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Ventas Reports 2017 Third Quarter Results
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  • Earnings Growth and Enhanced Financial Strength
  • Property Level Growth Across All Segments; Updated and Improved 2017 Guidance
  • Over $600 Million of Strategic Dispositions with Gains Exceeding $500 Million
  • Expansion of Attractive University-Based Life Science Business

CHICAGO--(BUSINESS WIRE)--Oct. 27, 2017-- Ventas, Inc. (NYSE: VTR) today announced its results for the third quarter ended September 30, 2017:

  • Income from continuing operations per diluted common share for the third quarter 2017 grew five percent to $0.44 compared to the same period in 2016. The increase from the third quarter 2016 was driven by improved property performance, accretive investments and lower transaction costs. These benefits were partially offset by the impact of dispositions and loan repayments and $10 million, or approximately $0.03 per share, of current period expenses related to natural disasters (the “natural disaster expenses”).
  • Normalized Funds From Operations (“FFO”) per diluted common share for the third quarter 2017 grew one percent to $1.04 compared to the same period in 2016. The increase from the third quarter 2016 was principally due to improved property performance and accretive investments, partially offset by the impact of dispositions and loan repayments.
  • Reported FFO per diluted common share, as defined by the National Association of Real Estate Investment Trusts (“NAREIT FFO”), for the third quarter 2017 grew two percent to $1.02 compared to the same period in 2016. The increase from the third quarter 2016 was principally due to the same items as described for normalized FFO, but NAREIT FFO also includes the net benefit of lower transaction costs partially offset by natural disaster expenses.

Strong Results Fueled by the Ventas Advantage

“We delivered yet another strong quarter for our shareholders. With positive earnings and property growth, improved financial strength and recognition of over $500 million in gains from our ongoing divestiture of our skilled nursing assets, we are in an excellent position,” said Debra A. Cafaro, Ventas Chairman and Chief Executive Officer. “We are pleased to improve our 2017 property guidance and to accelerate the expansion of our university-based life science business through acquisitions and exciting ground-up developments with top-tier research institutions. The Ventas Advantage of a high-quality, diversified portfolio, leading platforms with care providers, developers, universities and health networks, and a consistent cohesive team will continue to fuel our success.”

Portfolio Performance

  • The Company’s third quarter 2017 same-store total portfolio (1,045 assets) cash net operating income (“NOI”) grew 2.1 percent compared to the same period in 2016. Same-store cash NOI growth by segment follows:
    • The triple-net leased portfolio increased 3.8 percent, driven by in-place lease escalations;
    • The seniors housing operating portfolio (“SHOP”) grew 0.6 percent, supported by continued growth in high-barrier markets, largely offset by the impact of new deliveries in select markets; and
    • The medical office building (“MOB”) portfolio rose 1.5 percent, supported by lease escalations and a strong tenant retention rate.
  • The above results exclude the impact of natural disaster expenses recorded in the third quarter 2017.

Third Quarter 2017 and Recent Highlights

  • The Company is further building out its institutional life science business through development and acquisition, with both existing university relationships and newly-created ones:
    • Expansion of Ventas’s university footprint with the pending acquisition of a 262,000 square foot class-A life science building affiliated with a AA-rated research university that is a leading recipient of National Institutes of Health funding and an awardee of a Bill & Melinda Gates Foundation grant. The property is located in a thriving life science, medical and research campus, is 82 percent occupied and has potential for increased occupancy and NOI.
    • Expansion of existing university relationships through commitment to a new $62 million life science and innovation center development affiliated with Brown University. This building, located in the growing sub-market adjacent to the Company’s recently opened South Street Landing project in Providence, Rhode Island, is 80 percent pre-leased to tenants including Brown, Johnson & Johnson and Cambridge Innovation Center. The project broke ground in the third quarter and will be a magnet to convene universities, private enterprise and entrepreneurs, and to spawn new companies.
  • Ventas funded investments of over $80 million, including $67 million for the Company’s share of development and redevelopment projects during the quarter for projects currently underway.
  • During and immediately following the quarter, Ventas sold properties and received final repayments on loans receivable for proceeds of $630 million, with gains exceeding $500 million, consisting principally of:
    • The Company’s completed sales of 29 of its Kindred Healthcare, Inc. (NYSE: KND) (“Kindred”) skilled nursing facilities (“SNFs”) for proceeds of approximately $570 million. The Company continues to expect total aggregate proceeds of $700 million from sales of its 36 Kindred SNFs in 2017, representing a seven percent yield on cash rent and an eight percent GAAP yield. Following the sales of the Company’s Kindred SNFs, Ventas’s percentage of NOI received from SNFs will be only one percent of its aggregate NOI.
  • The Company's credit profile, liquidity and financial health were excellent in the third quarter, including:
    • Sequential improvement in Net Debt to Adjusted Pro Forma EBITDA to 5.7x;
    • Sequential improvement in total indebtedness to gross asset value to 39 percent at quarter end; and
    • Exceptional fixed charge coverage of 4.6x at quarter end.
  • Ventas paid its shareholders a quarterly dividend of $0.775 per share, a six percent year-over-year increase.
  • In September, Ventas closed a $400 million dollar revolving construction credit facility. The facility increases the Company’s liquidity and is designed to facilitate funding its growing development pipeline with its attractive platform partners, including Wexford, PMB Medical, Sunrise and Atria.
  • Currently, the Company has excellent liquidity with $2.9 billion of available borrowing capacity and over $100 million of cash on hand.

