First Quarter 2017 Net Income of $0.77 Per
Diluted Share and Normalized FFO of $0.68 Per Diluted Share
Care Capital Properties, Inc. (NYSE: CCP) (“CCP” or the
“Company”), a company with a diversified portfolio of triple-net
leased healthcare properties, focused on the post-acute sector,
today announced operating results for the first quarter ended March
31, 2017.
First Quarter 2017 Financial
Results
- Net income attributable to common
stockholders for the quarter ended March 31, 2017 was $65 million,
or $0.77 per diluted common share, excluding dividends on unvested
restricted shares, compared with $30 million, or $0.35 per diluted
common share, excluding dividends on unvested restricted shares,
for the quarter ended March 31, 2016.
- Normalized Funds from Operations
(“FFO”) for the quarter ended March 31, 2017 was $57 million, or
$0.68 per diluted common share. FFO, as defined by the National
Association of Real Estate Investment Trusts (“NAREIT”), for the
same time period was $57 million, or $0.68 per diluted common
share. Normalized FFO and NAREIT FFO for the quarter ended March
31, 2016 were $67 million, or $0.80 per diluted common share, and
$64 million, or $0.76 per diluted common share, respectively. The
decreases in the first quarter of 2017 compared to the prior year
period are attributable primarily to an increase in interest
expense resulting from the refinancing of short-term floating rate
debt with longer term fixed rate debt during 2016, the impact of
dispositions and transitions, restructures and new leases completed
during 2016 and the first quarter of 2017, partially offset by
acquisitions and contractual rent increases.
Operating Results
- During the quarter ended March 31,
2017, CCP invested a total of $8 million through acquisitions and
redevelopment, at an average yield of 8.1%. In addition, the
Company committed $23 million in new loans for redevelopment and
working capital.
- During the quarter, the Company
disposed of nine properties for gross proceeds of $65 million,
representing a weighted average cap rate on cash rent of
approximately 9.25%. In addition, the Company entered into
definitive agreements to sell an additional 29 properties for gross
proceeds of approximately $180 million at an average cap rate on
cash rent of 9.6%.
Subsequent to Quarter
End
- In April, CCP completed its previously
announced acquisition of six behavioral health hospitals for $379
million at an initial GAAP yield of 8.7%. The Company has an
option, exercisable beginning in the fourth quarter of 2018, to
purchase one additional building for an amount expected to be
approximately $20 million. In addition, the Company is providing
the tenant with a line of $50 million to fund future expansions and
revenue-generating improvements in the portfolio.
Balance Sheet and Capital Markets
Activities
- At March 31, 2017, the Company had $514
million of available borrowing capacity under its revolver, and its
net debt to Adjusted EBITDA was 4.7x, adjusting for the fourth
quarter 2016 dividend paid in January 2017. The Company also had
approximately $64 million in cash held in an Internal Revenue Code
Section 1031 exchange escrow account at March 31, 2017, which was
used to fund a portion of the behavioral health hospital
acquisition.
- The Company’s weighted average interest
rate as of March 31, 2017 was approximately 3.8%.
Dividends
- As previously disclosed, CCP paid its
fourth quarter 2016 dividend of $0.57 per share in January
2017.
- On March 31, 2017, the Company paid a
dividend for the first quarter of 2017 in the amount of $0.57 per
share to stockholders of record as of March 10, 2017.
Merger with Sabra Health
Care
On May 7, 2017, CCP announced that it has entered into a
definitive agreement with Sabra Health Care REIT, Inc. (NASDAQ:
SBRA) (“Sabra”) pursuant to which the two companies will combine in
an all-stock transaction. Under the terms of the agreement, at the
effective time of the merger, CCP stockholders will receive 1.123
shares of Sabra common stock for each share of CCP common stock
they own. The transaction is subject to customary closing
conditions, including receipt of the approval of both companies’
shareholders. Due to this announcement, CCP has cancelled its first
quarter earnings call previously scheduled for today.
About Care Capital
Properties
Care Capital Properties, Inc. is a healthcare real estate
investment trust with a diversified portfolio of triple-net leased
properties, focused on the post-acute sector. The Company’s skilled
management team is fully invested in delivering excellent returns
by forging strong relationships with shareholders, operators, and
employees.
