EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

    Contacts:  

Debra A. Cafaro

       

Chairman, President and CEO

       

or

       

Richard A. Schweinhart

       

Senior Vice President and CFO

       

(502) 357-9000

 

VENTAS REPORTS FOURTH QUARTER NORMALIZED FFO OF $0.47 PER SHARE;

 

2004 Normalized FFO Rises 17 Percent to $1.80 Per Share;

 

2005 FIRST QUARTER DIVIDEND INCREASES 11 PERCENT TO $0.36 PER SHARE;

 

2004 Investment Activity Exceeds $400 Million

 

LOUISVILLE, KY (February 28, 2005) – Ventas, Inc. (NYSE:VTR) (“Ventas” or the “Company”) said today that fourth quarter 2004 normalized Funds from Operations (“FFO”) rose 24 percent to $40.1 million, compared with $32.3 million in the fourth quarter 2003. Normalized FFO per diluted share in the fourth quarter 2004 increased 18 percent to $0.47 from $0.40 per diluted share for the comparable 2003 period. In the fourth quarter ended December 31, 2004, the Company had 85.2 million weighted average diluted shares outstanding, compared to 81.2 million weighted average diluted shares outstanding a year earlier.

 

Normalized FFO per diluted share for the year ended December 31, 2004 was $1.80, a 17 percent increase from the year ended December 31, 2003 level of $1.54 per diluted share. Normalized FFO for 2004 grew 23 percent year-over-year, to $151.7 million in 2004 from $123.5 million in 2003.

 

Normalized FFO for all periods excludes the benefit of a $20.2 million reversal of a previously recorded contingent liability that increased operating income in the first quarter of 2003, 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 year ended December 31, 2003, 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.

 

Results for the fourth quarter and full year benefited from the Company’s accelerated investment activity and increased rent from its diversified portfolio of quality healthcare and senior housing assets.

 

Ventas also said that its Board of Directors voted to increase the Company’s first quarter 2005 dividend to $0.36 per share, an increase of 11 percent from the quarterly 2004 dividend of $0.325. The Ventas first quarter dividend is payable April 5, 2005 to stockholders of record on March 24, 2005.

 

“Ventas delivered another excellent year of performance for its shareholders. In 2004, we again produced double-digit FFO growth. Our $400 million of accretive acquisitions added to our strong internal growth rate and diversified our tenant and asset base,” Ventas Chairman, President and CEO Debra A. Cafaro said. “Ventas was the best performing REIT in the Morgan Stanley REIT Index (RMS) for the five year period ended December 31, 2004, with a compound annual total shareholder return of over 59 percent.

 

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Ventas Reports Fourth Quarter 2004

Page 2

February 28, 2005

 

“We are beginning 2005 on a positive note by increasing our quarterly dividend 11 percent. This increase shares the benefits of our strong and reliable cash flow with our shareholders and indicates our confidence in our assets, our revenue stream and our industry,” Cafaro said. “Looking ahead, we remain committed to managing the Company to deliver long-term shareholder value and superior risk adjusted return.”

 

GAAP NET INCOME

 

Ventas reported fourth quarter 2004 net income of $46.7 million, or $0.55 per diluted share, after discontinued operations of $20.2 million, or $0.24 per diluted share. In the fourth quarter of 2003, Ventas reported net income of $77.1 million, or $0.96 per diluted share, after discontinued operations of $62.0 million, or $0.78 per diluted share. Net income was higher in the fourth quarter of 2003 due to larger gains on the sale of real estate, which were $55.0 million in the fourth quarter of 2003 compared to $19.4 million in the fourth quarter of 2004.

 

Net income for the year ended December 31, 2004 was $120.9 million, or $1.43 per diluted share, after discontinued operations of $20.7 million, or $0.24 per diluted share, compared with net income for the year ended December 31, 2003 of $162.8 million, or $2.03 per diluted share, after discontinued operations of $66.6 million, or $0.83 per diluted share. Net income was higher for the year ended December 31, 2003 due to larger gains on the sale of real estate, which were $51.8 million, $0.65 per diluted share, in 2003 compared to $19.4 million, $0.23 per diluted share, in 2004.

 

A breakdown of discontinued operations is included in a schedule attached to this Press Release.

