UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO .
Commission file number: 1-10989
Ventas, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 61-1055020 | |
| (State or other jurisdiction) | (I.R.S. Employer Identification No.) |
10350 Ormsby Park Place, Suite 300
Louisville, Kentucky
(Address of principal executive offices)
40223
(Zip Code)
(502) 357-9000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class of Common Stock: |
Outstanding at April 27, 2004: | |
| Common Stock, $.25 par value | 83,891,281 Shares |
VENTAS, INC.
FORM 10-Q
| Page | ||
| 3 | ||
| Item 1. Financial Statements |
3 | |
| Condensed Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 |
3 | |
| 4 | ||
| 5 | ||
| 6 | ||
| 7 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
36 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
44 | |
| Item 4. Controls and Procedures |
45 | |
| 46 | ||
| Item 1. Legal Proceedings |
46 | |
| Item 6. Exhibits and Reports on Form 8-K |
46 | |
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2004 (Unaudited) |
December 31, 2003 (Audited) |
|||||||
| Assets | ||||||||
| Real estate investments: |
||||||||
| Land |
$ | 132,433 | $ | 104,300 | ||||
| Building and improvements |
1,233,827 | 985,881 | ||||||
| 1,366,260 | 1,090,181 | |||||||
| Accumulated depreciation |
(419,664 | ) | (408,891 | ) | ||||
| Total net real estate property |
946,596 | 681,290 | ||||||
| Loan receivable, net |
16,437 | 16,455 | ||||||
| Total net real estate investments |
963,033 | 697,745 | ||||||
| Cash and cash equivalents |
1,723 | 82,104 | ||||||
| Restricted cash |
18,984 | 7,575 | ||||||
| Deferred financing costs, net |
12,443 | 13,465 | ||||||
| Notes receivable from employees |
3,609 | 3,772 | ||||||
| Other |
7,527 | 8,189 | ||||||
| Total assets |
$ | 1,007,319 | $ | 812,850 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Liabilities: |
||||||||
| Senior Notes payable and other debt |
$ | 782,362 | $ | 640,562 | ||||
| Deferred revenue |
14,718 | 15,308 | ||||||
| Interest rate swap agreements |
32,041 | 27,868 | ||||||
| Accrued dividend |
— | 21,614 | ||||||
| Accrued interest |
14,525 | 5,821 | ||||||
| Accounts payable and other accrued liabilities |
18,853 | 14,562 | ||||||
| Other liabilities—disputed federal, state and local tax refunds |
533 | 406 | ||||||
| Deferred income taxes |
30,394 | 30,394 | ||||||
| Total liabilities |
893,426 | 756,535 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, unissued |
— | — | ||||||
| Common stock |
21,157 | 20,652 | ||||||
| Capital in excess of par value |
199,945 | 162,466 | ||||||
| Unearned compensation on restricted stock |
(1,339 | ) | (748 | ) | ||||
| Accumulated other comprehensive loss |
(23,341 | ) | (18,294 | ) | ||||
| Retained earnings (deficit) |
(60,740 | ) | (56,790 | ) | ||||
| 135,682 | 107,286 | |||||||
| Treasury stock |
(21,789 | ) | (50,971 | ) | ||||
| Total stockholders’ equity |
113,893 | 56,315 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,007,319 | $ | 812,850 | ||||
See notes to condensed consolidated financial statements
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended March 31, |
|||||||
| 2004 |
2003 |
||||||
| Revenues: |
|||||||
| Rental income |
$ | 53,240 | $ | 45,764 | |||
| Interest income from loan receivable |
756 | 747 | |||||
| Interest and other income |
281 | 492 | |||||
| 54,277 | 47,003 | ||||||
| Expenses: |
|||||||
| Property level operating expense |
207 | — | |||||
| General and administrative |
3,731 | 3,140 | |||||
| Professional fees |
607 | 760 | |||||
| Reversal of contingent liability |
— | (20,164 | ) | ||||
| Amortization of restricted stock grants |
271 | 291 | |||||
| Depreciation |
10,858 | 9,928 | |||||
| Interest |
15,328 | 15,932 | |||||