Other Updates

  • The Company intends to partner with an institutional investor in a to-be-established joint venture (the “JV”) that will own one of the Company’s existing senior living portfolios (the “Portfolio”). The Portfolio contains over 70 private pay senior living assets currently operated by Elmcroft Senior Living under a Master Lease with the Company. Ventas also has formed a strategic relationship with a seniors housing operator recently founded by a team of experienced senior living executives, led by Kai Hsiao, with a demonstrated track record of value creation and success. The new management company is expected to begin operating the Portfolio, and the JV is expected to close, in early 2018. The Company is in the preliminary stages of the transactions, and there can be no assurance whether, when or on what terms the transactions will be completed.

Continued Sustainability and Leadership Excellence

  • Ventas Chairman and Chief Executive Officer Debra A. Cafaro was recognized by the Harvard Business Review as one of “The Best-Performing CEOs in the World.” She is one of 23 CEOs named to the Harvard Business Review list for four consecutive years and one of only two women on this year’s list. Ventas’s financial performance ranked 32nd of 898 companies globally for Ms. Cafaro’s tenure, which exceeds 18 years.
  • Ventas’s leadership in environmental, social and governance (“ESG”) matters was recognized by two prominent benchmarking organizations:
    • The Company was included in the Dow Jones Sustainability™ North America Index for the first time, ranking in the top quartile of real estate companies in North America across a broad spectrum of ESG metrics.
    • In the 2017 GRESB real estate ESG assessment, Ventas ranked first among the three listed healthcare real estate company participants, retained its Green Star designation for the fourth consecutive year and improved its score by nearly 10 percent. Ventas also achieved an “A” ranking, the highest possible score, on the new GRESB Public Disclosure Assessment, recognizing the Company’s focus on transparency and public reporting.

Updated 2017 Guidance

Ventas updated and improved its expectations for full year 2017 same-store cash NOI growth as follows:

 
Full Year 2017 Projected Same-Store Cash NOI Growth
Current Guidance   07/28/2017 Guidance
Low   High Low   High
   
Triple-Net 3% 3.5% 2.5% 3.5%
SHOP 0.5% 1.5% 0% 2%
MOB 1.5% 2% 1% 2%
Total Company 2% 2.5% 1.5% 2.5%
 

Ventas expects income from continuing operations per diluted common share to range between $1.63 and $1.74 and NAREIT FFO per diluted common share to range between $4.07 and $4.12, both modestly lower than previously disclosed guidance principally due to the $0.03 per share of natural disaster expenses in the third quarter 2017.

The Company projects normalized FFO per diluted common share to now range between $4.13 and $4.16. The midpoint of the Company’s narrowed normalized FFO per share range remains unchanged from its previously disclosed guidance because improved property performance offsets the accelerated completion of the Company’s Kindred SNF sales.

No undisclosed material acquisitions or dispositions, loan repayments or capital activity are included in guidance. The Company expects to invest in future growth by funding approximately $300 million in development and redevelopment projects for the full year 2017, including attractive new ground-up medical office and life science developments.

The 2017 outlook assumes approximately 359 million weighted average fully-diluted shares. A reconciliation of the Company’s guidance to the Company’s projected GAAP measures is included in this press release.

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. In particular, the Company’s estimate of natural disaster expenses is preliminary and subject to change. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results.

Third Quarter 2017 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 (844) 776-7841 (or +1 (661) 378-9542 for international callers). 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 webcast will be available following the call online, or by calling (855) 859-2056 (or +1 (404) 537-3406 for international callers), passcode 92386070, beginning at approximately 2:00 p.m. Eastern Time and will remain for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of more than 1,200 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, health systems and skilled nursing facilities. 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. References to “Ventas” or the “Company” mean Ventas, Inc. and its consolidated subsidiaries unless otherwise expressly noted. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.

Supplemental information regarding the Company can be found on the Company’s website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports---supplemental-information. A comprehensive listing of the Company’s properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

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 or acquisition 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; (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 or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition, including new construction in the markets in which the Company’s seniors housing communities and medical office buildings (“MOBs”) are located; (f) the extent and effect 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 tenants, 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, 2017; (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 exchange rates for any foreign currency in which the Company may, from time to time, conduct business; (p) year-over-year changes in the Consumer Price Index or the UK Retail Price Index and the effect of those changes on the rent escalators contained in the Company’s leases 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 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) 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; (v) the Company’s ability to obtain the financial results expected from its development and redevelopment projects; (w) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (x) consolidation activity in the seniors housing and healthcare industries resulting in a change of control of, or a competitor’s investment in, 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; (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; and (z) changes in accounting principles, or their application or interpretation, and the Company’s ability to make estimates and the assumptions underlying the estimates, which could have an effect on the Company’s earnings.

         
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
 
Assets
Real estate investments:
Land and improvements $ 2,121,214 $ 2,117,692 $ 2,123,266 $ 2,089,591 $ 2,089,329
Buildings and improvements 21,935,860 21,827,419 21,869,961 21,516,396 21,551,049
Construction in progress 306,095 281,093 213,281 210,599 192,848
Acquired lease intangibles 1,536,476   1,534,173   1,532,365   1,510,629   1,522,708  
25,899,645 25,760,377 25,738,873 25,327,215 25,355,934
Accumulated depreciation and amortization (5,434,772 ) (5,220,611 ) (5,123,144 ) (4,932,461 ) (4,754,532 )
Net real estate property 20,464,873 20,539,766 20,615,729 20,394,754 20,601,402
Secured loans receivable and investments, net 1,352,434 1,395,404 1,398,417 702,021 821,663
Investments in unconsolidated real estate entities 117,185   119,794   108,976   95,921   97,814  
Net real estate investments 21,934,492 22,054,964 22,123,122 21,192,696 21,520,879
Cash and cash equivalents 85,063 103,353 91,284 286,707 89,279
Escrow deposits and restricted cash 76,522 68,343 92,175 80,647 89,521
Goodwill 1,034,497 1,034,054 1,033,484 1,033,225 1,043,075
Assets held for sale 68,926 89,569 61,983 54,961 195,252
Other assets 540,295   505,475   517,283   518,364   488,258  
Total assets $ 23,739,795   $ 23,855,758   $ 23,919,331   $ 23,166,600   $ 23,426,264  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 11,424,145 $ 11,907,997 $ 11,943,733 $ 11,127,326 $ 11,252,327
Accrued interest 95,684 87,248 78,219 83,762 70,790
Accounts payable and other liabilities 943,800 929,573 946,674 907,928 930,103
Liabilities related to assets held for sale 9,837 9,812 1,389 1,462 77,608
Deferred income taxes 296,272   296,822   294,057   316,641   315,713  
Total liabilities 12,769,738 13,231,452 13,264,072 12,437,119 12,646,541
 
