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 JUNE 30, 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 |
40223 | |
| (Address of principal executive offices) | (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 July 26, 2004: | |
| Common Stock, $.25 par value | 84,148,322 Shares |
FORM 10-Q
INDEX
| Page | ||||
| 3 | ||||
| Item 1. |
Financial Statements | 3 | ||
| Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
40 | ||
| Item 3. |
53 | |||
| Item 4. |
56 | |||
| 57 | ||||
| Item 1. |
Legal Proceedings | 57 | ||
| Item 4. |
Submission of Matters to a Vote by Securities Holders | 57 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 57 | ||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| Assets | ||||||||
| Real estate investments: |
||||||||
| Land |
$ | 136,634 | $ | 104,300 | ||||
| Building and improvements |
1,299,660 | 985,881 | ||||||
| 1,436,294 | 1,090,181 | |||||||
| Accumulated depreciation |
(431,707 | ) | (408,891 | ) | ||||
| Total net real estate property |
1,004,587 | 681,290 | ||||||
| Loan receivable, net |
16,423 | 16,455 | ||||||
| Total net real estate investments |
1,021,010 | 697,745 | ||||||
| Cash and cash equivalents |
8,880 | 82,104 | ||||||
| Restricted cash |
18,358 | 7,575 | ||||||
| Deferred financing costs, net |
11,423 | 13,465 | ||||||
| Notes receivable from employees |
3,251 | 3,772 | ||||||
| Other |
10,081 | 8,189 | ||||||
| Total assets |
$ | 1,073,003 | $ | 812,850 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Liabilities: |
||||||||
| Senior Notes payable and other debt |
$ | 851,675 | $ | 640,562 | ||||
| Deferred revenue |
14,204 | 15,308 | ||||||
| Interest rate swap agreements |
18,251 | 27,868 | ||||||
| Accrued dividend |
— | 21,614 | ||||||
| Accrued interest |
6,718 | 5,821 | ||||||
| Accounts payable and other accrued liabilities |
21,298 | 14,562 | ||||||
| Other liabilities—disputed tax refunds |
835 | 406 | ||||||
| Deferred income taxes |
30,394 | 30,394 | ||||||
| Total liabilities |
943,375 | 756,535 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, 10,000 shares authorized, unissued |
— | — | ||||||
| Common stock, $0.25 par value; authorized 180,000 shares; 84,759 and 82,608 shares issued at June 30, 2004 and December 31, 2003, respectively |
21,190 | 20,652 | ||||||
| Capital in excess of par value |
201,482 | 162,466 | ||||||
| Unearned compensation on restricted stock |
(1,235 | ) | (748 | ) | ||||
| Accumulated other comprehensive loss |
(10,129 | ) | (18,294 | ) | ||||
| Retained earnings (deficit) |
(62,377 | ) | (56,790 | ) | ||||
| 148,931 | 107,286 | |||||||
| Treasury stock, 688 and 1,817 shares at June 30, 2004 and December 31, 2003, respectively |
(19,303 | ) | (50,971 | ) | ||||
| Total stockholders’ equity |
129,628 | 56,315 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,073,003 | $ | 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 June 30, |
Six Months Ended June 30, |
||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||
| Revenues: |
|||||||||||||
| Rental income |
$ | 58,710 | $ | 46,705 | $ | 111,950 | $ | 92,469 | |||||
| Interest income from loan receivable |
755 | 758 | 1,511 | 1,505 | |||||||||
| Interest and other income |
302 | 553 | 583 | 1,045 | |||||||||
| 59,767 | 48,016 | 114,044 | 95,019 | ||||||||||
| Expenses: |
|||||||||||||
| Property level operating expense |
290 | — | 497 | — | |||||||||
| General and administrative |
3,653 | 3,080 | 7,384 | 6,220 | |||||||||
| Professional fees |
763 | 702 | 1,370 | 1,462 | |||||||||
| Reversal of contingent liability |
— | — | — | (20,164 | ) | ||||||||
| Amortization of restricted stock grants |
279 | 310 | 550 | 601 | |||||||||
| Depreciation |
12,136 | 9,925 | 22,994 | 19,853 | |||||||||
| Swap ineffectiveness |
— | 369 | — | 369 | |||||||||
| Interest |
16,992 | 15,662 | 32,320 | 31,594 | |||||||||
| Interest on United States Settlement |
— | 3,761 | — | 4,943 | |||||||||
| Total expenses |
34,113 | 33,809 | 65,115 | 44,878 | |||||||||
| Operating income |
25,654 | 14,207 | 48,929 | 50,141 | |||||||||
| Gain on Sale of Kindred Healthcare, Inc. common stock |
— | 922 | — | 922 | |||||||||
| Income before discontinued operations |
25,654 | 15,129 | 48,929 | 51,063 | |||||||||
| Discontinued operations |
— | 1,000 | — | 2,354 | |||||||||
| Net income |
$ | 25,654 | $ | 16,129 | $ | 48,929 | $ | 53,417 | |||||
| Earnings Per Common Share: |
|||||||||||||
| Basic: |
|||||||||||||
| Income before discontinued operations |
$ | 0.31 | $ | 0.19 | $ | 0.59 | $ | 0.65 | |||||
| Net income |
$ | 0.31 | $ | 0.20 | $ | 0.59 | $ | 0.68 | |||||
| Diluted: |
|||||||||||||
| Income before discontinued operations |
$ | 0.30 | $ | 0.19 | $ | 0.58 | $ | 0.64 | |||||
| Net income |
$ | 0.30 | $ | 0.20 | $ | 0.58 | $ | 0.67 | |||||
| Shares used in computing earnings per common share: |
|||||||||||||
| Basic |
83,820 | 78,935 | 82,762 | 78,885 | |||||||||
| Diluted |
84,565 | 79,575 | 83,662 | 79,435 | |||||||||
| Dividend declared per common share |
$ | 0.3250 | $ | 0.2675 | $ | 0.6500 | $ | 0.5350 | |||||
See notes to condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||
| Net income |
$ | 25,654 | $ | 16,129 | $ | 48,929 | $ | 53,417 | ||||||
| Other comprehensive income (loss): |
||||||||||||||
| Unrealized gain (loss) on interest rate swaps |
10,212 | (10,821 | ) | 2,471 | (15,520 | ) | ||||||||
| Reclassification adjustment for realized loss on interest rate swaps included in net income during the period |
3,000 | 4,855 | 5,694 | 9,395 | ||||||||||
| Unrealized loss on Kindred Healthcare, Inc. common stock |
— | 6,080 | — | (219 | ) | |||||||||
| Reclassification adjustment for realized gain on Kindred Healthcare, Inc. common stock included in net income during the period |
— | (922 | ) | — | (922 | ) | ||||||||
| 13,212 | (808 | ) | 8,165 | (7,266 | ) | |||||||||
| Net comprehensive income |
$ | 38,866 | $ | 15,321 | $ | 57,094 | $ | 46,151 | ||||||
See notes to condensed consolidated financial statements
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 48,929 | $ | 53,417 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||