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

 

VENTAS THIRD QUARTER FFO RISES 23 PERCENT TO $32.2 MILLION

PER SHARE FFO INCREASES 8 PERCENT TO $0.40 PER SHARE

 

 

Company Increases 2003 FFO Guidance To $1.52—$1.54 Per Share

 

 

Company Increases 2004 FFO Guidance To $1.58—$1.62 Per Share

 

 

LOUISVILLE, Ky (October 27, 2003) – Ventas, Inc. (NYSE:VTR) (“Ventas” or the “Company”) said today that normalized Funds From Operations (“FFO”) for the 2003 third quarter rose 23 percent to $32.2 million, compared with $26.3 million in the comparable 2002 period. Normalized FFO per diluted share increased 8 percent to $0.40, from $0.37 per diluted share for the comparable 2002 period. In the third quarter ended September 30, 2003, the Company had 80.3 million diluted shares outstanding, compared to 70.0 million diluted shares outstanding in the third quarter ended September 30, 2002.

 

The growth in FFO resulted from increased rents from Ventas’s annual lease escalations, income from the Company’s 2002 investments in the Trans Healthcare, Inc. (THI) properties and decreased interest expense due to lower interest rates on reduced indebtedness.

 

“Our third quarter performance reflects the benefit of our Master Leases, which continue to give Ventas reliable industry-leading internal FFO growth. In addition, our cash flow remains strong,” Ventas Chairman, President and CEO Debra A. Cafaro said. “Increasing our FFO guidance to $1.52-$1.54 per share for 2003 evidences the progress we have made on reducing our debt balances and engaging in positive transactions with our principal tenant, Kindred Healthcare, Inc. (NASDAQ: KIND), whose credit quality and performance continue to improve. We expect our 2004 FFO to show additional growth when we put our strong balance sheet fully to work on new, diversifying investments.”

 

NINE MONTH FFO RESULTS

 

Normalized FFO for the nine months ended September 30, 2003 was $91.3 million, or $1.14 per diluted share, a 12 percent increase from the same period in the prior year of $71.3 million, or $1.02 per diluted share.

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 2

October 27, 2003

 

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.

 

GAAP NET INCOME

 

After discontinued operations of $1.2 million, or $0.02 per diluted share, Ventas reported third quarter 2003 net income of $32.2 million, or $0.40 per diluted share. After discontinued operations of $0.8 million, or $0.01 per diluted share, net income for the third quarter ended September 30, 2002 was $17.1 million, or $0.24 per diluted share. A breakdown of discontinued operations is included in a schedule attached to this Press Release.

 

After discontinued operations of $2.5 million, or $0.03 per diluted share, net income for the nine months ended September 30, 2003 was $85.6 million, or $1.07 per diluted share. Net income for the nine months ended September 30, 2002 was $56.3 million, or $0.80 per diluted share, after discontinued operations of $25.9 million, or $0.37 per diluted share.

 

THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

 

  • Ventas reduced its indebtedness during the third quarter by $40.8 million. Net debt to EBITDA annualized for the nine months ended September 30, 2003 was 3.4x.
  • In the third quarter, CMS finalized a 6.26 percent increase (approximately $20 per patient day) to Medicare nursing home rates effective October 1, 2003.
  • The 237 skilled nursing facilities and hospitals leased to Kindred produced EBITDAR to rent coverage of 1.6x for the trailing twelve month period ended June 30, 2003 (the latest date available).
  • Ventas recently launched a targeted marketing program under the name “VentasSM Healthcare Properties” directed at healthcare operators to support its diversification strategy. The Company also unveiled its new tag line of “Custom Capital Tailored for GrowthSM” to emphasize its commitment to rapidly deliver capital in highly customized deals to operators who want to leverage their equity for growth or monetize their assets.
  • During the third quarter, Ventas sold a non-operating skilled nursing facility for $2.3 million and received a non-binding proposal to purchase another non-operating skilled nursing facility. As a result, the Company recognized a gain of $2.1 million on the sold facility and also recorded an $0.8 million impairment on the other facility.
  • Ventas completed its programmatic disposition of its Kindred equity stake, which it received under Kindred’s 2001 bankruptcy plan of reorganization (the “Plan”). During the third quarter, Ventas sold its remaining 780,814 shares of Kindred common stock, resulting in an $8.1 million gain. In total, Ventas realized a $30 million gain and $48 million in aggregate value for the 1.5 million shares it received under the Plan.
  • In October, the Company and Kindred distributed approximately $1 million to each company from a previously established Tax Refund Escrow. Approximately $1 million remains in the Tax Refund Escrow. Proceeds, net of any tax claims, will be shared equally between Kindred and Ventas.
  • As a result of the Kindred equity and facility sales, and distributions from the Tax Refund Escrow, the Company continues to realize cash from non-income producing assets.