Redeemable OP unitholder and noncontrolling interests 171,813 182,154 171,384 200,728 209,278
 
Commitments and contingencies
 
Equity:
Ventas stockholders' equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 356,163; 356,134; 354,863; 354,125; and 353,793 shares issued at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively 89,023 89,016 88,698 88,514 88,431
Capital in excess of par value 13,034,527 13,019,023 12,944,501 12,917,002 12,870,566
Accumulated other comprehensive loss (40,780 ) (45,035 ) (53,657 ) (57,534 ) (49,614 )
Retained earnings (deficit) (2,351,430 ) (2,688,946 ) (2,564,936 ) (2,487,695 ) (2,420,766 )
Treasury stock, 0; 0; 0; 1 and 1 shares at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively       (47 ) (78 )
Total Ventas stockholders' equity 10,731,340 10,374,058 10,414,606 10,460,240 10,488,539
Noncontrolling interests 66,904   68,094   69,269   68,513   81,906  
Total equity 10,798,244   10,442,152   10,483,875   10,528,753   10,570,445  
Total liabilities and equity $ 23,739,795   $ 23,855,758   $ 23,919,331   $ 23,166,600   $ 23,426,264  

   
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
   
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues
Rental income:
Triple-net leased $ 212,370 $ 210,424 $ 634,955 $ 635,030
Office 189,506   158,273   561,641   446,496  
401,876 368,697 1,196,596 1,081,526
Resident fees and services 461,700 461,974 1,386,131 1,390,387
Office building and other services revenue 3,196 4,317 9,781 17,006
Income from loans and investments 32,985 31,566 85,499 78,098
Interest and other income 171   562   854   792  
Total revenues 899,928 867,116 2,678,861 2,567,809
Expenses
Interest 113,869 105,063 336,245 312,001
Depreciation and amortization 213,407 208,387 655,298 666,735
Property-level operating expenses:
Senior living 315,598 312,145 936,296 932,675
Office 60,609   48,972   174,728   136,619  
376,207 361,117 1,111,024 1,069,294
Office building services costs 418 974 1,708 6,277
General, administrative and professional fees 33,317 31,567 100,560 95,387
Loss on extinguishment of debt, net 511 383 856 3,165
Merger-related expenses and deal costs 804 16,217 8,903 25,073
Other 13,030   2,430   16,066   8,901  
Total expenses 751,563   726,138   2,230,660   2,186,833  
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests 148,365 140,978 448,201 380,976
Income from unconsolidated entities 750 931 3,794 2,151
Income tax benefit 7,815   8,537   13,119   28,507  
Income from continuing operations 156,930 150,446 465,114 411,634
Discontinued operations (19 ) (118 ) (95 ) (755 )
Gain (loss) on real estate dispositions 458,280   (144 ) 502,288   31,779  
Net income 615,191 150,184 967,307 442,658
Net income attributable to noncontrolling interests 1,233   732   3,391   1,064  
Net income attributable to common stockholders $ 613,958   $ 149,452   $ 963,916   $ 441,594  
Earnings per common share
Basic:
Income from continuing operations $ 0.44 $ 0.43 $ 1.31 $ 1.20
Net income attributable to common stockholders 1.72 0.43 2.71 1.29
Diluted:
Income from continuing operations $ 0.44 $ 0.42 $ 1.30 $ 1.19
Net income attributable to common stockholders 1.71 0.42 2.69 1.28
 
Weighted average shares used in computing earnings per common share
Basic 355,929 350,274 355,110 341,610
Diluted 359,333 354,186 358,365 345,352
 
Dividends declared per common share $ 0.775 $ 0.73 $ 2.325 $ 2.19

 
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
For the Quarters Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Revenues
Rental income:
Triple-net leased $ 212,370 $ 213,258 $ 209,327 $ 210,804 $ 210,424
Office 189,506   186,240   185,895   183,846   158,273  
401,876 399,498 395,222 394,650 368,697
Resident fees and services 461,700 460,243 464,188 456,919 461,974
Office building and other services revenue 3,196 3,179 3,406 4,064 4,317
Income from loans and investments 32,985 32,368 20,146 19,996 31,566
Interest and other income 171   202   481   84   562  
Total revenues 899,928 895,490 883,443 875,713 867,116
 
Expenses
Interest 113,869 113,572 108,804 107,739 105,063
Depreciation and amortization 213,407 224,108 217,783 232,189 208,387
Property-level operating expenses:
Senior living 315,598 308,625 312,073 310,303 312,145
Office 60,609   57,205   56,914   55,165   48,972  
376,207 365,830 368,987 365,468 361,117
Office building services costs 418 552 738 1,034 974
General, administrative and professional fees 33,317 33,282 33,961 31,488 31,567
Loss (gain) on extinguishment of debt, net 511 36 309 (386 ) 383
Merger-related expenses and deal costs 804 6,043 2,056 (438 ) 16,217
Other 13,030   1,848   1,188   1,087   2,430  
Total expenses 751,563   745,271   733,826   738,181   726,138  
 