Supplemental information about Care Capital Properties, Inc. can
be found on the Company’s website under the “Investors” section at:
www.carecapitalproperties.com/investors/financial-information/documents.
Forward-Looking
Statements
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 CCP’s or its tenants’ or
borrowers’ expected future financial condition, results of
operations, cash flows, funds from operations, dividends and
dividend plans, financing opportunities and plans, capital markets
transactions, business strategy, budgets, projected costs,
operating metrics, capital expenditures, competitive positions,
acquisitions, investment opportunities, dispositions, growth
opportunities, expected lease income, continued qualification as a
real estate investment trust (“REIT”), plans and objectives of
management for future operations and statements that include words
such as “anticipate,” “if,” “believe,” “plan,” “estimate,”
“expect,” “intend,” “may,” “could,” “should,” “will” and other
similar expressions are forward-looking statements. These
forward-looking statements are inherently uncertain, and actual
results may differ materially from CCP’s expectations. Except as
required by law, CCP does not undertake a duty to update these
forward-looking statements, which speak only as of the date on
which they are made.
Factors that could cause CCP’s actual future results and trends
to differ materially from those anticipated are discussed in its
filings with the Securities and Exchange Commission and include,
without limitation: (a) the ability and willingness of CCP’s
tenants, borrowers and other counterparties to satisfy their
obligations under their respective contractual arrangements with
CCP, including, in some cases, their obligations to indemnify,
defend and hold harmless CCP from and against various claims,
litigation and liabilities; (b) the ability of CCP’s tenants and
borrowers to maintain the financial strength and liquidity
necessary to satisfy their respective obligations and liabilities
to third parties, including without limitation obligations under
their existing credit facilities and other indebtedness, and the
impact of CCP’s tenants or borrowers declaring bankruptcy or
becoming insolvent; (c) CCP’s ability to successfully execute its
business strategy, including identifying, underwriting, financing,
consummating and integrating suitable acquisitions and investments;
(d) macroeconomic conditions such as a disruption in or lack of
access to the capital markets, changes in the debt rating on U.S.
government securities, default or delay in payment by the United
States of its obligations, and changes in federal or state budgets
resulting in the reduction or nonpayment of Medicare or Medicaid
reimbursement rates; (e) the nature and extent of competition in
the markets in which CCP’s properties are located; (f) the impact
of pending and future healthcare reform and regulations, including
cost containment measures, quality initiatives and changes in
reimbursement methodologies, policies, procedures and rates; (g)
increases in CCP’s borrowing costs as a result of changes in
interest rates and other factors; (h) the ability of CCP’s tenants
to successfully operate CCP’s properties in compliance with
applicable laws, rules and regulations, to deliver high-quality
services, to hire and retain qualified personnel, to attract
residents and patients, and to participate in government or managed
care reimbursement programs; (i) changes in general economic
conditions or economic conditions in the markets in which CCP may,
from time to time, compete for investments, capital and talent, and
the effect of those changes on CCP’s earnings and financing
sources; (j) CCP’s ability to repay, refinance, restructure or
extend its indebtedness as it becomes due; (k) CCP’s ability and
willingness to maintain its qualification as a real estate
investment trust in light of economic, market, legal, tax and other
considerations; (l) final determination of CCP’s taxable net income
for the year ended December 31, 2016 and for current and future
years; (m) the ability and willingness of CCP’s tenants to renew
their leases with CCP upon expiration of the leases, CCP’s ability
to reposition its properties on the same or better terms in the
event of nonrenewal or in the event CCP exercises its right to
replace an existing tenant, and obligations, including
indemnification obligations, CCP may incur in connection with the
replacement of an existing tenant; (n) year-over-year changes in
the Consumer Price Index and the effect of those changes on the
rent escalators contained in CCP’s leases and on CCP’s earnings;
(o) CCP’s ability and the ability of its tenants and borrowers to
obtain and maintain adequate property, liability and other
insurance from reputable, financially stable providers; (p) the
impact of increased operating costs and uninsured professional
liability claims on CCP’s or its tenants’ or borrowers’ liquidity,
financial condition and results of operations, and the ability of
CCP and its tenants and borrowers to accurately estimate the
magnitude of those costs and claims; (q) consolidation in the
healthcare industry resulting in a change of control of, or a
competitor’s investment in, one or more of CCP’s tenants or
borrowers or significant changes in the senior management of CCP’s
tenants or borrowers; (r) the impact of litigation or any
financial, accounting, legal or regulatory issues, including
government investigations, enforcement proceedings and punitive
settlements, that may affect CCP or its tenants or borrowers; and
(s) changes in accounting principles, or their application or
interpretation, and CCP’s ability to make estimates and the
assumptions underlying the estimates, which could have an effect on
CCP’s earnings. Many of these factors are beyond the control of CCP
and its management.