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 3

October 27, 2003

 

THIRD QUARTER 2003 RESULTS

 

Revenue for the quarter ended September 30, 2003 was $59.8 million, of which $48.6 million (or 81.3 percent) resulted from leases with Kindred. Expenses for the quarter ended September 30, 2003 totaled $28.8 million, and included $10.2 million of depreciation expense and $14.7 million of interest expense on debt financing. General, administrative and professional expenses for the third quarter totaled $3.6 million.

 

NINE MONTH 2003 RESULTS

 

Revenue for the nine months ended September 30, 2003 was $158.2 million, of which $139.6 million (or 88.2 percent) resulted from leases with Kindred. Expenses totaled $75.1 million for the nine months ended September 30, 2003, were reduced by the $20.2 million reversal of a contingent liability and included $30.7 million of depreciation expense, $47.1 million of interest expense and $4.9 million of interest expense on the United States Settlement, which was paid in full in June 2003 without prepayment penalty or premium. General and administrative and professional expenses for the nine months ended totaled $11.2 million.

 

2003 AND 2004 NORMALIZED FFO GUIDANCE RAISED

 

Ventas expects its 2003 normalized FFO to increase to between $1.52 and $1.54 per diluted share, up from the previous guidance of $1.50 to $1.52 per diluted share. The increase is due to the Company’s continued debt reduction through cash realized from non-income producing assets and lower than anticipated general, administrative and professional fees. If achieved, these results would represent a 13 percent per share growth in normalized FFO in 2003.

 

Ventas expects to achieve 2004 normalized FFO of between $1.58 and $1.62 per share, an increase from its previous guidance of $1.55 to $1.57 per share.

 

The Company’s FFO guidance (and related GAAP earnings projections) for 2003 and 2004 excludes gains and losses on the sales of assets, and the impact of acquisitions, additional divestitures and capital transactions.

 

At September 30, 2003, the Company’s floating rate debt balance was $313 million and the aggregate notional amount of the Company’s interest rate LIBOR swap (the “Swap”) was $450 million. Therefore, the notional amount of the swap was in excess of the Company’s outstanding variable rate debt balances. The Company currently expects that in the future its variable rate debt balances will increase to equal or exceed the notional amount of its interest rate swap. As a result, interest expense is likely to increase. If the Company does not increase its variable rate debt balances to equal or exceed the notional amount of the Swap, then under certain circumstances the Company may record a noncash expense for swap ineffectiveness equal to the portion of the unrealized loss on the Swap allocable to the excess notional amount of the Swap or pay to reduce the notional amount of the Swap to more closely match its variable rate debt balances. The Company’s FFO guidance for 2003 and 2004 excludes the impact of any such expense or cost.

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 4

October 27, 2003

 

Reconciliation of the 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 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.

 

THIRD QUARTER CONFERENCE CALL

 

Ventas will hold a conference call to discuss this earnings release on Tuesday morning, October 28, 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.fulldisclosure.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, 203 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, 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, 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

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 5

October 27, 2003

 

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 Third Quarter FFO of $0.40 Per Share

Page 6

October 27, 2003

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

    

September
30,

2003

    

December 31,

2002

  
     (Unaudited)     (Audited)  
Assets                 

Real estate investments:

                 

Land

    $ 107,998     $ 119,559  

Building and improvements

      1,020,825       1,101,847  
    
 
       1,128,823       1,221,406  

Accumulated depreciation

      (414,594 )     (409,132 )
    
 

Total net real estate property

      714,229       812,274  

Loan receivable, net

      16,474       16,528  
    
 

Total net real estate investments

      730,703       828,802  

Cash and cash equivalents

      10,095       2,455  

Restricted cash

      8,030       19,953  

Deferred financing costs, net

      14,676       17,704  

Investment in Kindred Healthcare, Inc. common stock

      —       16,713  

Notes receivable from employees, former employees and accrued interest

      3,822       4,139  

Other assets

      7,074       6,014  
    
 