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests 148,365 150,219 149,617 137,532 140,978
Income (loss) from unconsolidated entities 750 (106 ) 3,150 2,207 931
Income tax benefit 7,815   2,159   3,145   2,836   8,537  
Income from continuing operations 156,930 152,272 155,912 142,575 150,446
Discontinued operations (19 ) (23 ) (53 ) (167 ) (118 )
Gain (loss) on real estate dispositions 458,280   719   43,289   66,424   (144 )
Net income 615,191 152,968 199,148 208,832 150,184
Net income attributable to noncontrolling interests 1,233   1,137   1,021   1,195   732  
Net income attributable to common stockholders $ 613,958   $ 151,831   $ 198,127   $ 207,637   $ 149,452  
 
Earnings per common share
Basic:
Income from continuing operations $ 0.44 $ 0.43 $ 0.44 $ 0.40 $ 0.43
Net income attributable to common stockholders 1.72 0.43 0.56 0.59 0.43
Diluted:
Income from continuing operations $ 0.44 $ 0.42 $ 0.44 $ 0.40 $ 0.42
Net income attributable to common stockholders 1.71 0.42 0.55 0.58 0.42
 
Weighted average shares used in computing earnings per common share
Basic 355,929 355,024 354,410 353,911 350,274
Diluted 359,333 358,311 357,572 357,435 354,186

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  For the Nine Months Ended September 30,
2017   2016
Cash flows from operating activities:
Net income $ 967,307 $ 442,658
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 655,298 666,735
Amortization of deferred revenue and lease intangibles, net (16,283 ) (15,307 )
Other non-cash amortization 11,186 7,174
Stock-based compensation 19,923 15,885
Straight-lining of rental income, net (17,384 ) (21,386 )
Loss on extinguishment of debt, net 856 3,165
Gain on real estate dispositions (502,288 ) (31,779 )
Gain on real estate loan investments (124 ) (2,271 )
Income tax benefit (15,619 ) (30,832 )
Income from unconsolidated entities (767 ) (2,151 )
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Distributions from unconsolidated entities 3,909 5,574
Other 7,439 (1,075 )
Changes in operating assets and liabilities:
(Increase) decrease in other assets (17,598 ) 1,753
Increase (decrease) in accrued interest 12,688 (10,053 )
Decrease in accounts payable and other liabilities (19,277 ) (21,944 )
Net cash provided by operating activities 1,086,239 1,006,146
Cash flows from investing activities:
Net investment in real estate property (262,123 ) (1,421,592 )
Investment in loans receivable and other (734,033 ) (154,949 )
Proceeds from real estate disposals 532,137 63,561
Proceeds from loans receivable 84,361 194,063
Development project expenditures (210,423 ) (94,398 )
Capital expenditures (83,387 ) (75,296 )
Distributions from unconsolidated entities 5,816
Investment in unconsolidated entities (42,399 ) (6,175 )
Net cash used in investing activities (710,051 ) (1,494,786 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facility 384,738 46,728
Proceeds from debt 1,058,437 876,617
Repayment of debt (1,225,525 ) (916,505 )
Purchase of noncontrolling interests (15,809 ) (1,604 )
Payment of deferred financing costs (26,426 ) (6,147 )
Issuance of common stock, net 73,596 1,265,702
Cash distribution to common stockholders (827,285 ) (750,402 )
Cash distribution to redeemable OP unitholders (5,677 ) (6,486 )
Contributions from noncontrolling interests 4,402 5,926
Distributions to noncontrolling interests (9,248 ) (5,121 )
Other 10,543   16,631  
Net cash (used in) provided by financing activities (578,254 ) 525,339  
Net (decrease) increase in cash and cash equivalents (202,066 ) 36,699
Effect of foreign currency translation on cash and cash equivalents 422 (443 )
Cash and cash equivalents at beginning of period 286,707   53,023  
Cash and cash equivalents at end of period $ 85,063   $ 89,279  
 
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions:
Real estate investments $ 206,771 $ 59,666
Utilization of funds held for an Internal Revenue Code Section 1031 exchange (84,995 ) (6,954 )
Other assets (5,546 ) 79,879
Debt 64,629 47,641
Other liabilities 64,090 60,446
Deferred income tax liability (16,116 ) 2,279
Noncontrolling interests 3,627 22,225
Equity issued for redemption of OP and Class C units 22,694 22,970