CONSOLIDATED BALANCE SHEETS (Unaudited) (In
thousands, except per share amounts) March
31, December 31, 2017 2016 Assets
Real estate investments: Land and improvements $ 262,601 $ 262,064
Buildings and improvements 2,812,433 2,785,166 Construction in
progress 24,999 45,892 Acquired lease intangibles 91,824 92,431
3,191,857 3,185,553 Accumulated depreciation and amortization
(727,907) (702,809) Net real estate property 2,463,950 2,482,744
Net investment in direct financing lease 22,636 22,531 Net real
estate investments 2,486,586 2,505,275 Loans receivable, net 61,522
62,264 Cash 17,891 15,813 Restricted cash 64,396 — Goodwill 123,884
123,884 Other assets 78,172 105,132 Total assets $ 2,832,451 $
2,812,368
Liabilities and equity Liabilities: Term
loans, senior notes and other debt $ 1,477,591 $ 1,414,534 Tenant
deposits 43,470 42,574 Lease intangible liabilities, net 99,027
103,182 Dividends payable — 47,861 Accounts payable and other
liabilities 25,160 37,177 Deferred income taxes 1,766 1,852 Total
liabilities 1,647,014 1,647,180 Commitments and
contingencies Equity: Preferred stock, $0.01 par value;
10,000 shares authorized, unissued at March 31, 2017 and December
31, 2016 — — Common stock, $0.01 par value; 300,000 share
authorized; 84,069 and 83,970 shares issued at March 31, 2017 and
December 31, 2016, respectively 841 840 Additional paid-in capital
1,274,079 1,272,642 Dividends in excess of net income (102,752)
(119,750) Treasury stock, 20 and 11 shares at March 31, 2017 and
December 31, 2016, respectively (488) (330) Accumulated other
comprehensive income 12,471 10,476 Total common stockholders’
equity 1,184,151 1,163,878 Noncontrolling interest 1,286 1,310
Total equity 1,185,437 1,165,188 Total liabilities and equity $
2,832,451 $ 2,812,368
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (Unaudited) (In thousands,
except per share amounts) For the Three Months
Ended March 31, 2017 2016
Revenues: Rental income, net $ 78,221 $ 81,351 Income from
investments in direct financing lease and loans 1,946 1,182 Real
estate services fee income 1,226 1,705 Interest and other income
323 305 Net gain on lease termination 1,115 — Total revenues 82,831
84,543
Expenses: Interest 15,185 10,067 Depreciation
and amortization 24,896 28,641 Impairment on real estate
investments and associated goodwill — 5,499 General, administrative
and professional fees 8,729 8,001 Deal costs 197 1,160 Loss on
extinguishment of debt — 757 Other expenses, net 913 94 Total
expenses 49,920 54,219 Income before income taxes,
real estate dispositions and noncontrolling interests 32,911 30,324
Income tax expense (239) (421) Gain (loss) on real estate
dispositions 32,245 (120) Net income 64,917 29,783 Net income
attributable to noncontrolling interests 8 17
Net income
attributable to common stockholders $ 64,909 $
29,766 Net income $ 64,917 $ 29,783 Other comprehensive
gain (loss) - derivatives 1,995 (5,791) Total comprehensive income
66,912 23,992 Comprehensive income attributable to noncontrolling
interests 8 17
Comprehensive income attributable to common
stockholders $ 66,904 $ 23,975 Earnings
per common share: Basic: Net income attributable to common
stockholders, excluding dividends on unvested restricted shares $
0.77 $ 0.35 Diluted: Net income attributable to common
stockholders, excluding dividends on unvested restricted shares $
0.77 $ 0.35 Dividends declared per common share $ 0.57 $
0.57
Weighted average shares used in computing earnings
per common share: Basic 83,670 83,544 Diluted 83,799 83,620
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands) For the Three
Months Ended March 31, 2017 2016
Cash flows from operating activities: Net income $ 64,917 $ 29,783
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, amortization and impairment
23,737 33,122 Amortization of above and below market lease
intangibles, net (1,721) (2,032) Amortization of deferred financing
fees 1,057 1,283 Accretion of direct financing lease (400) (361)
Amortization of leasing costs and other intangibles 1,134 1,018
Amortization of stock-based compensation 1,344 1,497
Straight-lining of rental income, net 3 (21) (Gain) loss on real
estate dispositions (32,245) 120 Net gain on lease termination
(1,115) — Loss on extinguishment of debt — 757 Deferred income tax
