EX-99.1 3 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

[VENTAS LOGO]

 

Ventas, Inc.     4360 Brownsboro Road     Suite 115     Louisville, Kentucky 40207-1642     (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 2nd QUARTER FFO RISES 18% TO $0.39 PER SHARE

 

 

Ventas to Comply with SFAS 145 Regarding Three Prior Years’ Financial Statements

 

LOUISVILLE, Ky (July 23, 2003) – Ventas, Inc. (NYSE:VTR) (“Ventas” or the “Company”) said today that normalized Funds From Operations (“FFO”) for the second quarter 2003 rose 18 percent to $31.2 million, or $0.39 per diluted share from $23.0 million, or $0.33 per diluted share, for the comparable 2002 period.

 

The increase in FFO resulted from increased rents from Ventas’s annual lease escalations, income from its 2002 investments, lower debt balances that reduced interest expense, and its June 30, 2003 sale of 16 skilled nursing facilities in Florida and Texas to the Company’s largest tenant, Kindred Healthcare, Inc. (NASDAQ: KIND)(“Kindred”).

 

“Ventas’s second quarter was excellent. Our 18 percent increase in FFO reflects the Company’s strong internal growth from its lease escalators, the results of its consistent debt pay down efforts and the impact of 2002 acquisitions,” Chairman, President and CEO Debra A. Cafaro said. “In addition, the successful sale of 16 skilled nursing assets to Kindred represented a major positive for both companies. We are entering the second half of the year with our focus clearly set on implementing our diversification strategy and maintaining reliable and growing cash flow.”

 

Normalized FFO for the six months ended June 30, 2003 was $59.1 million, or $0.74 per diluted share, a 16 percent increase from the same period in the prior year of $45.0 million, or $0.64 per diluted share.

 

Normalized FFO for all periods excludes (a) gains on sales of Kindred common stock, (b) a $20.2 million reversal of a previously recorded contingent liability, which was recorded as income in the first quarter of 2003, (c) losses from extinguishment of debt and (d) a one-time swap breakage incurred in connection with the Company’s refinancing in April 2002.

 

After discontinued operations of $0.5 million related to the sale of the 16 skilled nursing facilities, Ventas reported second quarter net income of $16.1 million, or $0.20 per diluted share. After discontinued operations of $23.4 million, or $0.34 per share, net income for the second quarter ended June 30, 2002 was $26.5 million, or $0.38 per diluted share. A breakdown of discontinued operations is included in a schedule attached to this Press Release.

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 2

July 23, 2003

 

After discontinued operations of $1.3 million, or $0.01 per diluted share, net income for the six months ended June 30, 2003 was $53.4 million, or $0.67 per diluted share. Net income for the six months ended June 30, 2002 was $39.2 million, or $0.56 per diluted share, after discontinued operations of $25.2 million, or $0.36 per diluted share.

 

SECOND QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

 

  •   Ventas completed its sale of 16 skilled nursing facilities in Florida and Texas to its primary tenant, Kindred, for $59.7 million, plus a $4.1 million lease termination fee. Annualized rent on the 16 facilities was $9 million.
  •   Ventas and Kindred amended the Master Leases (1) to increase rent on certain facilities by $8.6 million on an annualized basis for approximately seven years and (2) to make all lease escalations payable in cash.
  •   Ventas used a portion of the net proceeds from the sale of the 16 skilled nursing facilities to repay in full the Company’s settlement agreement with the Department of Justice (“United States Settlement”).
  •   The Company reduced its indebtedness during the second quarter by $30.3 million.
  •   Ventas appointed Thomas C. Theobald, a Managing Director with William Blair and the retired Chairman and Chief Executive Officer of Continental Bank Corporation, to its Board of Directors.
  •   The Company sold a total of 140,000 shares of Kindred common stock at an average price of $18.73 per share. As of June 30, 2003, the Company owned 780,814 shares of Kindred common stock. During the period July 1, 2003 through July 15, 2003, the Company sold an additional 428,407 shares of Kindred common stock at an average net price of $22.35 per share. As of July 15, 2003, the Company owned 352,407 shares of Kindred common stock.
  •   The 237 skilled nursing facilities and hospitals leased to Kindred produced EBITDAR to rent coverage of 1.7x for the trailing twelve month period ended March 31, 2003.

