Investors

As baby boomers age, Medicare enrollment rises, and so does the need for more high quality senior care facilities. CareTrust remains bullish on the senior healthcare space.

Press Release

CareTrust REIT Announces Second Quarter 2018 Operating Results; Updates 2018 Guidance

08/01/18
Conference Call Scheduled for Thursday, August 2, 2018 at 1:00 pm ET

SAN CLEMENTE, Calif., Aug. 01, 2018 (GLOBE NEWSWIRE) -- CareTrust REIT, Inc. (Nasdaq:CTRE) today reported operating results for the quarter ended June 30, 2018, as well as other recent events. 

For the quarter, CareTrust REIT reported: 

  • Net income of $13.3 million, and net income per diluted weighted-average common share of $0.17;
  • Normalized FFO of $24.5 million, an increase of 19%, and normalized FFO per diluted weighted-average common share of $0.32, an increase of 14% over Q2 2017;
  • Normalized FAD of $25.6 million, an increase of 18%, and normalized FAD per diluted weighted-average common share of $0.33, an increase of 10% over Q2 2017;
  • A net debt-to-normalized EBITDA ratio of 4.1x and a debt-to-enterprise value of 29%, each as of quarter-end. 

Pipeline Rebuilding 

Commenting on the Company’s lighter-than-usual year-to-date acquisition pace, Greg Stapley, CareTrust REIT’s Chairman and Chief Executive Officer, noted that the Company has been adhering to its core discipline of deploying capital at solid returns and reasonable prices. “In our view, the market for good assets has been overheated since the fourth quarter of 2017, and we will never hesitate to head for the sidelines if the right deals aren’t there,” he said. He noted that, while no acquisitions were closed in the second quarter, one has closed since, and more are underway. “We are pleased to report that deal flow has picked up markedly in the second quarter, and our pipeline is getting back to where it has been historically,” he concluded.

Financial Results for Quarter Ended June 30, 2018 

Chief Financial Officer Bill Wagner reported that, for the second quarter, CareTrust REIT generated net income of $13.3 million, or $0.17 per diluted weighted-average common share, normalized FFO of $24.5 million, or $0.32 per diluted weighted-average common share, and normalized FAD of $25.6 million, or $0.33 per diluted weighted-average common share. “We are pleased to be delivering a quarter-over-quarter increase in normalized FFO per share of 14%,” said Mr. Wagner. 

Liquidity 

Discussing CareTrust REIT’s current liquidity, Mr. Wagner noted that the acquisition-light quarter allowed the Company to significantly pay down the outstanding balance on its $400 million revolving credit facility. “We have used retained FFO and proceeds of equity sales under our at-the-market equity program to reduce our loan balance to approximately $130 million as of today, leaving plenty of liquidity for near-term growth,” he said. He further noted that the revolving credit facility includes an additional $250 million “accordion” feature that can be exercised by the Company if additional liquidity is needed. 

Mr. Wagner also reported that, during the quarter and since, CareTrust REIT issued approximately 4.9 million shares of common stock through the Company’s at-the-market equity program at an average price of $16.50 per share, for $80.2 million in gross proceeds. “Our ATM program remains a significant instrument in the Company’s capital-raising repertoire, with up to $155.9 million remaining in authorization at present,” he said. Mr. Wagner stated that CareTrust REIT’s net debt-to-normalized EBITDA ratio was 4.1x and its debt-to-enterprise value was 29%, each at quarter-end, which is well within management’s target leverage range. He also noted that CareTrust REIT continues to have no property-level debt and, taking into account existing extension rights, no debt maturing before 2020. 

2018 Guidance Updated 

Mr. Wagner updated CareTrust REIT's 2018 earnings guidance, projecting on a per-diluted weighted-average common share basis, net income of approximately $0.71 to $0.73, normalized FFO of approximately $1.26 to $1.28, and normalized FAD of approximately $1.32 to $1.34. He noted that the 2018 guidance is based on a diluted weighted-average common share count of 78.4 million shares and assumes no new acquisitions beyond those made to date, no new debt incurrences or new equity issuances, and 2.0% CPI-based rent escalators under CareTrust REIT's long-term net leases. 