 

FOURTH QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

 

  •   Between October 27 and December 31, 2004, Ventas purchased a combined independent and assisted living facility for $38.5 million. The 221-unit facility is located in Framingham, Massachusetts. Initial cash rent on this investment exceeds 9 percent.

 

  •   Year to date, Ventas has invested an additional $49.0 million in healthcare and senior housing assets. The initial cash yield on these investments exceeds 9 percent. The investments consist of an acute care hospital, one assisted living facility, three medical office buildings and a first mortgage loan.

 

  •   With these completed transactions, annualized rent from Kindred represents approximately 76 percent of the Company’s run rate total revenue, assuming a full first quarter effect of all acquisitions. Annualized rent from market rate, non-government reimbursed assets in the Company’s portfolio represents 16 percent of the Company’s annualized revenue on the same basis.

 

  •   Assets leased to Kindred now represent 65 percent of the Company’s total real estate assets, measured on a gross book value basis.

 

  •   Ventas said its acquisition pipeline remains active and that it expects to continue to aggressively implement its strategic growth and diversification plan in 2005.

 

  •   Ventas recorded a gain of $19.4 million during the fourth quarter from the sale of two hospitals to Kindred, which had previously leased those facilities from Ventas.

 

  •   As of December 31, 2004, Ventas’s enterprise value exceeded $3.1 billion.

 

  •   In 2004, Ventas acquired more than $400 million of new healthcare and senior housing assets.

 

  •   The Company maintained a strong balance sheet at December 31, 2004, with a fourth quarter pro forma annualized net debt-to-EBITDA ratio of 3.5 times.

 

  •   Moody’s recently re-affirmed the Company’s debt rating at Ba3, retaining its “positive” outlook.

 

  •   Ventas delivered Total Shareholder Return (TSR) of 31 percent for 2004, compared with the healthcare REIT sector average and median of 22 percent.

 

  •   The 225 skilled nursing facilities and hospitals leased by the Company to Kindred produced EBITDAR to rent coverage of 1.8 times (after management fees) for the trailing twelve month period ended September 30, 2004 (the latest date available). Further information detailing these rent coverages is contained on a schedule attached to this Press Release.

 

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Ventas Reports Fourth Quarter 2004

Page 3

February 28, 2005

 

  •   On October 1, 2004, Medicare reimbursement for skilled nursing facilities increased by 2.8 percent.

 

  •   In the first quarter of 2005, CMS proposed a Medicare rate increase of approximately 5.5 percent for long-term acute care hospitals.

 

  •   Ventas expects to file its 2004 Form 10-K on or about March 1, 2005, including unqualified management certifications and an unqualified auditor opinion under section 404 of the Sarbanes-Oxley Act of 2002.

 

FOURTH QUARTER 2004 RESULTS

 

Rental revenue for the quarter ended December 31, 2004 was $61.3 million, of which $48.6 million resulted from leases with Kindred. Fourth quarter expenses totaled $35.7 million and included $12.9 million of depreciation expense and $17.8 million of interest expense. Interest expense for the 2004 fourth quarter included a $0.5 million non-cash expense for “swap ineffectiveness.” Combined general and administrative expenses and professional fees totaled $4.1 million. Property-level operating expenses relating to the Company’s medical office building portfolio for the period were $0.5 million.

 

FULL YEAR 2004 RESULTS

 

Rental revenue for the year ended December 31, 2004 was $232.9 million, of which $192.4 million resulted from leases with Kindred. Expenses for the year ended December 31, 2004 totaled $136.7 million and included $49.0 million of depreciation expense, $66.8 million of interest expense and $16.9 million of combined general and administrative expenses and professional fees. Property-level operating expenses for the period were $1.3 million.

 

VENTAS AFFIRMS 2005 NORMALIZED FFO GUIDANCE

 

Ventas affirmed its 2005 normalized FFO guidance 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. In addition, the Company’s normalized FFO guidance (and related GAAP earnings projections) excludes gains and losses on the sales of assets and the impact of 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.

 

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Ventas Reports Fourth Quarter 2004

Page 4

February 28, 2005

 

FOURTH QUARTER CONFERENCE CALL

 

Ventas will hold a conference call to discuss this earnings release on Tuesday, March 1, 2005, 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 OFFERS DRIP DISCOUNT OF ONE PERCENT

 

Ventas said today that, beginning in March 2005, it will offer a one percent discount on the purchase price of its stock to shareholders who reinvest their dividends and/or make optional cash purchases of Ventas common stock through the Company’s Distribution Reinvestment and Stock Purchase Plan (DRIP). Previously, the discount offered on these reinvestments and cash purchases was two percent. The Company reserves the right to change or terminate its DRIP program.