 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  For the Quarters Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2017 2017 2017 2016 2016
Cash flows from operating activities:
Net income $ 615,191 $ 152,968 $ 199,148 $ 208,832 $ 150,184
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 213,407 224,108 217,783 232,189 208,387
Amortization of deferred revenue and lease intangibles, net (5,434 ) (5,834 ) (5,015 ) (5,029 ) (5,217 )
Other non-cash amortization 4,602 4,124 2,460 3,183 2,487
Stock-based compensation 6,527 6,695 6,701 5,073 5,848
Straight-lining of rental income, net (6,229 ) (5,778 ) (5,377 ) (6,602 ) (5,960 )
Loss (gain) on extinguishment of debt, net 511 36 309 (386 ) 383
(Gain) loss on real estate dispositions (458,280 ) (719 ) (43,289 ) (66,424 ) 144
Gain on real estate loan investments (120 ) (4 ) (2,238 )
Income tax benefit (8,515 ) (2,959 ) (4,145 ) (3,395 ) (9,389 )
(Income) loss from unconsolidated entities (750 ) 106 (123 ) (2,207 ) (931 )
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Distributions from unconsolidated entities 775 754 2,380 2,024 1,701
Other 6,091 696 652 (772 ) (1,799 )
Changes in operating assets and liabilities:
(Increase) decrease in other assets (47,532 ) 33,648 (3,714 ) 3,807 (8,856 )
Increase (decrease) in accrued interest 8,138 9,291 (4,741 ) 12,657 (9,284 )
Increase (decrease) in accounts payable and other liabilities 20,601   (15,607 ) (24,271 ) (16,755 ) 19,950  
Net cash provided by operating activities 348,983 401,525 335,731 366,195 345,410
Cash flows from investing activities:
Net investment in real estate property (22,625 ) (40,655 ) (198,843 ) (7,520 ) (1,387,139 )
Investment in loans receivable and other (15,800 ) (16,875 ) (701,358 ) (3,686 ) (2,499 )
Proceeds from real estate disposals 512,567 19,570 237,000
Proceeds from loans receivable 59,294 21,704 3,363 126,019 186,419
Development project expenditures (67,154 ) (56,817 ) (86,452 ) (49,249 ) (24,719 )
Capital expenditures (27,435 ) (32,117 ) (23,835 ) (42,160 ) (28,371 )
Distributions from unconsolidated entities 5,816
Investment in unconsolidated entities (3,351 ) (12,108 ) (26,940 ) (261 ) (1,910 )
Net cash provided by (used in) investing activities 441,312 (117,298 ) (1,034,065 ) 260,143 (1,258,219 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facility 20,282 341,634 22,822 (82,365 ) 22,424
Proceeds from debt 29,928 231,295 797,214 16,601 460,400
Repayment of debt (568,989 ) (636,040 ) (20,496 ) (105,608 ) (176,168 )
Purchase of noncontrolling interests (15,809 ) (1,242 )
Payment of deferred financing costs (6,739 ) (13,303 ) (6,384 ) (408 ) (2,303 )
Issuance of common stock, net 73,596 20,978 887,963
Cash distribution to common stockholders (276,320 ) (275,597 ) (275,368 ) (274,566 ) (256,931 )
Cash distribution to redeemable OP unitholders (1,957 ) (1,827 ) (1,893 ) (2,154 ) (2,049 )
Contributions from noncontrolling interests 2,175 125 2,102 1,400 246
Distributions to noncontrolling interests (5,092 ) (1,746 ) (2,410 ) (1,758 ) (1,539 )
Other 841   6,405   3,297   621   13,009  
Net cash (used in) provided by financing activities (805,871 ) (275,458 ) 503,075   (428,501 ) 945,052  
Net (decrease) increase in cash and cash equivalents (15,576 ) 8,769 (195,259 ) 197,837 32,243
Effect of foreign currency translation on cash and cash equivalents (2,714 ) 3,300 (164 ) (409 ) (286 )
Cash and cash equivalents at beginning of period 103,353   91,284   286,707   89,279   57,322  
Cash and cash equivalents at end of period $ 85,063   $ 103,353   $ 91,284   $ 286,707   $ 89,279  

 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
 
  For the Quarters Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2017 2017 2017 2016 2016
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions:
Real estate investments

$

1,505

$

16,347

$

188,919

$

9,426

$

51,001

Utilization of funds held for an Internal Revenue Code Section 1031 exchange (84,995 )
Other assets (1,450 ) (3,723 ) (373 ) 10,158 79,018
Debt 12,167 52,462 47,641
Other liabilities (1,664 ) (2,922 ) 68,676 12,190 57,808
Deferred income tax liability 64 3,384 (19,564 ) 7,102 2,345
Noncontrolling interests 1,655 (5 ) 1,977 292 22,225
Equity issued for redemption of OP and Class C units 335 288 22,071 1,348 2,200

               
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Funds From Operations (FFO) and Funds Available for Distribution (FAD)1

(Dollars in thousands, except per share amounts)
 
YOY
2016   2017   Growth
    Q3   Q4   FY   Q1   Q2   Q3   YTD   '16-'17
Income from continuing operations $ 150,446 $ 142,575 $ 554,209 $ 155,912 $ 152,272 $ 156,930 $ 465,114 4 %
Income from continuing operations per share   $ 0.42     $ 0.40     $ 1.59     $ 0.44     $ 0.42     $ 0.44     $ 1.30     5 %
Discontinued operations (118 ) (167 ) (922 ) (53 ) (23 ) (19 ) (95 )
(Loss) gain on real estate dispositions (144 )   66,424     98,203     43,289     719     458,280     502,288  
Net income 150,184 208,832 651,490 199,148 152,968 615,191 967,307
Net income attributable to noncontrolling interests   732     1,195     2,259     1,021     1,137     1,233     3,391      
Net income attributable to common stockholders $ 149,452 $ 207,637 $ 649,231 $ 198,127 $ 151,831 $ 613,958 $ 963,916 311 %
Net income attributable to common stockholders per share   $ 0.42     $ 0.58     $ 1.86     $ 0.55     $ 0.42     $ 1.71     $ 2.69     307 %
 
