National Health Investors, Inc. (NYSE:NHI) announced today its
net income attributable to common stockholders, its Funds From
Operations (“FFO”), its Normalized Funds From Operations and its
Normalized Adjusted Funds From Operations (“AFFO”) for the three
and six months ended June 30, 2019.
2019 Highlights
- GAAP net income attributable to common stockholders of $.92 for
the second quarter and $1.75 year-to-date, per diluted common
share
- AFFO of $1.26 for the second quarter and $2.48 year-to-date,
per diluted common share
- Announced or completed $295 million in real estate and mortgage
note investments
- Ample liquidity with $277 million available to draw on
revolving credit facility
- Maintained low leverage balance sheet at 4.8x net
debt-to-annualized adjusted EBITDA
- Fixed charge coverage remains conservative at 5.4x
- Portfolio lease coverage remains strong at 1.65x
- Transitioned three non-compliant leases to high-quality
operating partners
2019 Guidance
The Company currently expects net income to be in the range of
$3.63 to $3.67 per diluted common share, Normalized FFO for 2019 to
be in the range of $5.44 to $5.50 per diluted common share and
Normalized AFFO to be in the range of $5.06 to $5.10 per diluted
common share. The Company’s guidance range for the full year 2019,
with underlying assumptions and timing of certain transactions, is
set forth and reconciled below:
Full-Year 2019 Range
Low
High
Net income attributable to common
stockholders - diluted
$
3.63
$
3.67
Plus: Depreciation
1.75
1.77
Plus: real estate write-down
.06
.06
Normalized FFO per diluted common
share
$
5.44
$
5.50
Less: Straight-line rental income
(0.46
)
(0.48
)
Plus: Amortization of debt issuance
costs
0.06
0.06
Plus: Amortization of original issue
discount
0.02
0.02
Normalized AFFO per diluted common
share
$
5.06
$
5.10
The Company’s guidance range reflects the existence of volatile
economic conditions as well as the impact of three non-performing
leases which account for less than 1% of our second quarter 2019
revenues. The Company has transitioned these properties to new
third-party operators with the intention to stabilize the
operations. We cannot currently estimate the amount of rent income
that may be lost when compared to 2018 as a result of these
transitions. In addition to the $295 million of lease and loan
investments during 2019, the Company’s guidance range includes
approximately $45 million of new investments for the remainder of
2019 and 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 attributable to common stockholders per diluted
common share for the three months ended June 30, 2019 was $.92, an
increase of 1.1% from the same period in the prior year. Net income
attributable to common stockholders per diluted common share for
the six months ended June 30, 2019 was $1.75, a decrease of 4.4%
from the same period in the prior year. Net income for the six
months ended June 30, 2019 included a write-down of $2,500,000 on
two assisted living properties which we have classified as held for
sale. Net income per common share for the three and six months
ended June 30, 2019 includes the dilutive impact of 1,185,152
common shares issued since June 30, 2018.
- Normalized FFO per diluted common share for the three months
ended June 30, 2019 was $1.36, a decrease of 1.4% from the same
period in the prior year. Normalized FFO per diluted common share
for the six months ended June 30, 2019 was $2.67, a decrease of
1.8% from the same period in the prior year. Normalized FFO per
common share for the three and six months ended June 30, 2019
includes the dilutive impact of 1,185,152 common shares issued
since June 30, 2018.
- Normalized AFFO per diluted common share for the three months
ended June 30, 2019 was $1.26, unchanged over the same period in
the prior year. Normalized AFFO per diluted common share for the
six months ended June 30, 2019 was $2.48, unchanged over the same
period in the prior year. Normalized AFFO per common share for the
three and six months ended June 30, 2019 includes the dilutive
impact of 1,185,152 common shares issued since June 30, 2018.
- NAREIT FFO per diluted common share for the three months ended
June 30, 2019 was $1.36, an increase of 2.3% from the same period
in the prior year. NAREIT FFO per diluted common share for the six
months ended June 30, 2019 was $2.67, unchanged over the same
period in the prior year. NAREIT FFO per common share for the three
and six months ended June 30, 2019 includes the dilutive impact of
1,185,152 common shares issued since June 30, 2018.
