Ventas Reports Eight Percent Increase in Third Quarter 2013 Normalized FFO to a Record $1.04 Per Diluted Share

Ventas Closes $1.3 Billion of Investments Since July 1, 2013

COMPANY RAISES FULL YEAR 2013 NORMALIZED FFO PER DILUTED SHARE GUIDANCE TO $4.12 TO $4.14

Business Wire

CHICAGO--(BUSINESS WIRE)--

Ventas, Inc. (VTR) (“Ventas” or the “Company”) said today that normalized Funds From Operations (“FFO”) for the quarter ended September 30, 2013 increased eight percent to $307.2 million, from $284.9 million for the comparable 2012 period. Normalized FFO per diluted common share was a record $1.04 for the quarter ended September 30, 2013, an eight percent increase from $0.96 for the comparable 2012 period. Weighted average diluted shares outstanding for the quarter decreased by one percent to 295.2 million from 297.4 million in the third quarter of 2012.

“Ventas delivered another quarter of record results by accretively investing capital, raising capital and managing our diverse, high-quality portfolio of seniors housing and healthcare assets,” Ventas Chairman and Chief Executive Officer Debra A. Cafaro said. “We also positioned Ventas to succeed in the future by maintaining strong liquidity through a highly successful bond issuance, by acquiring over a billion dollars in higher growth private pay assets, and by completing favorable lease extensions with our valued tenant Kindred Healthcare,” she added. “We are pleased to increase our full-year outlook, reflecting the strength of our business model and execution.”

The growth in third quarter 2013 normalized FFO per diluted common share compared to the third quarter of 2012 is due primarily to the Company’s 2012 and 2013 investments; net operating income increases in its high-quality private pay seniors housing communities managed by Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (“Sunrise”), its triple-net lease portfolio and its medical office building (“MOB”) segment; lower weighted average interest rates; and a decrease in weighted average diluted shares outstanding. These benefits were partially offset by higher debt balances, asset sales and receipt of loan repayments.

Normalized FFO for the quarter ended September 30, 2013 excludes the net expense (totaling $3.5 million, or $0.01 per diluted share) from merger-related expenses and deal costs (including integration costs) and amortization of other intangibles, partially offset by an income tax benefit and net gains on extinguishment of debt. Normalized FFO for the quarter ended September 30, 2012 excluded the net benefit (totaling $4.8 million, or $0.01 per diluted share) from an income tax benefit and net gains on extinguishment of debt, partially offset by merger-related expenses and deal costs (including integration costs) and amortization of other intangibles.

Normalized FFO for the nine months ended September 30, 2013 increased ten percent to $907.1 million, from $826.6 million for the comparable 2012 period. Normalized FFO per diluted common share was $3.08 for the nine months ended September 30, 2013, a nine percent increase from $2.82 for the comparable 2012 period. Normalized FFO for the nine months ended September 30, 2013 excludes the net expense (totaling $3.7 million, or $0.01 per diluted share) from merger-related expenses and deal costs (including integration costs) and amortization of other intangibles, offset by an income tax benefit and net gains on extinguishment of debt. Normalized FFO for the nine months ended September 30, 2012 excluded the net expense (totaling $86.1 million, or $0.30 per diluted share) from merger-related expenses and deal costs (including integration costs), loss on extinguishment of debt and amortization of other intangibles, offset by an income tax benefit.

Net income attributable to common stockholders for the quarter ended September 30, 2013 was $118.3 million, or $0.40 per diluted common share, including discontinued operations of $(9.1) million. Net income attributable to common stockholders for the quarter ended September 30, 2012 was $111.9 million, or $0.38 per diluted common share, including discontinued operations of $(3.7) million. This $6.4 million increase in net income attributable to common stockholders in the third quarter of 2013 over the comparable prior-year period is primarily the result of the increases described above for normalized FFO and decreases in merger-related expenses and deal costs (including integration costs), offset by year-over-year decreases in income tax benefits, gains on extinguishment of debt and discontinued operations.

Net income attributable to common stockholders for the nine months ended September 30, 2013 was $345.1 million, or $1.17 per diluted common share, including discontinued operations of $(33.7) million. Net income attributable to common stockholders for the nine months ended September 30, 2012 was $276.5 million, or $0.94 per diluted common share, including discontinued operations of $70.1 million. This $68.5 million increase in net income attributable to common stockholders for the nine months ended September 30, 2013 over the comparable prior-year nine-month period is primarily the result of the increases described above for normalized FFO, decreases in merger-related expenses and deal costs (including integration costs), income tax benefit increases and net gains on extinguishment of debt in 2013 compared to net losses in 2012, partially offset by year-over-year changes in discontinued operations.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), for the quarter ended September 30, 2013 increased five percent to $303.7 million, from $289.7 million in the comparable 2012 period. NAREIT FFO per diluted common share for the quarter ended September 30, 2013 increased six percent to $1.03, from $0.97 in the third quarter of 2012.

NAREIT FFO for the nine months ended September 30, 2013 increased 22 percent to $903.4 million, from $740.6 million in the comparable 2012 period. NAREIT FFO per diluted common share for the nine months ended September 30, 2013 increased 21 percent to $3.06, from $2.52 in the nine months ended September 30, 2012.

PRIVATE PAY SENIORS HOUSING OPERATING PORTFOLIO

Third Quarter 2013 Same-Store Occupancy Rises 110 Basis Points and NOI Grows 6.2 Percent Year over Year Excluding 2012 Non-Recurring Item, 4.4 Percent As Reported

At September 30, 2013, the Company’s seniors housing operating portfolio included 235 communities managed by Sunrise and Atria, seven of which were acquired in the third quarter of 2013: 140 seniors housing communities managed by Atria and 95 seniors housing communities managed by Sunrise. Third quarter 2013 Net Operating Income (“NOI”) after management fees for this portfolio totaled $114.7 million.

For the 212 private pay seniors housing communities owned by the Company for the full third quarters of 2013 and 2012 (“same-store”), average unit occupancy rose 110 basis points to 91.5 percent, NOI after management fees grew 4.4 percent and REVPOR (revenue per occupied room) grew 3.6 percent in the third quarter of 2013 compared to the third quarter of 2012. Same-store NOI grew 6.2 percent in the third quarter of 2013 excluding a $1.7 million real estate tax credit recorded in the third quarter of 2012.

THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

Investments and Dispositions

  • Since July 1, 2013, Ventas invested $1.3 billion, principally in private pay seniors housing communities and MOBs. Highlights of the investments are:

(1) The expected first-year NOI yield is 7.3 percent.

(2) Of the $1.3 billion invested, approximately $360 million was invested in seniors housing operating investments, transitioned to Atria at the time of closing; just under $800 million was invested in independent living triple-net leases with a new tenant; and approximately $120 million was invested in MOBs.

(3) The eight Atria-managed senior living communities contain 940 independent and assisted living units, are 91 percent occupied and are located primarily in the top 31 Metropolitan Statistical Areas (MSAs).

(4) The triple-net independent living portfolio consists of 26 communities with 3,138 apartment-like units and is 94 percent occupied.

(5) The eight MOBs contain 427,870 square feet, are located on the campuses of A-rated hospital systems and are 90 percent occupied.

  • During the quarter, Ventas sold assets and received final repayments on outstanding loans totaling $81.5 million.

Liquidity, Capital Raising, Ratings and Balance Sheet

  • In September 2013, Ventas issued and sold $850 million aggregate principal amount of senior notes with a weighted average interest rate of 3.0 percent and a weighted average initial maturity of 12.5 years and used the proceeds to repay amounts outstanding under the Company’s unsecured revolving credit facility bearing interest at LIBOR plus 110 basis points. These transactions took advantage of low interest rates, expanded the Company’s liquidity, improved its ratio of fixed to floating rate debt, and extended its weighted average maturity.
  • Since July 1, 2013, the Company received aggregate proceeds of approximately $51.6 million from sales of its common stock under its previously established “at-the-market” equity offering program (ATM). Of that amount, $27.9 million was raised in the fourth quarter.
  • Moody’s Investors Service (“Moody’s”) raised its rating on the Company’s senior unsecured debt to Baa1 (stable) in August 2013. Ventas’s senior unsecured debt is currently rated BBB+ (stable) by Fitch Ratings, Baa1 (stable) by Moody’s and BBB (positive) by Standard & Poor’s Rating Services.
  • The Company’s current debt to total capitalization is 32 percent. The Company’s fixed charge coverage ratio was 4.3x in the third quarter of 2013 and net debt to Adjusted Pro Forma EBITDA at September 30, 2013 was 5.6x.
  • At September 30, 2013, the Company had $448.0 million of borrowings outstanding under its $2 billion unsecured revolving credit facility and $54.7 million of cash and cash equivalents. Currently, it has $429 million in borrowings outstanding under its unsecured revolving credit facility and approximately $62.8 million of cash and cash equivalents.

PORTFOLIO UPDATE AND ADDITIONAL INFORMATION

  • The Company owned 1,300 properties for the full third quarters of 2013 and 2012 (“same-store”). Cash NOI growth for the Company’s total same-store portfolio equaled 4.2 percent in the third quarter of 2013 compared to the third quarter of 2012, excluding $4.5 million of out of period cash receipts in the 2012 period, and 2.8 percent on an as-reported basis.
  • As previously announced, Ventas entered into favorable agreements with Kindred Healthcare, Inc. (KND) (“Kindred”) to extend the leases with respect to 48 of the 108 licensed healthcare assets whose current lease term was scheduled to expire on April 30, 2015 (the “2015 Renewal Assets”). Annual rent on those 48 healthcare assets leased to Kindred will increase by $15 million on the then current escalated rent on October 1, 2014. Including that increase, 67 percent of the total current rent on the 108 healthcare assets has been replaced. In addition, (1) the expiration date of the lease for the 60 remaining healthcare assets was accelerated to September 30, 2014, and Ventas has already launched the re-marketing process for those assets; and (2) Ventas received a payment of $20 million from Kindred that will be recognized as rent over the life of the new and renewed leases. The 2015 Renewal Assets consist of 86 skilled nursing facilities (“SNFs”) and 22 long-term acute care hospitals (“LTACs”).
   
Contractual
(dollars in millions) Cash Rent Rent Increase
 
Facilities   2013   October 1, 2014
 
Renewed (26 SNFs and 22 LTACs) $ 78 $ 15
60 SNFs 60   N/A
Total $ 138   N/A
Total Rent Renewed as a Percentage of Total 2013 Cash Rent 67 %

VENTAS RAISES 2013 NORMALIZED FFO PER DILUTED SHARE GUIDANCE TO $4.12 TO $4.14

Ventas currently expects its 2013 normalized FFO per diluted share to range between $4.12 and $4.14, improving its previously announced 2013 guidance of between $4.06 and $4.10 per diluted share, assuming that the Company’s weighted average diluted shares outstanding for the year approximate 295.2 million. The midpoint of the Company’s improved guidance range constitutes approximately eleven percent per share growth in 2013, excluding non-cash items from normalized FFO (projected to be $0.14 per diluted share), computed consistent with prior periods, and nearly nine percent on an as-reported basis. A reconciliation of the Company’s guidance, and the non-cash items, to the Company’s projected GAAP earnings is included elsewhere in this press release.

The Company expects full year 2013 NOI from its 236 Atria- and Sunrise-managed seniors housing communities, including 15 communities acquired year to date, to range between $447 million to $451 million. For the 195 communities owned by the Company for both the full year 2013 and 2012, the Company expects same-store NOI growth to range from five to six percent.

The Company’s normalized FFO guidance (and related GAAP earnings projections) for all periods assumes, with certain immaterial exceptions, 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 excludes, other than as specifically stated, (a) net gains on the sales of real property assets, including gain on re-measurement of equity method investments, (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt, (d) the non-cash effect of income tax benefits or expenses and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement, and (e) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions.

The Company’s guidance is based on a number of other assumptions that 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 assurances that the Company will achieve these results. The Company may from time to time update its publicly announced guidance, but it is not obligated to do so.

