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News Release

Ventas Reports 2017 Fourth Quarter and Full Year Results
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  • Strong 2017 Earnings and Property Performance
  • Over $900 Million of Strategic Dispositions in 2017 with Gains Exceeding $700 Million
  • Outstanding Financial Condition and Liquidity
  • 2018 Guidance Incorporates Property Level Growth, $1.5 Billion of Capital Recycling and Further Enhancement of Financial Strength

CHICAGO--(BUSINESS WIRE)--Feb. 9, 2018-- Ventas, Inc. (NYSE: VTR) today announced its results for the fourth quarter and full year ended December 31, 2017:

  • Income from continuing operations per diluted common share for the full year 2017 grew 13 percent to $1.80 compared to the same period in 2016. For the fourth quarter 2017, income from continuing operations per diluted common share was $0.50.
  • Normalized Funds From Operations (“FFO”) per diluted common share for the full year 2017 grew one percent to $4.16 compared to the same period in 2016. For the fourth quarter 2017, normalized FFO per diluted common share was $1.03.
  • Reported FFO per diluted common share, as defined by the National Association of Real Estate Investment Trusts (“NAREIT FFO”), for the full year 2017 grew two percent to $4.22 compared to the same period in 2016. For the fourth quarter 2017, NAREIT FFO per diluted common share was $1.13.
  • The Company recognized $717 million, or $2.00 per share, in gains on real estate disposals in 2017, which are included in net income but excluded from income from continuing operations, normalized FFO and NAREIT FFO.

The Ventas Advantage: Foundation for Lasting Excellence

“2017 was another excellent year for Ventas, as we generated record cash flow from operations and delivered normalized FFO per share and same-store property cash NOI growth at the high end of our expectations,” said Debra A. Cafaro, Ventas Chairman and Chief Executive Officer. “To further enhance our diverse portfolio, we made nearly $2 billion in value-creating investments, including significant expansion of our exciting university-based life science business, profitably disposed of almost $1 billion in assets and completed innovative deals with our leading operating partners.

“The Ventas Advantage has proven resilient through cycles for two decades. This success is founded on solid strategic vision, superior foresight and innovation, intelligent and timely capital allocation decisions, rigorous execution and a cohesive, expert team. As we enter 2018 - our Company’s 20th anniversary year - we are confident that we will continue our long track record of superior consistent performance as the industry leader.”

2017 Performance

  • For the full year 2017, the Company’s normalized FFO per diluted common share year-over-year growth of one percent to $4.16 was principally due to accretive investments and improved property performance, partially offset by the impact of dispositions and loan repayments, higher rates on refinanced debt and lower profits and fees from beneficial transactions.
  • For the full year 2017, the Company’s net cash provided by operating activities grew five percent to $1.44 billion compared to the same period in 2016.
  • For the full year 2017, the Company’s same-store total portfolio (1,037 assets) cash net operating income (“NOI”) grew 2.5 percent compared to the same period in 2016, at the high end of previously disclosed guidance of 2 to 2.5 percent.
  • For the fourth quarter 2017, the Company’s same-store total portfolio (1,068 assets) cash NOI grew 2 percent compared to the same period in 2016.
  • Same-store cash NOI growth for the total portfolio and by segment for the full year and fourth quarter 2017 follows:
 
2017 Same-Store Cash NOI
Full Year 2017   Q4 2017
Reported Growth   10/27/17 Guidance Reported Growth
 
Triple-Net 3.7% 3% ─ 3.5% 4.2%
SHOP 1.3% 0.5% ─ 1.5% (0.1%)
Office 2.0% 1.5% ─ 2% 1.5%
Total Company 2.5% 2% 2.5% 2.0%
 

