LTC LTC Properties Inc

LTC Properties, Inc. (NYSE: LTC) (“LTC” or the “Company”) announces today operating results for the quarter ended September 30, 2014. The Company reported an increase of 12.8% in Funds from Operations (“FFO”) to $22.5 million in the quarter ended September 30, 2014, from $20.0 million in the comparable 2013 period. FFO per diluted common share was $0.64 and $0.57 for the quarters ended September 30, 2014 and 2013, respectively. Normalized FFO increased by 12.6% to $22.5 million in the third quarter of 2014 from $20.0 million in the third quarter of 2013. Normalized FFO per diluted common share was $0.64 and $0.57 for the quarters ended September 30, 2014 and 2013, respectively. The increase in FFO and normalized FFO was due to higher revenues from mortgage loan originations, acquisitions and completed property developments.

Net income available to common stockholders decreased to $16.2 million in the third quarter of 2014, or $0.46 per diluted share, from $16.4 million, or $0.47 per diluted share, for the same period in 2013. The decrease in net income available to common stockholders was primarily due to a gain on sale recognized in 2013 and higher interest expense related to the sale of senior unsecured notes offset by an increase in revenues from mortgage loan originations, acquisitions and completed property developments.

Subsequent to September 30, 2014, the Company entered into three agreements relating to the 37 assisted living properties currently leased to affiliates of Extendicare, Inc. (“Extendicare”) and Enlivant as follows:

• LTC will sell 16 properties, consisting of 615 units located in Washington, Oregon, Idaho and Arizona, to an affiliate of Enlivant for a sales price of $26.5 million. Accordingly, the Company expects to record a gain on sale of approximately $3.9 million with closing expected to occur in December 2014. Additionally, LTC gave Extendicare and Enlivant consent to close a property located in Oregon. LTC is currently exploring sale and lease options for this property which has a net book value of $1.0 million.
• The Company will add 13 properties with 500 units in Indiana, Iowa, Ohio, Nebraska and New Jersey to an existing master lease with an affiliate of Senior Lifestyle (“Senior Lifestyle”). Beginning January 1, 2015 the initial term of the amended and restated master lease will be 15 years and rent will increase by $5.1 million over the current annual rent annually by 2.6%.
• The Company re-leased seven properties with 278 units in Texas to Veritas InCare (“Veritas”) under a new 10-year master lease. Beginning January 1, 2015 the initial rent will be $1.5 million increasing 2.5% annually.

Extendicare and Enlivant are obligated to pay rent in accordance with the terms of the current master leases through December 31, 2014. The initial cash yield on the 20 properties re-leased to Senior Lifestyle and Veritas is comparable to the cash yield in 2014 under the expiring master leases with Extendicare and Enlivant. Additionally, the master leases will provide LTC with the potential for additional rent attributable to participation in revenue growth at the properties over a predetermined base amount.

Conference Call Information

The Company will conduct a conference call on Tuesday, November 4, 2014, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide commentary on the Company’s performance and operating results for the quarter ended September 30, 2014. 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, log on to the Company’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 November 4 through November 18, 2014 and may be accessed by dialing 877-344-7529 (domestically) or 412-317-0088 (internationally) and entering conference number 10054900. Additionally, an audio archive will be available on the Company’s website in the “Presentations” page of the “Investor Information” section which is under the “Investors” tab. The Company’s earnings release and supplemental information package for the current period will be available on the Company’s website in the “Press Releases” and “Presentations” pages, respectively, of the “Investor Information” section which is under the “Investors” tab.

About LTC

At September 30, 2014, LTC had 226 investments located in 29 states comprising of 101 skilled nursing properties, 106 assisted living properties, nine range of care properties, one school, four parcels of land under development and five parcels of land held-for-use. Assisted living properties, independent living properties, memory care properties and combinations thereof are included in the assisted living property type. Range of care properties consist of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services. The Company is a self-administered real estate investment trust that primarily invests in senior housing and long-term care facilities through facility lease transactions, mortgage loans and other investments. 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 our most recent Annual Report on Form 10-K, our subsequent Quarterly Reports on Form 10-Q, and our 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 the Company 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 (unaudited amounts in thousands, except per share amounts)         Three Months Ended       Nine Months Ended September 30, September 30, 2014       2013 2014       2013 Revenues: Rental income $ 25,098 $ 24,645 $ 75,375 $ 72,907 Interest income from mortgage loans 4,213 1,086 12,445 3,195 Interest and other income   230     94     386     279   Total revenues   29,541     25,825     88,206     76,381     Expenses: Interest expense 3,170 2,581 9,445 8,512 Depreciation and amortization 6,335 6,139 18,935 18,152 General and administrative expenses   2,914     2,676     8,567     8,962   Total expenses   12,419     11,396     36,947     35,626     Operating income 17,122 14,429 51,259 40,755 Gain on sale of real estate, net   —     —     1,140     —   Income from continuing operations 17,122 14,429 52,399 40,755 Discontinued operations: Income from discontinued operations — 238 — 805 Gain on sale of real estate, net   —     2,619     —     1,605   Net income from discontinued operations — 2,857 — 2,410   Net income 17,122 17,286 52,399 43,165   Income allocated to participating securities (123 ) (95 ) (343 ) (284 ) Income allocated to preferred stockholders   (818 )   (818 )   (2,454 )   (2,454 ) Net income available to common stockholders $ 16,181   $ 16,373   $ 49,602   $ 40,427     Basic earnings per common share: Continuing operations $ 0.47 $ 0.39 $ 1.43 $ 1.17 Discontinued operations $ 0.00   $ 0.08   $ 0.00   $ 0.07   Net income available to common stockholders $ 0.47   $ 0.47   $ 1.43   $ 1.24     Diluted earnings per common share: Continuing operations $ 0.46 $ 0.39 $ 1.42 $ 1.16 Discontinued operations $ 0.00   $ 0.08   $ 0.00   $ 0.07   Net income available to common stockholders $ 0.46   $ 0.47   $ 1.42   $ 1.24     Weighted average shares used to calculate earnings per common share: Basic   34,605     34,553    

34,596

    32,625  

Diluted

  36,629     36,580     36,620     34,657    

NOTE: Computations of per share amounts from continuing operations, discontinued operations and net income are made independently. Therefore, the sum of per share amounts from continuing operations and discontinued operations may not agree with the per share amounts from net income available to common stockholders.

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 U.S. 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 U.S. 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 and amortization of lease inducement. U.S. 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. By excluding the non-cash portion of straight-line rental revenue and amortization of lease inducement, 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. 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, normalized AFFO 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 U.S. 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, Normalized FFO, Normalized AFFO and Normalized FAD

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

      Three Months Ended       Nine Months Ended September 30, September 30, 2014       2013 2014       2013  

Net income available to common stockholders

$

16,181

 

$

16,373

$

49,602

$ 40,427 Add: Depreciation and amortization (continuing and discontinued operations) 6,335 6,202 18,935 18,469 Less: Gain on sale of real estate, net   —     (2,619 )   (1,140 )   (1,605 ) FFO available to common stockholders 22,516 19,956 67,397 57,291 Add: Non-cash interest related to earn-out liabilities — 36 — 256 Add: Non-recurring one-time items   —     —     —     707  

(1)

Normalized FFO available to common stockholders 22,516 19,992 67,397 58,254 Less: Non-cash rental income   (452 )   (975 )   (1,369 )   (2,505 ) Normalized adjusted FFO (AFFO) 22,064 19,017 66,028 55,749 Add: Non-cash compensation charges 877 542 2,326 1,593 Less: Capitalized interest   (474 )   (218 )   (1,216 )   (718 ) Normalized funds available for distribution (FAD) $ 22,467   $ 19,341   $ 67,138   $ 56,624    

(1) Represents the one-time severance and accelerated restricted stock vesting charges related to the retirement of our former Senior Vice President, Marketing and Strategic Planning.

 

          Basic FFO available to common stockholders per share $ 0.65   $ 0.58   $ 1.95   $ 1.76   Diluted FFO available to common stockholders per share $ 0.64   $ 0.57   $ 1.91   $ 1.72     Diluted FFO available to common stockholders $ 23,457   $ 20,869   $ 70,194   $ 60,029   Weighted average shares used to calculate diluted FFO per share available to common stockholders   36,869     36,779     36,841     34,858             Basic normalized FFO available to common stockholders per share $ 0.65   $ 0.58   $ 1.95   $ 1.79   Diluted normalized FFO available to common stockholders per share $ 0.64   $ 0.57   $ 1.91   $ 1.75     Diluted normalized FFO available to common stockholders $ 23,457   $ 20,905   $ 70,194   $ 60,992   Weighted average shares used to calculate diluted normalized FFO per share available to common stockholders   36,869     36,779     36,841     34,858             Basic normalized AFFO per share $ 0.64   $ 0.55   $ 1.91   $ 1.71   Diluted normalized AFFO per share $ 0.62   $ 0.54   $ 1.87   $ 1.68     Diluted normalized AFFO $ 23,005   $ 19,930   $ 68,825   $ 58,487   Weighted average shares used to calculate diluted normalized AFFO per share   36,869     36,779     36,841     34,858             Basic normalized FAD per share $ 0.65   $ 0.56   $ 1.94   $ 1.74   Diluted normalized FAD per share $ 0.63   $ 0.55   $ 1.90   $ 1.70     Diluted normalized FAD $ 23,408   $ 20,254   $ 69,935   $ 59,362   Weighted average shares used to calculate diluted normalized FAD per share   36,869     36,779     36,841     34,858       LTC PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (amounts in thousands)

 

      September 30, 2014         December 31, 2013 ASSETS (unaudited) (audited) Real estate investments: Land $ 79,661 $ 80,993 Buildings and improvements 886,351 856,624 Accumulated depreciation and amortization   (234,634 )   (218,700 )

Net real estate property

731,378 718,917

Mortgage loans receivable, net of allowance for doubtfulaccounts: 2014 — $1,730; 2013 — $1,671

  171,321     165,444   Real estate investments, net 902,699 884,361 Other assets: Cash and cash equivalents 7,589 6,778 Debt issue costs, net 2,036 2,458 Interest receivable 661 702

Straight-line rent receivable, net of allowance for doubtfulaccounts: 2014 — $720; 2013 — $1,541

31,581 29,760 Prepaid expenses and other assets 6,858 6,756 Notes receivable   1,147     595   Total assets $ 952,571   $ 931,410     LIABILITIES Bank borrowings $ 19,500 $ 21,000 Senior unsecured notes 281,633 255,800 Bonds payable 1,400 2,035 Accrued interest 2,424 3,424 Accrued expenses and other liabilities   15,937     16,713   Total liabilities 320,894 298,972   EQUITY Stockholders' equity:

Preferred stock $0.01 par value; 15,000 shares authorized; shares issuedand outstanding: 2014 — 2,000; 2013 — 2,000

38,500 38,500

Common stock: $0.01 par value; 60,000 shares authorized;shares issued and outstanding: 2014 — 34,845; 2013 — 34,746

348 347 Capital in excess of par value 691,249 688,654 Cumulative net income 834,247 781,848 Accumulated other comprehensive income 91 117 Cumulative distributions   (932,758 )   (877,028 ) Total equity 631,677 632,438     Total liabilities and equity $ 952,571   $ 931,410  

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