Dividend Declared 

During the quarter, CareTrust REIT declared a quarterly dividend of $0.205 per common share. “On an annualized basis, our quarterly dividend represents a payout ratio of approximately 64% based on the second quarter 2018 normalized FFO, and 62% on normalized FAD,” said Mr. Wagner. “At this level, our dividend remains among the best-protected of all our industry peers, while simultaneously providing additional growth capital for reinvestment and a solid overall return to our shareholders,” he added. 

New Officers 

CareTrust REIT also announced that David Sedgwick, CareTrust’s Vice President of Operations since 2014, has been named Chief Operating Officer, and that Mark Lamb, CareTrust’s Director of Investments since 2014, has been named Chief Investment Officer. “Mark and Dave have been key contributors to CareTrust’s growth and success since inception, and we couldn’t be more pleased to have them assume these roles,” said Mr. Stapley. He called the recognitions “hard-earned and well-deserved,” adding that the two new officers have performed at the highest levels throughout their tenure with CareTrust REIT.

Acquisitions in the Quarter and Since 

Subsequent to quarter-end, CareTrust REIT acquired a 99-bed skilled nursing facility in Aberdeen, South Dakota, which was formerly operated by an affiliate of HCR ManorCare. CareTrust REIT added the property to its existing master lease with Salt Lake City-based Eduro Healthcare, LLC, which took over operations on July 18, 2018 and rechristened the facility Prairie Heights Healthcare Center.  The total investment was approximately $9.7 million, inclusive of transaction costs, and the initial increase in annual cash rent under Eduro’s master lease was approximately $870,000. The Eduro master lease has approximately twelve years remaining on the initial term and carries CPI-based annual escalators. CareTrust REIT funded the acquisition using cash on hand. 

Planned Re-Tenantings Completed 

Also during the quarter, CareTrust REIT completed the previously-announced planned re-tenanting of nine Ohio assets. “We are pleased to report that the last of the Ohio assets formerly leased to subsidiaries of Pristine Senior Living were successfully transferred to two outstanding operators, on schedule and with minimal disruption to facility operations and our rent stream,” said Mr. Stapley. He also reported that two other properties, which were formerly leased to affiliates of OnPointe Health, were successfully transferred to other current CareTrust operators during the quarter, also without any material rent loss. 

Conference Call 

A conference call will be held on Thursday, August 2, 2018, at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time), during which CareTrust REIT’s management will discuss second quarter 2018 results, recent developments and other matters. The dial-in number for this call is (844) 220-4972 (U.S.) or (317) 973-4053 (International). The conference ID number is 7496046. To listen to the call online, or to view any financial or other statistical information required by SEC Regulation G, please visit the Investors section of the CareTrust REIT website at http://investor.caretrustreit.com. The call will be recorded, and will be available for replay via the website for 30 days following the call. 

About CareTrust REITTM 

CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition and leasing of seniors housing and healthcare-related properties. With 189 net-leased healthcare properties and three operated seniors housing properties in 25 states, CareTrust REIT is pursuing opportunities across the nation to acquire properties that will be leased to a diverse group of local, regional and national seniors housing operators, healthcare services providers, and other healthcare-related businesses. More information about CareTrust REIT is available at www.caretrustreit.com

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: 

This press release contains, and the related conference call will include, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include all statements that are not historical statements of fact and statements regarding the Company’s intent, belief or expectations, including, but not limited to, statements regarding future financial and financing positions, business and acquisition strategies, growth prospects, operating and financial performance, expectations regarding the making of distributions, payment of dividends, compliance with and changes in governmental regulations, and the performance of the Company’s tenants and operators and their respective facilities. 