2017 and Recent Highlights

  • 2017 New Investments: Ventas closed on $1.8 billion of investments and new development and redevelopment project commitments, including:
    • University-Based Life Science Growth: The Company made acquisitions or development commitments approaching $400 million with new and existing relationships to further scale its institutional university-based life science business affiliated with leading research universities and companies:
      • New relationships included the Company’s acquisitions of high-quality life science and research properties affiliated with AA-rated Brown University (“Brown”) and AA-rated Virginia Commonwealth University.
      • Ventas also grew with existing partners, including follow-on development projects with Brown and Washington University in St. Louis. Ventas has grown its overall life science footprint by 37 percent since its initial life science acquisition in September 2016.
    • High-Quality Growth with Leading Seniors Housing Partners: Ventas acquired nearly $400 million in high-quality seniors housing communities principally located in coastal markets and also committed to over $275 million of attractive development and redevelopment projects, primarily with leading senior care providers Atria Senior Living (“Atria”) and Sunrise Senior Living. These development projects are all part of joint ventures with institutional capital partners.
    • Scaling of Leading Health System Platform: Ventas invested in the growth of leading healthcare provider Ardent Health Services (“Ardent”) by funding Ardent’s acquisition of LHP Hospital Group through a $700 million term loan. Pro forma for the pending acquisition of East Texas Medical Center by Ardent and the University of Texas System, Ardent will be an over $4 billion in annual revenue private, for-profit provider operating 31 hospitals in 7 states with average market shares of nearly 40 percent and with valuable not-for-profit and academic medical center relationships.
  • Profitable Capital Recycling: Ventas sold properties and received final repayments on loans receivable in 2017 for proceeds of over $900 million, with gains exceeding $700 million. The majority of proceeds consisted of the Company’s completed sales of its 36 skilled nursing facilities (“SNFs”) operated by Kindred Healthcare, Inc. (NYSE: KND) (“Kindred”) for proceeds of $700 million, representing a seven percent yield on cash rent and an eight percent GAAP yield. Ventas’s percentage of aggregate NOI received from SNFs is now only one percent.
  • Focused Partnerships with Leading Platforms: Ventas’s operators and assets continue to be highly valued and sought after, as experienced investors made meaningful investments in its platforms. Ventas’s support positioned its operators for continued success and value creation, including: recapitalization of Atria in its growth-focused capital raise with Fremont Realty Group; establishment of a new strategic seniors housing relationship in Eclipse Senior Living, a newly-formed operator founded by a team of experienced senior living executives led by industry veteran Kai Hsiao; and support of Kindred’s pending acquisition by TPG, Welsh, Carson, Anderson & Stowe and Humana (NYSE: HUM), which will create a separate, operationally focused and financially strong company that will operate Ventas’s long-term acute care and inpatient rehabilitation facilities.
  • Outstanding Financial Strength and Liquidity: The Company’s liquidity and financial flexibility remain strong, including:
    • Net debt to Adjusted Pro Forma EBITDA of 5.7x at year-end 2017;
    • Total indebtedness to gross asset value of 38 percent at year-end 2017;
    • Exceptional fixed charge coverage of 4.6x at year-end 2017;
    • Dividends for 2017 totaled $3.115 per share, representing a five percent year-over-year increase; and
    • Excellent liquidity currently with over $2.7 billion of borrowing capacity under its revolving credit facilities and approximately $100 million of cash on hand.
  • Leadership in Environmental, Social and Governance (ESG) Matters: Ventas accelerated its commitment to ESG matters and was recognized repeatedly for its results and leadership, including:
    • First time inclusion in the Dow Jones Sustainability™ North America Index, ranking in the top quartile of real estate companies in North America across a broad spectrum of ESG metrics;
    • Recognition as NAREIT’s 2017 Health Care “Leader in the Light,” and first place ranking among the three listed healthcare real estate company participants in the 2017 GRESB real estate ESG assessment; and
    • Being named a “Winning Company” in the 2020 Women on Boards Gender Diversity Index, which showcases Fortune 1000 Companies with 20 percent or greater women serving on their boards of directors. The Ventas Board of Directors is currently 30 percent female.
  • Company and Leadership Recognition
    • Ventas was named one of Fortune’s “2018 World’s Most Admired Companies” in January 2018, the only healthcare REIT on this year’s list, recognizing the Company’s industry leadership, exemplary stewardship and world-class team.
    • Ventas Chairman and Chief Executive Officer Debra A. Cafaro was again recognized as a top global CEO and a leader in the real estate and healthcare industries, including being named by: Forbes as one of the “World's 100 Most Powerful Women” for the second year; The Harvard Business Review as one of “The Best-Performing CEOs in the World” for the fourth consecutive year; and Modern Healthcare as one of the “100 Most Influential People in Healthcare.”
    • In the Harvard Business Review’s ranking of “The Best-Performing CEOs,” Ventas’s financial performance ranked in the top four percent of all companies measured, listed at number 32 of almost 900 firms - highlighting the superior and consistent performance of Ventas over an 18-year period.

First Quarter Dividend

The Company’s Board of Directors declared a dividend for the first quarter 2018 of $0.79 per share, representing a two percent year-over-year increase. The dividend is payable in cash on April 12, 2018 to stockholders of record on April 2, 2018.

2018 Guidance

“Our 2018 forecast reflects our expectation that our high-quality diverse portfolio will continue to grow same-store cash NOI. It incorporates continued strategic actions to create shareholder value over the short and long-term, including $1.5 billion in asset dispositions, inclusive of a potential joint venture on an existing portfolio of senior housing assets and proceeds from the repayment of nearly $850 million of highly profitable loan investments. These disposition proceeds are expected to be redeployed into the repayment of debt, resulting in further improvement of our balance sheet, and investments in future growth in our attractive university-based life science business,” said Cafaro. “While these actions affect 2018 normalized FFO, we are confident they position us to seize opportunities and maintain our leading market position.”

Ventas expects 2018 income from continuing operations per share, NAREIT FFO per share, normalized FFO per share and same-store cash NOI growth to range as follows:

 
Full Year 2018 Range
Per Diluted Common Share
Low   High
 
Income from Cont. Ops $1.34 $1.40
NAREIT FFO $3.80 $3.89
Normalized FFO $3.95 $4.05
 
 
Full Year 2018 Projected Same-
Store Cash NOI Growth
Current Guidance
Low   High
 
Triple-Net 3% 4%
SHOP (4%) (1%)
Office 1.75% 2.75%
Total Company 0.5% 2%
 

Substantially all of the expected normalized FFO change in 2018 compared to 2017 results from: (a) no material unannounced acquisitions included in 2018 guidance; (b) the impact of 2017 and 2018 disposition activity including i) the carryover impact of nearly $1 billion of late 2017 dispositions - principally comprised of $700 million in SNF dispositions at an eight percent GAAP yield - and related debt reduction and ii) $1.5 billion of additional capital recycling in 2018 at a GAAP rate of over eight percent, including joint ventures, loan repayments and other asset dispositions, the proceeds of which will be used principally to retire debt; and (c) proactive balance sheet management, including the expectation that the Company will refinance approximately $1 billion of debt during the year with longer-duration fixed rate debt, and increased interest expense from LIBOR increases. Debt retirement in 2018 is expected to further improve the Company’s net debt to Adjusted Pro Forma EBITDA ratio to approximately 5.5x by year-end 2018.

The Company’s guidance does include the funding of $425 million in future growth through high-quality development and redevelopment projects, mostly in Ventas’s attractive university-based life science and medical office businesses.