THIRD QUARTER CONFERENCE CALL

Ventas will hold a conference call to discuss this earnings release today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in number for the conference call is (877) 415-3177. The participant passcode is “Ventas.” The conference call is being webcast live by NASDAQ OMX and can be accessed at the Company’s website at www.ventasreit.com. A replay of the call will be available at the Company’s website, or by calling (888) 286-8010, passcode 61761463, beginning at approximately 2:00 p.m. Eastern Time and will remain for 28 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of nearly 1,500 assets in 47 states (including the District of Columbia) and two Canadian provinces consists of seniors housing communities, skilled nursing facilities, hospitals, medical office buildings and other properties. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.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 the Company’s or its tenants’, operators’, borrowers’ or managers’ expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger integration, 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. These forward-looking statements are inherently uncertain, and actual results may differ from the Company’s expectations. The Company does not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

The Company’s actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Company’s filings with the Securities and Exchange Commission. These factors include without limitation: (a) the ability and willingness of the Company’s tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold harmless the Company from and against various claims, litigation and liabilities; (b) the ability of the Company’s tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Company’s success in implementing its business strategy and the Company’s ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments, including investments in different asset types and outside the United States; (d) macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal budget resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition; (f) the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors; (h) the ability of the Company’s operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Company’s properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) changes in general economic conditions or economic conditions in the markets in which the Company may, from time to time, compete, and the effect of those changes on the Company’s revenues, earnings and funding sources; (j) the Company’s ability to pay down, refinance, restructure or extend its indebtedness as it becomes due; (k) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (l) final determination of the Company’s taxable net income for the year ending December 31, 2013; (m) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration of the leases, the Company’s ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant; (n) risks associated with the Company’s senior living operating portfolio, such as factors that can cause volatility in the Company’s operating income and earnings generated by those properties, including without limitation national and regional economic conditions, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; (o) changes in U.S. and Canadian currency exchange rates; (p) year-over-year changes in the Consumer Price Index and the effect of those changes on the rent escalators contained in the Company’s leases, including the rent escalators for two of the Company’s master lease agreements with Kindred, and the Company’s earnings; (q) the Company’s ability and the ability of its tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers; (r) the impact of increased operating costs and uninsured professional liability claims on the Company’s liquidity, financial condition and results of operations or that of the Company’s tenants, operators, borrowers and managers, and the ability of the Company and the Company’s tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims; (s) risks associated with the Company’s MOB portfolio and operations, including the Company’s ability to successfully design, develop and manage MOBs, to accurately estimate its costs in fixed fee-for-service projects and to retain key personnel; (t) the ability of the hospitals on or near whose campuses the Company’s MOBs are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (u) the Company’s ability to build, maintain and expand its relationships with existing and prospective hospital and health system clients; (v) risks associated with the Company’s investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners’ financial condition; (w) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (x) merger and acquisition activity in the healthcare industry resulting in a change of control of one or more of the Company’s tenants, operators, borrowers or managers or significant changes in the senior management of the Company’s tenants, operators, borrowers or managers; and (y) the impact of litigation or any financial, accounting, legal or regulatory issues that may affect the Company or its tenants, operators, borrowers or managers. Many of these factors are beyond the control of the Company and its management.

 
CONSOLIDATED BALANCE SHEETS
As of September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012
(In thousands, except per share amounts)
         
September 30, June 30, March 31, December 31, September 30,
2013 2013 2013 2012 2012
 
Assets
Real estate investments:
Land and improvements $ 1,856,739 $ 1,783,664 $ 1,764,208 $ 1,772,417 $ 1,754,826
Buildings and improvements 18,383,075 17,238,843 16,977,860 16,920,821 16,552,534
Construction in progress 79,172 99,947 72,714 70,665 93,992
Acquired lease intangibles 1,012,163   990,548   984,023   981,704   965,500  
21,331,149 20,113,002 19,798,805 19,745,607 19,366,852
Accumulated depreciation and amortization (3,156,206 ) (2,977,154 ) (2,803,068 ) (2,634,075 ) (2,447,175 )
Net real estate property 18,174,943 17,135,848 16,995,737 17,111,532 16,919,677
Secured loans receivable and investments, net 400,889 470,441 490,107 635,002 215,775
Investments in unconsolidated entities 91,531   93,155   94,257   95,409   90,992  
Net real estate investments 18,667,363 17,699,444 17,580,101 17,841,943 17,226,444
Cash and cash equivalents 54,672 62,421 57,690 67,908 58,530
Escrow deposits and restricted cash 98,200 94,492 99,225 105,913 76,908
Deferred financing costs, net 55,242 50,821 54,079 42,551 25,426
Other assets 1,003,881   889,404   915,826   921,685   1,053,591  
Total assets $ 19,879,358   $ 18,796,582   $ 18,706,921   $ 18,980,000   $ 18,440,899  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 9,413,318 $ 8,420,073 $ 8,295,908 $ 8,413,646 $ 7,494,774
Accrued interest 62,176 50,860 58,086 47,565 56,326
Accounts payable and other liabilities 1,019,166 887,314 910,692 995,156 1,049,043
Deferred income taxes 248,369   247,591   261,122   259,715   265,116  
Total liabilities 10,743,029 9,605,838 9,525,808 9,716,082 8,865,259
 
Redeemable OP unitholder and noncontrolling interests 171,921 184,217 194,302 174,555 113,908
 
Commitments and contingencies
 
Equity:
Ventas stockholders' equity:

Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

Common stock, $0.25 par value; 297,328; 296,940; 295,823; 295,565 and 295,534 shares issued at September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively

74,345 74,248 73,969 73,904 73,896
Capital in excess of par value 10,032,285 9,996,095 9,904,694 9,920,962 9,941,030
Accumulated other comprehensive income 21,293 19,752 21,828 23,354 23,626
Retained earnings (deficit) (1,021,628 ) (943,384 ) (861,434 ) (777,927 ) (680,888 )

Treasury stock, 3,699; 3,698; 3,736; 3,699 and 0 shares at September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012, respectively