 

For full details of the DRIP, please refer to the Company’s Prospectus and the supplements thereto, which are available from the Plan Administrator, National City Bank, at 1-800-622-6757.

 

Ventas, Inc. is a leading healthcare real estate investment trust that owns 292 healthcare and senior housing assets in 39 states. Its properties include 41 hospitals, 201 skilled nursing facilities, 31 senior housing facilities, and 19 other healthcare assets. 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 (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, 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 ended December 31, 2004 and for the year ending December 31, 2005, (o) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration of the leases and the

 

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Ventas Reports Fourth Quarter 2004

Page 5

February 28, 2005

 

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 Fourth Quarter 2004

Page 6

February 28, 2005

 

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2004, September 30, 2004, June 30, 2004, March 31, 2004 and December 31, 2003

(In thousands)

 

     December 31,
2004
     September 30,
2004
     June 30,
2004
     March 31,
2004
    

December 31,

2003

  
     (Audited)     (Unaudited)     (Unaudited)     (Unaudited)     (Audited)  

Assets

                                         

Real estate investments:

                                         

Land

    $ 147,327     $ 140,969     $ 136,634     $ 132,433     $ 104,300  

Building and improvements

      1,364,884       1,333,310       1,299,660       1,233,827       985,881  
    
 
 
 
 
       1,512,211       1,474,279       1,436,294       1,366,260       1,090,181  

Accumulated depreciation

      (454,110 )     (444,859 )     (431,707 )     (419,664 )     (408,891 )
    
 
 
 
 

Total net real estate property

      1,058,101       1,029,420       1,004,587       946,596       681,290  

Loan receivable, net

      13,031       16,309       16,423       16,437       16,455  
    
 
 
 
 

Total net real estate investments

      1,071,132       1,045,729       1,021,010       963,033       697,745  

Cash and cash equivalents

      3,365       3,805       8,880       1,723       82,104  

Escrow deposits and restricted cash

      25,710       16,757       18,358       18,984       7,575  

Deferred financing costs, net

      13,550       11,738       11,423       12,443       13,465  

Notes receivable from employees

      3,216       3,269       3,251       3,609       3,772  

Other

      9,962       10,047       10,081       7,527       8,189  
    
 
 
 
 

Total assets

    $ 1,126,935     $ 1,091,345     $ 1,073,003     $ 1,007,319     $ 812,850  
    
 
 
 
 

Liabilities and stockholders’ equity

                                         

Liabilities:

                                         

Senior Notes payable and other debt

    $ 843,178     $ 853,774     $ 851,675     $ 782,362     $ 640,562  

Deferred revenue

      12,887       13,536       14,204       14,718       15,308  

Interest rate swap agreements

      16,550       21,133       18,251       32,041       27,868  

Accrued dividend

      27,498       —         —         —         21,614  

Accrued interest

      8,743       15,261       6,718       14,525       5,821  

Accounts payable and other accrued liabilities

      27,461       27,074       22,133       19,386       14,968  

Deferred income taxes

      30,394       30,394       30,394       30,394       30,394  
    
 
 
 
 

Total liabilities

      966,711       961,172       943,375       893,426       756,535  

Commitments and contingencies

                                         

Stockholders’ equity:

                                         

Preferred stock, 10,000 shares authorized, unissued

      —         —         —         —         —    

Common stock, $0.25 par value; authorized 180,000 shares; 85,131 shares issued at December 31, 2004

      21,283       21,233       21,190       21,157       20,652  

Capital in excess of par value

      208,903       204,393       201,482       199,945       162,466  

Unearned compensation on restricted stock

      (633 )     (968 )     (1,235 )     (1,339 )     (748 )

Accumulated other comprehensive loss

      (9,114 )     (13,588 )     (10,129 )     (23,341 )     (18,294 )

Retained earnings (deficit)

      (45,297 )     (64,473 )     (62,377 )     (60,740 )     (56,790 )
    
 
 
 
 
       175,142       146,597       148,931       135,682       107,286  

Treasury stock, 532 shares at December 31, 2004

      (14,918 )     (16,424 )     (19,303 )     (21,789 )     (50,971 )
    