Words such as “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,” “plan,” “seek,” “should,” “will,” “would,” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements, though not all forward-looking statements contain these identifying words. The Company’s forward-looking statements are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although the Company believes that the assumptions underlying these forward-looking statements are reasonable, they are not guarantees and the Company can give no assurance that its expectations will be attained. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause actual results to differ materially from expectations include, but are not limited to:  (i) the ability to achieve some or all of the expected benefits from the completed spin-off from The Ensign Group, Inc. (“Ensign”);  (ii) the ability and willingness of Company tenants to meet and/or perform their obligations under the triple-net leases the Company has entered into with them and the ability and willingness of Ensign to meet and/or perform its obligations under the contractual arrangements that it entered into with the Company in connection with such spin-off, including its triple-net long-term leases with the Company, and any of its obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities; (iii) the ability and willingness of the Company’s tenants to comply with laws, rules and regulations in the operation of the properties the Company leases to them; (iv) the ability and willingness of the Company’s tenants, including Ensign, to renew their leases with the Company upon expiration and the ability to reposition Company properties on the same or better terms in the event of nonrenewal or in the event the Company replaces an existing tenant, and obligations, including indemnification obligations, that the Company may incur in connection with the replacement of an existing tenant; (v) the availability of and the ability to identify suitable acquisition opportunities and the ability to acquire and lease the respective properties on favorable terms; (vi) the ability to generate sufficient cash flows to service the Company’s outstanding indebtedness; (vii) access to debt and equity capital markets; (viii) fluctuating interest rates; (ix) the ability to retain key management personnel; (x) the ability to maintain the Company’s status as a real estate investment trust (“REIT”); (xi) changes in the U.S. tax laws and other state, federal or local laws, whether or not specific to REITs; (xii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xiii) any additional factors identified in the Company’s filings with the Securities and Exchange Commission (“SEC”), including those in the Company‘s Annual Report on Form 10-K for the year ended December 31, 2017 under the heading entitled “Risk Factors,” as such risk factors may be amended, supplemented or superseded from time to time by other reports the Company files with the SEC. 

Information in this press release or the related conference call is provided as of June 30, 2018, unless specifically stated otherwise.  The Company expressly disclaims any obligation to update or revise any information in this press release or the related conference call (and replays thereof), including forward-looking statements, whether to reflect any change in the Company’s expectations, any change in events, conditions or circumstances, or otherwise. 

As used in this press release or the related conference call, unless the context requires otherwise, references to “CTRE,” "CareTrust," “CareTrust REIT” or the “Company” refer to CareTrust REIT, Inc. and its consolidated subsidiaries. GAAP refers to generally accepted accounting principles in the United States of America. 

Contact:
CareTrust REIT, Inc.
(949) 542-3130
ir@caretrustreit.com 

 
CARETRUST REIT, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(unaudited)
    For the Three Months Ended June 30,   For the Six Months Ended June 30,
    2018   2017   2018   2017
Revenues:              
  Rental income $ 34,708     $ 28,511     $ 68,524     $ 55,850  
  Tenant reimbursements 3,016     2,389     5,984     4,710  
  Independent living facilities 845     789     1,644     1,582  
  Interest and other income 400     1,140     918     1,295  
  Total revenues 38,969     32,829     77,070     63,437  
Expenses:              
  Depreciation and amortization 11,299     9,335     22,876     18,411  
  Interest expense 7,285     6,219     14,377     12,098  
  Loss on the extinguishment of debt     11,883         11,883  
  Property taxes 3,016     2,389     5,984     4,710  
  Independent living facilities 744     644     1,460     1,305  
  Impairment of real estate investment     890         890  
  General and administrative 3,358     2,977     6,550     5,367  
  Total expenses 25,702     34,337     51,247     54,664  
Other income:              
  Gain on sale of real estate         2,051      
  Gain on disposition of other real estate investment     3,538         3,538  
Net income $ 13,267     $ 2,030     $ 27,874     $ 12,311  
                 
Earnings per common share:              
  Basic $ 0.17     $ 0.03     $ 0.36     $ 0.17  
  Diluted $ 0.17     $ 0.03     $ 0.36     $ 0.17  
                 
Weighted average shares outstanding:              
  Basic 76,374     72,564     75,941     69,773  
  Diluted 76,374     72,564     75,941     69,773  
                 
Dividends declared per common share $ 0.205     $ 0.185     $ 0.41     $ 0.37  
                               

 

 
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
 (unaudited)
      Three Months Ended June 30,   Six Months Ended June 30,
      2018   2017   2018   2017
                   