Total assets

    $ 774,400     $ 895,780  
    
 
Liabilities and stockholders’ equity (deficit)                 

Liabilities:

                 

Senior Notes payable and other debt

    $ 679,362     $ 707,709  

United States Settlement

      —       43,992  

Securities settlement due (purchase of Senior Notes)

      —       37,366  

Deferred revenue

      16,309       18,883  

Interest rate swap agreements

      44,092       47,672  

Accrued dividend

      —       16,596  

Accrued interest

      13,955       7,237  

Accounts payable and other accrued liabilities

      13,727       25,402  

Other liabilities—disputed federal, state and local tax refunds

      266       14,156  

Deferred income taxes

      30,394       30,394  
    
 

Total liabilities

      798,105       949,407  
    
 

Commitments and contingencies

                 

Stockholders’ equity (deficit):

                 

Preferred stock, unissued

      —       —  

Common stock

      20,652       20,652  

Capital in excess of par value

      173,665       191,779  

Unearned compensation on restricted stock

      (1,111 )     (793 )

Accumulated other comprehensive loss

      (30,667 )     (26,116 )

Retained earnings (deficit)

      (112,302 )     (134,279 )
    
 
       50,237       51,243  

Treasury stock

      (73,942 )     (104,870 )
    
 

Total stockholders’ equity (deficit)

      (23,705 )     (53,627 )
    
 

Total liabilities and stockholders’ equity (deficit).

    $ 774,400     $ 895,780  
    
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 7

October 27, 2003

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Nine Months Ended September 30, 2003 and 2002

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
     Nine Months Ended
  
     2003
    2002
     2003
     2002
  

Revenues:

                                

Rental income

    $ 50,616    $ 45,449     $ 145,551     $ 134,397  

Interest income from loan receivable

      766      —       2,271       —  

Gain on sale of Kindred common stock

      8,117      1,192       9,039       5,014  

Interest and other income

      280      237       1,325       952  
    
  
 
 

Total revenues

      59,779      46,878       158,186       140,363  

Expenses:

                                

General and administrative

      3,136      2,410       9,356       7,322  

Professional fees

      416      900       1,878       2,401  

Reversal of contingent liability

      —      —       (20,164 )     —  

Amortization of restricted stock grants

      309      354       910       1,491  

Depreciation

      10,238      9,823       30,663       29,460  

Swap ineffectiveness

      —      118       369       298  

Net loss on swap breakage

      —      —       —       5,407  

Loss on extinguishment of debt

      —      —       —       6,919  

Interest

      14,688      17,807       47,136       54,743  

Interest on United States Settlement

      —      1,331       4,943       4,204  
    
  
 
 

Total expenses

      28,787      32,743       75,091       112,245  
    
  
 
 

Income before benefit for income taxes and discontinued operations

      30,992      14,135       83,095       28,118  

Benefit for income taxes

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

Income before discontinued operations

      30,992      16,335       83,095       30,318  

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

      1,220      758       2,534       25,944  
    
  
 
 

Net income

    $ 32,212    $ 17,093     $ 85,629     $ 56,262  
    
  
 
 

Earnings per common share:

                                

Basic:

                                

Income before discontinued operations

    $ 0.39    $ 0.24     $ 1.05     $ 0.44  
    
  
 
 

Net income

    $ 0.41    $ 0.25     $ 1.08     $ 0.82  
    
  
 
 

Diluted:

                                

Income before discontinued operations

    $ 0.38    $ 0.23     $ 1.04     $ 0.43  
    
  
 
 

Net income

    $ 0.40    $ 0.24     $ 1.07     $ 0.80  
    
  
 
 

Shares used in computing earnings per common share:

                                

Basic

      79,389      69,098       79,055       68,895  

Diluted

      80,258      70,047       79,711       69,978  

Dividends declared per common share

    $ 0.2675    $ 0.2375     $ 0.8025     $ 0.7125  
    
  
 
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 8

October 27, 2003

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2003 and 2002

(In thousands)

(Unaudited)

 

     2003
     2002
  

Cash flows from operating activities:

                 

Net income

    $ 85,629     $ 56,262  

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

                 