Adjustments:
Depreciation and amortization on real estate assets 206,560 230,353 891,985 215,961 222,347 211,784 650,092
Depreciation on real estate assets related to noncontrolling interests (1,865 ) (2,031 ) (7,785 ) (1,995 ) (1,817 ) (1,911 ) (5,723 )
Depreciation on real estate assets related to unconsolidated entities 1,113 1,432 5,754 1,187 1,458 855 3,500
Gain on re-measurement of equity interest upon acquisition, net (3,027 ) (3,027 )
Loss (gain) on real estate dispositions 144 (66,424 ) (98,203 ) (43,289 ) (719 ) (458,280 ) (502,288 )
Gain on real estate dispositions related to noncontrolling interests 18 18
Loss (gain) on real estate dispositions related to unconsolidated entities 56 (439 ) 23 (82 ) (986 ) (1,045 )
Discontinued operations:
Loss on real estate dispositions         1                  
Subtotal: FFO add-backs 205,952 163,386 791,313 168,860 221,187 (248,520 ) 141,527
Subtotal: FFO add-backs per share   $ 0.58     $ 0.46     $ 2.27     $ 0.47     $ 0.62     $ (0.69 )   $ 0.39      
FFO (NAREIT) attributable to common stockholders $ 355,404 $ 371,023 $ 1,440,544 $ 366,987 $ 373,018 $ 365,438 $ 1,105,443 3 %
FFO (NAREIT) attributable to common stockholders per share   $ 1.00     $ 1.04     $ 4.13     $ 1.03     $ 1.04     $ 1.02     $ 3.08     2 %
 
Adjustments:
Change in fair value of financial instruments 14 134 62 23 (153 ) 8 (122 )
Non-cash income tax benefit (9,389 ) (3,395 ) (34,227 ) (4,145 ) (2,959 ) (8,515 ) (15,619 )
Loss (gain) on extinguishment of debt, net 383 (386 ) 2,779 403 47 486 936
Loss (gain) on non-real estate dispositions related to unconsolidated entities 28 (557 ) 4 (16 ) (22 ) (34 )
Merger-related expenses, deal costs and re-audit costs 16,965 (479 ) 28,290 3,129 7,036 2,741 12,906
Amortization of other intangibles 438 438 1,752 438 365 328 1,131
Unusual items related to unconsolidated entities 212 280 1,207 1,699
Non-cash impact of changes to equity plan 999 1,711 1,372 4,082
Natural disaster expenses (recoveries), net                     9,810     9,810  
Subtotal: normalized FFO add-backs 8,439 (3,688 ) (1,901 ) 1,063 6,311 7,415 14,789
Subtotal: normalized FFO add-backs per share   $ 0.02     $ (0.01 )   $ (0.01 )   $ 0.00     $ 0.02     $ 0.02     $ 0.04      
Normalized FFO attributable to common stockholders $ 363,843 $ 367,335 $ 1,438,643 $ 368,050 $ 379,329 $ 372,853 $ 1,120,232 2 %
Normalized FFO attributable to common stockholders per share   $ 1.03     $ 1.03     $ 4.13     $ 1.03     $ 1.06     $ 1.04     $ 3.13     1 %
 
Non-cash items included in normalized FFO:
Amortization of deferred revenue and lease intangibles, net (5,217 ) (5,029 ) (20,336 ) (5,015 ) (5,834 ) (5,434 ) (16,283 )
Other non-cash amortization, including fair market value of debt 2,487 3,183 10,357 2,460 4,124 4,602 11,186
Stock-based compensation 5,848 5,073 20,958 5,702 4,984 5,155 15,841
Straight-lining of rental income, net (5,960 )   (6,602 )   (27,988 )   (5,377 )   (5,778 )   (6,229 )   (17,384 )
Subtotal: non-cash items included in normalized FFO (2,842 ) (3,375 ) (17,009 ) (2,230 ) (2,504 ) (1,906 ) (6,640 )
Capital expenditures   (29,991 )   (44,540 )   (124,621 )   (24,919 )   (33,148 )   (30,899 )   (88,966 )    
Normalized FAD attributable to common stockholders   $ 331,010     $ 319,420     $ 1,297,013     $ 340,901     $ 343,677     $ 340,048     $ 1,024,626     3 %
Merger-related expenses, deal costs and re-audit costs (16,965 ) 479 (28,290 ) (3,129 ) (7,036 ) (2,741 ) (12,906 )
Unusual items related to unconsolidated entities               (212 )   (280 )   (1,207 )   (1,699 )    
FAD attributable to common stockholders   $ 314,045     $ 319,899     $ 1,268,723     $ 337,560     $ 336,361     $ 336,100     $ 1,010,021     7 %
Weighted average diluted shares 354,186     357,435     348,390     357,572     358,311     359,333     358,365  
 
1 Per share amounts may not add due to rounding. Per share quarterly amounts may not add to annual per share amounts due to material changes in the Company’s weighted average diluted share count, if any.
 

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, the Company considers FFO, normalized FFO, FAD and normalized FAD to be appropriate supplemental measures of operating performance of an equity REIT. In particular, the Company believes that normalized FFO is useful 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 non-recurring items and other non-operational events such as transactions and litigation. In some cases, the Company provides information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and Company management to assess the impact of those items on the Company’s financial results.

The Company uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as net income attributable to common stockholders (computed in accordance with GAAP) excluding gains or losses from sales of real estate property, including gains or losses 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) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) 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; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to the Company’s executive equity compensation plan and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement; (d) the financial impact of contingent consideration, severance-related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; (g) expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements and related matters; and (h) net expenses or recoveries related to natural disasters. Normalized FAD represents normalized FFO excluding non-cash components, which include straight-line rental adjustments, and deducting capital expenditures, including tenant allowances and leasing commissions. FAD represents normalized FAD after subtracting merger-related expenses, deal costs and re-audit costs and unusual items related to unconsolidated entities.

FFO, normalized FFO, FAD and normalized FAD presented herein may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO, normalized FFO, FAD and normalized FAD should not be considered as alternatives to net income or income from continuing operations (both 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 they necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that income from continuing operations is the most comparable GAAP measure because it provides insight into the Company’s continuing operations. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO, normalized FFO, FAD and normalized FAD should be examined in conjunction with net income and income from continuing operations as presented elsewhere herein.

