Market Overview

NHI Announces Second Quarter 2018 Results

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National Health Investors, Inc. (NYSE:NHI) announced today its net
income, its Funds From Operations ("FFO"), its Normalized Funds From
Operations and its Normalized Adjusted Funds From Operations ("AFFO")
for the three and six months ended June 30, 2018.

Q2 2018 Highlights

  • Announced or completed $159.0 million in real estate acquisitions and
    loans year-to-date
  • Maintained low leverage balance sheet at 4.3x net debt-to-annualized
    adjusted EBITDA
  • Portfolio lease coverage remains strong at 1.68x
  • GAAP net income of $.91 per diluted common share for the second quarter
  • Normalized FFO up 4.5% over second quarter 2017; up 5.8% year-to-date
  • Normalized AFFO up 6.8% over second quarter 2017; up 6.9% year-to-date

2018 Guidance

The Company currently expects Normalized FFO for 2018 to be in the range
of $5.47 to $5.51 per diluted common share and Normalized AFFO to be in
the range of $5.01 to $5.03 per diluted common share. The Company's
guidance range for the full year 2018, with underlying assumptions and
timing of certain transactions, is set forth and reconciled below:

   

Full-Year
2018 Range

Low     High
Net income per diluted share $ 3.73     $ 3.75
Plus: Depreciation 1.69 1.71
Plus: Write-off of tenant straight-line rent receivable .03 .03
Plus: Partial write-down of customer loan .01 .01
Plus: Other adjustments, net .01   .01  
Normalized FFO per diluted common share $ 5.47 $ 5.51
Less: Straight-line rental income (0.54 ) (0.56 )
Plus: Amortization of debt issuance costs 0.05 0.05
Plus: Amortization of original issue discount 0.03   0.03  
Normalized AFFO per diluted common share $ 5.01   $ 5.03  
 

The Company's guidance range reflects the existence of volatile economic
conditions, but does not assume any material deterioration in tenant
credit quality and/or performance of its portfolio. The Company has
announced or completed $159.0 million of new investments since
January 1, 2018. The guidance is based on a number of assumptions, many
of which are outside the Company's control and all of which are subject
to change. The Company's guidance range allows for the uncertainty
inherent in the structure and timing of the financing required to fund
previously announced investments and any pending new investments. The
Company's guidance may change if actual results vary from these
assumptions.

Financial Results

  • Net income per diluted common share for the three months ended
    June 30, 2018, was $.91, a decrease of 2.2% from the same period in
    the prior year. Net income for the three months ended June 30, 2018
    includes a write-down of $1,436,000 on a single-property lease and a
    $412,000 write-down on a potentially uncollectible note receivable.
    Net income per diluted common share for the six months ended June 30,
    2018, was $1.83, a decrease of 9.9% from the same period in the prior
    year. Net income for the six months ended June 30, 2017 includes gains
    on sales of marketable securities of $10.0 million.
  • Normalized FFO per diluted common share for the three months ended
    June 30, 2018, was $1.38, an increase of 4.5% over the same period in
    the prior year. Normalized FFO per diluted common share for the six
    months ended June 30, 2018, was $2.72, an increase of 5.8% over the
    same period in the prior year.
  • Normalized AFFO per diluted common share for the three months ended
    June 30, 2018 was $1.26, an increase of 6.8% over the same period in
    the prior year. Normalized AFFO per diluted common share for the six
    months ended June 30, 2018 was $2.48, an increase of 6.9% over the
    same period in the prior year.
  • NAREIT FFO per diluted common share for the three months ended
    June 30, 2018, was $1.33, a decrease of .7% from the same period in
    the prior year. FFO for the three months ended June 30, 2018 includes
    the write-downs mentioned above. FFO per diluted common share for the
    six months ended June 30, 2018, was $2.67, a decrease of 6.0% from the
    same period in the prior year. FFO for the six months ended June 30,
    2017 includes gains on sales of marketable securities of $10.0 million.

FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") and applied by us, is net income (computed in
accordance with GAAP), excluding gains (or losses) from sales of real
estate property, plus real estate depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures, if
any. The Company defines Normalized FFO as FFO adjusted for certain
items which may create some difficulty in comparing FFO for the current
period to similar prior periods. We define Normalized AFFO as Normalized
FFO excluding the effects of straight-line lease revenue, amortization
of debt issuance costs and the non-cash amortization of the original
issue discount of our unsecured convertible notes. These supplemental
non-GAAP performance measures may not be comparable to similarly titled
measures used by other REITs.

The reconciliation of net income to our FFO, Normalized FFO, Normalized
AFFO and Normalized Funds Available for Distribution ("FAD") is included
as a table to this press release and filed in the Company's Form 10-Q
with the Securities and Exchange Commission.

Investor Conference Call and Webcast

NHI will host a conference call on Tuesday, August 7, 2018, at 12 p.m.
ET, to discuss second quarter results. The number to call for this
interactive teleconference is (800) 732-6870, with the confirmation
number 21892983. The live broadcast of NHI's second quarter conference
call will be available online at www.nhireit.com.
The online replay will follow shortly after the call and continue for
approximately 90 days.

About National Health Investors

Incorporated in 1991, National Health Investors, Inc. (NYSE:NHI) is a
real estate investment trust specializing in sale-leaseback,
joint-venture, mortgage and mezzanine financing of need-driven and
discretionary senior housing and medical investments. NHI's portfolio
consists of independent, assisted and memory care communities,
entrance-fee retirement communities, skilled nursing facilities, medical
office buildings and specialty hospitals. Visit www.nhireit.com
for more information.

 
Reconciliation of FFO, Normalized FFO, Normalized AFFO and
Normalized FAD
(in thousands, except share and per share amounts)                
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Net income $ 37,839 $ 38,245 $ 76,271 $ 82,475
Elimination of certain non-cash items in net income:
Depreciation 17,794 16,819 35,129 32,963
Gain on sale of real estate       (50 )
Funds from operations 55,633 55,064 111,400 115,388
Gain on sales of marketable securities (10,038 )
Loss on convertible note retirement 96 738 96
Non-cash write-off of straight-line rent receivable 1,436 1,436
Note receivable impairment 413 413
Recognition of unamortized note receivable commitment fees   (922 ) (515 ) (922 )
Normalized FFO 57,482 54,238 113,472 104,524
Straight-line lease revenue, net (5,835 ) (6,249 ) (11,797 ) (12,005 )
Amortization of lease incentives 69 10 132 20
Amortization of original issue discount 187 288 408 581
Amortization of debt issuance costs 590   581   1,203   1,193  
Normalized AFFO 52,493 48,868 103,418 94,313
Non-cash stock based compensation 368   342   1,794   1,865  
Normalized FAD $ 52,861   $ 49,210   $ 105,212   $ 96,178  
 

BASIC

Weighted average common shares outstanding 41,704,819 40,982,244 41,618,487 40,468,024
FFO per common share $ 1.33 $ 1.34 $ 2.68 $ 2.85
Normalized FFO per common share $ 1.38 $ 1.32 $ 2.73 $ 2.58
Normalized AFFO per common share $ 1.26 $ 1.19 $ 2.48 $ 2.33
 

DILUTED

Weighted average common shares outstanding 41,786,829 41,245,173 41,681,854 40,679,345
FFO per common share $ 1.33 $ 1.34 $ 2.67 $ 2.84
Normalized FFO per common share $ 1.38 $ 1.32 $ 2.72 $ 2.57
Normalized AFFO per common share $ 1.26 $ 1.18 $ 2.48 $ 2.32
 

See Notes to Reconciliation of FFO, Normalized FFO, Normalized
AFFO and Normalized FAD.