(benefit) expense (86) 135 Other (20) (26) Changes in operating
assets and liabilities, net of effects of acquisitions: Increase in
other assets (3,890) (2,007) Increase (decrease) in tenant deposits
881 (2,793) Decrease in accounts payable and other liabilities
(8,624) (10,091) Net cash provided by operating activities 44,972
50,384 Cash flows from investing activities: Net investment
in real estate property (2,936) — Proceeds from real estate
disposals — 5,390 Investment in loans receivable (28,949) (13,879)
Proceeds from loans receivable 30,090 9,947 Development project
expenditures (5,110) (8,924) Capital expenditures (950) (2,028) Net
cash used in investing activities (7,855) (9,494) Cash flows
from financing activities: Net change in borrowings under revolving
credit facility 62,000 3,000 Proceeds from debt — 200,000 Repayment
of debt — (198,000) Payment of deferred financing costs — (1,790)
Distributions to noncontrolling interest (33) (32) Cash
distribution to common stockholders (95,772) (47,861) Purchase of
treasury stock (1,234) (654) Net cash used in financing activities
(35,039) (45,337) Net increase (decrease) in cash
2,078 (4,447) Cash at beginning of period 15,813 16,995 Cash at end
of period $ 17,891 $ 12,548
NON-GAAP FINANCIAL MEASURES
RECONCILIATION Funds From Operations (FFO), Normalized FFO
and Normalized Funds Available for Distribution (FAD)1
(Dollars in thousands, except per share amounts)
For the Three Months Ended March 31, 2017
2016 Net income attributable to common
stockholders $ 64,909 $ 29,766
Net income attributable to common
stockholders, excluding dividends on unvested restricted shares per
share
$ 0.77 $ 0.35 Adjustments: Real estate depreciation and
amortization 24,702 28,456 Real estate depreciation related to
noncontrolling interests (33) (37) Impairment on real estate
investments and goodwill — 5,499 (Gain) loss on real estate
dispositions (32,245) 120 Subtotal: FFO add-backs (7,576) 34,038
Subtotal: FFO add-backs per share $ (0.09) $ 0.41
FFO (NAREIT) attributable to common
stockholders
$ 57,333 $ 63,804
FFO (NAREIT) attributable to common
stockholders per share
$ 0.68 $ 0.76 Adjustments: Income tax expense
239 421 Transition services fee expense — 602 Deal costs 197 1,160
Amortization of other intangibles 170 171 Loss on extinguishment of
debt — 757 Net gain on lease termination (1,115) — Other non-cash
items, net 116 (305) Subtotal: normalized FFO add-backs (393) 2,806
Subtotal: normalized FFO add-backs per share $ (0.00)
$ 0.03
Normalized FFO attributable to common
stockholders
$ 56,940 $ 66,610
Normalized FFO attributable to common
stockholders per share
$ 0.68 $ 0.80 Non-cash items included in
normalized FFO: Amortization of above and below market and lease
intangibles, net (1,721) (2,032) Amortization of deferred financing
fees 1,057 1,283 Accretion of direct financing lease (400) (361)
Other amortization (27) (26) Straight-lining of rental income, net
3 (21) Other adjustments: Capital expenditures (950) (2,028)
Stock-based compensation 1,784 1,679 Deal costs (197) (865)
Acquisition costs (2,326) — Other non-cash items, net (63)
—
Normalized FAD attributable to common
stockholders
$ 54,100 $ 64,239 Weighted average diluted shares 83,799 83,620
1 Totals and per share amounts may not add due to rounding.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. However, since real estate values historically have
risen or fallen with market conditions, many industry investors
deem presentations of operating results for real estate companies
that use historical cost accounting to be insufficient by
themselves. For that reason, CCP considers FFO, normalized FFO and
normalized FAD to be appropriate measures of operating performance
of an equity REIT. In particular, CCP believes that normalized FFO
is useful because it allows investors, analysts and CCP management
to compare CCP’s operating performance to the operating performance
of other real estate companies and between periods on a consistent
basis without having to account for differences caused by
unanticipated items and other events such as transactions. CCP
believes that normalized FAD is useful because it allows investors,
analysts and CCP management to measure the quality of the Company’s
earnings.