 
NON-GAAP FINANCIAL MEASURES RECONCILIATION

EPS, FFO and FAD Guidance Attributable to Common Stockholders 1,2

(Dollars in millions, except per share amounts)
 
Tentative / Preliminary and Subject to Change
FY2017 - Guidance   2017 - Per Share
Low   High Low   High
                 
Income from Continuing Operations   $ 584     $ 623     $ 1.63     $ 1.74  
   
Gain on Real Estate Dispositions 705 725 1.97 2.02
Other Adjustments 3 (4 ) (5 ) (0.01 ) (0.01 )
                 
Net Income Attributable to Common Stockholders   $ 1,285     $ 1,343     $ 3.58     $ 3.74  
 
Depreciation and Amortization Adjustments 884 865 2.47 2.41
Gain on Real Estate Dispositions (705 ) (725 ) (1.97 ) (2.02 )
Other Adjustments 3 (4 ) (4 ) (0.01 ) (0.01 )
                 
FFO (NAREIT) Attributable to Common Stockholders   $ 1,460     $ 1,479     $ 4.07     $ 4.12  
 
Merger-Related Expenses, Deal Costs and Re-Audit Costs 15 13 0.04 0.04
Other Adjustments 3 6 1 0.02 0.00
                 
Normalized FFO Attributable to Common Stockholders $ 1,481 $ 1,493 $ 4.13 $ 4.16
% Year-Over-Year Growth             0 %     1 %
 
Non-Cash Items Included in Normalized FFO (7 ) (7 )
Capital Expenditures (130 ) (136 )
           
Normalized FAD Attributable to Common Stockholders   $ 1,344     $ 1,350    
 
Merger-Related Expense, Deal Costs and Re-Audit Costs (15 ) (13 )
Other Adjustments 3 (3 ) (3 )
           
FAD Attributable to Common Stockholders   $ 1,326     $ 1,334    
 
Weighted Average Diluted Shares (in millions) 359 359
 

1

The Company’s guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations depending on factors discussed in the Company’s filings with the Securities and Exchange Commission.

2

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.

3

See table titled “Funds From Operations (FFO) and Funds Available for Distribution (FAD)” for detailed breakout of adjustments for each respective category.

 

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Debt to Adjusted Pro Forma EBITDA

(Dollars in thousands)

 

The following table illustrates net debt to pro forma earnings, which includes amounts in discontinued operations, before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, consolidated joint venture partners’ share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments, unrealized foreign currency gains or losses and net expenses or recoveries related to natural disasters, and including the Company’s share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items (“Adjusted EBITDA”).

The following information considers the pro forma effect on Adjusted EBITDA of the Company’s activity during the three months ended September 30, 2017, as if the transactions had been consummated as of the beginning of the period (“Adjusted Pro Forma EBITDA”).

The Company believes that net debt, Adjusted Pro Forma EBITDA and net debt to Adjusted Pro Forma EBITDA are useful to investors, analysts and Company management because they allow the comparison of the Company’s credit strength between periods and to other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual credit quality.

 
Income from continuing operations $ 156,930
Discontinued operations (19 )
Gain on real estate dispositions 458,280  
Net income 615,191
Net income attributable to noncontrolling interests 1,233  
Net income attributable to common stockholders 613,958
Adjustments:
Interest 113,869
Loss on extinguishment of debt, net 511
Taxes (including tax amounts in general, administrative and professional fees) (8,130 )
Depreciation and amortization 213,407
Non-cash stock-based compensation expense 6,527
Merger-related expenses, deal costs and re-audit costs 2,092
Net income (loss) attributable to noncontrolling interests, net of consolidated joint venture partners’ share of EBITDA (3,278 )
(Income) loss from unconsolidated entities, net of Ventas share of EBITDA from unconsolidated entities 6,660
Gain on real estate dispositions (458,280 )
Unrealized foreign currency losses 210
Change in fair value of financial instruments 6
Natural disaster expenses (recoveries), net 9,810  
Adjusted EBITDA 497,362
Pro forma adjustments for current period activity (3,069 )
Adjusted Pro Forma EBITDA $ 494,293  
 
Adjusted Pro Forma EBITDA annualized $ 1,977,172  
 
As of September 30, 2017:
Total debt $ 11,424,145
Cash (85,063 )
Restricted cash pertaining to debt (38,727 )
Consolidated joint venture partners’ share of debt (74,135 )
Ventas share of debt from unconsolidated entities 89,860  
Net debt $ 11,316,080  
 
Net debt to Adjusted Pro Forma EBITDA 5.7 x

 

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Operating Income (NOI) and Same-Store Cash NOI by Segment

(Dollars in thousands)

 

The Company considers NOI and same-store cash NOI as important supplemental measures because they allow investors, analysts and the Company’s management to assess its unlevered property-level operating results and to compare its operating results with those of other real estate companies and between periods on a consistent basis. The Company defines NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. In the case of NOI, cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. The Company believes that income from continuing operations is the most comparable GAAP measure for both NOI and same-store cash NOI because it provides insight into the Company’s continuing operations. The Company defines same-store as properties owned, consolidated, operational and reported under a consistent business model for the full period in both comparison periods, and excluding assets intended for disposition and for SHOP, those properties that transitioned operators after the start of the prior comparison period. To normalize for exchange rate movements, all same-store cash NOI measures assume constant exchange rates across comparable periods, using the following methodology: the current period’s results are shown in actual reported USD, while prior comparison period’s results are adjusted and converted to USD based on the average exchange rate for the current period.