| Interest on United States Settlement |
— | 1,182 | |||||
| Total expenses |
31,002 | 11,069 | |||||
| Income before discontinued operations |
23,275 | 35,934 | |||||
| Discontinued operations |
— | 1,354 | |||||
| Net income |
$ | 23,275 | $ | 37,288 | |||
| Earnings Per Share: |
|||||||
| Basic: |
|||||||
| Income before discontinued operations |
$ | 0.28 | $ | 0.46 | |||
| Net income |
$ | 0.28 | $ | 0.47 | |||
| Diluted: |
|||||||
| Income before discontinued operations |
$ | 0.28 | $ | 0.45 | |||
| Net income |
$ | 0.28 | $ | 0.47 | |||
| Shares used in computing earnings per common share: |
|||||||
| Basic |
81,703 | 78,834 | |||||
| Diluted |
82,760 | 79,296 | |||||
| Dividend declared per common share |
$ | 0.3250 | $ | 0.2675 | |||
See notes to condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Net income |
$ | 23,275 | $ | 37,288 | ||||
| Other comprehensive income (loss): |
||||||||
| Unrealized loss on interest rate swaps |
(7,741 | ) | (4,699 | ) | ||||
| Reclassification adjustment for realized loss on interest rate swaps included in net income during the period |
2,694 | 4,540 | ||||||
| Unrealized loss on Kindred Healthcare, Inc. common stock |
— | (6,299 | ) | |||||
| (5,047 | ) | (6,458 | ) | |||||
| Net comprehensive income |
$ | 18,228 | $ | 30,830 | ||||
See notes to condensed consolidated financial statements
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 23,275 | $ | 37,288 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation (including discontinued operations) |
10,858 | 10,801 | ||||||
| Amortization of deferred financing costs |
1,022 | 1,020 | ||||||
| Amortization of restricted stock grants |
271 | 291 | ||||||
| Normalized rents |
(278 | ) | (43 | ) | ||||
| Amortization of deferred revenue |
(627 | ) | (666 | ) | ||||
| Other |
(818 | ) | (54 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| (Increase) decease in restricted cash |
(3,607 | ) | 378 | |||||
| (Increase) decrease in other assets |
474 | (914 | ) | |||||
| Increase in accrued interest |
8,704 | 7,879 | ||||||
| Increase (decrease) in accounts payable and accrued and other liabilities |
411 | (20,134 | ) | |||||
| Net cash provided by operating activities |
39,685 | 35,846 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of real estate property |
(176,670 | ) | — | |||||
| Collection from loan receivable |
55 | 54 | ||||||
| Purchase of furniture and equipment |
(30 | ) | (41 | ) | ||||
| (Increase) decrease in notes receivable from employees, former employees and accrued interest |
163 | (19 | ) | |||||
| Net cash used in investing activities |
(176,482 | ) | (6 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net change in borrowings under Revolving Credit Facility |
39,850 | 43,350 | ||||||
| Purchase of Senior Notes |
— | (37,366 | ) | |||||
| Repayment of debt |
(789 | ) | (617 | ) | ||||
| Payment on United States Settlement |
— | (2,872 | ) | |||||
| Proceeds from issuance of equity |
51,672 | — | ||||||
| Proceeds from stock option exercises |
14,521 | 35 | ||||||
| Cash dividends to stockholders |
(48,838 | ) | (37,742 | ) | ||||
| Net cash provided by (used in) financing activities |
56,416 | (35,212 | ) | |||||
| Increase (decrease) in cash and cash equivalents |
(80,381 | ) | 628 | |||||
| Cash and cash equivalents—beginning of period |
82,104 | 2,455 | ||||||
| Cash and cash equivalents—end of period |
$ | 1,723 | $ | 3,083 | ||||
| Supplemental schedule of noncash activities: |
||||||||
| Assets and liabilities assumed from acquisitions: |
||||||||
| Restricted cash |
$ | 7,802 | $ | — | ||||
| Other assets acquired |
168 | — | ||||||
| Assumed debt |
102,739 | — | ||||||
| Other liabilities assumed |
4,640 | — | ||||||
See notes to condensed consolidated financial statements
6