 

Notes to Reconciliation of FFO, Normalized FFO,
Normalized AFFO and Normalized FAD

These supplemental operating performance measures may not be comparable
to similarly titled measures used by other REITs. Consequently, our
Funds From Operations ("FFO"), Normalized FFO, Normalized Adjusted Funds
From Operations ("AFFO") and Normalized Funds Available for Distribution
("FAD") may not provide a meaningful measure of our performance as
compared to that of other REITs. Since other REITs may not use our
definition of these operating performance measures, caution should be
exercised when comparing our Company's FFO, Normalized FFO, Normalized
AFFO and Normalized FAD to that of other REITs. These financial
performance measures do not represent cash generated from operating
activities in accordance with generally accepted accounting principles
("GAAP") (these measures do not include changes in operating assets and
liabilities) and therefore should not be considered an alternative to
net earnings as an indication of operating performance, or to net cash
flow from operating activities as determined by GAAP as a measure of
liquidity, and are not necessarily indicative of cash available to fund
cash needs.

Funds From Operations - FFO

FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") and applied by us, is net income (computed in
accordance with GAAP), excluding gains (or losses) from sales of real
estate property, plus real estate depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures, if
any. 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. Diluted FFO assumes the exercise of stock options and other
potentially dilutive securities. Normalized FFO excludes from FFO
certain items which, due to their infrequent or unpredictable nature,
may create some difficulty in comparing FFO for the current period to
similar prior periods, and may include, but are not limited to,
impairment of non-real estate assets, gains and losses attributable to
the acquisition and disposition of assets and liabilities, and
recoveries of previous write-downs.

We believe that FFO and normalized FFO are important supplemental
measures of operating performance for a REIT. Because the historical
cost accounting convention used for real estate assets requires
depreciation (except on land), such accounting presentation implies that
the value of real estate assets diminishes predictably over time. Since
real estate values instead have historically risen and fallen with
market conditions, presentations of operating results for a REIT that
uses historical cost accounting for depreciation could be less
informative, and should be supplemented with a measure such as FFO. The
term FFO was designed by the REIT industry to address this issue.

Adjusted Funds From Operations - AFFO

In addition to the adjustments included in the calculation of normalized
FFO, normalized AFFO excludes the impact of any straight-line lease
revenue, amortization of the original issue discount on our convertible
senior notes and amortization of debt issuance costs.

We believe that normalized AFFO is an important supplemental measure of
operating performance for a REIT. GAAP requires a lessor to recognize
contractual lease payments into income on a straight-line basis over the
expected term of the lease. This straight-line adjustment has the effect
of reporting lease income that is significantly more or less than the
contractual cash flows received pursuant to the terms of the lease
agreement. GAAP also requires the original issue discount of our
convertible senior notes and debt issuance costs to be amortized as
non-cash adjustments to earnings. Normalized AFFO is useful to our
investors as it reflects the growth inherent in the contractual lease
payments of our real estate portfolio.

Funds Available for Distribution - FAD

In addition to the adjustments included in the calculation of normalized
AFFO, normalized FAD excludes the impact of non-cash stock based
compensation.

We believe that normalized FAD is an important supplemental measure of
operating performance for a REIT as a useful indicator of the ability to
distribute dividends to shareholders. Additionally, normalized FAD
improves the understanding of our operating results among investors and
makes comparisons with: (i) expected results, (ii) results of previous
periods and (iii) results among REITs, more meaningful. Because FAD may
function as a liquidity measure, we do not present FAD on a per-share
basis.

               
Condensed Statements of Income
(in thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
 
Revenues:
Rental income $ 69,869 $ 65,725 $ 139,122 $ 128,853
Interest income 3,087   4,101   6,580   7,352  
72,956   69,826   145,702   136,205  
Expenses:
Depreciation 17,794 16,819 35,129 32,963
Interest, including amortization of debt discount and issuance costs 12,220 11,732 23,834 23,393
Legal 223 146 334 202
Franchise, excise and other taxes 266 267 612 534
General and administrative 2,765 2,521 6,935 6,630
Loan and realty losses 1,849     1,849    
35,117   31,485   68,693   63,722  
Income before investment and other gains and losses 37,839 38,341 77,009 72,483
Investment and other gains 10,088
Loss on convertible note retirement   (96 ) (738 ) (96 )
Net income 37,839   38,245   $ 76,271   $ 82,475  
 