NAREIT defines FFO as net income (computed in accordance with
GAAP), excluding gains (or losses) from sales of real estate
property and impairment write-downs of depreciable real estate,
plus real estate depreciation and amortization, and after
adjustments for joint ventures. Adjustments for joint ventures will
be calculated to reflect FFO on the same basis. CCP defines
normalized FFO as FFO excluding items which may be nonrecurring or
recurring in nature but not consistent in amounts. Normalized FAD
represents normalized FFO adjusted for amortization determined in
accordance with GAAP reflected as income and/or expenses as well as
other expenditures, such as capital expenditures and acquisition
costs.
FFO, normalized FFO and normalized FAD presented herein may not
be comparable to similar measures presented by other real estate
companies due to the fact that not all real estate companies use
the same definitions. FFO, normalized FFO and normalized FAD should
not be considered as alternatives to net income (determined in
accordance with GAAP) as indicators of CCP’s financial performance
or as alternatives to cash flow from operating activities
(determined in accordance with GAAP) as measures of CCP’s
liquidity, nor are they necessarily indicative of sufficient cash
flow to fund all of CCP’s needs. CCP believes that in order to
facilitate a clear understanding of the consolidated historical
operating results of CCP, FFO, normalized FFO and normalized FAD
should be examined in conjunction with net income attributable to
common stockholders as presented elsewhere herein.
NON-GAAP FINANCIAL MEASURES RECONCILIATION Net
Debt to Adjusted Quarterly EBITDA
The following information considers the
effect on net income of CCP ’s investments and dispositions that
were completed during the three months ended March 31, 2017, as if
the transactions had been consummated as of the beginning of the
period. The following table illustrates net debt to adjusted
earnings before interest, taxes, depreciation and amortization, as
well as adjustments for items which may be nonrecurring or
recurring in nature but not consistent in amounts (“Adjusted
EBITDA”) (dollars in thousands):
Net income $ 64,917 Adjustments for
investments and dispositions during the period (1,285)
Adjusted net income $ 63,632 Add back:
Interest 15,185 Income tax expense 239 Depreciation and
amortization 24,896 Stock-based compensation 1,784 Deal costs 197
Gain on real estate dispositions (32,245) Net gain on lease
termination (1,115) Other non-cash items, net 19
Adjusted
EBITDA $ 72,592 Adjusted EBITDA annualized $
290,368 As of March 31, 2017: Debt (1) $ 1,429,730
Unamortized debt issuance costs 17,409
Cash (including restricted cash) (2)
(82,287)
Net debt (adjusted for unamortized debt issuance
costs) $ 1,364,852 Net debt to Adjusted
EBITDA 4.7 (1) Debt has been decreased for the
fourth quarter 2016 dividend that was declared in December 2016 but
paid in January 2017.
(2) The restricted cash is property sale
proceeds being held in a Code Section 1031 exchange escrow account
with a qualified intermediary.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170509005895/en/
Care Capital Properties, Inc.Lori B. WittmanExecutive Vice
President and Chief Financial
Officerlwittman@carecapitalproperties.com312.881.4702
Care Capital Properties, Inc. (delisted) (NYSE:CCP)
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