 
 
 
 

Total stockholders’ equity

      160,224       130,173       129,628       113,893       56,315  
    
 
 
 
 

Total liabilities and stockholders’ equity

    $ 1,126,935     $ 1,091,345     $ 1,073,003     $ 1,007,319     $ 812,850  
    
 
 
 
 

 

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Ventas Reports Fourth Quarter 2004

Page 7

February 28, 2005

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2004 and 2003

(In thousands, except per share amounts)

 

     2004
    2003
  

Revenues:

                

Rental income

    $ 232,911    $ 189,987  

Interest income from loan receivable

      2,958      3,036  

Interest and other income

      987      1,696  
    
  

Total revenues

      236,856      194,719  

Expenses:

                

Property-level operating expenses

      1,337      —    

General, administrative and professional fees

      16,917      15,158  

Reversal of contingent liability

      —        (20,164 )

Amortization of restricted stock grants

      1,207      1,274  

Depreciation

      49,035      39,500  

Net loss on swap breakage

      —        5,168  

Interest

      66,817      61,660  

Loss on extinguishment of debt

      1,370      84  

Interest on United States Settlement

      —        4,943  
    
  

Total expenses

      136,683      107,623  
    
  

Operating income

      100,173      87,096  

Gain on sale of Kindred common stock

      —        9,039  
    
  

Income before discontinued operations

      100,173      96,135  

Discontinued operations

      20,727      66,618  
    
  

Net income

    $ 120,900    $ 162,753  
    
  

Earnings per common share:

                

Basic:

                

Income before discontinued operations

    $ 1.20    $ 1.21  

Net income

    $ 1.45    $ 2.05  

Diluted:

                

Income before discontinued operations

    $ 1.19    $ 1.20  

Net income

    $ 1.43    $ 2.03  

Shares used in computing earnings per common share:

                

Basic

      83,491      79,340  

Diluted

      84,352      80,094  

 

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Ventas Reports Fourth Quarter 2004

Page 8

February 28, 2005

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2004 and 2003

(In thousands)

 

     2004
     2003
  

Cash flows from operating activities:

                 

Net income

    $ 120,900     $ 162,753  

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

                 

Depreciation (including discontinued operations)

      49,238       41,943  

Amortization of deferred financing costs

      3,895       4,095  

Amortization of restricted stock grants

      1,207       1,274  

Reversal of contingent liability

      —         (20,164 )

Straight-lining of rental income

      (2,462 )     (108 )

Gain on sale of Kindred common stock

      —         (9,039 )

Loss on extinguishment of debt

      1,370       84  

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

      (19,428 )     (51,781 )

Loss on impairment of asset (included in discontinued operations)

      —         845  

Amortization of deferred revenue

      (2,577 )     (3,707 )

Net loss on swap breakage

      —         5,168  

Other

      (2,016 )     (212 )

Changes in operating assets and liabilities:

                 

(Increase) decrease in escrow deposits and restricted cash

      (8,965 )     12,378  

Increase in other assets

      (102 )     (1,892 )

Increase (decrease) in accrued interest

      2,922       (1,416 )

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

      5,976       (2,855 )
    
 

Net cash provided by operating activities

      149,958       137,366  

Cash flows from investing activities:

                 

Net investment in real estate property

      (323,729 )     —    

Net proceeds from sale of real estate

      21,100       139,164  

Proceeds from sale of Kindred common stock

      —         20,223  

Proceeds from loan receivable

      3,580       205  

Purchase of furniture and equipment

      (202 )     (258 )

Decrease in notes receivable from employees

      556       367  
    
 

Net cash (used in) provided by investing activities

      (298,695 )     159,701  

Cash flows from financing activities:

                 

Net change in borrowings under revolving credit facility

      39,000       (59,900 )

Issuance of Senior Notes

      125,000       —    

Purchase of Senior Notes

      —         (37,366 )

Repayment of debt

      (67,011 )     (7,247 )

Payment of swap breakage fee

      —         (8,575 )

Payment on the United States Settlement

      —         (46,647 )

Payment of deferred financing costs

      (5,350 )     (40 )

Issuance of common stock

      64,206       —    

Proceeds from stock option exercises

      17,676       22,604  

Cash dividends to stockholders

      (103,523 )     (80,247 )
    