Depreciation (including discontinued operations)

      31,837       31,332  

Amortization of deferred financing costs

      3,068       2,685  

Amortization of restricted stock grants

      910       1,491  

Normalized rents

      (115 )     (144 )

Loss on extinguishment of debt

      —       6,919  

Gain on sale of Kindred common stock

      (9,039 )     (5,014 )

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

      3,189       (23,450 )

Loss on impairment of asset (included in discontinued operations)

      845       —  

Amortization of deferred revenue

      (2,671 )     (1,998 )

Net loss on swap breakage

      —       5,407  

Non-cash interest on the United States Settlement

      2,655       —  

Other

      (2,437 )     110  

Changes in operating assets and liabilities:

                 

Decrease in restricted cash

      11,923       1,117  

Increase in other assets

      (586 )     (1,379 )

Increase in accrued interest

      6,718       17,226  

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

      (24,078 )     6,123  
    
 

Net cash provided by operating activities

      107,848       96,687  

Cash flows from investing activities:

                 

Net proceeds from sale of real estate

      61,159       28,620  

Proceeds from sale of Kindred common stock

      20,223       6,950  

Collection from loan receivable

      151       —  

Purchase of furniture and equipment

      (258 )     (236 )

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

      317       (551 )
    
 

Net cash provided by investing activities

      81,592       34,783  

Cash flows from financing activities:

                 

Net change in borrowings under Revolving Credit Facility

      (26,450 )     (57,651 )

Proceeds from Senior Notes Offering and Revolving Credit Facility

      —       620,300  

Purchase of Senior Notes

      (37,366 )     —  

Repayment of debt

      (1,897 )     (17,987 )

Repayment of debt through refinancing

      —       (607,106 )

Payment on United States Settlement

      (46,647 )     (7,958 )

Payment of deferred financing costs

      (40 )     (15,127 )

Payment of swap breakage fee

      —       (12,837 )

Proceeds from issuance of stock

      10,847       2,546  

Cash dividends to stockholders

      (80,247 )     (50,125 )
    
 

Net cash used in financing activities

      (181,800 )     (145,945 )
    
 

Increase (decrease) in cash and cash equivalents

      7,640       (14,475 )

Cash and cash equivalents at beginning of period

      2,455       18,596  
    
 

Cash and cash equivalents at end of period

    $ 10,095     $ 4,121  
    
 

Supplemental schedule of noncash activities:

                 

Dividend distribution of Kindred common stock

    $ —     $ 17,086  
    
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 9

October 27, 2003

 

SUPPLEMENTAL DATA

 

Funds from Operations

 

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

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
  
     2003
     2002
     2003
     2002
  

Net income

    $ 32,212     $ 17,093     $ 85,629     $ 56,262  

Adjustments:

                                 

Depreciation on real estate assets

      10,164       9,768       30,461       29,312  

Other items:

                                 

Discontinued operations:

                                 

Real estate depreciation – discontinued

      —       591       1,174       1,872  

(Gain) loss on sale of real estate

      (2,065 )     —       3,189       (23,450 )
    
 
 
 

FFO

      40,311       27,452       120,453       63,996  

Realized gain on sale of Kindred common stock

      (8,117 )     (1,192 )     (9,039 )     (5,014 )

Reversal of contingent liability

      —       —       (20,164 )     —  

Loss on extinguishment of debt

      —       —       —       6,919  

Net loss on swap breakage

      —       —       —       5,407  
    
 
 
 

Normalized FFO

    $ 32,194     $ 26,260     $ 91,250     $ 71,308  
    
 
 
 

Per diluted share:

                                 

Net income

    $ 0.40     $ 0.24     $ 1.07     $ 0.80  

Adjustments:

                                 

Depreciation on real estate assets

      0.13       0.14       0.38       0.42  

Other items:

                                 

Discontinued operations:

                                 

Real estate depreciation – discontinued

      —       0.01       0.02       0.03  

(Gain) loss on sale of real estate

      (0.03 )     —       0.04       (0.34 )
    
 
 
 

FFO

      0.50       0.39       1.51       0.91  

Realized gain on sale of

                                 

Kindred common stock

      (0.10 )     (0.02 )     (0.11 )     (0.07 )

Reversal of contingent liability

      —       —       (0.26 )     —  

Loss on extinguishment of debt

      —       —       —       0.10  

Net loss on swap breakage

      —       —       —       0.08  
    
 
 
