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CareTrust REIT Announces Second Quarter 2022 Operating Results

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Conference Call Scheduled for Friday, August 5, 2022 at 1:00 pm ET

SAN CLEMENTE, Calif., August 04, 2022--(BUSINESS WIRE)--CareTrust REIT, Inc. (NYSE:CTRE) today reported operating results for the quarter ended June 30, 2022, as well as other recent events.

For the quarter, CareTrust REIT reported:

  • 93.9% of contractual rents collected;

  • Net income of $20.7 million and net income per share of $0.21;

  • Normalized FFO of $35.6 million, a 0.7% decrease over the prior year, and normalized FFO per share of $0.37;

  • Normalized FAD of $37.5 million, a 1.7% decrease over the prior year, and normalized FAD per share of $0.39; and

  • A quarterly dividend of $0.275 per share, representing a payout ratio of approximately 71% on normalized FAD.

Operating Environment

CareTrust’s President and Chief Executive Officer, Dave Sedgwick, discussed the business environment and the Company's Q2 results. "Inflation, rising rates, and mounting indications of a recession present both challenges and opportunities for us and for our operating partners," he said. Mr. Sedgwick noted that recessionary cycles have historically been a net benefit to the skilled nursing sector as labor tends to loosen while demand remains unaffected. Mr. Sedgwick continued, "These extraordinary times of rising borrowing rates could result in price moderation for assets and tip the scales to buyers like us who present more certainty to close in the coming quarters."

Key Metrics

Looking at the quarter, Mr. Sedgwick highlighted rent and occupancy data. He said, "We collected approximately 94% of contractual rents, including cash deposits, in the quarter." He added that average quarterly occupancy for skilled nursing operators grew by 1.4%, or 98 basis points, over Q1. And, for seniors housing, occupancy grew 2.8%, or 215 basis points. "All things considered, Q2 was a stable quarter for us and Q3 is starting off much the same."

Portfolio Optimization

James Callister, Executive Vice President, provided an update on the portfolio optimization work this year. "We are in the process of negotiating LOIs or purchase agreements on the skilled nursing and seniors housing assets we have brought to market," he said. He noted that in some cases, the Company was pursuing parallel paths of selling and re-tenanting and that some of the assets held for sale could be retained and re-leased.

Investments in the Quarter

During the quarter, CareTrust extended a $75 million "C" piece financing as part of a larger multi-tranche senior secured term loan and has extended a $25 million mezzanine loan in connection with the acquisition of an 18-property portfolio in the Mid-Atlantic. The portfolio includes approximately 2,000 skilled nursing beds. The "C" tranche of the senior secured term loan carries a five-year maturity and an annual effective interest rate of approximately 8.4%. The mezzanine loan bears interest at 11% and has a ten-year term. Both loans were funded using borrowings under the Company's unsecured revolving credit facility.

Commenting on the investment activity, Mark Lamb, CareTrust’s Chief Investment Officer, said, "We are thrilled with the $100 million debt investment in the quarter because it allowed us to strengthen our relationship with one of the premier operators in the eastern states while also providing a longer term than usual for the mezzanine part. The same is true for the $22.3 million we invested on Monday with an existing operating relationship in California." Mr. Lamb added, "Our primary focus continues to be growth through acquisition, and we are encouraged by these bread and butter growth opportunities returning to the market."

Guidance Discussion

Chief Financial Officer Bill Wagner commented on issuing guidance at this stage in CareTrust's asset management plan. "While considerable progress continues to be made on our disposition strategy, we need more visibility into the timing of the dispositions and possible re-tenanting work before issuing guidance for this year."

Financial Results for Quarter Ended June 30, 2022

Mr. Wagner reported that, for the second quarter, CareTrust reported net income of $20.7 million, or $0.21 per diluted weighted-average common share, normalized FFO of $35.6 million, or $0.37 per diluted weighted-average common share, and normalized FAD of $37.5 million, or $0.39 per diluted weighted-average common share.

Liquidity

As of quarter end, CareTrust reported net debt-to-annualized normalized run rate EBITDA of 4.3x, which is within the Company's target leverage range of 4.0x to 5.0x, and a net debt-to-enterprise value of approximately 30.2%. Mr. Wagner stated that as of today, the Company had approximately $215 million outstanding on its $600 million revolving credit line, with no scheduled debt maturities prior to 2024. He also disclosed that CareTrust currently has approximately $16 million in cash on hand. He further noted that the Company currently has approximately $476.5 million in available authorization remaining on its at-the-market equity program. "With substantial availability on our revolver, and equity markets readily accessible to us at present, we continue to have a wide range of capital options for funding our opportunistic growth strategy," said Mr. Wagner.

Dividend Maintained

During the quarter, CareTrust declared a quarterly dividend of $0.275 per common share. On an annualized basis, the payout ratio was approximately 74% based on second quarter 2022 normalized FFO, and 71% based on normalized FAD.