Ventas expects continued positive same-store cash NOI growth in 2018 for the Company’s total property portfolio. Total portfolio same-store cash NOI is expected to grow 0.5 to 2 percent, with strong Office and Triple-Net portfolio growth being largely offset by seniors housing operating portfolio (“SHOP”) performance. SHOP same-store cash NOI is expected to be lower in 2018 due to the cumulative impact of new seniors housing supply in certain markets and the full year occupancy impact of a severe flu season. Same-store NOI growth in 2018 as measured on a GAAP basis is expected at the guidance midpoint to be 100 basis points lower than same-store cash NOI growth for the total Company property portfolio, with the most pronounced differential in the Office segment.

No equity issuance is included in guidance. The 2018 outlook assumes approximately 360 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. 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.

Fourth Quarter and Full Year 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 2283238, 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.

The Company routinely announces material information to investors and the marketplace using press releases, SEC filings, public conference calls, webcasts and the Company’s website at www.ventasreit.com/investor-relations. The information that the Company posts to its website may be deemed to be material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Company’s press releases, SEC filings and public conference calls and webcasts. 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 ended December 31, 2017 and for the year ending December 31, 2018; (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)
 
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
 
Assets
Real estate investments:
Land and improvements $ 2,147,621 $ 2,121,214 $ 2,117,692 $ 2,123,266 $ 2,089,591
Buildings and improvements 22,177,088 21,935,860 21,827,419 21,869,961 21,516,396
Construction in progress 343,129 306,095 281,093 213,281 210,599
Acquired lease intangibles 1,537,995   1,536,476   1,534,173   1,532,365   1,510,629  
26,205,833 25,899,645 25,760,377 25,738,873 25,327,215
Accumulated depreciation and amortization (5,617,453 ) (5,434,772 ) (5,220,611 ) (5,123,144 ) (4,932,461 )
Net real estate property 20,588,380 20,464,873 20,539,766 20,615,729 20,394,754
Secured loans receivable and investments, net 1,346,359 1,352,434 1,395,404 1,398,417 702,021
Investments in unconsolidated real estate entities 123,639   117,185   119,794   108,976   95,921  
Net real estate investments 22,058,378 21,934,492 22,054,964 22,123,122 21,192,696
Cash and cash equivalents 81,355 85,063 103,353 91,284 286,707
Escrow deposits and restricted cash 106,898 76,522 68,343 92,175 80,647
Goodwill 1,034,641 1,034,497 1,034,054 1,033,484 1,033,225
Assets held for sale 100,324 68,926 89,569 61,983 54,961
Other assets 572,945   540,295   505,475   517,283   518,364  
Total assets $ 23,954,541   $ 23,739,795   $ 23,855,758   $ 23,919,331   $ 23,166,600  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 11,276,062 $ 11,424,145 $ 11,907,997 $ 11,943,733 $ 11,127,326
Accrued interest 93,958 95,684 87,248 78,219 83,762
Accounts payable and other liabilities 1,182,552 943,800 929,573 946,674 907,928
Liabilities related to assets held for sale 61,202 9,837 9,812 1,389 1,462
Deferred income taxes 250,092   296,272   296,822   294,057   316,641  
Total liabilities 12,863,866 12,769,738 13,231,452 13,264,072 12,437,119
 
Redeemable OP unitholder and noncontrolling interests 158,490 171,813 182,154 171,384 200,728
 
Commitments and contingencies
 
Equity:
Ventas stockholders' equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

Common stock, $0.25 par value; 356,187; 356,163;
356,134; 354,863; and 354,125 shares issued at
December 31, 2017, September 30, 2017, June 30,
2017, March 31, 2017, and December 31, 2016,
respectively

89,029 89,023 89,016 88,698 88,514
Capital in excess of par value 13,053,057 13,034,527 13,019,023 12,944,501 12,917,002
Accumulated other comprehensive loss (35,120 ) (40,780 ) (45,035 ) (53,657 ) (57,534 )
Retained earnings (deficit) (2,240,698 ) (2,351,430 ) (2,688,946 ) (2,564,936 ) (2,487,695 )

Treasury stock, 1; 0; 0; 0; and 1 shares at December 31,
2017, September 30, 2017, June 30, 2017, March 31,
2017, and December 31, 2016, respectively

(42 )       (47 )
Total Ventas stockholders' equity 10,866,226 10,731,340 10,374,058 10,414,606 10,460,240
Noncontrolling interests 65,959   66,904   68,094   69,269   68,513  
Total equity 10,932,185   10,798,244   10,442,152   10,483,875   10,528,753  
Total liabilities and equity $ 23,954,541   $ 23,739,795   $ 23,855,758   $ 23,919,331   $ 23,166,600  

 

   
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
   
For the Three Months Ended For the Year Ended
December 31, December 31,
2017 2016 2017 2016
Revenues
Rental income:
Triple-net leased $ 205,176 $ 210,804 $ 840,131 $ 845,834
Office 191,826   183,846   753,467   630,342  
397,002 394,650 1,593,598 1,476,176
Resident fees and services 457,101 456,919 1,843,232 1,847,306
Office building and other services revenue 3,896 4,064 13,677 21,070
Income from loans and investments 32,109 19,996 117,608 98,094
Interest and other income 5,180   84   6,034   876  
Total revenues 895,288 875,713 3,574,149 3,443,522
Expenses
Interest 111,951 107,739 448,196 419,740
Depreciation and amortization 232,650 232,189 887,948 898,924
Property-level operating expenses:
Senior living 313,769 310,303 1,250,065 1,242,978
Office 58,279   55,165   233,007   191,784  
372,048 365,468 1,483,072 1,434,762
Office building services costs 1,683 1,034 3,391 7,311
General, administrative and professional fees 34,930 31,488 135,490 126,875
(Gain) loss on extinguishment of debt, net (102 ) (386 ) 754 2,779
Merger-related expenses and deal costs 1,632 (438 ) 10,535 24,635
Other 3,986   1,087   20,052   9,988  
Total expenses 758,778   738,181   2,989,438   2,925,014  
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests 136,510 137,532 584,711 518,508
(Loss) income from unconsolidated entities (4,355 ) 2,207 (561 ) 4,358
Income tax benefit 46,680   2,836   59,799   31,343  
Income from continuing operations 178,835 142,575 643,949 554,209
Discontinued operations (15 ) (167 ) (110 ) (922 )
Gain on real estate dispositions 214,985   66,424   717,273   98,203  
Net income 393,805 208,832 1,361,112 651,490
Net income attributable to noncontrolling interests 1,251   1,195   4,642   2,259  
Net income attributable to common stockholders $ 392,554   $ 207,637   $ 1,356,470   $ 649,231  
Earnings per common share
Basic:
Income from continuing operations $ 0.50 $ 0.40 $ 1.81 $ 1.61
Net income attributable to common stockholders 1.10 0.59 3.82 1.88
Diluted:

