | $ | 172,606 | | 100.0 | % | | 39 |
| | |
| |
| |
|
| |
|
| | |
Other real estate investments: | | | | | | | | | | | | |
Loan receivable | | 25 | | 1,983 | | $ | 2,274 | | | | | |
| | |
| |
| |
|
| | | | | |
Kindred Coverage Ratios
The following is based on data provided by Kindred to the Company or obtained from Kindred’s public filings. This information reflects Kindred’s EBITDARM and EBITDAR coverage by Master Lease:
| | | | |
Master Lease
| | TTM1 EBITDARM Coverage2
| | TTM1 EBITDAR Coverage3
|
1 | | 2.9 | | 2.2 |
2 | | 2.7 | | 2.1 |
3 | | 2.1 | | 1.4 |
4 | | 1.9 | | 1.3 |
5 | | 1.9 | | 1.4 |
| |
| |
|
Portfolio | | 2.3 | | 1.7 |
| |
| |
|
1Trailing Twelve Months EBITDARM and EBITDAR for the period ended June 30, 2004 (the latest available data provided by Kindred) to the Company’s Trailing Twelve Months cash rental revenue.
2Coverage reflects the ratio of Kindred’s EBITDARM to rent. EBITDARM is defined as earnings before interest, income taxes, depreciation, amortization and rent. In the calculation of Trailing Twelve Months EBITDARM, intercompany profit pertaining to Kindred’s new PeopleFirst Rehabilitation Division for the six months ended June 30, 2004 has been eliminated from purchased ancillary expenses within the Ventas skilled nursing portfolio.
3Coverage reflects the ratio of Kindred’s EBITDAR to rent. EBITDAR is defined as earnings before interest, income taxes, depreciation, amortization and rent but after deducting a five percent management fee. In the calculation of Trailing Twelve Months EBITDAR, intercompany profit pertaining to Kindred’s new PeopleFirst Rehabilitation Division for the six months ended June 30, 2004 has been eliminated from purchased ancillary expenses within the Ventas skilled nursing portfolio.
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Ventas Reports Third Quarter Normalized FFO Rises 24 Percent
Page 13
October 27, 2004
Scheduled Maturities of Borrowing Arrangements
The Company’s indebtedness has the following maturities as of September 30, 2004 (in thousands):
| | | |
2004 | | $ | 10,326 |
2005 | | | 4,623 |
2006 | | | 215,562 |
2007 | | | 175,179 |
2008 | | | 1,799 |
Thereafter | | | 446,285 |
| | |
|
|
Total | | $ | 853,774 |
| | |
|
|
-END-