Conference Call

A conference call will be held on Friday, August 5, 2022, at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time), during which CareTrust’s management will discuss second quarter 2022 results, recent developments and other matters. Investors and participants must register for the call in advance by visiting https://register.vevent.com/register/BI0afb919ca39e430f867bc4d07d2deaa5. After registering, participants will receive dial-in information and a passcode. To listen to the call online, or to view a replay of the call, or to view any financial or other statistical information required by SEC Regulation G, please visit the Investors section of the CareTrust REIT website at http://investor.caretrustreit.com.

About CareTrustTM

CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition, development and leasing of skilled nursing, seniors housing and other healthcare-related properties. With a nationwide portfolio of long-term net-leased properties, and a growing portfolio of quality operators leasing them, CareTrust REIT is pursuing both external and organic growth opportunities across the United States. More information about CareTrust REIT is available at www.caretrustreit.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains, and the related conference call will include, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical statements of fact and statements regarding the Company’s intent, belief or expectations, including, but not limited to, statements regarding the following: future financial and financing plans; strategies related to the Companys business and its portfolio, including plans to sell, re-tenant or repurpose selected Company assets, the Companys planned expansion into behavioral health properties and acquisition plans; growth prospects; operating and financial performance; expectations regarding the making of distributions and payment of dividends; and the performance of the Company’s tenants and operators and their respective facilities.

Words such as "anticipate," "believe," "could," "expect," "estimate," "intend," "may," "plan," "seek," "should," "will," "would," and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements, though not all forward-looking statements contain these identifying words. The Company’s forward-looking statements are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although the Company believes that the assumptions underlying these forward-looking statements are reasonable, they are not guarantees and the Company can give no assurance that its expectations will be attained. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause actual results to differ materially from expectations include, but are not limited to: (i) the COVID-19 pandemic, including the risk of additional surges of COVID-19 infections due to the rate of public acceptance and efficacy of COVID-19 vaccines or to new and more contagious and/or vaccine resistant variants, and the measures taken to prevent the spread of COVID-19 and the related impact on our business or the businesses of our tenants; (ii) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (iii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect; (iv) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (v) the ability and willingness of our tenants to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant; (vi) the availability of and the ability to identify (a) tenants who meet our credit and operating standards, and (b) suitable acquisition opportunities, and the ability to acquire and lease the respective properties to such tenants on favorable terms; (vii) the ability to generate sufficient cash flows to service our outstanding indebtedness; (viii) access to debt and equity capital markets; (ix) fluctuating interest rates; (x) the ability to retain our key management personnel; (xi) the ability to maintain our status as a real estate investment trust ("REIT"); (xii) changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; (xiii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xiv) additional factors included in our Annual Report on Form 10-K for the year ended December 31, 2021, including in the section entitled "Risk Factors" in Item 1A of Part I of such report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC.

This press release and the related conference call provides information about the Companys financial results as of and for the quarter ended June 30, 2022 and is provided as of the date hereof, unless specifically stated otherwise. The Company expressly disclaims any obligation to update or revise any information in this press release or the related conference call (and replays thereof), including forward-looking statements, whether to reflect any change in the Company’s expectations, any change in events, conditions or circumstances, or otherwise.

As used in this press release or the related conference call, unless the context requires otherwise, references to "CTRE," "CareTrust," "CareTrust REIT" or the "Company" refer to CareTrust REIT, Inc. and its consolidated subsidiaries. GAAP refers to generally accepted accounting principles in the United States of America.

CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

For the Three Months Ended
June 30,

For the Six Months Ended
June 30,

2022

2021

2022

2021

Revenues:

Rental income

$

46,806

$

47,744

$

92,813

$

92,990

Interest and other income

747

514

1,216

1,019

Total revenues

47,553

48,258

94,029

94,009

Expenses:

Depreciation and amortization

12,559

13,843

26,134

27,316

Interest expense

6,303

6,534

12,045

12,296

Property taxes

1,254

766

2,674

1,462

Impairment of real estate investments

1,701

61,384

Provision for loan losses, net

3,844

Property operating expenses

89

536

General and administrative

4,978

5,798

10,193

10,940

Total expenses

26,884

26,941

116,810

52,014

Other income (loss):

Gain (loss) on sale of real estate

186

(192

)

Net income (loss)

$

20,669

$

21,317

$

(22,595

)

$

41,803

Earnings (loss) per common share:

Basic

$

0.21

$

0.22

$

(0.24

)

$

0.43

Diluted

$

0.21

$

0.22

$

(0.24

)

$

0.43

Weighted-average number of common shares:

Basic

96,564

96,082

96,487

95,732

Diluted

96,598

96,120

96,487

95,755

Dividends declared per common share

$

0.275

$

0.265

$

0.55

$

0.53

CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME (LOSS) TO NON-GAAP FINANCIAL MEASURES

