National Health Investors, Inc. (NYSE:NHI) announced today its
net income, its Funds From Operations (“FFO”), its Normalized Funds
From Operations and its Normalized Adjusted Funds From Operations
(“AFFO”) for the three and nine months ended September 30,
2018.
Q3 2018 Highlights
- Announced or completed $159.0 million
in real estate acquisitions and loans year-to-date
- Maintained low leverage balance sheet
at 4.2x net debt-to-annualized adjusted EBITDA
- Portfolio lease coverage remains strong
at 1.64x
- GAAP net income of $.97 per diluted
common share for the third quarter; $2.80 year-to-date
- Normalized FFO per diluted common share
up 1.5% over third quarter 2017; up 4.6% year-to-date
- Normalized AFFO per diluted common
share up 4.9% over third quarter 2017; up 6.2% year-to-date
2018 Guidance
The Company currently expects net income to be in the range of
$3.73 to $3.75 per diluted common share, Normalized FFO for 2018 to
be in the range of $5.47 to $5.51 per diluted common share and
Normalized AFFO to be in the range of $5.01 to $5.03 per diluted
common share. The Company’s guidance range for the full year 2018,
with underlying assumptions and timing of certain transactions, is
set forth and reconciled below:
Full-Year 2018 Range Low High
Net
income per diluted share $ 3.73 $ 3.75 Plus:
Depreciation 1.69 1.71 Plus: Write-off of tenant straight-line rent
receivable .03 .03 Plus: Partial write-down of customer loan .01
.01 Plus: Other adjustments, net .01 .01
Normalized FFO per diluted common share $ 5.47
$ 5.51 Less: Straight-line rental income (0.54 )
(0.56 ) Plus: Amortization of debt issuance costs 0.05 0.05 Plus:
Amortization of original issue discount 0.03 0.03
Normalized AFFO per diluted common share $
5.01 $ 5.03
The Company’s guidance range reflects the existence of volatile
economic conditions, but does not assume any material deterioration
in tenant credit quality and/or performance of its portfolio. The
Company has announced or completed $159.0 million of new
investments since January 1, 2018. The guidance is based on a
number of assumptions, many of which are outside the Company’s
control and all of which are subject to change. The Company’s
guidance range allows for the uncertainty inherent in the structure
and timing of the financing required to fund previously announced
investments and any pending new investments. The Company’s guidance
may change if actual results vary from these assumptions.
Financial Results
- Net income per diluted common share for
the three months ended September 30, 2018, was $.97, an
increase of 2.1% from the same period in the prior year. Net income
per diluted common share for the nine months ended
September 30, 2018, was $2.80, a decrease of 5.7% from the
same period in the prior year and includes a write-down of
$1,436,000 on a single-property lease and a $413,000 write-down on
a potentially uncollectible note receivable. Net income for the
nine months ended September 30, 2017 includes gains on sales
of marketable securities of $10.0 million.
- Normalized FFO per diluted common share
for the three months ended September 30, 2018, was $1.39, an
increase of 1.5% over the same period in the prior year. Normalized
FFO per diluted common share for the nine months ended
September 30, 2018, was $4.12, an increase of 4.6% over the
same period in the prior year.
- Normalized AFFO per diluted common
share for the three months ended September 30, 2018 was $1.28,
an increase of 4.9% over the same period in the prior year.
Normalized AFFO per diluted common share for the nine months ended
September 30, 2018 was $3.76, an increase of 6.2% over the
same period in the prior year.
- NAREIT FFO per diluted common share for
the three months ended September 30, 2018, was $1.39, an
increase of 3.0% from the same period in the prior year includes
the write-downs mentioned above. NAREIT FFO per diluted common
share for the nine months ended September 30, 2018, was $4.07,
a decrease of 2.9% from the same period in the prior year. NAREIT
FFO for the nine months ended September 30, 2017 includes
gains on sales of marketable securities of $10.0 million.
FFO, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”) and applied by us, is net income
(computed in accordance with GAAP), excluding gains (or losses)
from sales of real estate property, plus real estate depreciation
and amortization, and after adjustments for unconsolidated
partnerships and joint ventures, if any. The Company defines
Normalized FFO as FFO adjusted for certain items which may create
some difficulty in comparing FFO for the current period to similar
prior periods. We define Normalized AFFO as Normalized FFO
excluding the effects of straight-line lease revenue, amortization
of debt issuance costs and the non-cash amortization of the
original issue discount of our unsecured convertible notes. These
supplemental non-GAAP performance measures may not be comparable to
similarly titled measures used by other REITs.
The reconciliation of net income to our FFO, Normalized FFO,
Normalized AFFO and Normalized Funds Available for Distribution
(“FAD”) is included as a table to this press release and filed in
the Company’s Form 10-Q with the Securities and Exchange
Commission.
Investor Conference Call and Webcast
NHI will host a conference call on Tuesday, November 6,
2018, at 12 p.m. ET, to discuss third quarter results. The number
to call for this interactive teleconference is (800) 582-1443, with
the confirmation number 21897307. The live broadcast of NHI’s third
quarter conference call will be available online at www.nhireit.com. The online replay will follow
shortly after the call and continue for approximately 90 days.
About National Health Investors
Incorporated in 1991, National Health Investors, Inc. (NYSE:
NHI) is a real estate investment trust specializing in
sale-leaseback, joint-venture, mortgage and mezzanine financing of
need-driven and discretionary senior housing and medical
investments. NHI’s portfolio consists of independent, assisted and
memory care communities, entrance-fee retirement communities,
skilled nursing facilities, medical office buildings and specialty
hospitals. Visit www.nhireit.com for
more information.
Reconciliation of FFO, Normalized FFO, Normalized AFFO
and Normalized FAD (in thousands, except share and per share
amounts)
Three Months Ended Nine Months Ended September 30, September 30,
2018 2017 2018 2017 Net income $ 40,979 $ 39,092 $ 117,251 $
121,566 Elimination of certain non-cash items in net income:
Depreciation 18,153 17,023 53,282 50,006 Gain on sale of real
estate — — — (50 ) Funds from operations
59,132 56,115 170,533 171,522 Gain on sales of marketable
securities — — — (10,038 ) Loss on convertible note retirement —
495 738 591 Debt issuance costs written-off due to credit facility
modifications — 407 — 407 Ineffective portion of cash flow hedges —
(350 ) — (350 ) Non-cash write-off of straight-line rent receivable
— — 1,436 — Note receivable impairment — — 413 —
Recognition of unamortized note receivable
commitment fees
— — (515 ) (922 ) Normalized FFO 59,132 56,667
172,605 161,210 Straight-line lease revenue, net (5,719 ) (6,951 )
(17,516 ) (18,956 ) Amortization of lease incentives 108 69 240 69
Amortization of original issue discount 189 259 597 840
Amortization of debt issuance costs 625 635 1,828
1,828 Normalized AFFO 54,335 50,679 157,754 144,991
Non-cash stock based compensation 337 405 2,131
2,270 Normalized FAD $ 54,672 $ 51,084
$ 159,885 $ 147,261
BASIC
Weighted average common shares outstanding 42,187,077 41,108,699
41,808,017 40,681,582 FFO per common share $ 1.40 $ 1.37 $ 4.08 $
4.22 Normalized FFO per common share $ 1.40 $ 1.38 $ 4.13 $ 3.96
Normalized AFFO per common share $ 1.29 $ 1.23 $ 3.77 $ 3.56
DILUTED
Weighted average common shares outstanding 42,434,499 41,448,263
41,932,736 40,937,337 FFO per common share $ 1.39 $ 1.35 $ 4.07 $
4.19 Normalized FFO per common share $ 1.39 $ 1.37 $ 4.12 $ 3.94
Normalized AFFO per common share $ 1.28 $ 1.22 $ 3.76 $ 3.54
See Notes to Reconciliation of FFO, Normalized FFO, Normalized
AFFO and Normalized FAD.
Notes to Reconciliation of FFO, Normalized
FFO, Normalized AFFO and Normalized FAD
These supplemental operating performance measures may not be
comparable to similarly titled measures used by other REITs.
Consequently, our Funds From Operations (“FFO”), Normalized FFO,
Normalized Adjusted Funds From Operations (“AFFO”) and Normalized
Funds Available for Distribution (“FAD”) may not provide a
meaningful measure of our performance as compared to that of other
REITs. Since other REITs may not use our definition of these
operating performance measures, caution should be exercised when
comparing our Company’s FFO, Normalized FFO, Normalized AFFO and
Normalized FAD to that of other REITs. These financial performance
measures do not represent cash generated from operating activities
in accordance with generally accepted accounting principles
(“GAAP”) (these measures do not include changes in operating assets
and liabilities) and therefore should not be considered an
alternative to net earnings as an indication of operating
performance, or to net cash flow from operating activities as
determined by GAAP as a measure of liquidity, and are not
necessarily indicative of cash available to fund cash needs.
Funds From Operations - FFO
FFO, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”) and applied by us, is net income
(computed in accordance with GAAP), excluding gains (or losses)
from sales of real estate property, plus real estate depreciation
and amortization, and after adjustments for unconsolidated
partnerships and joint ventures, if any. 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.
Diluted FFO assumes the exercise of stock options and other
potentially dilutive securities. Normalized FFO excludes from FFO
certain items which, due to their infrequent or unpredictable
nature, may create some difficulty in comparing FFO for the current
period to similar prior periods, and may include, but are not
limited to, impairment of non-real estate assets, gains and losses
attributable to the acquisition and disposition of assets and
liabilities, and recoveries of previous write-downs.
We believe that FFO and normalized FFO are important
supplemental measures of operating performance for a REIT. Because
the historical cost accounting convention used for real estate
assets requires depreciation (except on land), such accounting
presentation implies that the value of real estate assets
diminishes predictably over time. Since real estate values instead
have historically risen and fallen with market conditions,
presentations of operating results for a REIT that uses historical
cost accounting for depreciation could be less informative, and
should be supplemented with a measure such as FFO. The term FFO was
designed by the REIT industry to address this issue.
Adjusted Funds From Operations - AFFO
In addition to the adjustments included in the calculation of
normalized FFO, normalized AFFO excludes the impact of any
straight-line lease revenue, amortization of the original issue
discount on our convertible senior notes and amortization of debt
issuance costs.
We believe that normalized AFFO is an important supplemental
measure of operating performance for a REIT. GAAP requires a lessor
to recognize contractual lease payments into income on a
straight-line basis over the expected term of the lease. This
straight-line adjustment has the effect of reporting lease income
that is significantly more or less than the contractual cash flows
received pursuant to the terms of the lease agreement. GAAP also
requires the original issue discount of our convertible senior
notes and debt issuance costs to be amortized as non-cash
adjustments to earnings. Normalized AFFO is useful to our investors
as it reflects the growth inherent in the contractual lease
payments of our real estate portfolio.
Funds Available for Distribution - FAD
In addition to the adjustments included in the calculation of
normalized AFFO, normalized FAD excludes the impact of non-cash
stock based compensation.
We believe that normalized FAD is an important supplemental
measure of operating performance for a REIT as a useful indicator
of the ability to distribute dividends to shareholders.
Additionally, normalized FAD improves the understanding of our
operating results among investors and makes comparisons with: (i)
expected results, (ii) results of previous periods and (iii)
results among REITs, more meaningful. Because FAD may function as a
liquidity measure, we do not present FAD on a per-share basis.
Condensed Statements of Income (in thousands, except share
and per share amounts) Three Months Ended Nine Months Ended
September 30, September 30, 2018 2017 2018 2017 Revenues:
Rental income $ 71,688 $ 68,204 $ 210,809 $ 197,077 Interest income
3,227 3,148 9,807 10,499 74,915
71,352 220,616 207,576 Expenses: Depreciation
18,153 17,023 53,282 50,006 Interest, including amortization of
debt discount and issuance costs 12,374 11,746 36,207 35,139 Legal
371 215 705 417 Franchise, excise and other taxes 245 268 857 802
General and administrative 2,793 2,513 9,727 9,143 Loan and realty
losses — — 1,849 — 33,936 31,765
102,627 95,507 Income before investment and
other gains and losses 40,979 39,587 117,989 112,069 Investment and
other gains — — — 10,088 Loss on convertible note retirement —
(495 ) (738 ) (591 ) Net income 40,979 39,092
$ 117,251 $ 121,566 Weighted average common
shares outstanding: Basic 42,187,077 41,108,699 41,808,017
40,681,582 Diluted 42,434,499 41,448,263 41,932,736 40,937,337
Earnings per common share: Net income per common share -
basic $ .97 $ .95 $ 2.80 $ 2.99 Net income per common share -
diluted $ .97 $ .94 $ 2.80 $ 2.97 Regular dividends declared
per common share $ 1.00 $ .95 $ 3.00 $ 2.85
Selected Balance Sheet Data (in thousands)
September 30, 2018 December 31, 2017 Real estate properties,
net $ 2,373,905 $ 2,285,701 Mortgage and other notes receivable,
net $ 155,461 $ 141,486 Cash and cash equivalents $ 2,638 $ 3,063
Straight-line rent receivable $ 114,397 $ 97,359 Other assets $
24,608 $ 18,212 Debt $ 1,220,135 $ 1,145,497 Stockholders’ equity $
1,363,400 $ 1,322,117
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, tenants’,
operators’, borrowers’ or managers’ expected future financial
position, results of operations, cash flows, funds from operations,
dividend and dividend plans, financing opportunities and plans,
capital market transactions, business strategy, budgets, projected
costs, operating metrics, capital expenditures, competitive
positions, acquisitions, investment opportunities, dispositions,
acquisition integration, growth opportunities, expected lease
income, continued qualification as a real estate investment trust
(“REIT”), plans and objectives of management for future operations,
continued performance improvements, ability to service and
refinance our debt obligations, ability to finance growth
opportunities, and similar statements including, without
limitation, those containing words such as “may,” “will,”
“believes,” “anticipates,” “expects,” “intends,” “estimates,”
“plans,” and other similar expressions are forward-looking
statements. Forward-looking statements involve known and unknown
risks and uncertainties that may cause our actual results in future
periods to differ materially from those projected or contemplated
in the forward-looking statements. Such risks and uncertainties
include, among other things; the operating success of our tenants
and borrowers for collection of our lease and interest income; the
success of property development and construction activities, which
may fail to achieve the operating results we expect; the risk that
our tenants and borrowers may become subject to bankruptcy or
insolvency proceedings; risks related to governmental regulations
and payors, principally Medicare and Medicaid, and the effect that
lower reimbursement rates would have on our tenants’ and borrowers’
business; the risk that the cash flows of our tenants and borrowers
would be adversely affected by increased liability claims and
liability insurance costs; risks related to environmental laws and
the costs associated with liabilities related to hazardous
substances; the risk that we may not be fully indemnified by our
lessees and borrowers against future litigation; the success of our
future acquisitions and investments; our ability to reinvest cash
in real estate investments in a timely manner and on acceptable
terms; the potential need to incur more debt in the future, which
may not be available on terms acceptable to us; our ability to meet
covenants related to our indebtedness which impose certain
operational; the risk that the illiquidity of real estate
investments could impede our ability to respond to adverse changes
in the performance of our properties; risks associated with our
investments in unconsolidated entities, including our lack of sole
decision-making authority and our reliance on the financial
condition of other interests; our dependence on revenues derived
mainly from fixed rate investments in real estate assets, while a
portion of our debt bears interest at variable rates; the risk that
our assets may be subject to impairment charges; and our dependence
on the ability to continue to qualify for taxation as a real estate
investment trust. Many of these factors are beyond the control of
the Company and its management. The Company assumes no obligation
to update any of the foregoing or any other forward looking
statements, except as required by law, and these statements speak
only as of the date on which they are made. Investors are urged to
carefully review and consider the various disclosures made by NHI
in its periodic reports filed with the Securities and Exchange
Commission, including the risk factors and other information
disclosed in NHI’s Annual Report on Form 10-K for the most recently
ended fiscal year. Copies of these filings are available at no cost
on the SEC’s web site at http://www.sec.gov or on NHI’s web site at
http://www.nhireit.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20181106005277/en/
National Health Investors, Inc.Roger R. Hopkins,
615-890-9100Chief Accounting Officer
National Health Investors (NYSE:NHI)
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