Income from continuing operations

$ 0.50 $ 0.40 $ 1.80 $ 1.59
Net income attributable to common stockholders 1.09 0.58 3.78 1.86
 
Weighted average shares used in computing earnings per common share
Basic 355,966 353,911 355,326 344,703
Diluted 359,184 357,435 358,566 348,390
 
Dividends declared per common share $ 0.79 $ 0.775 $ 3.115 $ 2.965

 
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
For the Quarters Ended
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Revenues
Rental income:
Triple-net leased $ 205,176 $ 212,370 $ 213,258 $ 209,327 $ 210,804
Office 191,826   189,506   186,240   185,895   183,846  
397,002 401,876 399,498 395,222 394,650
Resident fees and services 457,101 461,700 460,243 464,188 456,919
Office building and other services revenue 3,896 3,196 3,179 3,406 4,064
Income from loans and investments 32,109 32,985 32,368 20,146 19,996
Interest and other income 5,180   171   202   481   84  
Total revenues 895,288 899,928 895,490 883,443 875,713
 
Expenses
Interest 111,951 113,869 113,572 108,804 107,739
Depreciation and amortization 232,650 213,407 224,108 217,783 232,189
Property-level operating expenses:
Senior living 313,769 315,598 308,625 312,073 310,303
Office 58,279   60,609   57,205   56,914   55,165  
372,048 376,207 365,830 368,987 365,468
Office building services costs 1,683 418 552 738 1,034
General, administrative and professional fees 34,930 33,317 33,282 33,961 31,488
(Gain) loss on extinguishment of debt, net (102 ) 511 36 309 (386 )
Merger-related expenses and deal costs 1,632 804 6,043 2,056 (438 )
Other 3,986   13,030   1,848   1,188   1,087  
Total expenses 758,778   751,563   745,271   733,826   738,181  
 
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests 136,510 148,365 150,219 149,617 137,532
(Loss) income from unconsolidated entities (4,355 ) 750 (106 ) 3,150 2,207
Income tax benefit 46,680   7,815   2,159   3,145   2,836  
Income from continuing operations 178,835 156,930 152,272 155,912 142,575
Discontinued operations (15 ) (19 ) (23 ) (53 ) (167 )
Gain on real estate dispositions 214,985   458,280   719   43,289   66,424  
Net income 393,805 615,191 152,968 199,148 208,832
Net income attributable to noncontrolling interests 1,251   1,233   1,137   1,021   1,195  
Net income attributable to common stockholders $ 392,554   $ 613,958   $ 151,831   $ 198,127   $ 207,637  
 
Earnings per common share
Basic:
Income from continuing operations $ 0.50 $ 0.44 $ 0.43 $ 0.44 $ 0.40
Net income attributable to common stockholders 1.10 1.72 0.43 0.56 0.59
Diluted:
Income from continuing operations $ 0.50 $ 0.44 $ 0.42 $ 0.44 $ 0.40
Net income attributable to common stockholders 1.09 1.71 0.42 0.55 0.58
 
Weighted average shares used in computing earnings per common share
Basic 355,966 355,929 355,024 354,410 353,911
Diluted 359,184 359,333 358,311 357,572 357,435

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  For the Year Ended December 31,
2017   2016
Cash flows from operating activities:
Net income $ 1,361,112 $ 651,490
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 887,948 898,924
Amortization of deferred revenue and lease intangibles, net (20,537 ) (20,336 )
Other non-cash amortization 16,058 10,357
Stock-based compensation 26,543 20,958
Straight-lining of rental income, net (23,134 ) (27,988 )
Loss on extinguishment of debt, net 754 2,779
Gain on real estate dispositions (717,273 ) (98,203 )
Gain on real estate loan investments (124 ) (2,271 )
Income tax benefit (63,599 ) (34,227 )
Loss (income) from unconsolidated entities 3,588 (4,358 )
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Distributions from unconsolidated entities 4,676 7,598
Other 9,240 (1,847 )
Changes in operating assets and liabilities:
(Increase) decrease in other assets (15,854 ) 5,560
Increase in accrued interest 11,068 2,604
Decrease in accounts payable and other liabilities (35,259 ) (38,699 )
Net cash provided by operating activities 1,442,180 1,372,341
Cash flows from investing activities:
Net investment in real estate property (380,232 ) (1,429,112 )
Investment in loans receivable and other (748,119 ) (158,635 )
Proceeds from real estate disposals 537,431 300,561
Proceeds from loans receivable 101,097 320,082
Development project expenditures (299,085 ) (143,647 )
Capital expenditures (132,558 ) (117,456 )
Distributions from unconsolidated entities 6,169
Investment in unconsolidated entities (61,220 ) (6,436 )
Net cash used in investing activities (976,517 ) (1,234,643 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities 384,783 (35,637 )
Proceeds from debt 1,111,649 893,218
Repayment of debt (1,369,084 ) (1,022,113 )
Purchase of noncontrolling interests (15,809 ) (2,846 )
Payment of deferred financing costs (27,297 ) (6,555 )
Issuance of common stock, net 73,596 1,286,680
Cash distribution to common stockholders (827,285 ) (1,024,968 )
Cash distribution to redeemable OP unitholders (5,677 ) (8,640 )
Contributions from noncontrolling interests 4,402 7,326
Distributions to noncontrolling interests (11,187 ) (6,879 )
Other 10,582   17,252  
Net cash (used in) provided by financing activities (671,327 ) 96,838  
Net (decrease) increase in cash and cash equivalents (205,664 ) 234,536
Effect of foreign currency translation on cash and cash equivalents 312 (852 )
Cash and cash equivalents at beginning of period 286,707   53,023  
Cash and cash equivalents at end of period $ 81,355   $ 286,707  
 
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions:
Real estate investments $ 425,906 $ 69,092
Utilization of funds held for an Internal Revenue Code Section 1031 exchange (286,748 ) (6,954 )
Other assets (3,716 ) 90,037
Debt 75,231 47,641
Other liabilities 70,878 72,636
Deferred income tax liability (14,869 ) 9,381
Noncontrolling interests 4,202 22,517
Equity issued for redemption of OP and Class C units 24,002 24,318

 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  For the Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2017 2017 2017 2017 2016
Cash flows from operating activities:
Net income $ 393,805 $ 615,191 $ 152,968 $ 199,148 $ 208,832
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 232,650 213,407 224,108 217,783 232,189
Amortization of deferred revenue and lease intangibles, net (4,254 ) (5,434 ) (5,834 ) (5,015 ) (5,029 )
Other non-cash amortization 4,872 4,602 4,124 2,460 3,183
Stock-based compensation 6,620 6,527 6,695 6,701 5,073
Straight-lining of rental income, net (5,750 ) (6,229 ) (5,778 ) (5,377 ) (6,602 )
(Gain) loss on extinguishment of debt, net (102 ) 511 36 309 (386 )
Gain on real estate dispositions (214,985 ) (458,280 ) (719 ) (43,289 ) (66,424 )
Gain on real estate loan investments (120 ) (4 )
Income tax benefit (47,980 ) (8,515 ) (2,959 ) (4,145 ) (3,395 )
Loss (income) from unconsolidated entities 4,355 (750 ) 106 (123 ) (2,207 )
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Distributions from unconsolidated entities 767 775 754 2,380 2,024
Other 1,801 6,091 696 652 (772 )
Changes in operating assets and liabilities:
Decrease (increase) in other assets 1,744 (47,532 ) 33,648 (3,714 ) 3,807
(Decrease) increase in accrued interest (1,620 ) 8,138 9,291 (4,741 ) 12,657
(Decrease) increase in accounts payable and other liabilities (15,982 ) 20,601   (15,607 ) (24,271 ) (16,755 )
Net cash provided by operating activities 355,941 348,983 401,525 335,731 366,195
Cash flows from investing activities:
Net investment in real estate property (118,109 ) (22,625 ) (40,655 ) (198,843 ) (7,520 )
Investment in loans receivable and other (14,086 ) (15,800 ) (16,875 ) (701,358 ) (3,686 )
Proceeds from real estate disposals 5,294 512,567 19,570 237,000
Proceeds from loans receivable 16,736 59,294 21,704 3,363 126,019
Development project expenditures (88,662 ) (67,154 ) (56,817 ) (86,452 ) (49,249 )
Capital expenditures (49,171 ) (27,435 ) (32,117 ) (23,835 ) (42,160 )
Distributions from unconsolidated entities 353 5,816
Investment in unconsolidated entities (18,821 ) (3,351 ) (12,108 ) (26,940 ) (261 )
Net cash (used in) provided by investing activities (266,466 ) 441,312 (117,298 ) (1,034,065 ) 260,143
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities 45 20,282 341,634 22,822 (82,365 )
Proceeds from debt 53,212 29,928 231,295 797,214 16,601
Repayment of debt (143,559 ) (568,989 ) (636,040 ) (20,496 ) (105,608 )
Purchase of noncontrolling interests (15,809 ) (1,242 )
Payment of deferred financing costs (871 ) (6,739 ) (13,303 ) (6,384 ) (408 )
Issuance of common stock, net 73,596 20,978
Cash distribution to common stockholders (276,320 ) (275,597 ) (275,368 ) (274,566 )
Cash distribution to redeemable OP unitholders (1,957 ) (1,827 ) (1,893 ) (2,154 )
Contributions from noncontrolling interests 2,175 125 2,102 1,400
Distributions to noncontrolling interests (1,939 ) (5,092 ) (1,746 ) (2,410 ) (1,758 )
Other 39   841   6,405   3,297   621  
Net cash (used in) provided by financing activities (93,073 ) (805,871 ) (275,458 ) 503,075   (428,501 )
Net (decrease) increase in cash and cash equivalents (3,598 ) (15,576 ) 8,769 (195,259 ) 197,837
Effect of foreign currency translation on cash and cash equivalents (110 ) (2,714 ) 3,300 (164 ) (409 )
Cash and cash equivalents at beginning of period 85,063   103,353   91,284   286,707   89,279  
Cash and cash equivalents at end of period $ 81,355   $ 85,063   $ 103,353   $ 91,284   $ 286,707  
 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
  For the Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2017 2017 2017 2017 2016
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions:
Real estate investments $ 219,135 $ 1,505 $ 16,347 $ 188,919 $ 9,426
Utilization of funds held for an Internal Revenue Code Section 1031 exchange (201,753 ) (84,995 )
Other assets 1,830 (1,450 ) (3,723 ) (373 ) 10,158
Debt 10,602 12,167 52,462
Other liabilities 6,788 (1,664 ) (2,922 ) 68,676 12,190
Deferred income tax liability 1,247 64 3,384 (19,564 ) 7,102
Noncontrolling interests 575 1,655 (5 ) 1,977 292
Equity issued for redemption of OP and Class C units 1,308 335 288 22,071 1,348

               
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
    Q4   FY   Q1   Q2   Q3   Q4   FY   '16-'17
Income from continuing operations $ 142,575 $ 554,209 $ 155,912 $ 152,272 $ 156,930 $ 178,835 $ 643,949 16 %
Income from continuing operations per share   $ 0.40     $ 1.59     $ 0.44     $ 0.42     $ 0.44     $ 0.50     $ 1.80     13 %
Discontinued operations (167 ) (922 ) (53 ) (23 ) (19 ) (15 ) (110 )
Gain on real estate dispositions 66,424     98,203     43,289     719     458,280     214,985     717,273  
Net income 208,832 651,490 199,148 152,968 615,191 393,805 1,361,112
Net income attributable to noncontrolling interests   1,195     2,259     1,021     1,137     1,233     1,251     4,642      
Net income attributable to common stockholders $ 207,637 $ 649,231 $ 198,127 $ 151,831 $ 613,958 $ 392,554 $ 1,356,470 109 %
Net income attributable to common stockholders per share   $ 0.58     $ 1.86     $ 0.55     $ 0.42     $ 1.71     $ 1.09     $ 3.78     103 %
Adjustments:

Depreciation and amortization on real estate assets

230,353 891,985 215,961 222,347 211,784 230,996 881,088
Depreciation on real estate assets related to noncontrolling interests (2,031 ) (7,785 ) (1,995 ) (1,817 ) (1,911 ) (1,842 ) (7,565 )
Depreciation on real estate assets related to unconsolidated entities 1,432 5,754 1,187 1,458 855 731 4,231
Gain on re-measurement of equity interest upon acquisition, net (3,027 ) (3,027 )
Gain on real estate dispositions (66,424 ) (98,203 ) (43,289 ) (719 ) (458,280 ) (214,985 ) (717,273 )
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 ) (12 ) (1,057 )
Discontinued operations:
Loss on real estate dispositions     1                      
Subtotal: FFO add-backs 163,386 791,313 168,860 221,187 (248,520 ) 14,888 156,415
Subtotal: FFO add-backs per share   $ 0.46     $ 2.27     $ 0.47     $ 0.62     $ (0.69 )   $ 0.04     $ 0.44      
FFO (NAREIT) attributable to common stockholders $ 371,023 $ 1,440,544 $ 366,987 $ 373,018 $ 365,438 $ 407,442 $ 1,512,885 5 %
FFO (NAREIT) attributable to common stockholders per share   $ 1.04     $ 4.13     $ 1.03     $ 1.04     $ 1.02     $ 1.13     $ 4.22     2 %
 
Adjustments:
Change in fair value of financial instruments 134 62 23 (153 ) 8 81 (41 )
Non-cash income tax benefit (3,395 ) (34,227 ) (4,145 ) (2,959 ) (8,515 ) (6,768 ) (22,387 )
Impact of tax reform (36,539 ) (36,539 )
(Gain) loss on extinguishment of debt, net (386 ) 2,779 403 47 486 (97 ) 839
(Gain) loss on non-real estate dispositions related to unconsolidated entities (557 ) 4 (16 ) (22 ) (5 ) (39 )
Merger-related expenses, deal costs and re-audit costs (479 ) 28,290 3,129 7,036 2,741 1,917 14,823
Amortization of other intangibles 438 1,752 438 365 328 327 1,458
Other items related to unconsolidated entities 212 280 1,207 1,489 3,188
Non-cash impact of changes to equity plan 999 1,711 1,372 1,371 5,453
Natural disaster expenses (recoveries), net                 9,810     1,791     11,601  
Subtotal: normalized FFO add-backs (3,688 ) (1,901 ) 1,063 6,311 7,415 (36,433 ) (21,644 )
Subtotal: normalized FFO add-backs per share   $ (0.01 )   $ (0.01 )   $ 0.00     $ 0.02     $ 0.02     $ (0.10 )   $ (0.06 )    
Normalized FFO attributable to common stockholders $ 367,335 $ 1,438,643 $ 368,050 $ 379,329 $ 372,853 $ 371,009 $ 1,491,241 4 %
Normalized FFO attributable to common stockholders per share   $ 1.03     $ 4.13     $ 1.03     $ 1.06     $ 1.04     $ 1.03     $ 4.16     1 %
 
Non-cash items included in normalized FFO:
Amortization of deferred revenue and lease intangibles, net (5,029 ) (20,336 ) (5,015 ) (5,834 ) (5,434 ) (4,254 ) (20,537 )
Other non-cash amortization, including fair market value of debt 3,183 10,357 2,460 4,124 4,602 4,872 16,058
Stock-based compensation 5,073 20,958 5,702 4,984 5,155 5,249 21,090
Straight-lining of rental income, net (6,602 )   (27,988 )   (5,377 )   (5,778 )   (6,229 )   (5,750 )   (23,134 )
Subtotal: non-cash items included in normalized FFO (3,375 ) (17,009 ) (2,230 ) (2,504 ) (1,906 ) 117 (6,523 )
Capital expenditures   (44,540 )   (124,621 )   (24,919 )   (33,148 )   (30,899 )   (49,812 )   (138,778 )    
Normalized FAD attributable to common stockholders   $ 319,420     $ 1,297,013     $ 340,901     $ 343,677     $ 340,048     $ 321,314     $ 1,345,940     4 %
Merger-related expenses, deal costs and re-audit costs 479 (28,290 ) (3,129 ) (7,036 ) (2,741 ) (1,917 ) (14,823 )
Other items related to unconsolidated entities           (212 )   (280 )   (1,207 )   (1,489 )   (3,188 )    
FAD attributable to common stockholders   $ 319,899     $ 1,268,723     $ 337,560     $ 336,361     $ 336,100     $ 317,908     $ 1,327,929     5 %
Weighted average diluted shares 357,435     348,390     357,572     358,311     359,333     359,184     358,566  
 
1 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 certain tenant allowances and leasing commissions. FAD represents normalized FAD after subtracting merger-related expenses, deal costs and re-audit costs and other 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
FY2018 - Guidance   FY2018 - Per Share
Low   High Low   High
                 
Income from Continuing Operations   $484   $505   $1.34   $1.40
   
Gain on Real Estate Dispositions 280 310 0.78 0.86
Other Adjustments 3 (4 ) (6 ) (0.01 ) (0.02 )
                 
Net Income Attributable to Common Stockholders   $760   $809   $2.11   $2.25
 
Depreciation and Amortization Adjustments 887 900 2.46 2.50
Gain on Real Estate Dispositions (280 ) (310 ) (0.78 ) (0.86 )
Other Adjustments 3
                 
FFO (NAREIT) Attributable to Common Stockholders   $1,367   $1,399   $3.80   $3.89
 
Merger-Related Expenses, Deal Costs and Re-Audit Costs 13 8 0.04 0.02
(Gain) Loss on Extinguishment of Debt, Net 45 63 0.12 0.18
Other Adjustments 3 (3 ) (12 ) (0.01 ) (0.03 )
                 
Normalized FFO Attributable to Common Stockholders $1,422 $1,458 $3.95 $4.05
% Year-Over-Year Growth           (5 )%   (3 )%
 
Non-Cash Items Included in Normalized FFO 19 17
Capital Expenditures (138 ) (148 )
           
Normalized FAD Attributable to Common Stockholders   $1,303   $1,327  
 
Merger-Related Expense, Deal Costs and Re-Audit Costs (13 ) (8 )
Other Adjustments 3 (4 ) (2 )
           
FAD Attributable to Common Stockholders   $1,286   $1,317  
 
Weighted Average Diluted Shares (in millions) 360 360
 

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 December 31, 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 $ 178,835
Discontinued operations (15 )
Gain on real estate dispositions 214,985  
Net income 393,805
Net income attributable to noncontrolling interests 1,251  
Net income attributable to common stockholders 392,554
Adjustments:
Interest 111,951
Gain on extinguishment of debt, net (102 )
Taxes (including tax amounts in general, administrative and professional fees) (45,678 )
Depreciation and amortization 232,650
Non-cash stock-based compensation expense 6,620
Merger-related expenses, deal costs and re-audit costs 1,652
Net income (loss) attributable to noncontrolling interests, net of consolidated joint venture partners’ share of EBITDA (3,187 )
(Income) loss from unconsolidated entities, net of Ventas share of EBITDA from unconsolidated entities 11,422
Gain on real estate dispositions (214,985 )
Unrealized foreign currency losses 287
Change in fair value of financial instruments 81
Natural disaster expenses (recoveries), net 1,791  
Adjusted EBITDA 495,056
Pro forma adjustments for current period activity (1,195 )
Adjusted Pro Forma EBITDA $ 493,861  
 
Adjusted Pro Forma EBITDA annualized $ 1,975,444  
 
As of December 31, 2017:
Total debt $ 11,276,062
Debt on held for sale assets 59,221
Cash (81,355 )
Restricted cash pertaining to debt (70,753 )
Consolidated joint venture partners’ share of debt (76,668 )
Ventas share of debt from unconsolidated entities 90,257  
Net debt $ 11,196,764  
 
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 December 31, 2017
Income from continuing operations $ 178,835
Adjustments:
Interest and other income (5,180 )
Interest 111,951
Depreciation and amortization 232,650
General, administrative and professional fees 34,930
Gain on extinguishment of debt, net (102 )
Merger-related expenses and deal costs 1,632
Other 3,986
Loss from unconsolidated entities 4,355
Income tax benefit (46,680 )
Reported Segment NOI $ 206,301 $ 143,332 $ 134,014 $ 32,730 516,377
Adjustments:
Normalizing adjustment for technology costs 310 310
NOI not included in same-store (28,931 ) (3,444 ) (8,116 ) (40,491 )
Straight-lining of rental income (608 ) (5,142 ) (5,750 )
Non-cash rental income (3,007 ) (351 ) (3,358 )
Non-segment NOI       (32,730 ) (32,730 )
(32,546 ) (3,134 ) (13,609 ) (32,730 ) (82,019 )
Same-Store cash NOI (Constant Currency) $ 173,755   $ 140,198   $ 120,405   $   $ 434,358  
 
Percentage increase 4.2 % (0.1 )% 1.5 % 2.0 %
 
For the Three Months Ended December 31, 2016
Income from continuing operations $ 142,575
Adjustments:
Interest and other income (84 )
Interest 107,739
Depreciation and amortization 232,189
General, administrative and professional fees 31,488
Gain on extinguishment of debt, net (386 )
Merger-related expenses and deal costs (438 )
Other 1,087
Income from unconsolidated entities (2,207 )
Income tax benefit (2,836 )
Reported Segment NOI $ 212,049 $

146,616

$ 130,120 $ 20,342 509,127
Adjustments:
NOI not included in same-store (39,013 ) (7,099 ) (6,547 )