 

SECOND QUARTER 2003 RESULTS

 

Revenue for the quarter ended June 30, 2003 was $50.2 million, of which $46.0 million (or 91.6 percent) resulted from leases with Kindred. Expenses for the quarter ended June 30, 2003 totaled $34.5 million, and included $10.2 million of depreciation expense, $16.1 million of interest expense on debt financing and $3.8 million of interest expense on the United States Settlement, which was paid in full without prepayment penalty or premium. General, administrative and professional expenses for the second quarter totaled $3.8 million.

 

SIX MONTH 2003 RESULTS

 

Revenue for the six months ended June 30, 2003 was $98.4 million, of which $90.9 million (or 92.4%) resulted from leases with Kindred. Expenses for the six months ended June 30, 2003 totaled $46.3 million, were reduced by the $20.2 million reversal of a contingent liability and included $20.4 million of depreciation expense, $32.4 million of interest expense and $4.9 million of interest expense on the United States Settlement, which was paid in full. General and administrative and professional expenses for the six months ended totaled $7.7 million.

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 3

July 23, 2003

 

VENTAS TO COMPLY WITH SFAS 145 AND 144 REGARDING THREE PRIOR YEARS’ FINANCIAL STATEMENTS FOR EXTRAORDINARY ITEMS AND DISCONTINUED OPERATIONS

 

Ventas said that, as required by accounting principles generally accepted in the United States (“GAAP”), it will re-issue three prior years’ financial statements (2000-2002) in an updated format in accordance with the adoption of SFAS 145 to reclassify the loss on extinguishment of debt as continuing operations. SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB 13, and Technical Corrections” was adopted by the Company in 2003, as required by GAAP.

 

This reclassification does not change the Company’s net income or normalized FFO for any period and only affects the presentation of results for the prior periods by conforming the presentation of those prior financial statements to the format adopted in 2003. As required, the loss on the extinguishment of debt will be reflected as a separate line item in the Consolidated Statements of Operations and will be included in continuing operations rather than being shown as an extraordinary loss. The Company incurred charges for the extinguishment of debt in connection with the refinancing of the entire outstanding principal balance of its indebtedness during Kindred’s bankruptcy proceedings in 2000 and again in 2001 and 2002 to reposition itself following Kindred’s successful restructuring. The Company has excluded extinguishment of debt charges from normalized FFO.

 

Under SEC requirements for transitional disclosure, the reclassification of extraordinary items to continuing operations required by SFAS No. 145 is required for previously issued annual financial statements for each of the three years shown in the Company’s last annual report on Form 10-K if those financials are incorporated by reference in subsequent filings with the SEC made under the Securities Act of 1933, as amended, even though those financial statements relate to periods prior to adoption of SFAS No. 145.

 

In addition, Ventas will include in the re-issued financial statements the reclassification of the results of 15 Florida facilities and 1 Texas facility sold to Kindred on June 30, 2003 as discontinued operations. This reclassification does not change the Company’s net income or normalized FFO and only affects the presentation of results for the prior periods by conforming the presentation of those prior financial statements to the format adopted in 2002. In accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS No. 144”), the results of operations and gain/(loss) on real estate properties sold or held for sale subsequent to December 31, 2001 are reclassified into a single line in the Consolidated Statement of Operations as discontinued operations for all periods presented.

 

The financial statements attached to this Press Release reflect the reclassification for all periods presented.

 

FFO GUIDANCE

 

Ventas said it reaffirmed its 2003 normalized FFO guidance of $1.50 to $1.52 per diluted share and its 2004 normalized FFO guidance of $1.55 to $1.57.

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 4

July 23, 2003

 

The Company’s FFO guidance (and related GAAP earnings projections) for 2003 and 2004 exclude gains and losses on the sales of assets, the non-cash effect of swap ineffectiveness under SFAS 133 and the impact of acquisitions, additional divestitures and other capital transactions. Reconciliation of the FFO guidance to the Company’s projected GAAP earnings is provided on a schedule at the conclusion of this press release. The Company may from time to time update its publicly announced FFO guidance, but it is not obligated to do so.

 

The Company’s FFO guidance is based on a number of 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.

 

SECOND QUARTER CONFERENCE CALL

 

The Company will hold a conference call to discuss this earnings release tomorrow morning, July 24, 2003, 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 at www.ventasreit.com or www.companyboardroom.com. An online replay of the web cast will be available at approximately 12:00 p.m. Eastern time and will be archived for thirty (30) days.