(in thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income (loss)

$

20,669

$

21,317

$

(22,595

)

$

41,803

Depreciation and amortization

12,559

13,843

26,134

27,316

Interest expense

6,303

6,534

12,045

12,296

Amortization of stock-based compensation

1,394

1,810

2,915

3,395

EBITDA

40,925

43,504

18,499

84,810

Impairment of real estate investments

1,701

61,384

Provision for loan losses, net

3,844

Provision for doubtful accounts and lease restructuring

977

Lease termination revenue

(63

)

Property operating expenses

631

1,862

(Gain) loss on sale of real estate

(186

)

192

Normalized EBITDA

$

43,257

$

43,504

$

86,380

$

84,939

Net income (loss)

$

20,669

$

21,317

$

(22,595

)

$

41,803

Real estate related depreciation and amortization

12,553

13,837

26,124

27,303

Impairment of real estate investments

1,701

61,384

(Gain) loss on sale of real estate

(186

)

192

Funds from Operations (FFO)

34,923

35,154

64,727

69,298

Effect of the senior unsecured notes payable redemption

642

642

Provision for loan losses, net

3,844

Provision for doubtful accounts and lease restructuring

977

Lease termination revenue

(63

)

Property operating expenses

631

1,862

Normalized FFO

$

35,554

$

35,796

$

71,410

$

69,877

CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME (LOSS) TO NON-GAAP FINANCIAL MEASURES (continued)

(in thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income (loss)

$

20,669

$

21,317

$

(22,595

)

$

41,803

Real estate related depreciation and amortization

12,553

13,837

26,124

27,303

Amortization of deferred financing fees

520

495

1,040

982

Amortization of stock-based compensation

1,394

1,810

2,915

3,395

Straight-line rental income

(5

)

(8

)

(11

)

(20

)

Impairment of real estate investments

1,701

61,384

(Gain) loss on sale of real estate

(186

)

192

Funds Available for Distribution (FAD)

36,832

37,451

68,671

73,655

Effect of the senior unsecured notes payable redemption

642

642

Provision for loan losses, net

3,844

Provision for doubtful accounts and lease restructuring

977

Lease termination revenue

(63

)

Property operating expenses

631

1,862

Normalized FAD

$

37,463

$

38,093

$

75,354

$

74,234

FFO per share

$

0.36

$

0.36

$

0.67

$

0.72

Normalized FFO per share

$

0.37

$

0.37

$

0.74

$

0.73

FAD per share

$

0.38

$

0.39

$

0.71

$

0.77

Normalized FAD per share

$

0.39

$

0.40

$

0.78

$

0.77

Diluted weighted average shares outstanding [1]

96,672

96,366

96,687

95,995

[1] For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.

CARETRUST REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - 5 QUARTER TREND

(in thousands, except per share data)

(Unaudited)

Quarter

Quarter

Quarter

Quarter

Quarter

Ended

Ended

Ended

Ended

Ended

June 30,
2021

September 30,
2021

December 31,
2021

March 31,
2022

June 30,
2022

Revenues:

Rental income

$

47,744

$

48,087

$

49,118

$

46,007

$

46,806

Interest and other income

514

518

619

469

747

Total revenues

48,258

48,605

49,737

46,476

47,553

Expenses:

Depreciation and amortization

13,843

13,968

14,056

13,575

12,559

Interest expense

6,534

5,692

5,689

5,742

6,303

Property taxes

766

1,004

1,108

1,420

1,254

Impairment of real estate investments

59,683

1,701

Provision for loan losses, net

3,844

Property operating expenses

447

89

General and administrative

5,798

5,196

10,738

5,215

4,978

Total expenses

26,941

25,860

31,591

89,926

26,884

Other (loss) income:

Loss on extinguishment of debt

(10,827

)

Gain on sale of real estate

115

186

Total other (loss) income

(10,827

)

115

186

Net income (loss)

$

21,317

$

11,918

$

18,261

$

(43,264

)

$

20,669

Diluted earnings (loss) per share

$

0.22

$

0.12

$

0.19

$

(0.45

)

$

0.21

Diluted weighted average shares outstanding

96,120

96,297

96,552

96,410

96,598

CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME (LOSS) TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND

(in thousands)

(Unaudited)

Quarter

Quarter

Quarter

Quarter

Quarter

Ended

Ended

Ended

Ended

Ended

June 30,
2021

September 30,
2021

December 31,
2021

March 31,
2022

June 30,
2022

Net income (loss)

$

21,317

$

11,918

$

18,261

$

(43,264

)

$

20,669

Depreciation and amortization

13,843

13,968

14,056

13,575

12,559

Interest expense

6,534

5,692

5,689

5,742

6,303

Amortization of stock-based compensation

1,810

1,802

5,635