 

Normalized FFO

    $ 0.40     $ 0.37     $ 1.14     $ 1.02  
    
 
 
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 10

October 27, 2003

 

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

 

     2003 Projected
     2004 Projected

Per diluted share:

                                        

Net income

    $ 1.32     —    $ 1.34     $ 1.11    —    $ 1.15

Adjustments:

                                        

Depreciation on real estate assets

      0.52     —      0.52       0.47    —      0.47

Realized loss on sale of real estate assets

      0.04     —      0.04       —    —      —
    
      
 
       

FFO

    $ 1.88     —    $ 1.90     $ 1.58    —    $ 1.62

Adjustments:

                                        

Gain on sale of Kindred common stock

      (0.11 )   —      (0.11 )     —    —      —

Reversal of contingent liability

      (0.25 )   —      (0.25 )     —    —      —
    
      
 
       

Normalized FFO

    $ 1.52     —    $ 1.54     $ 1.58    —    $ 1.62
    
      
 
       

 

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 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.

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 11

October 27, 2003

 

Net Debt to EBITDA

 

Earnings before interest, income taxes, depreciation and amortization (“EBITDA”) and Normalized EBITDA for the nine months ended September 30, 2003 and the year ended December 31, 2002 (dollars in thousands):

 

    

Nine Months Ended

September 30, 2003

    

Year Ended

December 31, 2002

  

Net income

    $ 85,629     $ 65,706  

Add Back:

                 

Interest

      47,136       73,029  

Interest on United States Settlement

      4,943       5,461  

Depreciation

      30,663       39,644  

Swap ineffectiveness

      369       1,850  

Amortization of restricted stock grants

      910       1,853  

Benefit for income taxes

      —       (2,200 )

Net loss on swap breakage

      —       5,407  

Loss on extinguishment of debt

      —       11,077  

Discontinued Operations add back:

                 

Depreciation

      1,174       2,463  

Interest

      1,523       3,730  
    
 

EBITDA

      172,347       208,020  

Adjustments:

                 

Gain on sale of Kindred common stock

      (9,039 )     (5,014 )

Reversal of contingent liability

      (20,164 )     —  

Discontinued operations:

                 

(Gain) loss on sale of real estate

      3,189       (23,514 )

Loss on impairment of asset

      845       —  
    
 

Normalized EBITDA

    $ 147,178     $ 179,492  

Annualized EBITDA1

    $ 194,865     $ 179,492  
    
 

Debt

    $ 679,362     $ 707,709  

Kindred common stock

      —       (16,713 )

Cash

      (10,095 )     (2,455 )
    
 

Net debt

    $ 669,267     $ 688,541  
    
 

Net debt to EBITDA

      3.4x       3.8x  

 

1EBITDA has been annualized for the nine months ended September 30, 2003. The lease termination fee of $4.1 million has not been annualized.

 

The Company considers EBITDA a profitability measure which indicates the Company’s ability to service debt. Normalized EBITDA excludes income and expense items that are nonrecurring in the Company’s core business. 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 FFO of $0.40 Per Share

Page 12

October 27, 2003

 

Discontinued Operations

 

Set forth below is a summary of the results of operations of the sold and held for sale facilities during the three and nine months ended September 30, 2003 and 2002 (in thousands):

 

    

Three Months

Ended

September 30,

   

Nine Months

Ended

September 30,

     2003
     2002
    2003
     2002

Rental income

    $ —     $ 2,201    $ 5,149     $ 7,221

Lease termination fee

      —       —      4,116       —
    
 
  
 
       —       2,201      9,265       7,221
    
 
  
 

Interest

      —       852      1,523       2,855

Depreciation

      —       591      1,174       1,872

Loss on impairment of asset held for sale

      845       —      845       —
    
 
  
 
       845       1,443      3,542       4,727
    
 
  
 

Income before gain (loss) on sale of real estate

      (845 )     758      5,723       2,494

Gain (loss) on sale of real estate

      2,065       —      (3,189 )     23,450
    
 
  
 

Discontinued operations

    $ 1,220     $ 758    $ 2,534     $ 25,944
    
 
  
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 13

October 27, 2003

 

Ventas, Inc.