 

Ventas, Inc. is a healthcare real estate investment trust that owns 44 hospitals, 204 nursing facilities and nine other healthcare and senior housing facilities in 37 states. The Company also has investments in 25 additional healthcare and senior housing facilities. More information about Ventas can be found on its website at www.ventasreit.com.

 

This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding Ventas, Inc.’s (“Ventas” or the “Company”) and its subsidiaries’ expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, expected lease income, continued qualification as a real estate investment trust (“REIT”), plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from the Company’s expectations. The Company does not undertake a duty to update such forward-looking statements.

 

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. 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 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, (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 and procedures, (g) increases in the cost of borrowing for the Company, (h) the ability

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 5

July 23, 2003

 

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 the Company’s interest rate swap agreement and the Company’s net worth, (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, 2003, (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 Second Quarter FFO of $0.39 Per Share

Page 6

July 23, 2003

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     June 30,
2003
     December
31, 2002
  
     (Unaudited)     (Audited)  

Assets

                 

Real estate investments:

                 

Land

    $ 108,816     $ 119,559  

Building and improvements

      1,027,887       1,101,847  
    
 
       1,136,703       1,221,406  

Accumulated depreciation

      (410,051 )     (409,132 )
    
 

Total net real estate property

      726,652       812,274  

Loan receivable, net

      16,489       16,528  
    
 

Total net real estate investments

      743,141       828,802  

Cash and cash equivalents

      9,173       2,455  

Restricted cash

      7,031       19,953  

Deferred financing costs, net

      15,684       17,704  

Investment in Kindred Healthcare, Inc. common stock

      13,875       16,713  

Notes receivable from employees, former employees and accrued interest

      3,803       4,139  

Other

      7,895       6,014  
    
 

Total assets

    $ 800,602     $ 895,780  
    
 

Liabilities and stockholders’ equity (deficit)

                 

Liabilities:

                 

Senior Notes payable and other debt

    $ 720,160     $ 707,709  

United States Settlement

      —       43,992  

Securities settlement due (purchase of Senior Notes)

      —       37,366  

Deferred revenue

      16,916       18,883  

Interest rate swap agreements

      53,280       47,672  

Accrued dividend

      —       16,596  

Accrued interest

      6,664       7,237  

Accounts payable and other accrued liabilities

      19,940       25,402  

Other liabilities—disputed federal, state and local tax refunds

      452       14,156  

Deferred income taxes

      30,394       30,394  
    
 

Total liabilities

      847,806       949,407  
    
 

Commitments and contingencies

                 

Stockholders’ equity (deficit):

                 

Preferred stock, unissued

      —       —  

Common stock

      20,652       20,652  

Capital in excess of par value

      185,153       191,779  

Unearned compensation on restricted stock

      (1,421 )     (793 )

Accumulated other comprehensive loss

      (33,382 )     (26,116 )

Retained earnings (deficit)

      (123,177 )     (134,279 )
    
 
       47,825       51,243  

Treasury stock

      (95,029 )     (104,870 )
    
 

Total stockholders’ equity (deficit)

      (47,204 )     (53,627 )
    
 

Total liabilities and stockholders’ equity (deficit).

    $ 800,602     $ 895,780  
    
 

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 7

July 23, 2003

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months Ended June 30, 2003 and 2002

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
    Six Months Ended
     2003
    2002
    2003
     2002

Revenues:

                             

Rental income

    $ 47,952    $ 44,974    $ 94,935     $ 88,948

Interest income from loan receivable

      758      —      1,505       —

Gain on sale of Kindred common stock

      922      3,822      922       3,822

Interest and other income

      553      373      1,045       715
    
  
  
 

Total revenues

      50,185      49,169      98,407       93,485
    
  
  
 

Expenses:

                             

General and administrative

      3,080      2,601      6,220       4,912

Professional fees

      702      936      1,462       1,501

Reversal of contingent liability

      —      —      (20,164 )     —

Amortization of restricted stock grants

      310      715      601       1,137

Depreciation

      10,211      9,823      20,425       19,637

Swap ineffectiveness

      369      180      369       180

Net loss on swap breakage

      —      5,407      —       5,407

Loss on extinguishment of debt

      —      6,919      —       6,919

Interest

      16,090      18,098      32,448       36,936

Interest on United States Settlement

      3,761      1,402      4,943       2,873
    
  
  
