View:
8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2017

 

 

CareTrust REIT, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   001-36181   46-3999490

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

Registrant’s telephone number, including area code: (949) 542-3130

 

905 Calle Amanecer, Suite 300,

San Clemente, CA

  92673
(Address of principal executive offices)   (Zip Code)

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 2, 2017, CareTrust REIT, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in any such filing.

 

Item 7.01. Regulation FD Disclosure.

A copy of the Company’s supplemental financial information for the second quarter ended June 30, 2017 is attached hereto as Exhibit 99.2 and is incorporated herein by reference. A copy of the supplemental financial information is also available on the “Investors” section of the Company’s website at www.caretrustreit.com.

Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and shall not be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in any such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibits

  

Description

99.1    Press Release of CareTrust REIT, Inc., dated August 2, 2017
99.2    Supplemental financial information for the quarter ended June 30, 2017


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 2, 2017     CARETRUST REIT, INC.
    By:  

/s/ William M. Wagner

      William M. Wagner
      Chief Financial Officer and Treasurer
EX-99.1

Exhibit 99.1

 

LOGO

CareTrust REIT Announces Second Quarter 2017 Operating Results

Conference Call Scheduled for Thursday, August 3, 2017 at 12:00 pm ET

SAN CLEMENTE, Calif., August 02, 2017 (GLOBE NEWSWIRE) — CareTrust REIT, Inc. (NASDAQ:CTRE) reported today operating results for the second quarter of 2017, as well as other recent events.

During the quarter, CareTrust REIT:

 

    Posted net income of $0.03, normalized FFO of $0.28 and normalized FAD of $0.30, all per diluted weighted-average common share;

 

    Sold 3.4 million shares under its at-the-market equity offering program, raising $63.9 million of gross proceeds which were used to fund acquisitions and reduce borrowings under its $400 million revolving credit facility to zero as of quarter-end;

 

    Invested approximately $35.8 million (inclusive of transaction costs) at a blended initial cash yield of 9.3%, including three skilled nursing facilities and one assisted living and memory care facility;

 

    Issued $300 million of new 5.25% senior notes due 2025, the net proceeds of which were used to redeem CareTrust REIT’s existing $260 million 5.875% senior notes due 2021 and repay borrowings under the revolving credit facility; and

 

    Reduced its debt-to-EBITDA ratio to 3.72x and its debt-to-enterprise value to 22%, each as of quarter-end.

Laying the Groundwork for Future Growth

Greg Stapley, CareTrust REIT’s Chairman and Chief Executive Officer, reported that the company made significant progress toward its long-term goals in the quarter. “We believe we have laid the groundwork for a solid second half of 2017, and a great start to 2018,” he said. “With our new 5.25% senior notes and our new $300 million at-the-market program, we have lowered our cost of capital, reduced the balance on our $400 million revolving credit line to zero, and significantly extended our debt maturity ladder,” he added.

He further reported that, in the quarter and since, CareTrust REIT completed $51.3 million in new acquisitions at a blended initial cash yield of 9.2%, investing in both existing and new tenant relationships. “Our continuously improving cost of capital has positioned us to be an even stronger player in an increasingly-active market for quality healthcare assets, and our current pipeline is the strongest it has ever been” he said. “That said, our team remains committed to our disciplined ‘operator-first’ investment approach, and we continue to be optimistic about CareTrust REIT’s ability to create long-term shareholder value,” he concluded.

Financial Results for the Quarter Ended June 30, 2017

Chief Financial Officer Bill Wagner reported that for the quarter, CareTrust REIT generated net income of $2.0 million, or $0.03 per diluted weighted-average common share, normalized FFO of $20.6 million, or $0.28 per diluted weighted-average common share, and normalized FAD of $21.7 million, or $0.30 per diluted weighted-average common share. He noted that the adjustments to net income in the quarter included one-time adjustments related to the refinancing of CareTrust REIT’s 5.875% senior notes, offset slightly by interest received and gain on the disposition of its preferred equity investment in a newly-constructed Colorado assisted living and memory care facility.