2003 QUARTERLY STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

     First
     Second
     Third
     Nine Months
Ended
September 30, 2003
  

Revenues:

                                 

Rental Income

    $ 46,983     $ 47,952     $ 50,616     $ 145,551  

Interest income from loan receivable

      747       758       766       2,271  

Gain on sale of Kindred common stock

      —       922       8,117       9,039  

Interest and other income

      492       553       280       1,325  
    
 
 
 

Total revenues

      48,222       50,185       59,779       158,186  

Expenses:

                                 

General and administrative

      3,140       3,080       3,136       9,356  

Professional fees

      760       702       416       1,878  

Reversal of contingent liability

      (20,164 )     —       —       (20,164 )

Amortization of restricted stock grants

      291       310       309       910  

Depreciation

      10,214       10,211       10,238       30,663  

Swap ineffectiveness

      —       369       —       369  

Interest

      16,358       16,090       14,688       47,136  

Interest on United States Settlement

      1,182       3,761       —       4,943  
    
 
 
 

Total expenses

      11,781       34,523       28,787       75,091  
    
 
 
 

Income before discontinued operations

      36,441       15,662       30,992       83,095  

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

      847       467       1,220       2,534  
    
 
 
 

Net income

    $ 37,288     $ 16,129     $ 32,212     $ 85,629  
    
 
 
 

Weighted average number of shares outstanding, basic

      78,834       78,935       79,389       79,055  

Weighted average number of shares outstanding, diluted

      79,296       79,575       80,258       79,711  

Earnings per common share:

                                 

Basic:

                                 

Income before discontinued operations

    $ 0.46     $ 0.20     $ 0.39     $ 1.05  

Discontinued operations

      0.01       —       0.02       0.03  
    
 
 
 

Net income

    $ 0.47     $ 0.20     $ 0.41     $ 1.08  
    
 
 
 

Diluted:

                                 

Income before discontinued operations

    $ 0.46     $ 0.20     $ 0.38     $ 1.04  

Discontinued operations

      0.01       —       0.02       0.03  
    
 
 
 

Net income

    $ 0.47     $ 0.20     $ 0.40     $ 1.07  
    
 
 
 

Discontinued Operations

                                 

Revenues

    $ 2,201     $ 7,064     $ —     $ 9,265  

Interest

      767       756       —       1,523  

Depreciation

      587       587       —       1,174  

Loss on impairment of asset held for sale

      —       —       845       845  
    
 
 
 

Income before gain (loss) on sale of real estate

      847       5,721       (845 )     5,723  

Gain (loss) on sale of real estate

      —       (5,254 )     2,065       (3,189 )
    
 
 
 

Discontinued operations

    $ 847     $ 467     $ 1,220     $ 2,534  
    
 
 
 

 

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Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 14

October 27, 2003

 

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, 2003, excluding discontinued operations ($’s in thousands):

 

     As of and for the Nine Months Ended September 30,
2003
Portfolio by Type    # of
Properties
    # of
Beds
    Revenue
    Percent
of Rental
Revenue
    

# of

States

Healthcare Property

                            

Skilled Nursing Facilities

    203    25,298    $ 95,382    65 %   30

Hospitals

    44    4,037      49,333    34 %   20

Other Facilities

    9    181      836    1 %   2
    
  
  
  
   

Total

    256    29,516    $ 145,551    100 %   37
    
  
  
  
   

Other Real Estate Investments

                            

Loan Receivable

    25    1,983    $ 2,271           
    
  
  
          

 

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

   

TTM 1

EBITDAR
Coverage 2,3

1

    1.7

2

    1.7

3

    1.5

4

    1.7

5

    1.4
    

Portfolio

    1.6
    

 

1 Trailing Twelve Months EBITDAR ended June 30, 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 by $18.6 million in order to normalize certain of Kindred’s professional liability insurance expenses.

 

3 These computations reflect the impact of the reduction in Medicare reimbursement to skilled nursing facilities, which took effect October 1, 2002.

 

-MORE-

Ventas Reports Third Quarter FFO of $0.40 Per Share

Page 15

October 27, 2003

 

Scheduled Maturities of Borrowing Arrangements

 

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

 

2003

    $ 812

2004

      3,412

2005

      36,990

2006

      214,810

2007

      57,300

Thereafter

      366,038
    

Total

    $ 679,362
    

 

 

-END-