 

Total expenses

      34,523      46,081      46,304       79,502
    
  
  
 

Income before discontinued operations

      15,662      3,088      52,103       13,983

Discontinued operations (including gain/loss on sale of assets)

      467      23,380      1,314       25,186
    
  
  
 

Net income

    $ 16,129    $ 26,468    $ 53,417     $ 39,169
    
  
  
 

Earnings per common share:

                             

Basic:

                             

Income before discontinued operations

    $ 0.20    $ 0.04    $ 0.66     $ 0.20
    
  
  
 

Net income

    $ 0.20    $ 0.38    $ 0.68     $ 0.57
    
  
  
 

Diluted:

                             

Income before discontinued operations

    $ 0.20    $ 0.04    $ 0.66     $ 0.20
    
  
  
 

Net income

    $ 0.20    $ 0.38    $ 0.67     $ 0.56
    
  
  
 

Shares used in computing earnings per common share:

                             

Basic

      78,935      68,850      78,885       68,792

Diluted

      79,575      70,002      79,435       69,941

Dividends declared per common share

    $ 0.2675    $ 0.2375    $ 0.5350     $ 0.4750
    
  
  
 

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 8

July 23, 2003

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2003 and 2002

(In thousands)

(Unaudited)

 

     2003
     2002
  

Cash flows from operating activities:

                 

Net income

    $ 53,417     $ 39,169  

Adjustments to reconcile net income to net cash provided by operating activities:

                 

Depreciation (including discontinued operations)

      21,599       20,918  

Amortization of deferred financing costs

      2,040       1,642  

Amortization of restricted stock grants

      601       1,137  

Normalized rents

      (86 )     (96 )

Loss on extinguishment of debt

      —       6,919  

Gain on sale of Kindred common stock

      (922 )     (3,822 )

(Gain) loss on sale of real estate assets (included in discontinued

operations)

      5,254       (23,450 )

Amortization of deferred revenue

      (2,030 )     (1,374 )

Net loss on swap breakage

      —       5,407  

Non-cash interest on the United States Settlement

      2,655       —  

Other

      (383 )     74  

Changes in operating assets and liabilities:

                 

Decrease in restricted cash

      12,922       1,089  

Increase in other assets

      (2,900 )     (5,188 )

Increase (decrease) in accrued interest

      (573 )     10,254  

Increase (decrease) in accounts payable and accrued and other liabilities

      (17,578 )     3,784  
    
 

Net cash provided by operating activities

      74,016       56,463  

Cash flows from investing activities:

                 

Net proceeds from sale of real estate

      58,897       28,620  

Proceeds from sale of Kindred common stock

      2,622       5,273  

Collection from loan receivable

      102       —  

Purchase of furniture and equipment

      (38 )     (135 )

Decrease (increase) in notes receivable from employees, former employees and accrued interest

      336       (535 )
    
 

Net cash provided by investing activities

      61,919       33,223  

Cash flows from financing activities:

                 

Net change in borrowings under Revolving Credit Facility

      13,700       (36,500 )

Proceeds from Senior Notes Offering and Revolving Credit Facility

      —       620,300  

Purchase of Senior Notes

      (37,366 )     —  

Repayment of debt

      (1,249 )     (17,399 )

Repayment of debt through refinancing

      —       (607,106 )

Payment on United States Settlement

      (46,647 )     (2,583 )

Payment of deferred financing costs

      (20 )     (15,139 )

Payment of swap breakage fee

      —       (12,837 )

Proceeds from (cost of) issuance of stock

      1,276       (45 )

Cash dividends to stockholders

      (58,911 )     (33,637 )
    
 

Net cash used in financing activities

      (129,217 )     (104,946 )
    
 

Increase (decrease) in cash and cash equivalents

      6,718       (15,260 )

Cash and cash equivalents at beginning of period

      2,455       18,596  
    
 

Cash and cash equivalents at end of period

    $ 9,173     $ 3,336  
    
 

Supplemental schedule of noncash activities:

                 

Dividend distribution of Kindred common stock

    $ —     $ 17,086  
    
 

 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 9

July 23, 2003

 

SUPPLEMENTAL DATA

 

Funds from Operations

 

FFO and Normalized FFO for the three months and six months ended June 30, 2003 and 2002 (in thousands except per share amounts):