Net income   $ 13,267     $ 2,030     $ 27,874     $ 12,311  
  Depreciation and amortization   11,299     9,335     22,876     18,411  
  Interest expense   7,285     6,219     14,377     12,098  
  Amortization of stock-based compensation   924     600     1,828     1,136  
EBITDA   32,775     18,184     66,955     43,956  
  Loss on the extinguishment of debt       11,883         11,883  
  Deferred preferred return       (544 )       (544 )
  Impairment of real estate investment       890         890  
  Gain on sale of real estate           (2,051 )    
  Gain on disposition of other real estate investment       (3,538 )       (3,538 )
Normalized EBITDA   $ 32,775     $ 26,875     $ 64,904     $ 52,647  
                   
Net income   $ 13,267     $ 2,030     $ 27,874     $ 12,311  
  Real estate related depreciation and amortization   11,265     9,309     22,814     18,359  
  Impairment of real estate investment       890         890  
  Gain on sale of real estate           (2,051 )    
  Gain on disposition of other real estate investment       (3,538 )       (3,538 )
Funds from Operations (FFO)   24,532     8,691     48,637     28,022  
  Deferred preferred return       (544 )       (544 )
  Effect of the senior unsecured notes payable redemption       12,475         12,475  
Normalized FFO   $ 24,532     $ 20,622     $ 48,637     $ 39,953  
                                 


 
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES (continued)
 (in thousands, except per share data)
 (unaudited)
      Three Months Ended June 30,   Six Months Ended June 30,
      2018   2017   2018   2017
                   
Net income   $ 13,267     $ 2,030     $ 27,874     $ 12,311  
  Real estate related depreciation and amortization   11,265     9,309     22,814     18,359  
  Amortization of deferred financing fees   484     529     968     1,090  
  Amortization of stock-based compensation   924     600     1,828     1,136  
  Straight-line rental income   (342 )   (43 )   (933 )   (115 )
  Impairment of real estate investment       890         890  
  Gain on sale of real estate           (2,051 )    
  Gain on disposition of other real estate investment       (3,538 )       (3,538 )
Funds Available for Distribution (FAD)   25,598     9,777     50,500     30,133  
  Deferred preferred return       (544 )       (544 )
  Effect of the senior unsecured notes payable redemption       12,475         12,475  
Normalized FAD   $ 25,598     $ 21,708     $ 50,500     $ 42,064  
                   
FFO per share   $ 0.32     $ 0.12     $ 0.64     $ 0.40  
Normalized FFO per share   $ 0.32     $ 0.28     $ 0.64     $ 0.57  
                   
FAD per share   $ 0.33     $ 0.13     $ 0.66     $ 0.43  
Normalized FAD per share   $ 0.33     $ 0.30     $ 0.66     $ 0.60  
                   
  Diluted weighted average shares outstanding [1]   76,545     72,803     76,103     69,984  
                   
   [1] For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.        


 
CARETRUST REIT, INC.
CONSOLIDATED INCOME STATEMENTS - 5 QUARTER TREND
(in thousands, except per share data)
(unaudited)
  Quarter Quarter Quarter Quarter Quarter
  Ended Ended Ended Ended Ended
  June 30,
2017
September 30,
2017
December 31,
2017
March 31,
2018
June 30,
2018
Revenues:          
Rental income $ 28,511   $ 29,404   $ 32,379   $ 33,816   $ 34,708  
Tenant reimbursements 2,389   2,543   3,001   2,968   3,016  
Independent living facilities 789   825   821   799   845  
Interest and other income 1,140   176   396   518   400  
Total revenues 32,829   32,948   36,597   38,101   38,969  
Expenses:          
Depreciation and amortization 9,335   9,745   11,003   11,577   11,299  
Interest expense 6,219   5,592   6,506   7,092   7,285  
Loss on the extinguishment of debt 11,883          
Property taxes 2,389   2,543   3,001   2,968   3,016  
Independent living facilities 644   698   730   716   744  
Impairment of real estate investment 890          
Reserve for advances and deferred rent     10,414      
General and administrative 2,977   3,059   2,691   3,192   3,358  
Total expenses 34,337   21,637   34,345   25,545   25,702  
Other income:          
Gain on disposition of other real estate investment 3,538          
Gain on sale of real estate       2,051    
Net income $ 2,030   $ 11,311   $ 2,252   $ 14,607   $ 13,267  
           
Diluted earnings per share $ 0.03   $ 0.15   $ 0.03   $ 0.19   $ 0.17  
           
Diluted weighted average shares outstanding 72,564   75,471   75,476   75,504   76,374  
                     


 
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND
(in thousands, except per share data)
 (unaudited)
  Quarter Quarter Quarter Quarter Quarter
  Ended Ended Ended Ended Ended
  June 30,
2017
September 30,
2017
December 31,
2017
March 31,
2018
June 30,
2018
           
Net income $ 2,030   $ 11,311   $ 2,252   $ 14,607   $ 13,267  
Depreciation and amortization 9,335   9,745   11,003   11,577   11,299  
Interest expense 6,219   5,592   6,506   7,092   7,285  
Amortization of stock-based compensation 600   656   624   904   924  
EBITDA 18,184   27,304   20,385   34,180   32,775  
Loss on the extinguishment of debt 11,883          
Deferred preferred return (544 )        
Impairment of real estate investment 890          
Reserve for advances and deferred rent     10,414      
Gain on sale of real estate       (2,051 )  
Gain on disposition of other real estate investment (3,538 )        
Normalized EBITDA $ 26,875   $ 27,304   $ 30,799   $ 32,129   $ 32,775  
           
Net income $ 2,030   $ 11,311   $ 2,252   $ 14,607   $ 13,267  
Real estate related depreciation and amortization 9,309   9,717   10,973   11,549   11,265  
Impairment of real estate investment 890          
Gain on sale of real estate       (2,051 )  
Gain on disposition of other real estate investment (3,538 )        
Funds from Operations (FFO) 8,691   21,028   13,225   24,105   24,532  
Deferred preferred return (544 )        
Effect of the senior unsecured notes payable redemption 12,475          
Reserve for advances and deferred rent     10,414      
Normalized FFO $ 20,622   $ 21,028   $ 23,639   $ 24,105   $ 24,532  
                               

 

 
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND (continued)
 (in thousands, except per share data)
 (unaudited)
  Quarter Quarter Quarter Quarter Quarter
  Ended Ended Ended Ended Ended
  June 30,
2017
September 30,
2017
December 31,
2017
March 31,
2018
June 30,
2018
           
Net income $ 2,030   $ 11,311   $ 2,252   $ 14,607   $ 13,267  
Real estate related depreciation and amortization 9,309   9,717   10,973   11,549   11,265  
Amortization of deferred financing fees 529   484   485   484   484  
Amortization of stock-based compensation 600   656   624   904   924  
Straight-line rental income (43 ) (2 ) (227 ) (591 ) (342 )
Impairment of real estate investment 890          
Gain on sale of real estate       (2,051 )  
Gain on disposition of other real estate investment (3,538 )        
Funds Available for Distribution (FAD) 9,777   22,166   14,107   24,902   25,598  
Deferred preferred return (544 )        
Effect of the senior unsecured notes payable redemption 12,475          
Reserve for advances and deferred rent     10,414      
Normalized FAD $ 21,708   $ 22,166   $ 24,521   $ 24,902   $ 25,598  
           
FFO per share $ 0.12   $ 0.28   $ 0.17   $ 0.32   $ 0.32  
Normalized FFO per share $ 0.28   $ 0.28   $ 0.31   $ 0.32   $ 0.32  
           
FAD per share $ 0.13   $ 0.29   $ 0.19   $ 0.33   $ 0.33  
Normalized FAD per share $ 0.30   $ 0.29   $ 0.32   $ 0.33   $ 0.33  
           
Diluted weighted average shares outstanding [1] 72,803   75,659   75,692   75,657   76,545  
           
 [1]  For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.


 
CARETRUST REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
        June 30, 2018   December 31, 2017
Assets:        
Real estate investments, net $ 1,167,001     $ 1,152,261  
Other real estate investments, net 18,108     17,949  
Cash and cash equivalents 11,560     6,909  
Accounts and other receivables, net 9,023     5,254  
Prepaid expenses and other assets 4,972     895  
Deferred financing costs, net 1,176     1,718  
      Total assets $ 1,211,840     $ 1,184,986  
             
Liabilities and Equity:      
Senior unsecured notes payable, net $ 294,774     $ 294,395  
Senior unsecured term loan, net 99,564     99,517  
Unsecured revolving credit facility 150,000     165,000  
Accounts payable and accrued liabilities 12,515     17,413  
Dividends payable 16,249     14,044  
      Total liabilities 573,102     590,369  
             
Equity:        
Common stock 785     755  
Additional paid-in capital 831,286     783,237  
Cumulative distributions in excess of earnings (193,333 )   (189,375 )
      Total equity 638,738     594,617  
      Total liabilities and equity $ 1,211,840     $ 1,184,986  
                     


 
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
  For the Six Months Ended June 30,
  2018   2017
Cash flows from operating activities:      
Net income $ 27,874     $ 12,311  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization (including a below-market ground lease) 22,885     18,419  
Amortization of deferred financing costs 969     1,131  
Loss on the extinguishment of debt     11,883  
Amortization of stock-based compensation 1,828     1,136  
Straight-line rental income (933 )   (115 )
Noncash interest income (217 )   (320 )
Gain on sale of real estate (2,051 )    
Interest income distribution from other real estate investment     1,500  
Impairment of real estate investment     890  
Change in operating assets and liabilities:      
Accounts and other receivables, net (2,837 )   (3,414 )
Prepaid expenses and other assets (462 )   (311 )
Accounts payable and accrued liabilities (4,940 )   1,791  
    Net cash provided by operating activities 42,116     44,901  
Cash flows from investing activities:      
Acquisitions of real estate (47,310 )   (96,641 )
Improvements to real estate (506 )   (598 )
Purchases of equipment, furniture and fixtures (702 )   (233 )
Investment in real estate mortgage and other loans receivable (1,390 )    
Principal payments received on mortgage loan receivable 58      
Sale of other real estate investment     7,500  
Escrow deposits for acquisitions of real estate (2,250 )   (4,335 )
Net proceeds from the sale of real estate 13,004      
   Net cash used in investing activities (39,096 )   (94,307 )
Cash flows from financing activities:      
Proceeds from the issuance of common stock, net 47,547     170,485  
Proceeds from the issuance of senior unsecured notes payable     300,000  
Borrowings under unsecured revolving credit facility 60,000     63,000  
Payments on senior unsecured notes payable     (267,639 )
Payments on unsecured revolving credit facility (75,000 )   (158,000 )
Payments of deferred financing costs     (5,511 )
Net-settle adjustment on restricted stock (1,288 )   (866 )
Dividends paid on common stock (29,628 )   (24,497 )
   Net cash provided by financing activities 1,631     76,972  
Net increase in cash and cash equivalents 4,651     27,566  
Cash and cash equivalents, beginning of period 6,909     7,500  
Cash and cash equivalents, end of period $ 11,560     $ 35,066  
               


 
CARETRUST REIT, INC.
DEBT SUMMARY
(dollars in thousands)
(unaudited)
                       
          June 30, 2018
  Interest   Maturity       % of   Deferred   Net Carrying
Debt Rate   Date   Principal   Principal   Loan
Costs
  Value
                       
Fixed Rate Debt                      
                       
Senior unsecured notes payable 5.250 %   2025   $ 300,000     54.5 %   $ (5,226 )   $ 294,774  
                       
Floating Rate Debt                      
                       
Senior unsecured term loan 4.044 % [1] 2023   100,000     18.2 %   (436 )   99,564  
                       
Unsecured revolving credit facility 3.844 % [2] 2020 [3] 150,000     27.3 %     [4] 150,000  
  3.924 %       250,000     45.5 %   (436 )   249,564  
                       
Total Debt 4.647 %       $ 550,000     100.0 %   $ (5,662 )   $ 544,338  
                       
[1] Funds can be borrowed at applicable LIBOR plus 1.95% to 2.60% or at the Base Rate (as defined) plus 0.95% to 1.6%.
[2] Funds can be borrowed at applicable LIBOR plus 1.75% to 2.40% or the Base Rate (as defined) plus 0.75% to 1.4%.
[3] Maturity date assumes exercise of two 6-month extension options.
[4] Deferred financing fees are not shown net for the unsecured revolving credit facility and are included in assets on the balance sheet.


 
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
 (shares in thousands)
 (unaudited)
         
         
 2018 Guidance
         
         
    Low   High
Net income $ 0.71     $ 0.73  
  Real estate related depreciation and amortization 0.58     0.58  
  Gain on sale of real estate (0.03 )   (0.03 )
Funds from Operations (FFO) 1.26     1.28  
Normalized FFO $ 1.26     $ 1.28  
         
Net income $ 0.71     $ 0.73  
  Real estate related depreciation and amortization 0.58     0.58  
  Amortization of deferred financing fees 0.03     0.03  
  Amortization of stock-based compensation 0.05     0.05  
  Straight-line rental income (0.02 )   (0.02 )
  Gain on sale of real estate (0.03 )   (0.03 )
Funds Available for Distribution (FAD) 1.32     1.34  
Normalized FAD $ 1.32     $ 1.34  
Weighted average shares outstanding:      
  Diluted 78,380     78,380  
             

Non-GAAP Financial Measures 

EBITDA represents net income before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Normalized EBITDA represents EBITDA as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as real estate impairment charges, certain deferred preferred return, losses on the extinguishment of debt, reserve for advances and deferred rent and gains or losses from dispositions of real estate or other real estate investments. EBITDA and Normalized EBITDA do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. EBITDA and Normalized EBITDA do not purport to be indicative of cash available to fund future cash requirements, including the Company’s ability to fund capital expenditures or make payments on its indebtedness. Further, the Company’s computation of EBITDA and Normalized EBITDA may not be comparable to EBITDA and Normalized EBITDA reported by other REITs. 

Funds from Operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), and Funds Available for Distribution (“FAD”) are important non-GAAP supplemental measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP.

FFO is defined by NAREIT as net income computed in accordance with GAAP, excluding gains or losses from dispositions of real estate or other real estate investments, real estate depreciation and amortization and real estate impairment charges, and adjustments for unconsolidated partnerships and joint ventures. The Company computes FFO in accordance with NAREIT’s definition. 

FAD is defined as FFO excluding non-cash income and expenses, such as amortization of stock-based compensation, amortization of deferred financing fees and the effects of straight-line rent. The Company considers FAD to be a useful supplemental measure to evaluate the Company’s operating results excluding these income and expense items to help investors, analysts and other interested parties compare the operating performance of the Company between periods or as compared to other companies on a more consistent basis. 

In addition, the Company reports Normalized FFO and Normalized FAD, which adjust FFO and FAD for certain revenue and expense items that the Company does not believe are indicative of its ongoing operating results, such as losses on the extinguishment of debt, certain deferred preferred returns, the effect of the senior unsecured notes payable redemption and other unanticipated charges. By excluding these items, investors, analysts and our management can compare Normalized FFO and Normalized FAD between periods more consistently. 

While FFO, Normalized FFO, FAD and Normalized FAD are relevant and widely-used measures of operating performance among REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. FFO, Normalized FFO, FAD and Normalized FAD do not purport to be indicative of cash available to fund future cash requirements. 

Further, the Company’s computation of FFO, Normalized FFO, FAD and Normalized FAD may not be comparable to FFO, Normalized FFO, FAD and Normalized FAD reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define FAD differently than the Company does. 

The Company believes that net income, as defined by GAAP, is the most appropriate earnings measure. The Company also believes that the use of EBITDA, Normalized EBITDA, FFO, Normalized FFO, FAD and Normalized FAD, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and makes comparisons of operating results among such companies more meaningful. The Company considers EBITDA and Normalized EBITDA useful in understanding the Company’s operating results independent of its capital structure, indebtedness and non-recurring charges, thereby allowing for a more meaningful comparison of operating performance between periods and against other REITs. The Company considers FFO, Normalized FFO, FAD and Normalized FAD to be useful measures for reviewing comparative operating and financial performance because, by excluding gains or losses from real estate dispositions, impairment charges and real estate depreciation and amortization, and, for FAD and Normalized FAD, by excluding non-cash income and expenses such as amortization of stock-based compensation, amortization of deferred financing fees, and the effects of straight-line rent, FFO, Normalized FFO, FAD and Normalized FAD can help investors compare the Company’s operating performance between periods and to other REITs.

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Source: CareTrust REIT, Inc.

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