(221,203 ) (221,129 ) (223,709 ) (221,165 )  
Total Ventas stockholders' equity 8,885,092 8,925,582 8,915,348 9,019,128 9,357,664
Noncontrolling interest 79,316   80,945   71,463   70,235   104,068  
Total equity 8,964,408   9,006,527   8,986,811   9,089,363   9,461,732  
Total liabilities and equity $ 19,879,358   $ 18,796,582   $ 18,706,921   $ 18,980,000   $ 18,440,899  
 
CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2013 and 2012
(In thousands, except per share amounts)
       
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
 
2013 2012 2013 2012
Revenues:
Rental income:
Triple-net leased $ 219,170 $ 207,372 $ 645,719 $ 613,939
Medical office buildings 115,444   100,814   337,536   253,889  
334,614 308,186 983,255 867,828
Resident fees and services 359,112 316,560 1,039,876 905,190
Medical office building and other services revenue 4,146 4,544 11,331 16,791
Income from loans and investments 14,448 9,035 45,284 25,223
Interest and other income 66   330   1,901   442  
Total revenues 712,386 638,655 2,081,647 1,815,474
 
Expenses:
Interest 84,089 74,037 245,622 214,028
Depreciation and amortization 177,710 188,540 528,180 534,792
Property-level operating expenses:
Senior living 244,316 216,306 706,561 618,471
Medical office buildings 40,796   36,144   115,738   86,468  
285,112 252,450 822,299 704,939
Medical office building services costs 1,651 1,487 4,957 8,314
General, administrative and professional fees 28,659 26,867 84,760 75,488
(Gain) loss on extinguishment of debt, net (189 ) (1,194 ) (909 ) 38,339
Merger-related expenses and deal costs 6,208 4,917 17,137 49,566
Other 4,353   1,966   13,325   5,052  
Total expenses 587,593   549,070   1,715,371   1,630,518  
 

Income before income/loss from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest

124,793 89,585 366,276 184,956
Income from unconsolidated entities 110 17,074 533 17,905
Income tax benefit 2,780   8,886   13,100   2,727  
Income from continuing operations 127,683 115,545 379,909 205,588
Discontinued operations (9,084 ) (3,724 ) (33,679 ) 70,061  
Net income 118,599 111,821 346,230 275,649
Net income (loss) attributable to noncontrolling interest 303   (61 ) 1,161   (884 )
Net income attributable to common stockholders $ 118,296   $ 111,882   $ 345,069   $ 276,533  
 
Earnings per common share:
Basic:
Income from continuing operations attributable to
common stockholders $ 0.43 $ 0.39 $ 1.30 $ 0.71
Discontinued operations (0.03 ) (0.01 ) (0.12 ) 0.24  
Net income attributable to common stockholders $ 0.40   $ 0.38   $ 1.18   $ 0.95  
Diluted:
Income from continuing operations attributable to
common stockholders $ 0.43 $ 0.39 $ 1.28 $ 0.70
Discontinued operations (0.03 ) (0.01 ) (0.11 ) 0.24  
Net income attributable to common stockholders $ 0.40   $ 0.38   $ 1.17   $ 0.94  
 
Weighted average shares used in computing earnings per common share:
Basic 292,818 294,928 292,308 291,177
Diluted 295,190 297,407 294,788 293,622
 
Dividends declared per common share $ 0.67 $ 0.62 $ 2.01 $ 1.86
 
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
2013 Quarters 2012 Quarters
Third Second First Fourth Third
 
Revenues:
Rental income:
Triple-net leased $ 219,170 $ 213,634 $ 212,915 $ 206,966 $ 207,372
Medical office buildings 115,444   110,946   111,146   108,951   100,814  
334,614 324,580 324,061 315,917 308,186
Resident fees and services 359,112 341,594 339,170 321,933 316,560
Medical office building and other services revenue 4,146 3,537 3,648 3,950 4,544
Income from loans and investments 14,448 14,733 16,103 14,690 9,035
Interest and other income 66   797   1,038   665   330  
Total revenues 712,386 685,241 684,020 657,155 638,655
 
Expenses:
Interest 84,089 82,568 78,965 75,850 74,037
Depreciation and amortization 177,710 172,192 178,278 182,157 188,540
Property-level operating expenses:
Senior living 244,316 231,337 230,908 222,551 216,306
Medical office buildings 40,796   38,401   36,541   39,684   36,144  
285,112 269,738 267,449 262,235 252,450
Medical office building services costs 1,651 1,667 1,639 1,569 1,487
General, administrative and professional fees 28,659 27,327 28,774 23,022 26,867
Gain on extinguishment of debt, net (189 ) (720 ) (699 ) (1,194 )
Merger-related expenses and deal costs 6,208 6,667 4,262 13,617 4,917
Other 4,353   4,385   4,587   1,887   1,966  
Total expenses 587,593   563,824   563,954   559,638   549,070  
 

Income before income/loss from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest

124,793 121,417 120,066 97,517 89,585
Income (loss) from unconsolidated entities 110 (506 ) 929 249 17,074
Income tax benefit (expense) 2,780   12,064   (1,744 ) 3,555   8,886  
Income from continuing operations 127,683 132,975 119,251 101,321 115,545
Discontinued operations (9,084 ) (18,442 ) (6,153 ) (15,195 ) (3,724 )
Net income 118,599 114,533 113,098 86,126 111,821
Net income (loss) attributable to noncontrolling interest 303   (47 ) 905   (141 ) (61 )
Net income attributable to common stockholders $ 118,296   $ 114,580   $ 112,193   $ 86,267   $ 111,882  
 
Earnings per common share:
Basic:
Income from continuing operations attributable to
common stockholders $ 0.43 $ 0.45 $ 0.40 $ 0.34 $ 0.39
Discontinued operations (0.03 ) (0.06 ) (0.02 ) (0.05 ) (0.01 )
Net income attributable to common stockholders $ 0.40   $ 0.39   $ 0.38   $ 0.29   $ 0.38  
Diluted:
Income from continuing operations attributable to
common stockholders $ 0.43 $ 0.45 $ 0.40 $ 0.34 $ 0.39
Discontinued operations (0.03 ) (0.06 ) (0.02 ) (0.05 ) (0.01 )
Net income attributable to common stockholders $ 0.40   $ 0.39   $ 0.38   $ 0.29   $ 0.38  
 