 

     Three Months     Six Months  
     Ended June 30,
     Ended June 30,
  
     2003
     2002
     2003
     2002
  

Net Income

    $ 16,129     $ 26,468     $ 53,417     $ 39,169  

Adjustments:

                                 

Depreciation on real estate assets

      10,147       9,772       20,297       19,544  

Other Items:

                                 

Discontinued operations:

                                 

Real estate depreciation – discontinued

      587       629       1,174       1,281  

(Gain) loss on sale of real estate

      5,254       (22,393 )     5,254       (23,450 )
    
 
 
 

FFO

      32,117       14,476       80,142       36,544  

Realized gain on sale of

                                 

Kindred common stock

      (922 )     (3,822 )     (922 )     (3,822 )

Reversal of contingent liability

      —       —       (20,164 )     —  

Loss on extinguishment of debt

      —       6,919       —       6,919  

Net loss on swap breakage

      —       5,407       —       5,407  
    
 
 
 

Normalized FFO

    $ 31,195     $ 22,980     $ 59,056     $ 45,048  
    
 
 
 

Per diluted share:

                                 

Net Income

    $ 0.20     $ 0.38     $ 0.67     $ 0.56  

Adjustments:

                                 

Depreciation on real estate assets

      0.13       0.14       0.26       0.28  

Other items:

                                 

Discontinued operations:

                                 

Real estate depreciation – discontinued

      —       0.01       0.01       0.02  

(Gain) loss on sale of real estate

      0.07       (0.32 )     0.07       (0.34 )
    
 
 
 

FFO

      0.40       0.21       1.01       0.52  

Realized gain on sale of

                                 

Kindred common stock

      (0.01 )     (0.06 )     (0.01 )     (0.06 )

Reversal of contingent liability

      —       —       (0.26 )     —  

Loss on extinguishment of debt

      —       0.10       —       0.10  

Net loss swap breakage

      —       0.08       —       0.08  
    
 
 
 

Normalized FFO

    $ 0.39     $ 0.33     $ 0.74     $ 0.64  
    
 
 
 

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Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 10

July 23, 2003

 

Projected FFO per diluted share for the years ended December 31, 2003 and 2004:

 

     2003 Projected
     2004 Projected

Per diluted share:

                                        

Net income

    $ 1.18     —    $ 1.20     $ 1.08    —    $ 1.10

Adjustments:

                                        

Depreciation on real estate assets

      0.52     —      0.52       0.47      —      0.47

Realized (gain) loss on

                                        

sale of real estate assets

      0.07     —      0.07       —    —      —
    
      
 
       

FFO

    $ 1.77     —      1.79     $ 1.55    —      1.57

Adjustments:

                                        

Gain on sale of Kindred Common Stock

      (0.01 )     —      (0.01 )     —    —      —

Reversal of contingent liability

      (0.26 )   —      (0.26 )     —    —      —
    
      
 
       

Normalized Funds from Operations

    $ 1.50       —    $ 1.52     $ 1.55      —    $ 1.57
    
      
 
       

 

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 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 generally accepted accounting principles), 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 funds from operations 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 accounting principles generally accepted in the United States (“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 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 Second Quarter FFO of $0.39 Per Share

Page 11

July 23, 2003

 

Discontinued Operations

 

Set forth below is a summary of the results of operations of the sold facilities during the three and six months ended June 30, 2003 and 2002 (in thousands):

 

     Three Months Ended June 30,
    Six Months Ended June 30,
     2003
     2002
    2003
     2002

Rental income

    $ 2,948     $ 2,597    $ 5,149     $ 5,020

Lease termination fee

      4,116       —      4,116       —
    
 
  
 
       7,064       2,597      9,265       5,020
    
 
  
 

Interest

      756       981      1,523       2,003

Depreciation

      587       629      1,174       1,281
    
 
  
 
       1,343       1,610      2,697       3,284
    
 
  
 

Income before gain(loss) on sale of real estate

      5,721       987      6,568       1,736

Gain (loss) on sale of real estate

      (5,254 )     22,393      (5,254 )     23,450
    
 
  
 

Discontinued operations

    $ 467     $ 23,380    $ 1,314     $ 25,186
    
 
  
 

 

-MORE-

Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 12

July 23, 2003

 

Ventas, Inc.