Weighted average common shares outstanding:
Basic 41,704,819 40,982,244 41,618,487 40,468,024
Diluted 41,786,829 41,245,173 41,681,854 40,679,345
 
Earnings per common share:
Net income per common share - basic $ .91 $ .93 $ 1.83 $ 2.04
Net income per common share - diluted $ .91 $ .93 $ 1.83 $ 2.03
 
Regular dividends declared per common share $ 1.00 $ .95 $ 2.00 $ 1.90
 
       
Selected Balance Sheet Data
(in thousands)
June 30, 2018 December 31, 2017
 
Real estate properties, net $ 2,388,618 $ 2,285,701
Mortgage and other notes receivable, net $ 149,676 $ 141,486
Cash and cash equivalents $ 3,045 $ 3,063
Straight-line rent receivable $ 108,771 $ 97,359
Other assets $ 23,126 $ 18,212
Debt $ 1,225,720 $ 1,145,497
Stockholders' equity $ 1,361,372 $ 1,322,117
 

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 the Company's, tenants', operators', borrowers' or
managers' expected future financial position, results of operations,
cash flows, funds from operations, dividend and dividend plans,
financing opportunities and plans, capital market transactions, business
strategy, budgets, projected costs, operating metrics, capital
expenditures, competitive positions, acquisitions, investment
opportunities, dispositions, acquisition integration, growth
opportunities, expected lease income, continued qualification as a real
estate investment trust ("REIT"), plans and objectives of management for
future operations, continued performance improvements, ability to
service and refinance our debt obligations, ability to finance growth
opportunities, and similar statements including, without limitation,
those containing words such as "may," "will," "believes," "anticipates,"
"expects," "intends," "estimates," "plans," and other similar
expressions are forward-looking statements.
Forward-looking
statements involve known and unknown risks and uncertainties that may
cause our actual results in future periods to differ materially from
those projected or contemplated in the forward-looking statements. Such
risks and uncertainties include, among other things; the operating
success of our tenants and borrowers for collection of our lease and
interest income; the success of property development and construction
activities, which may fail to achieve the operating results we expect;
the risk that our tenants and borrowers may become subject to bankruptcy
or insolvency proceedings; risks related to governmental regulations and
payors, principally Medicare and Medicaid, and the effect that lower
reimbursement rates would have on our tenants' and borrowers' business;
the risk that the cash flows of our tenants and borrowers would be
adversely affected by increased liability claims and liability insurance
costs; risks related to environmental laws and the costs associated with
liabilities related to hazardous substances; the risk that we may not be
fully indemnified by our lessees and borrowers against future
litigation; the success of our future acquisitions and investments; our
ability to reinvest cash in real estate investments in a timely manner
and on acceptable terms; the potential need to incur more debt in the
future, which may not be available on terms acceptable to us; our
ability to meet covenants related to our indebtedness which impose
certain operational; the risk that the illiquidity of real estate
investments could impede our ability to respond to adverse changes in
the performance of our properties; risks associated with our investments
in unconsolidated entities, including our lack of sole decision-making
authority and our reliance on the financial condition of other
interests; our dependence on revenues derived mainly from fixed rate
investments in real estate assets, while a portion of our debt bears
interest at variable rates; the risk that our assets may be subject to
impairment charges; and our dependence on the ability to continue to
qualify for taxation as a real estate investment trust. Many of these
factors are beyond the control of the Company and its management.
The
Company assumes no obligation to update any of the foregoing or any
other forward looking statements, except as required by law, and these
statements speak only as of the date on which they are made.
Investors
are urged to carefully review and consider the various disclosures made
by NHI in its periodic reports filed with the Securities and Exchange
Commission, including the risk factors and other information disclosed
in NHI's Annual Report on Form 10-K for the most recently ended fiscal
year. Copies of these filings are available at no cost on the SEC's web
site at
http://www.sec.gov
or on NHI's web site at
http://www.nhireit.com.

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