Weighted average shares used in computing earnings per
common share:
Basic 292,818 292,635 291,455 294,704 294,928
Diluted 295,190 295,123 293,924 297,089 297,407
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2013 and 2012
(In thousands)
  2013   2012
Cash flows from operating activities:
Net income $ 346,230 $ 275,649
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amounts in discontinued operations) 569,325 563,027
Amortization of deferred revenue and lease intangibles, net (11,159 ) (12,965 )
Other non-cash amortization (13,376 ) (31,326 )
Stock-based compensation 15,010 16,529
Straight-lining of rental income, net (21,165 ) (16,712 )
(Gain) loss on extinguishment of debt, net (1,062 ) 38,339
Gain on real estate dispositions, net (including amounts in discontinued operations) (2,241 ) (79,148 )
(Gain) loss on real estate loan investments (3,598 ) 559
Gain on sale of marketable debt securities (856 )
Income tax benefit (including amounts in discontinued operations) (13,100 ) (2,731 )
Loss (income) from unconsolidated entities 707 (1,260 )
Gain on re-measurement of equity interest upon acquisition, net (1,241 ) (16,645 )
Other 6,133 6,472
Changes in operating assets and liabilities:
Increase in other assets (28,132 ) (11,930 )
Increase in accrued interest 14,624 18,730
Decrease in accounts payable and other liabilities (20,670 ) (37,269 )
Net cash provided by operating activities 835,429 709,319
Cash flows from investing activities:
Net investment in real estate property (1,358,766 ) (1,154,912 )
Purchase of noncontrolling interest (7,895 ) (3,934 )
Investment in loans receivable and other (34,717 ) (30,523 )
Proceeds from real estate disposals 29,191 75,145
Proceeds from loans receivable 299,156 34,817
Proceeds from sale or maturity of marketable securities 5,493
Funds held in escrow for future development expenditures 15,189
Development project expenditures (74,707 ) (90,119 )
Capital expenditures (50,634 ) (42,270 )
Other (411 ) (2,110 )
Net cash used in investing activities (1,178,101 ) (1,213,906 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facility (92,586 ) 248,921
Proceeds from debt 1,766,844 1,568,382
Repayment of debt (840,532 ) (1,103,000 )
Payment of deferred financing costs (19,977 ) (4,257 )
Issuance of common stock, net 106,002 342,469
Cash distribution to common stockholders (588,770 ) (545,240 )
Cash distribution to redeemable OP unitholders (3,479 ) (3,358 )
Purchases of redeemable OP units (317 ) (1,760 )
Contributions from noncontrolling interest 2,094
Distributions to noncontrolling interest (7,614 ) (4,035 )
Other 7,830   19,130  
Net cash provided by financing activities 329,495   517,252  
Net (decrease) increase in cash and cash equivalents (13,177 ) 12,665
Effect of foreign currency translation on cash and cash equivalents (59 ) 58
Cash and cash equivalents at beginning of period 67,908   45,807  
Cash and cash equivalents at end of period $ 54,672   $ 58,530  
 
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments $ 221,447 $ 497,755
Utilization of funds held for an Internal Revenue Code Section 1031 exchange (134,003 )
Other assets acquired 6,526 99,889
Debt assumed 183,848 367,902
Other liabilities 27,583 60,684
Deferred income tax liability 4,849 4,299
Noncontrolling interests 11,693 26,430
Equity issued 4,326
Debt transferred on the sale of assets 14,535
 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
         
2013 Quarters 2012 Quarters
Third Second First Fourth Third
Cash flows from operating activities:
Net income $ 118,599 $ 114,533 $ 113,098 $ 86,126 $ 111,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amounts in discontinued operations) 188,393 193,989 186,943 201,748 196,622
Amortization of deferred revenue and lease intangibles, net (4,156 ) (3,693 ) (3,310 ) (4,153 ) (4,136 )
Other non-cash amortization (3,975 ) (4,072 ) (5,329 ) (8,617 ) (10,141 )
Stock-based compensation 4,210 5,138 5,662 4,255 5,443
Straight-lining of rental income, net (6,835 ) (6,465 ) (7,865 ) (7,330 ) (6,242 )
Gain on extinguishment of debt, net (189 ) (873 ) (699 ) (1,194 )
Gain on real estate dispositions, net (including amounts in discontinued operations) (46 ) (1,718 ) (477 ) (1,804 ) (357 )
Gain on real estate loan investments (2,499 ) (759 ) (340 ) (5,789 )
Gain on sale of marketable debt securities (856 )
Income tax (benefit) expense (including amounts in discontinued operations) (2,780 ) (12,064 ) 1,744 (3,555 ) (8,869 )
(Income) loss from unconsolidated entities (111 ) 506 312 (249 ) (429 )
Gain on re-measurement of equity interest upon acquisition, net (1,241 ) (16,645 )
Other 2,261 967 2,905 3,942 482
Changes in operating assets and liabilities:
(Increase) decrease in other assets (11,717 ) (5,956 ) (10,459 ) 15,686 (12,791 )
Increase (decrease) in accrued interest 11,309 (7,215 ) 10,530 (8,761 ) 8,471
Increase (decrease) in accounts payable and other liabilities 35,277   5,921   (61,868 ) 12,697   (13,524 )
Net cash provided by operating activities 327,741 277,383 230,305 283,497 248,511
Cash flows from investing activities:
Net investment in real estate property (1,075,144 ) (227,447 ) (56,175 ) (298,153 ) (255,508 )
Purchase of private investment funds (276,419 )
Purchase of noncontrolling interest (1,771 ) (2,938 ) (3,186 )
Investment in loans receivable and other (2,385 ) (29,543 ) (2,789 ) (422,035 ) (3,263 )
Proceeds from real estate disposals 4,901 13,040 11,250 73,900 66,298 ...
Proceeds from loans receivable 81,113 71,649 146,394 8,402 1,594
Proceeds from sale or maturity of marketable securities 5,493 37,500
Funds held in escrow for future development expenditures 3,373 6,376 5,440 (28,050 )
Development project expenditures (26,423 ) (26,696 ) (21,588 ) (23,883 ) (29,558 )
Capital expenditures (18,175 ) (12,664 ) (19,795 ) (27,160 ) (18,458 )
Other   (333 ) (78 ) 115   40  
Net cash (used in) provided by investing activities (1,034,511 ) (203,063 ) 59,473 (955,783 ) (238,855 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facility 188,340 94,990 (375,916 ) (163,983 ) 337,575
Proceeds from debt 848,389 1,584 916,871 1,142,023 299,067
Repayment of debt (155,014 ) (49,725 ) (635,793 ) (90,023 ) (457,278 )
Payment of deferred financing costs (6,980 ) 811 (13,808 ) (19,513 ) (1,277 )
Issuance of common stock, net 23,618 77,334 5,050
Cash distribution to common stockholders (196,540 ) (196,530 ) (195,700 ) (183,306 ) (183,283 )
Cash distribution to redeemable OP unitholders (1,166 ) (1,162 ) (1,151 ) (1,088 ) (1,117 )
Purchases of redeemable OP units (109 ) (100 ) (108 ) (2,841 ) (1,149 )
Contributions from noncontrolling interest 2,094
Distributions to noncontrolling interest (2,569 ) (3,595 ) (1,450 ) (1,180 ) (1,128 )
Other 1,022   4,750   2,058   1,573   4,621  
Net cash provided by (used in) financing activities 698,991   (69,549 ) (299,947 ) 681,662   (3,969 )
Net (decrease) increase in cash and cash equivalents (7,779 ) 4,771 (10,169 ) 9,376 5,687
Effect of foreign currency translation on cash and cash equivalents 30 (40 ) (49 ) 2 40
Cash and cash equivalents at beginning of period 62,421   57,690   67,908   58,530   52,803  
Cash and cash equivalents at end of period $ 54,672   $ 62,421   $ 57,690   $ 67,908   $ 58,530  
 