2003 QUARTERLY STATEMENTS OF INCOME

($000, except per share amounts)

     First
     Second
     Six Month
Ended
June 30, 2003
  

Revenues:

                         

Rental Income

    $ 46,983     $ 47,952     $ 94,935  

Interest income from loan receivable

      747       758       1,505  

Gain on sale of Kindred common stock

      —       922       922  

Interest and other income

      492       553       1,045  
    
 
 

Total revenues

      48,222       50,185       98,407  

Expenses:

                         

General and administrative

      3,140       3,080       6,220  

Professional fees

      760       702       1,462  

Reversal of contingent liability

      (20,164 )     —       (20,164 )

Amortization of restricted stock grants

      291       310       601  

Depreciation

      10,214       10,211       20,425  

Swap ineffectiveness

      —       369       369  

Interest

      16,358       16,090       32,448  

Interest on United States Settlement

      1,182       3,761       4,943  
    
 
 

Total expenses

      11,781       34,523       46,304  
    
 
 

Income before discontinued operations

      36,441       15,662       52,103  

Discontinued operations (including loss on sale of assets)

      847       467       1,314  
    
 
 

Net income

    $ 37,288     $ 16,129     $ 53,417  
    
 
 

Weighted average number of shares outstanding, basic

      78,834       78,935       78,885  

Weighted average number of shares outstanding, diluted

      79,296       79,575       79,435  

Earnings per common share:

                         

Basic:

                         

Income before discontinued operations

    $ 0.46     $ 0.20     $ 0.66  

Discontinued operations

      0.01       —       0.02  
    
 
 

Net income

    $ 0.47     $ 0.20     $ 0.68  
    
 
 

Diluted:

                         

Income before discontinued operations

    $ 0.46     $ 0.20     $ 0.66  

Discontinued operations

      0.01       —       0.01  
    
 
 

Net income

    $ 0.47     $ 0.20     $ 0.67  
    
 
 

Discontinued Operations

                         

Revenues

    $ 2,201     $ 7,064     $ 9,265  

Interest

      767       756       1,523  

Depreciation

      587       587       1,174  
    
 
 

Income before loss on sale of real estate

      847       5,721       6,568  

Loss on sale of real estate

      —         (5,254 )     (5,254 )
    
 
 

Discontinued operations

    $ 847     $ 467     $ 1,314  
    
 
 

 

-MORE-

Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 13

July 23, 2003

 

Ventas, Inc.

2002 QUARTERLY STATEMENTS OF INCOME

($000, except per share amounts)

     First
    Second
    Third
     Fourth
    Year
  

Revenues:

                                      

Rental Income

    $ 43,974    $ 44,974    $ 45,449     $ 46,413    $ 180,810  

Interest income from loan receivable

      —      —      —       995      995  

Gain on sale of Kindred common stock

      —      3,822      1,192       —      5,014  

Interest and other income

      342      373      237       226      1,178  
    
  
  
 
  

Total revenues

      44,316      49,169      46,878       47,634      187,997  
    
  
  
 
  

Expenses:

                                      

General and administrative

      2,311      2,601      2,410       2,441      9,763  

Professional fees

      565      936      900       749      3,150  

Amortization of restricted stock grants

      422      715      354       362      1,853  

Depreciation

      9,814      9,823      9,823       10,184      39,644  

Net loss on swap breakage

      —      5,407      —       —      5,407  

Swap ineffectiveness

      —      180      118       1,552      1,850  

Loss on extinguishment of debt

      —      6,919      —       4,158      11,077  

Interest

      18,838      18,098      17,807       18,286      73,029  

Interest on United States Settlement

      1,471      1,402      1,331       1,257      5,461  
    
  
  
 
  

Total expenses

      33,421      46,081      32,743       38,989      151,234  
    
  
  
 
  

Income before benefit for income taxes, gain on disposal of real estate assets and discontinued operations

      10,895      3,088      14,135       8,645      36,763  

Benefit for income taxes

      —      —      (2,200 )     —      (2,200 )
    
  
  
 
  

Income before gain on disposal of real estate assets and discontinued operations

      10,895      3,088      16,335       8,645      38,963  

Net gain on real estate disposals

      —      —      —       64      64  
    
  
  
 
  

Income before discontinued operations

      10,895      3,088      16,335       8,709      39,027  

Discontinued operations

      1,806      23,380      758       735      26,679  
    
  
  
 
  

