LTC LTC Properties Inc

LTC Properties, Inc. (NYSE: LTC), a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for its fourth quarter ended December 31, 2016.

Net income available to common stockholders was $20.6 million, or $0.53 per diluted share, for the 2016 fourth quarter, compared with $17.8 million, or $0.48 per diluted share, for the same period in 2015. The increase in net income available to common stockholders was primarily due to higher revenues from investing activities, and the net reduction in impairment charges, partially offset by higher interest expense resulting from the sale of senior unsecured notes in 2016, gain on sale recognized in 2015, as well as additional general and administrative expenditures related to increased investment activities.

Funds from Operations (“FFO”) increased 10.2% to $30.7 million for the 2016 fourth quarter, up from $27.8 million for the comparable 2015 period. FFO per diluted common share was $0.78 and $0.74 for the quarters ended December 31, 2016 and 2015, respectively, which represents a 5.4% per share increase. The increase in FFO was primarily due to higher investing activities, partially offset by higher interest expense resulting from the sale of senior unsecured notes in 2016, as well as additional general and administrative expenditures related to increased investment activities.

LTC completed the following transactions during the fourth quarter of 2016:

• Purchased a parcel of land in Illinois for $1.6 million and entered into a development commitment to construct a 66-unit memory care community. The commitment totals $14.5 million, including the land purchase;
• Completed construction and opened a 108-unit independent living community in Kansas;
• Purchased a $12.5 million mezzanine loan on a portfolio of 64 skilled nursing centers. The mezzanine loan has a five-year term and a rate of LIBOR plus 11.75%; and
• Entered into a $3.4 million mezzanine loan commitment for the development of a 127-unit senior living community in Florida, which will provide a combination of independent, assisted and memory care services. The mezzanine loan has a seven-year term and a 15% return, a portion of which is paid in cash, subject to minimum payment requirements, and the remaining unpaid portion is deferred and subsequently paid to us at times set forth in the loan agreement.

Subsequent to December 31, 2016, LTC completed the following:

• Amended its shelf agreement with Prudential Investment Management, Inc. (“Prudential”) to increase the shelf commitments to $337.5 million, of which $36.7 million is currently available;
• Sold 15-year senior unsecured notes in the aggregate amount of $100.0 million to a group of institutional investors, which included Prudential, in a private placement transaction. The notes bear interest at an annual fixed rate of 4.5%, have scheduled principal payments and mature on February 16, 2032. The proceeds were used to repay the outstanding balance of the unsecured line of credit;
• Sold 312,881 shares of its common stock for $14.6 million in net proceeds under its equity distribution agreement; and
• Entered into a contingent agreement to sell a property in Texas, and as a result, recorded a $0.8 million impairment charge during the fourth quarter of 2016. The property’s net book value, after recording the impairment, is $1.2 million and it generated revenue of approximately $0.2 million in 2016.

Conference Call Information

LTC will conduct a conference call on Thursday, February 23, 2017, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide commentary on its performance and operating results for the quarter ended December 31, 2016. The conference call is accessible by telephone and the internet. Telephone access will be available by dialing 877-510-2862 (domestically) or 412-902-4134 (internationally). To participate in the webcast, go to LTC’s website at www.LTCreit.com 15 minutes before the call to download the necessary software.

An audio replay of the conference call will be available from February 23 through March 9, 2017 and may be accessed by dialing 877-344-7529 (domestically) or 412-317-0088 (internationally) and entering conference number 10099552. Additionally, an audio archive will be available on LTC’s website on the “Presentations” page of the “Investor Information” section, which is under the “Investors” tab. LTC’s earnings release and supplemental information package for the current period will be available on its website on the “Press Releases” and “Presentations” pages, respectively, of the “Investor Information” section which is under the “Investors” tab.

About LTC

LTC is a self-administered real estate investment trust that primarily invests in seniors housing and health care properties primarily through sale-leaseback transactions, mortgage financing and structured finance solutions including mezzanine lending. At December 31, 2016, LTC had 219 investments located in 30 states comprising 112 assisted living communities, 92 skilled nursing centers, 7 range of care communities, 1 behavioral health care hospital, 3 parcels of land under development and 4 parcels of land held-for-use. Assisted living communities, independent living communities, memory care communities and combinations thereof are included in the assisted living property type. Range of care communities consist of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services. For more information on LTC Properties, Inc., visit the Company’s website at www.LTCreit.com.

Forward Looking Statements

This press release includes statements that are not purely historical and are “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, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward looking statements. These forward looking statements involve a number of risks and uncertainties. Please see LTC’s most recent Annual Report on Form 10-K, its subsequent Quarterly Reports on Form 10-Q, and its other publicly available filings with the Securities and Exchange Commission for a discussion of these and other risks and uncertainties. All forward looking statements included in this press release are based on information available to the Company on the date hereof, and LTC assumes no obligation to update such forward looking statements. Although the Company’s management believes that the assumptions and expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward looking statements due to the risks and uncertainties of such statements.

                LTC PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

  Three Months Ended Twelve Months Ended December 31, December 31, 2016 2015 2016 2015 (unaudited) (audited) Revenues: Rental income $ 34,822 $ 30,755 $ 133,527 $ 113,080 Interest income from mortgage loans 6,974 6,342 27,321 22,119 Interest and other income   345     296     735     1,004   Total revenues   42,141     37,393     161,583     136,203     Expenses: Interest expense 6,856 5,581 26,442 17,497 Depreciation and amortization 9,309 8,310 35,932 29,431 Impairment on real estate for sale 766 2,250 766 2,250 Provision for doubtful accounts 212 156 457 619 Transaction costs 83 112 179 744 General and administrative expenses   4,548     3,892     17,412     14,986   Total expenses   21,774     20,301     81,188     65,527     Operating income 20,367 17,092 80,395 70,676 Income from unconsolidated joint ventures 299 276 1,138 1,819 Gain on sale of real estate, net   —     586     3,582     586   Net income 20,666 17,954 85,115 73,081 Income allocated to participating securities (89 ) (114 ) (385 ) (484 ) Income allocated to preferred stockholders   —     —     —     (2,454 ) Net income available to common stockholders $ 20,577   $ 17,840   $ 84,730   $ 70,143     Earnings per common share: Basic $ 0.53   $ 0.49   $ 2.21   $ 1.97   Diluted $ 0.53   $ 0.48   $ 2.21   $ 1.94     Weighted average shares used to calculate earnings per common share: Basic   39,065     36,433     38,388     35,590   Diluted   39,260     37,358     38,597     37,329     Dividends declared and paid per common share $ 0.57   $ 0.54   $ 2.19   $ 2.07    

Supplemental Reporting Measures

FFO, adjusted FFO (“AFFO”), and Funds Available for Distribution (“FAD”) are supplemental measures of a real estate investment trust’s (“REIT”) financial performance that are not defined by U.S. generally accepted accounting principles (“GAAP”). Investors, analysts and the Company use FFO, AFFO and FAD as supplemental measures of operating performance. The Company believes FFO, AFFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO, AFFO and FAD facilitate like comparisons of operating performance between periods. Additionally the Company believes that normalized FFO, normalized AFFO and normalized FAD provide useful information because they allow investors, analysts and our management to compare the Company’s operating performance on a consistent basis without having to account for differences caused by unanticipated items.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Normalized FFO represents FFO adjusted for certain items detailed in the reconciliations. The Company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company’s FFO to that of other REITs.

We define AFFO as FFO excluding the effects of straight-line rent, amortization of lease inducement, effective interest income and deferred income from unconsolidated joint ventures. GAAP requires rental revenues related to non-contingent leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. This method results in rental income in the early years of a lease that is higher than actual cash received, creating a straight-line rent receivable asset included in our consolidated balance sheet. At some point during the lease, depending on its terms, cash rent payments exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable asset included in the interest receivable line item in our consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. By excluding the non-cash portion of rental income, interest income from mortgage loans and income from unconsolidated joint ventures, investors, analysts and our management can compare AFFO between periods. Normalized AFFO represents AFFO adjusted for certain items detailed in the reconciliations.

We define FAD as AFFO excluding the effects of non-cash compensation charges, capitalized interest and non-cash interest charges. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs. Normalized FAD represents FAD adjusted for certain items detailed in the reconciliations.

While the Company uses FFO, Normalized FFO, AFFO, Normalized AFFO, FAD and Normalized FAD as supplemental performance measures of our cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

Reconciliation of FFO, AFFO and FAD

The following table reconciles GAAP net income available to common stockholders to each of NAREIT FFO attributable to common stockholders and normalized FFO attributable to common stockholders, as well as normalized AFFO and normalized FAD (unaudited, amounts in thousands, except per share amounts):

      Three Months Ended     Twelve Months Ended December 31, December 31, 2016     2015 2016     2015   GAAP net income available to common stockholders $ 20,577 $ 17,840 $ 84,730 $ 70,143 Add: Depreciation and amortization 9,309 8,310 35,932 29,431 Add: Impairment on real estate for sale 766 2,250 766 2,250 Less: Gain on sale of real estate, net   —     (586 )   (3,582 )   (586 ) NAREIT FFO attributable to common stockholders 30,652 27,814 117,846 101,238   Add: Non-recurring one-time items   —     —     —     937((1 )) Normalized FFO attributable to common stockholders 30,652 27,814 117,846 102,175   Less: Non-cash rental income (4,777 ) (2,559 ) (11,532 ) (8,456 ) Less: Effective interest income from mortgage loans (1,349 ) (1,232 ) (5,256 ) (3,912 ) Less: Deferred income from unconsolidated joint ventures   —     —     —     (1,000 ) Normalized adjusted FFO (AFFO) 24,526 24,023 101,058 88,807   Add: Non-cash compensation charges 1,131 913 4,280 4,006 Add: Non-cash interest related to earn-out liabilities 146 204 684 409 Less: Capitalized interest   (215 )   (346 )   (1,408 )   (827 ) Normalized funds available for distribution (FAD) $ 25,588   $ 24,794   $ 104,614   $ 92,395    

(1) Represents $537 of acquisition costs related to the 10-property senior housing portfolio acquired and a $400 provision for loan loss reserve related to additional loan proceeds funded under an existing mortgage loan.

NAREIT Basic FFO attributable to common stockholders per share $ 0.78   $ 0.76   $ 3.07   $ 2.84   NAREIT Diluted FFO attributable to common stockholders per share $ 0.78   $ 0.74   $ 3.06   $ 2.77     NAREIT Diluted FFO attributable to common stockholders $ 30,741   $ 27,928   $ 118,231   $ 104,176  

Weighted average shares used to calculate NAREIT diluted FFO per share attributable to common stockholders

  39,260     37,577     38,597     37,563       Diluted normalized FFO attributable to common stockholders $ 30,741   $ 27,928   $ 118,231   $ 105,113  

Weighted average shares used to calculate diluted normalized FFO per share attributable to common stockholders

  39,260     37,577     38,597     37,563                               Diluted normalized AFFO $ 24,615   $ 24,137   $ 101,443   $ 91,745  

Weighted average shares used to calculate diluted normalized AFFO per share

  39,260     37,577     38,597     37,563                               Diluted normalized FAD $ 25,667   $ 24,908   $ 104,999   $ 95,333  

Weighted average shares used to calculate diluted normalized FAD per share

  39,260     37,577     38,597     37,563                                                     LTC PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

  December 31, 2016 December 31, 2015 ASSETS Investments: Land $ 116,096 $ 106,841 Buildings and improvements 1,185,467 1,091,845 Accumulated depreciation and amortization   (275,861 )   (251,265 ) Real property investments, net 1,025,702 947,421 Mortgage loans receivable, net of loan loss reserve: 2016—$2,315; 2015—$2,190   229,801     217,529   Real estate investments, net 1,255,503 1,164,950 Notes receivable, net of loan loss reserve: 2016—$166; 2015—$0 16,427 1,961 Investments in unconsolidated joint ventures   25,221     24,042   Investments, net 1,297,151 1,190,953   Other assets: Cash and cash equivalents 7,991 12,942 Debt issue costs related to bank borrowings 1,847 2,865 Interest receivable 9,683 4,536 Straight-line rent receivable, net of allowance for doubtful accounts: 2016—$960; 2015—$833 55,276 42,685 Prepaid expenses and other assets   22,948     21,443   Total assets $ 1,394,896   $ 1,275,424     LIABILITIES Bank borrowings $ 107,100 $ 120,500 Senior unsecured notes, net of debt issue costs: 2016—$1,009; 2015—$1,095 502,291 451,372 Accrued interest 4,675 3,974 Accrued incentives and earn-outs 12,229 12,722 Accrued expenses and other liabilities   28,553     27,654   Total liabilities 654,848 616,222   EQUITY Stockholders’ equity: Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2016—39,221; 2015—37,548 392 375 Capital in excess of par value 839,005 758,676 Cumulative net income 1,013,443 928,328 Accumulated other comprehensive income — 47 Cumulative distributions   (1,112,792 )   (1,028,224 ) Total equity   740,048     659,202   Total liabilities and equity $ 1,394,896   $ 1,275,424    

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LTC Properties, Inc.Wendy L. SimpsonPam Kessler805-981-8655