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 attributable to common
stockholders 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 Thursday, August 8, 2019, at
12 p.m. ET, to discuss fourth quarter results. The number to call
for this interactive teleconference is (800) 909-4804, with the
confirmation number 21924450. The live broadcast of NHI’s fourth
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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Net income attributable to common
stockholders
$
39,979
$
37,839
$
75,658
$
76,271
Elimination of certain non-cash items in
net income:
Depreciation
19,020
17,794
37,511
35,129
Depreciation related to noncontrolling
interest
(7
)
—
(7
)
—
Impairment of real estate
—
—
2,500
—
NAREIT FFO attributable to common
stockholders
58,992
55,633
115,662
111,400
Loss on convertible note retirement
—
—
—
738
Non-cash write-off of straight-line rent
receivable
—
1,436
—
1,436
Note receivable impairment
—
413
—
413
Recognition of unamortized note receivable
commitment fees
—
—
—
(515
)
Normalized FFO attributable to common
stockholders
58,992
57,482
115,662
113,472
Straight-line rent revenue, net
(5,307
)
(5,835
)
(10,535
)
(11,797
)
Straight-line lease revenue, net, related
to noncontrolling interest
2
—
2
—
Amortization of lease incentives
215
69
383
132
Amortization of original issue
discount
195
187
388
408
Amortization of debt issuance costs
704
590
1,404
1,203
Normalized AFFO attributable to common
stockholders
54,801
52,493
107,304
103,418
Non-cash share-based compensation
477
368
2,478
1,794
Normalized FAD attributable to common
stockholders
$
55,278
$
52,861
$
109,782
$
105,212
BASIC
Weighted average common shares
outstanding
43,232,384
41,704,819
43,029,104
41,618,487
NAREIT FFO attributable to common
stockholders per share
$
1.36
$
1.33
$
2.69
$
2.68
Normalized FFO attributable to common
stockholders per share
$
1.36
$
1.38
$
2.69
$
2.73
Normalized AFFO attributable to common
stockholders per share
$
1.27
$
1.26
$
2.49
$
2.48
DILUTED
Weighted average common shares
outstanding
43,498,021
41,786,829
43,311,527
41,681,854
NAREIT FFO attributable to common
stockholders per share
$
1.36
$
1.33
$
2.67
$
2.67
Normalized FFO attributable to common
stockholders per share
$
1.36
$
1.38
$
2.67
$
2.72
Normalized AFFO attributable to common
stockholders per share
$
1.26
$
1.26
$
2.48
$
2.48
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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
(unaudited)
(unaudited)
Revenues:
Rental income
$
72,578
$
69,869
$
143,531
$
139,122
Interest income and other
5,518
3,087
10,673
6,580
78,096
72,956
154,204
145,702
Expenses:
Depreciation
19,020
17,794
37,511
35,129
Interest
13,746
12,220
27,264
23,834
Legal
99
223
369
334
Franchise, excise and other taxes
775
266
1,320
612
General and administrative
2,972
2,765
6,986
6,935
Property taxes and insurance on leased
properties
1,506
—
2,597
—
Loan and realty losses
—
1,849
2,500
1,849
38,118
35,117
78,547
68,693
Income before loss on convertible note
retirement
39,978
37,839
75,657
77,009
Loss on convertible note retirement
—
—
—
(738
)
Net income
$
39,978
$
37,839
$
75,657
$
76,271
Less: net loss attributable to
noncontrolling interest
1
—
1
—
Net income attributable to common
stockholders
$
39,979
$
37,839
$
75,658
$
76,271
Weighted average common shares
outstanding:
Basic
43,232,384
41,704,819
43,029,104
41,618,487
Diluted
43,498,021
41,786,829
43,311,527
41,681,854
Earnings per common share:
Net income attributable to common
stockholders - basic
$
.92
$
.91
$
1.76
$
1.83
Net income attributable to common
stockholders - diluted
$
.92
$
.91
$
1.75
$
1.83
Selected Balance Sheet Data
(in thousands)
June 30, 2019
December 31, 2018
Real estate properties, net
$
2,571,129
$
2,366,882
Mortgage and other notes receivable,
net
$
306,454
$
246,111
Cash and cash equivalents
$
5,635
$
4,659
Straight-line rent receivable
$
78,672
$
105,620
Assets held for sale, net
$
3,745
$
—
Other assets
$
31,746
$
27,298
Debt
$
1,471,787
$
1,281,675
National Health Investors Stockholders'
Equity
$
1,419,045
$
1,389,713
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190808005262/en/
Roger R. Hopkins, Chief Accounting Officer Phone: (615)
890-9100
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