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments $ 131,427 $ 81,181 $ 8,839 $ 84,939 $ 132,872
Other assets acquired 3,964 1,894 668 (22,159 ) 18,380
Debt assumed 115,246 68,602 44,923 117,539
Other liabilities 17,090 4,071 6,422 9,707 34,045
Deferred income tax liability 3,055 262 1,532 (1,596 )
Noncontrolling interests 10,140 1,553 8,150 1,264
               
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Funds From Operations (FFO) Including and Excluding Non-Cash Items1

(Dollars in thousands, except per share amounts)
 
Tentative Estimates
Preliminary and
Subject to Change YOY
2012  

2013

  FY2013 - Guidance Growth 2
Q3   Q4   FY   Q1   Q2   Q3   Low   High   '12-'13E
Net income attributable to common stockholders $ 111,882 $ 86,267 $ 362,800 $ 112,193 $ 114,580 $ 118,296 $ 449,088   $ 460,091
Net income attributable to common stockholders per share $ 0.38 $ 0.29 $ 1.23 $ 0.38 $ 0.39 $ 0.40 $ 1.52 $ 1.56
 
Adjustments:
Depreciation and amortization on real estate assets 187,288 180,889 712,526 177,000 170,776 176,263 726,540 721,540
Depreciation on real estate assets related to
noncontrolling interest (2,221 ) (2,435 ) (8,503 ) (2,502 ) (2,617 ) (2,719 ) (10,015 ) (11,015 )
Depreciation on real estate assets related to
unconsolidated entities 1,700 1,510 7,516 1,646 1,622 1,634 6,652 6,152
Gain on re-measurement of equity interest upon
acquisition, net (16,645 ) (16,645 ) (1,241 ) (1,241 ) (1,241 )
Discontinued operations:
Gain on real estate dispositions, net (357 ) (1,804 ) (80,952 ) (477 ) (1,718 ) (488 ) (3,184 ) (2,184 )
Depreciation and amortization on real estate assets 8,082     19,590     47,825     8,665     21,798     10,682     41,145     41,145  
Subtotal: FFO add-backs 177,847 197,750 661,767 183,091 189,861 185,372 759,897 754,397
Subtotal: FFO add-backs per share   $ 0.60     $ 0.67     $ 2.25     $ 0.62     $ 0.64     $ 0.63     $ 2.57     $ 2.56      
FFO $ 289,729 $ 284,017 $ 1,024,567 $ 295,284 $ 304,441 $ 303,668 $ 1,208,985 $ 1,214,488 18 %
FFO per share   $ 0.97     $ 0.96     $ 3.48     $ 1.00     $ 1.03     $ 1.03     $ 4.10     $ 4.11     18 %
 
Adjustments:
Merger-related expenses and deal costs 4,917 13,617 63,183 4,262 6,592 6,209 17,200 21,200
Income tax (benefit) expense (8,870 ) (3,555 ) (6,286 ) 1,744 (12,064 ) (2,780 ) (11,000 ) (13,000 )
(Gain) loss on extinguishment of debt (1,194 ) (699 ) 37,640 (873 ) (189 ) (2,000 )
Change in fair value of financial instruments 58 (52 ) 99 25 25 25
Amortization of other intangibles 256     255     1,022     256     255     256     822     1,222  
Subtotal: normalized FFO add-backs (4,833 ) 9,566 95,658 6,287 (6,090 ) 3,496 7,047 7,447
Subtotal: normalized FFO add-backs per share   $ (0.02 )   $ 0.03     $ 0.32     $ 0.02     $ (0.02 )   $ 0.01     $ 0.02     $ 0.03      
Normalized FFO $ 284,896 $ 293,583 $ 1,120,225 $ 301,571 $ 298,351 $ 307,164 $ 1,216,032 $ 1,221,935 9 %
Normalized FFO per share   $ 0.96     $ 0.99     $ 3.80     $ 1.03     $ 1.01     $ 1.04     $ 4.12     $ 4.14     9 %
 