Net income

    $ 12,701    $ 26,468    $ 17,093     $ 9,444    $ 65,706  
    
  
  
 
  

Weighted average number of shares outstanding, basic

      68,698      68,850      69,098       70,637      69,336  

Weighted average number of shares outstanding, diluted

      69,844      70,002      70,047       71,204      70,290  

Earnings per common share:

                                      

Basic:

                                      

Income before discontinued operations

    $ 0.16    $ 0.04    $ 0.24     $ 0.12    $ 0.56  

Discontinued operations

      0.02      0.34      0.01       0.01      0.39  
    
  
  
 
  

Net income

    $ 0.18    $ 0.38    $ 0.25     $ 0.13    $ 0.95  
    
  
  
 
  

Diluted:

                                      

Income before discontinued operations

    $ 0.16    $ 0.04    $ 0.23     $ 0.12    $ 0.56  

Discontinued operations

      0.02      0.34      0.01       0.01      0.37  
    
  
  
 
  

Net income

    $ 0.18    $ 0.38    $ 0.24     $ 0.13    $ 0.93  
    
  
  
 
  

Discontinued Operations

                                      

Revenues

    $ 2,423    $ 2,597    $ 2,201     $ 2,201    $ 9,422  

Interest

      1,022      981      852       875      3,730  

Depreciation

      652      629      591       591      2,463  
    
  
  
 
  

Income before gain on sale of real estate

      749      987      758       735      3,229  

Gain on sale of real estate

      1,057      22,393      —       —      23,450  
    
  
  
 
  

Discontinued operations

    $ 1,806    $ 23,380    $ 758     $ 735    $ 26,679  
    
  
  
 
  

 

-MORE-

Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 14

July 23, 2003

 

Portfolio of Properties

 

The following information provides an overview of the Company’s portfolio of healthcare properties as of and for the six months ended June 30, 2003, excluding discontinued operations ($’s in thousands):

 

     As of and for the Six Months Ended June 30, 2003

Portfolio by Type

    # of
Properties
    # of
Beds
    Revenue
    Percent
of
Rental
Revenue
    

# of

States

Healthcare Property

                            

Skilled Nursing Facilities

    204    25,417    $ 63,164    66 %   30

Hospitals

    44    3,916      31,213    33 %   20

Other Facilities

    9    181      558    1 %   2
    
  
  
  
   

Total Rental Income

    257    29,514    $ 94,935    100 %   37
    
  
  
  
   

Other Real Estate Investments

                            

Loan Receivable

    25    1,982    $ 1,505           
    
  
  
          

 

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 EBITDAR coverage by Master Lease after management fees and excluding the 16 skilled nursing facilities sold in June 2003:

 

Master Lease

    TTM1
EBITDAR
Coverage2,3

1

    1.6

2

    1.8

3

    1.6

4

    1.8

5

    1.6
    

Portfolio

    1.7
    

 

1 Trailing Twelve Months EBITDAR ended March 31, 2003 (the latest available data provided by Kindred) to the sum of (a) the Company’s Trailing Twelve Months cash rental revenue, plus (b) the $8.6 million in annual rental revenue added by the June 30, 2003 Master Lease amendments.

 

2 Coverage reflects the ratio of EBITDAR to rent. EBITDAR is defined as earnings before interest, income taxes, depreciation, amortization and rent but after deducting management fees. EBITDAR is adjusted to normalize Kindred professional liability expense. EBITDAR is adjusted for the $20.2 million re-allocation of third quarter 2002 to first quarter 2003 professional liability expense to the appropriate prior period, as derived from Kindred’s public announcements and detailed property-level information.

 

3 These computations reflect the fourth quarter 2002 and first quarter 2003 impact of the reduction in Medicare reimbursement to skilled nursing facilities, which took effect October 1, 2002. Application of that reduction to the second and third quarter 2002 would result in a pro forma reduction of property level EBITDAR: rent coverage to approximately 1.6(x).

 

-MORE-

Ventas Reports Second Quarter FFO of $0.39 Per Share

Page 15

July 23, 2003

 

Scheduled Maturities of Borrowing Arrangements

 

The Company’s indebtedness has the following maturities (in thousands):

 

2003

    $ 1,610

2004

      3,412

2005

      76,990

2006

      214,810

2007

      57,300

Thereafter

      366,038
    

Total

    $ 720,160
    

 

- END -