(52,659

)
Straight-lining of rental income (1,774 ) (4,828 ) (6,602 )
Non-cash rental income (4,782 ) (131 ) (4,913 )
Non-segment NOI

(20,342

)

 

 

(20,342 )
NOI impact from change in FX 330   854         1,184  
(45,239 ) (6,245 ) (11,506 ) (20,342   )   (83,332 )
Same-Store cash NOI (Constant Currency) $ 166,810   $ 140,371   $ 118,614   $  

$

425,795

 
 

         
Triple-Net Leased Properties Senior Living Operations Office Operations All Other Total
For the Twelve Months Ended December 31, 2017
Income from continuing operations $ 643,949
Adjustments:
Interest and other income (6,034 )
Interest 448,196
Depreciation and amortization 887,948
General, administrative and professional fees 135,490
Loss on extinguishment of debt, net 754
Merger-related expenses and deal costs 10,535
Other 20,052
Loss from unconsolidated entities 561
Income tax benefit (59,799 )
Reported Segment NOI $ 844,711 $ 593,167 $ 524,566 $ 119,208 2,081,652
Adjustments:
Normalizing adjustment for technology costs 3,375 3,375
NOI not included in same-store (142,448 ) (32,574 ) (125,974 ) (300,996 )
Straight-lining of rental income (3,612 ) (19,521 ) (23,133 )
Non-cash rental income (16,758 ) (942 ) (17,700 )
Non-segment NOI       (119,208 ) (119,208 )
(162,818 ) (29,199 ) (146,437 ) (119,208 ) (457,662 )
Same-Store cash NOI (Constant Currency) $ 681,893   $ 563,968   $ 378,129   $   $ 1,623,990  
Percentage increase 3.7 % 1.3 % 2.0 % 2.5 %
 
For the Twelve Months Ended December 31, 2016
Income from continuing operations $ 554,209
Adjustments:
Interest and other income (876 )
Interest 419,740
Depreciation and amortization 898,924
General, administrative and professional fees 126,875
Loss on extinguishment of debt, net 2,779
Merger-related expenses and deal costs 24,635
Other 9,988
Income from unconsolidated entities (4,358 )
Income tax benefit (31,343 )
Reported Segment NOI $ 850,755 $ 604,328 $ 444,276 $ 101,214 2,000,573
Adjustments:
Modification fee 2,720 2,720
NOI not included in same-store (158,884 ) (49,128 ) (63,015 ) (271,027 )
Straight-lining of rental income (15,411 ) (12,577 ) (27,988 )
Non-cash rental income (20,288 ) 1,905 (18,383 )
Non-segment NOI (101,214 ) (101,214 )
NOI impact from change in FX (1,037 ) 1,293       256  
(192,900 ) (47,835 ) (73,687 ) (101,214 ) (415,636 )
Same-Store cash NOI (Constant Currency) $ 657,855   $ 556,493   $ 370,589   $   $ 1,584,937  
 

 
NON-GAAP FINANCIAL MEASURES RECONCILIATION

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

(Dollars in millions, except per share amounts)
 
FY2018 - Guidance
Tentative / Preliminary and Subject to Change
NNN   SHOP   Office   Non-Segment   Total
High End
Income from Continuing Operations $ 505
Depreciation and Amortization3 881
Interest Expense, G&A, Other Income and Expenses4 615  
Reported Segment NOI5 $ 762 $ 591 $ 538 $ 109 2,001
Normalizing Adjustment for Technology Costs6 1 1
Non-Cash and Non-Same-Store Adjustments (49 ) (24 ) (82 ) (109 ) (264 )
Same-Store Cash NOI5 713 568 456 1,738
Percentage Increase 4.0 % (1.0 )% 2.75 % NM 2.0 %
 
Modification Fees     (1 )   (1 )
Adjusted Same-Store Cash NOI5 $ 713   $ 568   $ 455   $   $ 1,737  
Adjusted Percentage Increase 4.0 % (1.0 )% 2.6 % NM 2.0 %
 
Low End
Income from Continuing Operations $ 484
Depreciation and Amortization3 861
Interest Expense, G&A, Other Income and Expenses4 615  
Reported Segment NOI5 $ 755 $ 574 $ 533 $ 94 1,960
Normalizing Adjustment for Technology Costs6 1 1
Non-Cash and Non-Same-Store Adjustments (49 ) (24 ) (81 ) (94 ) (248 )
Same-Store Cash NOI5 706 551 452 1,713
Percentage Increase 3.0 % (4.0 )% 1.75 % NM 0.5 %
 
Modification Fees     (1 )   (1 )
Adjusted Same-Store Cash NOI5 $ 706   $ 551   $ 451   $   $ 1,712  
Adjusted Percentage Increase 3.0 % (4.0 )% 1.6 % NM 0.5 %
 
Prior Year
Income from Continuing Operations $ 644
Depreciation and Amortization3 888
Interest Expense, G&A, Other Income and Expenses4 550  
Reported Segment NOI $ 845 $ 593 $ 525 $ 119 2,082
Normalizing Adjustment for Technology Costs6 3 3
Non-Cash and Non-Same-Store Adjustments (161 ) (25 ) (81 ) (119 ) (386 )
NOI Impact from Change in FX 2   3       5  
Same-Store Cash NOI 686 574 444 1,704
Modification Fees          
 
Adjusted Same-Store Cash NOI $ 686   $ 574   $ 444   $   $ 1,704  
 
2018
GBP (£) to USD ($) 1.40
USD ($) 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 tables titled “Net Operating Income (NOI) and Same-Store Cash NOI by Segment” for the three and twelve months ended December 31, 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.

Source: Ventas, Inc.

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