Non-cash items included in normalized FFO:
Amortization of deferred revenue and
lease intangibles, net (4,136 ) (4,153 ) (17,118 ) (3,310 ) (3,693 ) (4,156 ) (15,590 ) (15,590 )
Other non-cash amortization, including fair market
value of debt (10,141 ) (8,617 ) (39,943 ) (5,329 ) (4,072 ) (3,975 ) (16,274 ) (17,274 )
Stock-based compensation 5,443 4,255 20,784 5,662 5,138 4,210 19,797 21,797
Straight-lining of rental income, net (6,242 )   (7,330 )   (24,042 )   (7,865 )   (6,465 )   (6,835 )   (30,363 )   (30,863 )
Subtotal: non-cash items included in normalized FFO (15,076 ) (15,845 ) (60,319 ) (10,842 ) (9,092 ) (10,756 ) (42,430 ) (41,930 )
Subtotal: normalized FFO add-backs per share   $ (0.05 )   $ (0.05 )   $ (0.20 )   $ (0.04 )   $ (0.03 )   $ (0.04 )   $ (0.14 )   $ (0.14 )    
Normalized FFO, excluding non-cash items $ 269,820 $ 277,738 $ 1,059,906 $ 290,729 $ 289,259 $ 296,408 $ 1,173,602 $ 1,180,005 11 %
Normalized FFO, excluding non-cash items per share   $ 0.91     $ 0.93     $ 3.60     $ 0.99     $ 0.98     $ 1.00     $ 3.98     $ 4.00     11 %
Weighted average diluted shares 297,407 297,089 294,488 293,924 295,123 295,190 295,154 295,154
 

 

1 Totals and per share amounts may not add due to rounding. Per share quarterly amounts may not add to annual per share amounts due to changes in the Company’s weighted average diluted share count, if any.

2 2012-2013E growth assumes the midpoint of 2013 guidance.
 

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 and normalized FFO appropriate measures of operating performance of an equity REIT. Moreover, the Company believes that normalized FFO provides useful information because it allows investors, analysts and Company management to compare the Company’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items such as transactions and litigation.

The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of real estate property, including gain on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, 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. The Company defines normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) net gains on the sales of real property assets, including gain on re-measurement of equity method investments; (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (d) the non-cash effect of income tax benefits or expenses and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement; (e) except as specifically stated in the case of guidance, the impact of future acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f) the financial impact of contingent consideration; (g) charitable donations made to the Ventas Charitable Foundation; and (h) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments.

FFO and normalized FFO presented herein may not be identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO and normalized FFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of the Company’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are FFO and normalized 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 and normalized FFO should be examined in conjunction with net income as presented elsewhere herein.

NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Debt to Adjusted Pro Forma EBITDA

The following information considers the pro forma effect on net income, interest and depreciation of the Company’s investments and other capital transactions that were completed during the three months ended September 30, 2013, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, merger-related expenses and deal costs, net gains on real estate activity and changes in the fair value of financial instruments (including amounts in discontinued operations) (“Adjusted Pro Forma EBITDA”) (dollars in thousands):

Net income attributable to common stockholders $ 118,296
Pro forma adjustments for current period investments, capital
transactions and dispositions 10,893  
Pro forma net income for the three months ended September 30, 2013 129,189
Add back:
Pro forma interest 91,375
Pro forma depreciation and amortization 190,139
Stock-based compensation 4,210
Gain on real estate dispositions, net (488 )
Gain on extinguishment of debt, net (189 )
Income tax benefit (2,780 )
Other taxes 1,318
Pro forma merger-related expenses and deal costs 3,466  
Adjusted Pro Forma EBITDA $ 416,240  
 
Adjusted Pro Forma EBITDA annualized $ 1,664,960  
 
 
As of September 30, 2013:
Debt $ 9,413,318
Cash, including cash escrows pertaining to debt (86,352 )
Net debt $ 9,326,966  
 
Net debt to Adjusted Pro Forma EBITDA 5.6   x
 

NON-GAAP FINANCIAL MEASURES RECONCILIATION
Adjusted Pro Forma EBITDA and Fixed Charge Coverage Ratio

The following information considers the pro forma effect on net income, interest and depreciation of the Company’s investments and other capital transactions that were completed during the trailing twelve months ended September 30, 2013, as if the transactions had been consummated as of the beginning of the period. The following table illustrates Adjusted Pro Forma EBITDA and fixed charge coverage ratio (dollars in thousands):

Net income attributable to common stockholders   $ 431,336
Pro forma adjustments for current period investments, capital
transactions and dispositions 92,475  
Pro forma net income 523,811
Add back:
Pro forma interest 326,628
Pro forma depreciation and amortization 771,042
Stock-based compensation 19,265
Gain on real estate dispositions, net (4,487 )
Gain on extinguishment of debt, net (1,761 )
Gain on re-measurement of equity interest upon acquisition, net (1,241 )

Income tax benefit

(16,655

)

Other taxes 4,455
Pro forma merger-related expenses and deal costs 25,776  
Adjusted Pro Forma EBITDA $ 1,646,833  
 
Adjusted Pro Forma Fixed Charges:

Adjusted interest

$ 305,193
Scheduled principal debt payments 52,061

Non-cash amortization and pro forma adjustments

26,349  
Total pro forma fixed charges $ 383,603  
 
Adjusted Pro Forma Fixed Charge Coverage Ratio 4.3   x
 
NON-GAAP FINANCIAL MEASURES RECONCILIATION
FFO and Normalized FFO
(In thousands, except per share amounts)
   
For the Nine Months
Ended September 30,
2013 2012
 
Net income attributable to common stockholders $ 345,069 $ 276,533
Adjustments:
Depreciation and amortization on real estate assets 524,039 531,637
Depreciation on real estate assets related to noncontrolling interest (7,838 ) (6,068 )
Depreciation on real estate assets related to unconsolidated entities 4,902 6,006
Gain on re-measurement of equity interest upon acquisition, net (1,241 ) (16,645 )
Discontinued operations:
Gain on real estate dispositions, net (2,683 ) (79,148 )
Depreciation and amortization on real estate assets 41,145   28,235  
FFO 903,393 740,550
Merger-related expenses and deal costs 17,063 49,566
Income tax benefit (13,100 ) (2,731 )
(Gain) loss on extinguishment of debt, net (1,062 ) 38,339
Change in fair value of financial instruments 25 151
Amortization of other intangibles 767   767  
Normalized FFO $ 907,086   $ 826,642  
 
Per diluted share 1:
Net income attributable to common stockholders $ 1.17 $ 0.94
Adjustments:
Depreciation and amortization on real estate assets 1.78 1.81
Depreciation on real estate assets related to noncontrolling interest (0.03 ) (0.02 )
Depreciation on real estate assets related to unconsolidated entities 0.02 0.02
Gain on re-measurement of equity interest upon acquisition, net 0.00 (0.06 )
Discontinued operations:
Gain on real estate dispositions, net (0.01 ) (0.27 )
Depreciation and amortization on real estate assets 0.14   0.10  
FFO 3.06 2.52
Merger-related expenses and deal costs 0.06 0.17
Income tax benefit (0.04 ) (0.01 )
(Gain) loss on extinguishment of debt, net (0.00 ) 0.13
Change in fair value of financial instruments 0.00 0.00
Amortization of other intangibles 0.00   0.00  
Normalized FFO $ 3.08   $ 2.82  
 
1 Per share amounts may not add due to rounding.
 
NON-GAAP FINANCIAL MEASURES RECONCILIATION
NOI by Segment 1
(In thousands)
       
2013 Quarters 2012 Quarters
Third Second First Fourth   Third
Revenues
 
Triple-Net
Triple-Net Rental Income $ 219,170 $ 213,634 $ 212,915 $ 206,966 $ 207,372
 
Medical Office Buildings
Medical Office - Stabilized 108,083 104,889 105,167 102,895 95,314
Medical Office - Lease up 7,361   6,057   5,979   6,056   5,500
Total Medical Office Buildings - Rental Income 115,444   110,946   111,146   108,951   100,814
Total Rental Income 334,614 324,580 324,061 315,917 308,186
 
Medical Office Building Services Revenue 2,530   2,159   2,537   2,840   3,434
Total Medical Office Buildings - Revenue 117,974 113,105 113,683 111,791 104,248
 
Triple-Net Services Revenue 1,116 1,115 1,111 1,110 1,110
Non-Segment Services Revenue 500   263      
Total Medical Office Building and Other Services Revenue 4,146 4,146 3,648 3,950 4,544
 
Seniors Housing Operating
Seniors Housing - Stabilized 355,294 338,244 335,873 318,761 313,289
Seniors Housing - Lease up 3,152 2,624 2,556 2,431 2,530
Seniors Housing - Other 666   726   741   741   741
Total Resident Fees and Services 359,112 341,594 339,170 321,933 316,560
 
Non-Segment Income from Loans and Investments 14,448   14,733   16,103   14,690   9,035
Total Revenues, excluding Interest and Other Income 712,320 684,444 682,982 656,490 638,325
 
Property-Level Operating Expenses
 
Medical Office Buildings
Medical Office - Stabilized 37,902 36,177 34,620 37,446 33,978
Medical Office - Lease up 2,894   2,224   1,921   2,238   2,166
Total Medical Office Buildings 40,796 38,401 36,541 39,684 36,144
 
Seniors Housing Operating
Seniors Housing - Stabilized 241,319 228,776 228,396 219,887 213,829
Seniors Housing - Lease up 2,392 1,946 1,898 2,084 1,848
Seniors Housing - Other 605   615   614   580   629
Total Seniors Housing 244,316   231,337   230,908   222,551   216,306
Total Property-Level Operating Expenses 285,112 269,738 267,449 262,235 252,450
 
Medical Office Building Services Costs 1,651 1,667 1,639 1,569 1,487
 
Net Operating Income
 
Triple-Net
Triple-Net Properties 219,170 213,634 212,915 206,966 207,372
Triple-Net Services Revenue 1,116   1,115   1,111   1,110   1,110
Total Triple-Net 220,286 214,749 214,026 208,076 208,482
 
Medical Office Buildings
Medical Office - Stabilized 70,181 68,712 70,547 65,449 61,336
Medical Office - Lease up 4,467 3,833 4,058 3,818 3,334
Medical Office Buildings Services 879   492   898   1,271   1,947
Total Medical Office Buildings 75,527 73,037 75,503 70,538 66,617
 
Seniors Housing Operating
Seniors Housing - Stabilized 113,975 109,468 107,477 98,874 99,460
Seniors Housing - Lease up 760 678 658 347 682
Seniors Housing - Other 61   111   127   161   112
Total Seniors Housing 114,796 110,257 108,262 99,382 100,254
Non-Segment 14,948   14,996   16,103   14,690   9,035
Net Operating Income $ 425,557   $ 413,039   $ 413,894   $ 392,686   $ 384,388
 
1 Amounts above are adjusted to exclude discontinued operations for all periods presented.
 
NON-GAAP FINANCIAL MEASURES RECONCILIATION
(Dollars in thousands)
 
Total Same-Store Portfolio NOI
For the Three Months Ended
September 30,
2013   2012
 
Net Operating Income $ 425,557 $ 384,388
 
Less:
NOI Not Included in Same-Store 33,390

8,296

Straight-Lining of Rental Income, Excluding Discontinued Operations 6,842 6,135
Non-Cash Rental Income 3,170 3,810
 
Non-Segment NOI 14,947   9,035  
58,349  

27,276

 

Same-Store Cash NOI as Reported

$ 367,208   $

357,112

 
 
Percentage Increase

2.8

%
 

Excluding Out of Period Cash Receipts

 

(4,544

)

 

Same-Store Cash NOI

$ 367,208   $

352,568

 
 
Percentage Increase

4.2

%
 
Seniors Housing Operating Portfolio Same-Store NOI
For the Three Months Ended
September 30,
2013 2012
 
Net Operating Income $ 114,796 $ 100,254
 
Less:
NOI Not Included in Same-Store 10,213   111  

Same-Store NOI as Reported

$ 104,583   $ 100,143  
 
Percentage Increase 4.4 %
 

Excluding Real Estate Tax Credit

  (1,653 )
 

Same-Store NOI

 

$

104,583

 

$

98,490

 
 
Percentage Increase 6.2 %

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Ventas, Inc.
Lori B. Wittman, (877) 4-VENTAS

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