 

Net cash provided by (used in) financing activities

      69,998       (217,418 )
    
 

Net (decrease) increase in cash and cash equivalents

      (78,739 )     79,649  

Cash and cash equivalents at beginning of period

      82,104       2,455  
    
 

Cash and cash equivalents at end of period

    $ 3,365     $ 82,104  
    
 

Supplemental schedule of noncash activities:

                 

Assets and liabilities assumed from acquisitions:

                 

Real estate investments

    $ 103,603     $ —    

Escrow deposits and restricted cash

      9,170       —    

Other assets acquired

      206       —    

Debt

      105,627       —    

Other liabilities assumed

      7,352       —    

 

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Ventas Reports Fourth Quarter 2004

Page 9

February 28, 2005

 

SUPPLEMENTAL DATA

 

Funds from Operations

 

FFO and normalized FFO for the four quarters and year ended December 31, 2004 (in thousands, except per share amounts):

 

     First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
     Year
  

Net income

    $ 23,275    $ 25,654    $ 25,297    $ 46,674     $ 120,900  

Adjustments:

                                      

Depreciation on real estate assets

      10,722      11,991      13,102      12,832       48,647  

Other items:

                                      

Discontinued operations:

                                      

Depreciation on real estate assets

      51      51      51      50       203  

Gain on sale of real estate

      —        —        —        (19,428 )     (19,428 )
    
  
  
  
 

FFO

      34,048      37,696      38,450      40,128       150,322  

Loss on extinguishment of debt

      —        —        1,370      —         1,370  
    
  
  
  
 

Normalized FFO

    $ 34,048    $ 37,696    $ 39,820    $ 40,128     $ 151,692  
    
  
  
  
 

Per diluted share:

                                      

Net income

    $ 0.28    $ 0.30    $ 0.30    $ 0.55     $ 1.43  

Adjustments:

                                      

Depreciation on real estate assets

      0.13      0.15      0.15      0.15       0.58  

Other items:

                                      

Discontinued operations:

                                      

Depreciation on real estate assets

      —        —        —        —         —    

Gain on sale of real estate

      —        —        —        (0.23 )     (0.23 )
    
  
  
  
 

FFO

      0.41      0.45      0.45      0.47       1.78  

Loss on extinguishment of debt

      —        —        0.02      —         0.02  
    
  
  
  
 

Normalized FFO

    $ 0.41    $ 0.45    $ 0.47    $ 0.47     $ 1.80  
    
  
  
  
 

 

- MORE -

Ventas Reports Fourth Quarter 2004

Page 10

February 28, 2005

 

Projected FFO per diluted share for the year ending December 31, 2005:

 

     GUIDANCE
     December 31, 2005

Net income

    $ 1.25   -    $ 1.28

Adjustments:

                  

Depreciation on real estate assets

      0.64   -      0.65
    
      

FFO

    $ 1.89   -    $ 1.93
    
      

Normalized FFO

    $ 1.89   -    $ 1.93
    
      

 

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 real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

 

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 Fourth Quarter 2004

Page 11

February 28, 2005

 

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 two properties and the sale of two properties during the fourth quarter 2004 as of the beginning of the three month period ended December 31, 2004. The following table illustrates net debt to pro forma earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the three months ended December 31, 2004 (dollars in thousands):

 

     Three Months
Ended
December 31,
2004
  

Pro forma net income

    $ 26,714  

Add back:

         

Pro forma interest

      18,197  

Pro forma depreciation

      13,103  

Amortization of restricted stock grants

      336  
    

Pro forma EBITDA

    $ 58,350  

Pro forma annualized EBITDA

    $ 233,400  
    

Debt

    $ 843,178  

Cash

      (3,365 )

Restricted cash pertaining to debt

      (6,896 )

Escrow deposits pertaining to Section 1031 Exchange

      (9,500 )
    

Net debt

    $ 823,417  
    

Net debt to pro forma annualized EBITDA

      3.5 x
    

 

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.

 

- MORE -

Ventas Reports Fourth Quarter 2004

Page 12

February 28, 2005

 

Ventas, Inc.

2004 QUARTERLY STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

     First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
    Year

Revenues:

                                   

Rental income

    $ 52,906    $ 58,368    $ 60,310    $ 61,327    $ 232,911

Interest income from loan receivable

      756      755      763      684      2,958

Interest and other income

      281      302      189      215      987
    
  
  
  
  

Total revenues

      53,943      59,425      61,262      62,226      236,856

Expenses:

                                   

Property-level operating expenses

      207      290      372      468      1,337

General, administrative and professional fees

      4,338      4,416      4,047      4,116      16,917

Amortization of restricted stock grants

      271      279      321      336      1,207

Depreciation

      10,807      12,085      13,204      12,939      49,035

Interest

      15,229      16,891      16,848      17,849      66,817

Loss on extinguishment of debt

      —        —        1,370      —        1,370
    
  
  
  
  

Total expenses

      30,852      33,961      36,162      35,708      136,683
    
  
  
  
  

Operating income

      23,091      25,464      25,100      26,518      100,173

Discontinued operations

      184      190      197      20,156      20,727
    
  
  
  
  

Net income

    $ 23,275    $ 25,654    $ 25,297    $ 46,674    $ 120,900
    
  
  
  
  

Weighted average number of shares outstanding, basic

      81,703      83,820      84,073      84,532      83,491

Weighted average number of shares outstanding, diluted

      82,760      84,565      84,889      85,180      84,352
Earnings per common share:                                   

Basic:

                                   

Income before discontinued operations

    $ 0.28    $ 0.30    $ 0.30    $ 0.32    $ 1.20

Discontinued operations

      0.00      0.01      0.00      0.24      0.25
    
  
  
  
  

Net income

    $ 0.28    $ 0.31    $ 0.30    $ 0.56    $ 1.45
    
  
  
  
  

Diluted:

                                   

Income before discontinued operations

    $ 0.28    $ 0.30    $ 0.30    $ 0.31    $ 1.19

Discontinued operations

      0.00      0.00      0.00      0.24      0.24
    
  
  
  
  

Net income

    $ 0.28    $ 0.30    $ 0.30    $ 0.55    $ 1.43
    
  
  
  
  
Discontinued Operations                                   

Revenues

    $ 334    $ 342    $ 346    $ 370    $ 1,392

Interest and other income

      —        —        —        500      500

Interest

      99      101      98      92      390

Depreciation

      51      51      51      50      203
    
  
  
  
  

Income before gain on sale of real estate

      184      190      197      728      1,299

Gain on sale of real estate

      —        —        —        19,428      19,428
    
  
  
  
  

Discontinued operations

    $ 184    $ 190    $ 197    $ 20,156    $ 20,727
    
  
  
  
  

 

- MORE -

Ventas Reports Fourth Quarter 2004

Page 13

February 28, 2005

 

Ventas, Inc.

2003 QUARTERLY STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

     First
Quarter
     Second
Quarter
     Third
Quarter
     Fourth
Quarter
    Year
  

Revenues:

                                        

Rental income

    $ 45,479     $ 46,413     $ 49,021     $ 49,074    $ 189,987  

Interest income from loan receivable

      747       758       766       765      3,036  

Interest and other income

      492       553       280       371      1,696  
    
 
 
 
  

Total revenues

      46,718       47,724       50,067       50,210      194,719  

Expenses:

                                        

General, administrative and professional fees

      3,900       3,782       3,552       3,924      15,158  

Reversal of contingent liability

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

Amortization of restricted stock grants

      291       310       309       364      1,274  

Depreciation

      9,873       9,870       9,897       9,860      39,500  

Net loss on swap breakage

      —         —         —         5,168      5,168  

Interest

      15,830       15,925       14,209       15,696      61,660  

Loss on extinguishment of debt

      —         —         —         84      84  

Interest on United States Settlement

      1,182       3,761       —         —        4,943  
    
 
 
 
  

Total expenses

      10,912       33,648       27,967       35,096      107,623  

Operating income

      35,806       14,076       22,100       15,114      87,096  

Gain on sale of Kindred common stock

      —         922       8,117       —        9,039  
    
 
 
 
  

Income before discontinued operations

      35,806       14,998       30,217       15,114      96,135  

Discontinued operations

      1,482       1,131       1,995       62,010      66,618  
    
 
 
 
  

Net income

    $ 37,288     $ 16,129     $ 32,212     $ 77,124    $ 162,753  
    
 
 
 
  

Weighted average number of shares outstanding, basic

      78,834       78,935       79,389       80,187      79,340  

Weighted average number of shares outstanding, diluted

      79,296       79,575       80,258       81,232      80,094  
Earnings per common share:                                        

Basic:

                                        

Income before discontinued operations

    $ 0.45     $ 0.19     $ 0.38     $ 0.19    $ 1.21  

Discontinued operations

      0.02       0.01       0.03       0.78      0.84  
    
 
 
 
  

Net income

    $ 0.47     $ 0.20     $ 0.41     $ 0.97    $ 2.05  
    
 
 
 
  

Diluted:

                                        

Income before discontinued operations

    $ 0.45     $ 0.19     $ 0.38     $ 0.18    $ 1.20  

Discontinued operations

      0.02       0.01       0.02       0.78      0.83  
    
 
 
 
  

Net income

    $ 0.47     $ 0.20     $ 0.40     $ 0.96    $ 2.03  
    
 
 
 
  
Discontinued Operations                                        

Revenues

    $ 3,705     $ 4,487     $ 1,595     $ 1,723    $ 11,510  

Interest and other income

      —         4,116       —         6,000      10,116  

Interest

      1,295       1,290       479       437      3,501  

Depreciation

      928       928       341       246      2,443  

Loss on impairment of asset held for sale

      —         —         845       —        845  
    
 
 
 
  

Income (loss) before gain (loss) on sale of real estate

      1,482       6,385       (70 )     7,040      14,837  

Gain (loss) on sale of real estate

      —         (5,254 )     2,065       54,970      51,781  
    
 
 
 
  

Discontinued operations

    $ 1,482     $ 1,131     $ 1,995     $ 62,010    $ 66,618  
    
 
 
 
  

 

- MORE -

Ventas Reports Fourth Quarter 2004

Page 14

February 28, 2005

 

Portfolio of Properties

 

The following information provides an overview of the Company’s portfolio of healthcare properties as of and for the year ended December 31, 2004 (dollars in thousands):

 

     As of and for the Year Ended December 31, 2004

Portfolio by Type

    # of
Properties
    # of
Beds/Units
    Revenue
    Percent of
Total
Revenues1
    

# of

States

Healthcare properties:                            

Skilled nursing facilities

    201    25,532    $ 135,854    57.4 %   31

Hospitals

    40    3,557      70,517    29.8 %   19

Senior housing facilities

    30    3,684      22,364    9.4 %   13

Other facilities

    16    122      4,176    1.7 %   4
    
  
  
  
   

Total

    287    32,895    $ 232,911    98.3 %   39
    
  
  
  
   
Other real estate investments:                            

Loan receivable

    25    1,983    $ 2,958           
    
  
  
          
1 The remainder of our total revenues is interest income from loan receivable and interest and other income.

 

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

    TTM 1
EBITDARM
Coverage 2
   

TTM 1

EBITDAR
Coverage 3

    1

    2.9    2.3

    2

    2.6    2.0

    3

    2.1    1.5

    4

    1.9    1.3

    5

    1.9    1.4
    
  

Portfolio

    2.4    1.8
    
  
1 Trailing Twelve Months EBITDARM and EBITDAR for the period ended September 30, 2004 (the latest available data provided by Kindred) to the Company’s Trailing Twelve Months cash rental revenue.
2 Coverage reflects the ratio of Kindred’s EBITDARM to rent. EBITDARM is defined as earnings before interest, income taxes, depreciation, amortization, rent and management fees. In the calculation of Trailing Twelve Months EBITDARM, intercompany profit pertaining to services provided by Kindred’s PeopleFirst Rehabilitation and Pharmacy Divisions for the nine months ended September 30, 2004 has been eliminated from purchased ancillary expenses within the Ventas portfolio.
3 Coverage 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 PeopleFirst Rehabilitation and Pharmacy Divisions for the nine months ended September 30, 2004 has been eliminated from purchased ancillary expenses within the Ventas portfolio.

 

- MORE -

Ventas Reports Fourth Quarter 2004

Page 15

February 28, 2005

 

Scheduled Maturities of Borrowing Arrangements

 

The Company’s indebtedness has the following maturities as of December 31, 2004 (in thousands):

 

2005

    $ 4,793

2006

      215,752

2007

      40,884

2008

      2,019

2009

      206,440

Thereafter

      373,290
    

Total

    $ 843,178
    

 

- END -