         

Triple-Net Leased Properties

Senior Living Operations

Office Operations

All Other

Total

For the Three Months Ended September 30, 2017
Income from continuing operations $ 156,930
Adjustments:
Interest and other income (171 )
Interest 113,869
Depreciation and amortization 213,407
General, administrative and professional fees 33,317
Loss on extinguishment of debt, net 511
Merger-related expenses and deal costs 804
Other 13,030
Income from unconsolidated entities (750 )
Income tax benefit (7,815 )
Reported Segment NOI $ 213,495 $ 146,102 $ 130,047 $ 33,488 523,132
Adjustments:
Normalizing adjustment for technology costs 1,616 1,616
NOI not included in same-store (37,009 ) (5,628 ) (29,114 ) (71,751 )
Straight-lining of rental income (1,195 ) (5,034 ) (6,229 )
Non-cash rental income (4,277 ) (312 ) (4,589 )
Non-segment NOI       (33,488 ) (33,488 )
(42,481 ) (4,012 ) (34,460 ) (33,488 ) (114,441 )
Same-Store cash NOI (Constant Currency) $ 171,014   $ 142,090   $ 95,587   $   $ 408,691  
Percentage increase 3.8 % 0.6 % 1.5 % 2.1 %

         

Triple-Net Leased Properties

Senior Living Operations

Office Operations

All Other

Total

For the Three Months Ended September 30, 2016
Income from continuing operations $ 150,446
Adjustments:
Interest and other income (562 )
Interest 105,063
Depreciation and amortization 208,387
General, administrative and professional fees 31,567
Loss on extinguishment of debt, net 383
Merger-related expenses and deal costs 16,217
Other 2,430
Income from unconsolidated entities (931 )
Income tax benefit (8,537 )
Reported Segment NOI $ 211,670 $ 149,829 $ 110,538 $ 32,426 504,463
Adjustments:
NOI not included in same-store (39,209 ) (9,237 ) (13,439 ) (61,885 )
Straight-lining of rental income (2,607 ) (3,329 ) (5,936 )
Non-cash rental income (5,092 ) 383 (4,709 )
Non-segment NOI (32,426 ) (32,426 )
NOI impact from change in FX (14 ) 699       685  
(46,922 ) (8,538 ) (16,385 ) (32,426 ) (104,271 )
Same-Store cash NOI (Constant Currency) $ 164,748   $ 141,291   $ 94,153   $   $ 400,192  

 
NON-GAAP FINANCIAL MEASURES RECONCILIATION

NOI and Same-Store Cash NOI by Segment Guidance 1,2

(Dollars in millions, except per share amounts)
 
FY2017 - Guidance
Tentative / Preliminary and Subject to Change
NNN   SHOP   Office   Non-Segment   Total
High End
Income from Continuing Operations $ 623
Depreciation and Amortization3 874
Interest Expense, G&A, Other Income and Expenses4 588  
Reported Segment NOI5 $ 844 $ 594 $ 523 $ 123 2,085
Normalizing Adjustment for Technology Costs6 3 3
Non-Cash and Non-Same-Store Adjustments (163 ) (32 ) (140 ) (123 ) (458 )
Same-Store Cash NOI5 681 565 383 1,630
Percentage Increase 3.5 % 1.5 % 2.0 % NM 2.5 %
 
Modification Fees          
Adjusted Same-Store Cash NOI5 $ 681   $ 565   $ 383   $   $ 1,630  
Adjusted Percentage Increase 3.9 % 1.5 % 2.0 % NM 2.7 %
 
Low End
Income from Continuing Operations $ 584
Depreciation and Amortization3 869
Interest Expense, G&A, Other Income and Expenses4 622  
Reported Segment NOI5 $ 840 $ 589 $ 521 $ 121 2,075
Normalizing Adjustment for Technology Costs6 3 3
Non-Cash and Non-Same-Store Adjustments (162 ) (32 ) (140 ) (121 ) (456 )
Same-Store Cash NOI5 678 560 381 1,622
Percentage Increase 3.0 % 0.5 % 1.5 % NM 2.0 %
 
Modification Fees          
Adjusted Same-Store Cash NOI5 $ 678   $ 560   $ 381   $   $ 1,622  
Adjusted Percentage Increase 3.4 % 0.5 % 1.5 % NM 2.2 %
 
Prior Year
Income from Continuing Operations $ 554
Depreciation and Amortization3 899
Interest Expense, G&A, Other Income and Expenses4 548  
Reported Segment NOI5 $ 851 $ 604 $ 444 $ 102 2,001
Modification Fees 3 3
Non-Cash and Non-Same-Store Adjustments (192 ) (49 ) (68 ) (102 ) (411 )
NOI Impact from Change in FX (4 ) 1       (3 )
Same-Store Cash NOI5 658 556 376 1,590
Modification Fees (3 )       (3 )
 
Adjusted Same-Store Cash NOI $ 655   $ 556   $ 376   $   $ 1,587  
 
2017
GBP (£) to USD ($) 1.32
USD ($) to CAD (C$) 1.25
 

1

The Company’s guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations depending on factors discussed in the Company’s filings with the Securities and Exchange Commission.

2

See table titled “Net Operating Income (NOI) and Same-Store Cash NOI by Segment” for the three months ended September 30, 2017 for a detailed breakout of adjustments for each respective category.

3

Includes real estate depreciation and amortization, corporate depreciation and amortization and amortization of other intangibles.

4

Includes interest expense, general and administrative expenses (including stock-based compensation), loss on extinguishment of debt, merger-related expenses and deal costs, income from unconsolidated entities, income tax benefit, and other income and expenses.

5

Totals may not add across due to minor corporate-level adjustments and rounding.

6

Represents costs expensed by one operator related to implementation of new software.

 

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Source: Ventas, Inc.

Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS