LTC Properties, Inc. LTC, a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for its fourth quarter ended December 31, 2018.
Net income available to common stockholders was $30.6 million, or $0.77 per diluted share, for the 2018 fourth quarter, compared with $19.8 million, or $0.50 per diluted share, for the same period in 2017. The improvement was primarily due to a net gain on sale of $8.0 million in 2018, compared with a net loss of $1.2 million in 2017, one-time non-recurring income of $3.1 million related to the write-off of a contingent lease incentive and related earn-out liability, higher rental and interest income resulting from acquisitions, mortgage loan originations, and higher income from unconsolidated joint ventures and mezzanine loans, partially offset by a reduction in rental income resulting from properties sold in 2018 and the non-payment of December rent by Senior Care Centers, LLC ("Senior Care") as a result of their bankruptcy filing.
Funds from Operations ("FFO") was $32.1 million for the 2018 fourth quarter, compared with $30.4 million for the comparable 2017 period. FFO per diluted common share was $0.81 and $0.77 for the quarters ended December 31, 2018 and 2017, respectively. Excluding the $3.1 million non-recurring income in the fourth quarter of 2018, FFO decreased $1.4 million compared with the fourth quarter of 2017 due to the non-payment of December rent by Senior Care.
During the fourth quarter of 2018, LTC sold two skilled nursing centers with a total of 169 beds in Florida and Georgia for an aggregate of $10.5 million.
Subsequent to December 31, 2018, and as announced in January, LTC entered into a real estate joint venture which acquired an operational 74-unit assisted living and memory care community for approximately $17.0 million. LTC's economic interest in the real estate joint venture is approximately 95%. The initial cash lease rate is 7.4% with a 10-year lease term.
Conference Call Information
LTC will conduct a conference call on Friday, March 1, 2019, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide commentary on its performance and operating results for the quarter ended December 31, 2018. The conference call is accessible by telephone and the internet. Telephone access will be available by dialing 877-510-2862 (domestically) or 412-902-4134 (internationally). To participate in the webcast, go to LTC's website at www.LTCreit.com 15 minutes before the call to download the necessary software.
An audio replay of the conference call will be available from March 1 through March 15, 2019 and may be accessed by dialing 877-344-7529 (domestically) or 412-317-0088 (internationally) and entering conference number 10128164. Additionally, an audio archive will be available on LTC's website on the "Presentations" page of the "Investor Information" section, which is under the "Investors" tab. LTC's earnings release and supplemental information package for the current period will be available on its website on the "Press Releases" and "Presentations" pages, respectively, of the "Investor Information" section which is under the "Investors" tab.
About LTC
LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC holds more than 200 investments in 28 states with 30 operating partners. The portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.
Forward Looking Statements
This press release includes statements that are not purely historical and are "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, including statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward looking statements. These forward looking statements involve a number of risks and uncertainties. Please see LTC's most recent Annual Report on Form 10-K, its subsequent Quarterly Reports on Form 10-Q, and its other publicly available filings with the Securities and Exchange Commission for a discussion of these and other risks and uncertainties. All forward looking statements included in this press release are based on information available to the Company on the date hereof, and LTC assumes no obligation to update such forward looking statements. Although the Company's management believes that the assumptions and expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward looking statements due to the risks and uncertainties of such statements.
| LTC PROPERTIES, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
|
(amounts in thousands, except per share amounts) |
||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (unaudited) | (audited) | |||||||||||||||
| Revenues: | ||||||||||||||||
| Rental income | $ | 32,759 | $ | 34,124 | $ | 135,405 | $ | 137,657 | ||||||||
| Interest income from mortgage loans | 7,290 | 6,719 | 28,200 | 26,769 | ||||||||||||
| Interest and other income | 3,538 | 886 | 5,040 | 3,639 | ||||||||||||
| Total revenues | 43,587 | 41,729 | 168,645 | 168,065 | ||||||||||||
| Expenses: | ||||||||||||||||
| Interest expense | 7,215 | 7,683 | 30,196 | 29,949 | ||||||||||||
| Depreciation and amortization | 9,396 | 9,424 | 37,555 | 37,610 | ||||||||||||
| Impairment charges | — | — | — | 1,880 | ||||||||||||
| Provision (recovery) for doubtful accounts | 11 | (67 | ) | 87 | (206 | ) | ||||||||||
| Transaction costs | 65 | — | 84 | 56 | ||||||||||||
| General and administrative expenses | 4,801 | 4,243 | 19,193 | 17,513 | ||||||||||||
| Total expenses | 21,488 | 21,283 | 87,115 | 86,802 | ||||||||||||
| Other operating income: | ||||||||||||||||
| Gain (loss) on sale of real estate, net | 7,984 | (1,240 | ) | 70,682 | 3,814 | |||||||||||
| Operating income | 30,083 | 19,206 | 152,212 | 85,077 | ||||||||||||
| Income from unconsolidated joint ventures | 761 | 628 | 2,864 | 2,263 | ||||||||||||
| Net income | 30,844 | 19,834 | 155,076 | 87,340 | ||||||||||||
| Income allocated to non-controlling interests | (78 | ) | — | (95 | ) | — | ||||||||||
| Net income attributable to LTC Properties, Inc. | 30,766 | 19,834 | 154,981 | 87,340 | ||||||||||||
| Income allocated to participating securities | (121 | ) | (81 | ) | (625 | ) | (362 | ) | ||||||||
| Net income available to common stockholders | $ | 30,645 | $ | 19,753 | $ | 154,356 | $ | 86,978 | ||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.78 | $ | 0.50 | $ | 3.91 | $ | 2.21 | ||||||||
| Diluted | $ | 0.77 | $ | 0.50 | $ | 3.89 | $ | 2.20 | ||||||||
|
Weighted average shares used to calculate earnings per common share: |
||||||||||||||||
| Basic | 39,501 | 39,429 | 39,477 | 39,409 | ||||||||||||
| Diluted | 39,864 | 39,645 | 39,839 | 39,637 | ||||||||||||
| Dividends declared and paid per common share | $ | 0.57 | $ | 0.57 | $ | 2.28 | $ | 2.28 | ||||||||
Supplemental Reporting Measures
FFO and Funds Available for Distribution ("FAD") are supplemental measures of a real estate investment trust's ("REIT") financial performance that are not defined by U.S. generally accepted accounting principles ("GAAP"). Investors, analysts and the Company use FFO and FAD as supplemental measures of operating performance. The Company believes FFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO and FAD facilitate like comparisons of operating performance between periods. Occasionally, the Company may exclude non-recurring items from FFO and FAD in order to allow investors, analysts and our management to compare the Company's operating performance on a consistent basis without having to account for differences caused by unanticipated items.
FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company's computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company's FFO to that of other REITs.
We define FAD as FFO excluding the effects of non-cash income, such as straight-line rent, amortization of lease inducement, effective interest income, and deferred income from unconsolidated joint ventures, and non-cash expense, such as non-cash compensation charges, capitalized interest and non-cash interest charges. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.
While the Company uses FFO and FAD as supplemental performance measures of our cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.
Reconciliation of FFO, AFFO and FAD
The following table reconciles GAAP net income available to common stockholders to each of NAREIT FFO attributable to common stockholders and FAD (unaudited, amounts in thousands, except per share amounts):
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| GAAP net income available to common stockholders | $ | 30,645 | $ | 19,753 | $ | 154,356 | $ | 86,978 | |||||||||
| Add: Depreciation and amortization | 9,396 | 9,424 | 37,555 | 37,610 | |||||||||||||
| Add: Impairment charges | — | — | — | 1,880 | |||||||||||||
| Less: (Gain) loss on sale of real estate, net | (7,984 | ) | 1,240 | (70,682 | ) | (3,814 | ) | ||||||||||
| NAREIT FFO attributable to common stockholders | 32,057 | 30,417 | 121,229 | 122,654 | |||||||||||||
| Less: Non-recurring income | (3,074 | ) |
(1) |
— | (3,074 | ) |
(1) |
(842 | ) |
(1) |
|||||||
| FFO attributable to common stockholders excluding non-recurring income (1) | 28,983 | 30,417 | 118,155 | 121,812 | |||||||||||||
| Less: Non-cash rental income | (480 | ) | (2,804 | ) | (7,458 | ) | (8,485 | ) | |||||||||
| Less: Effective interest income from mortgage loans | (1,438 | ) | (1,398 | ) | (5,703 | ) | (5,500 | ) | |||||||||
| Less: Deferred income from unconsolidated joint ventures | (15 | ) | (36 | ) | (108 | ) | (177 | ) | |||||||||
| Add: Non-cash compensation charges | 1,486 | 1,282 | 5,870 | 5,249 | |||||||||||||
| Add: Non-cash interest related to earn-out liabilities | — | 126 | 377 | 602 | |||||||||||||
| Less: Capitalized interest | (398 | ) | (281 | ) | (1,248 | ) | (908 | ) | |||||||||
| Funds available for distribution (FAD) | $ | 28,138 | $ | 27,306 | $ | 109,885 | $ | 112,593 | |||||||||
|
(1) Represents net write-off of a contingent lease incentive and related earn-out liability. |
|||||||||||||||||
| NAREIT Basic FFO attributable to common stockholders per share | $ | 0.81 | $ | 0.77 | $ | 3.07 | $ | 3.11 | |||||||||
| NAREIT Diluted FFO attributable to common stockholders per share | $ | 0.81 | $ | 0.77 | $ | 3.06 | $ | 3.10 | |||||||||
| NAREIT Diluted FFO attributable to common stockholders | $ | 32,178 | $ | 30,498 | $ | 121,854 | $ | 123,016 | |||||||||
| Weighted average shares used to calculate NAREIT diluted FFO per share | |||||||||||||||||
| attributable to common stockholders | 39,864 | 39,645 | 39,839 | 39,637 | |||||||||||||
|
|
|||||||||||||||||
| Diluted FFO attributable to common stockholders, excluding non-recurring income | $ | 29,104 | $ | 30,498 | $ | 118,780 | $ | 122,174 | |||||||||
| Weighted average shares used to calculate diluted | |||||||||||||||||
| FFO per share attributable to common stockholders, excluding non-recurring income | 39,864 | 39,645 | 39,839 | 39,637 | |||||||||||||
| Diluted FAD | $ | 28,259 | $ | 27,387 | $ | 110,510 | $ | 112,113 | |||||||||
| Weighted average shares used to calculate diluted FAD per share | 39,864 | 39,645 | 39,839 | 39,637 | |||||||||||||
| LTC PROPERTIES, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
|
(amounts in thousands, except per share) |
||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| ASSETS | (audited) | (audited) | ||||||
| Investments: | ||||||||
| Land | $ | 125,358 | $ | 124,041 | ||||
| Buildings and improvements | 1,290,352 | 1,262,335 | ||||||
| Accumulated depreciation and amortization | (312,959 | ) | (304,117 | ) | ||||
| Operating real estate property, net | 1,102,751 | 1,082,259 | ||||||
| Properties held-for-sale, net of accumulated depreciation: 2018—$1,916; 2017—$1,916 | 3,830 | 3,830 | ||||||
| Real property investments, net | 1,106,581 | 1,086,089 | ||||||
| Mortgage loans receivable, net of loan loss reserve: 2018—$2,447; 2017—$2,255 | 242,939 | 223,907 | ||||||
| Real estate investments, net | 1,349,520 | 1,309,996 | ||||||
| Notes receivable, net of loan loss reserve: 2018—$128; 2017—$166 | 12,715 | 16,402 | ||||||
| Investments in unconsolidated joint ventures | 30,615 | 29,898 | ||||||
| Investments, net | 1,392,850 | 1,356,296 | ||||||
| Other assets: | ||||||||
| Cash and cash equivalents | 2,656 | 5,213 | ||||||
| Restricted cash | 2,108 | — | ||||||
| Debt issue costs related to bank borrowings | 2,989 | 810 | ||||||
| Interest receivable | 20,732 | 15,050 | ||||||
| Straight-line rent receivable, net of allowance for doubtful accounts: 2018—$746; 2017—$814 | 73,857 | 64,490 | ||||||
| Lease incentives | 14,443 | 21,481 | ||||||
| Prepaid expenses and other assets | 3,985 | 2,230 | ||||||
| Total assets | $ | 1,513,620 | $ | 1,465,570 | ||||
| LIABILITIES | ||||||||
| Bank borrowings | $ | 112,000 | $ | 96,500 | ||||
| Senior unsecured notes, net of debt issue costs: 2018—$938; 2017—$1,131 | 533,029 | 571,002 | ||||||
| Accrued interest | 4,180 | 5,276 | ||||||
| Accrued incentives and earn-outs | — | 8,916 | ||||||
| Accrued expenses and other liabilities | 31,440 | 25,228 | ||||||
| Total liabilities | 680,649 | 706,922 | ||||||
| EQUITY | ||||||||
| Stockholders' equity: | ||||||||
| Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2018—39,657; 2017—39,570 | 397 | 396 | ||||||
| Capital in excess of par value | 862,712 | 856,992 | ||||||
| Cumulative net income | 1,255,764 | 1,100,783 | ||||||
| Cumulative distributions | (1,293,383 | ) | (1,203,011 | ) | ||||
| Total LTC Properties, Inc. stockholders' equity | 825,490 | 755,160 | ||||||
| Non-controlling interests | 7,481 | 3,488 | ||||||
| Total equity | 832,971 | 758,648 | ||||||
| Total liabilities and equity | $ | 1,513,620 | $ | 1,465,570 | ||||
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