Capital Events and Liquidity

Discussing CareTrust REIT’s current liquidity, Mr. Wagner highlighted the company’s $300 million issuance of new 5.25% senior notes due 2025. “Through this issuance we were able to fully redeem our old 5.875% senior notes due 2021, thereby reducing our interest expense and extending our runway,” he said.

He also reported significant activity in the company’s new $300 million at-the-market equity offering program. During the quarter, CareTrust REIT issued approximately 3.4 million shares of common stock through the program at an average price of $18.82 per share, for $63.9 million in gross proceeds. “Our ATM continues to draw solid investor interest and provides an excellent source of liquidity to match-fund our small-to-medium sized transactions,” said Mr. Wagner.

Mr. Wagner further reported a zero outstanding balance under CareTrust REIT’s $400 million unsecured revolving credit facility at quarter-end, and noted that the revolving credit facility continues to remain undrawn at present. He added that CareTrust REIT’s debt-to-EBITDA ratio was approximately 3.72x, and its debt-to-enterprise value was 22%, each at quarter-end. He also noted that CareTrust REIT continues to have no property-level debt and, taking into account existing extension rights, no debt maturing before 2023.

2017 FFO and FAD Guidance Revised Upward

Updating CareTrust REIT’s previously-issued 2017 earnings guidance, Mr. Wagner reported that, on a per-diluted weighted-average common share basis, CareTrust REIT expects net income of approximately $0.50 to $0.52. He also reported that, notwithstanding the significant equity issuances in the quarter, the company has increased its guidance ranges for normalized FFO to approximately $1.13 to $1.15, and for normalized FAD to approximately $1.19 to $1.21, both on a per-diluted weighted-average common share basis. This 2017 guidance assumes no new acquisitions beyond those made to date, no new debt incurrences or additional equity issuances, and no future CPI-based rent escalators under CareTrust REIT’s long-term net-leases beyond those made to date.

Dividend

During the quarter, CareTrust REIT declared a quarterly dividend of $0.185 per common share. “On an annualized basis, our quarterly dividend represents a payout ratio of approximately 65% based on the midpoint of our 2017 normalized FFO guidance,” said Mr. Wagner. “At this level, our dividend remains among the best-protected of all our industry peers, while giving us ample additional growth capital to reinvest and providing a solid overall return to our shareholders,” he added.

Conference Call

A conference call will be held on Thursday, August 3, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time), during which CareTrust REIT’s management will discuss second quarter results, recent developments and other matters affecting CareTrust REIT’s business and prospects. The dial-in number for this call is (844) 220-4972 (U.S.) or (317) 973-4053 (International). The conference ID number is 61282740. 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 164 net-leased healthcare properties and three operated seniors housing properties in 23 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 our 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 our 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. Our forward-looking statements are based on our 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 we believe that the assumptions underlying these forward-looking statements are reasonable, they are not guarantees and we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our 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 our tenants to meet and/or perform their obligations under the triple-net leases we have 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 us in connection with such spin-off, including its triple-net long-term leases with us, and any of its obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (iii) the ability and willingness of our tenants to comply with laws, rules and regulations in the operation of the properties we lease to them; (iv) the ability and willingness of our tenants, including Ensign, to renew their leases with us upon expiration and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, and obligations, including indemnification obligations, that we 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 our outstanding indebtedness; (vii) access to debt and equity capital markets; (viii) fluctuating interest rates; (ix) the ability to retain our key management personnel; (x) the ability to maintain our 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 our filings with the Securities and Exchange Commission (“SEC”), including those in our Annual Report on Form 10-K for the year ended December 31, 2016 under the heading entitled “Risk Factors,” as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC.

Information in this press release or the related conference call is provided as of June 30, 2017, unless specifically stated otherwise. We expressly disclaim 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 our 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 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.


CARETRUST REIT, INC.

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share amounts)

(unaudited)

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2017      2016      2017      2016  

Revenues:

           

Rental income

   $ 28,511      $ 22,781      $ 55,850      $ 43,678  

Tenant reimbursements

     2,389        1,929        4,710        3,726  

Independent living facilities

     789        730        1,582        1,411  

Interest and other income

     1,140        261        1,295        515  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     32,829        25,701        63,437        49,330  
  

 

 

    

 

 

    

 

 

    

 

 

 

Expenses:

           

Depreciation and amortization

     9,335        7,892        18,411        15,185  

Interest expense

     6,219        5,440        12,098        11,301  

Loss on the extinguishment of debt

     11,883        —          11,883        326  

Property taxes

     2,389        1,929        4,710        3,726  

Independent living facilities

     644        598        1,305        1,218  

Impairment of real estate investment

     890        —          890        —    

General and administrative

     2,977        2,211        5,367        4,441  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     34,337        18,070        54,664        36,197  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income:

           

Gain on disposition of other real estate investment

     3,538        —          3,538        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 2,030      $ 7,631      $ 12,311      $ 13,133  
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

           

Basic

   $ 0.03      $ 0.13      $ 0.17      $ 0.25  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.03      $ 0.13      $ 0.17      $ 0.25  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding:

           

Basic

     72,564        57,478        69,773        52,789  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     72,564        57,478        69,773        52,789  
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per common share

   $ 0.185      $ 0.17      $ 0.37      $ 0.34  
  

 

 

    

 

 

    

 

 

    

 

 

 


CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

(unaudited)

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2017     2016      2017     2016  

Net income

   $ 2,030     $ 7,631      $ 12,311     $ 13,133  

Depreciation and amortization

     9,335       7,892        18,411       15,185  

Interest expense

     6,219       5,440        12,098       11,301  

Amortization of stock-based compensation

     600       437        1,136       868  
  

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

     18,184       21,400        43,956       40,487  

Loss on the extinguishment of debt

     11,883       —          11,883       326  

Deferred preferred return

     (544     —          (544     —    

Impairment of real estate investment

     890       —          890       —    

Gain on disposition of other real estate investment

     (3,538     —          (3,538     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized EBITDA

   $ 26,875     $ 21,400      $ 52,647     $ 40,813  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 2,030     $ 7,631      $ 12,311     $ 13,133  

Real estate related depreciation and amortization

     9,309       7,867        18,359       15,137  

Impairment of real estate investment

     890       —          890       —    

Gain on disposition of other real estate investment

     (3,538     —          (3,538     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Funds from Operations (FFO)

     8,691       15,498        28,022       28,270  

Deferred preferred return

     (544     —          (544     —    

Effect of the senior unsecured notes payable redemption

     12,475       —          12,475       —    

Write-off of deferred financing fees

     —         —          —         326  
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized FFO

   $ 20,622     $ 15,498      $ 39,953     $ 28,596  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 2,030     $ 7,631      $ 12,311     $ 13,133  

Real estate related depreciation and amortization

     9,309       7,867        18,359       15,137  

Amortization of deferred financing fees

     529       561        1,090       1,117  

Amortization of stock-based compensation

     600       437        1,136       868  

Straight-line rental income

     (43     —          (115     —    

Impairment of real estate investment

     890       —          890       —    

Gain on disposition of other real estate investment

     (3,538     —          (3,538     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Funds Available for Distribution (FAD)

     9,777       16,496        30,133       30,255  

Deferred preferred return

     (544     —          (544     —    

Effect of the senior unsecured notes payable redemption

     12,475       —          12,475       —    

Write-off of deferred financing fees

     —         —          —         326  
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized FAD

   $ 21,708     $ 16,496      $ 42,064     $ 30,581  
  

 

 

   

 

 

    

 

 

   

 

 

 

FFO per share

   $ 0.12     $ 0.27      $ 0.40     $ 0.53  
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized FFO per share

   $ 0.28     $ 0.27      $ 0.57     $ 0.54  
  

 

 

   

 

 

    

 

 

   

 

 

 

FAD per share

   $ 0.13     $ 0.29      $ 0.43     $ 0.58  
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized FAD per share

   $ 0.30     $ 0.29      $ 0.60     $ 0.58  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted weighted average shares outstanding [1]

     72,803       57,667        69,984       52,954  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

[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 amounts)

(unaudited)

 

     Quarter
Ended
June 30,
2016
     Quarter
Ended
September 30,
2016
     Quarter
Ended
December 31,
2016
    Quarter
Ended
March 31,
2017
     Quarter
Ended
June 30,
2017
 

Revenues:

             

Rental income

   $ 22,781      $ 24,179      $ 25,269     $ 27,339      $ 28,511  

Tenant reimbursements

     1,929        2,089        2,031       2,321        2,389  

Independent living facilities

     730        766        793       793        789  

Interest and other income

     261        72        150       155        1,140  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total revenues

     25,701        27,106        28,243       30,608        32,829  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Expenses:

             

Depreciation and amortization

     7,892        8,248        8,532       9,076        9,335  

Interest expense

     5,440        5,743        5,829       5,879        6,219  

Loss on the extinguishment of debt

     —          —          —         —          11,883  

Property taxes

     1,929        2,089        2,031       2,321        2,389  

Independent living facilities

     598        708        623       661        644  

Impairment of real estate investment

     —          —          —         —          890  

Acquisition costs

     —          203        2       —          —    

General and administrative

     2,211        2,283        2,573       2,390        2,977  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total expenses

     18,070        19,274        19,590       20,327        34,337  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Other income (expense):

             

Loss on sale of real estate

     —          —          (265     —          —    

Gain on disposition of other real estate investment

     —          —          —         —          3,538  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 7,631      $ 7,832      $ 8,388     $ 10,281      $ 2,030  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.13      $ 0.13      $ 0.14     $ 0.15      $ 0.03  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Diluted weighted average shares outstanding

     57,478        57,595        60,875       66,951        72,564  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 


CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND

(in thousands, except per share amounts)

(unaudited)

 

     Quarter
Ended
June 30,
2016
     Quarter
Ended
September 30,
2016
     Quarter
Ended
December 31,
2016
     Quarter
Ended
March 31,
2017
     Quarter
Ended
June 30,
2017
 

Net income

   $ 7,631      $ 7,832      $ 8,388      $ 10,281      $ 2,030  

Depreciation and amortization

     7,892        8,248        8,532        9,076        9,335  

Interest expense

     5,440        5,743        5,829        5,879        6,219  

Amortization of stock-based compensation

     437        339        339        536        600  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     21,400        22,162        23,088        25,772        18,184  

Acquisition costs

     —          203        2        —          —    

Loss on sale of real estate

     —          —          265        —          —    

Loss on the extinguishment of debt

     —          —          —          —          11,883  

Deferred preferred return

     —          —          —          —          (544

Impairment of real estate investment

     —          —          —          —          890  

Gain on disposition of other real estate investment

     —          —          —          —          (3,538
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Normalized EBITDA

   $ 21,400      $ 22,365      $ 23,355      $ 25,772      $ 26,875  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 7,631      $ 7,832      $ 8,388      $ 10,281      $ 2,030  

Real estate related depreciation and amortization

     7,867        8,223        8,505        9,050        9,309  

Loss on sale of real estate

     —          —          265        —          —    

Impairment of real estate investment

     —          —          —          —          890  

Gain on disposition of other real estate investment

     —          —          —          —          (3,538
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Funds from Operations (FFO)

     15,498        16,055        17,158        19,331        8,691  

Acquisition costs

     —          203        2        —          —    

Deferred preferred return

     —          —          —          —          (544

Effect of the senior unsecured notes payable redemption

     —          —          —          —          12,475  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Normalized FFO

   $ 15,498      $ 16,258      $ 17,160      $ 19,331      $ 20,622  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


CARETRUST REIT, INC.

RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND (continued)

(in thousands, except per share amounts)

(unaudited)

 

     Quarter
Ended
June 30,
2016
     Quarter
Ended
September 30,
2016
    Quarter
Ended
December 31,
2016
    Quarter
Ended
March 31,
2017
    Quarter
Ended
June 30,
2017
 

Net income

   $ 7,631      $ 7,832     $ 8,388     $ 10,281     $ 2,030  

Real estate related depreciation and amortization

     7,867        8,223       8,505       9,050       9,309  

Amortization of deferred financing fees

     561        561       561       561       529  

Amortization of stock-based compensation

     437        339       339       536       600  

Straight-line rental income

     —          (78     (72     (72     (43

Loss on sale of real estate

     —          —         265       —         —    

Impairment of real estate investment

     —          —         —         —         890  

Gain on disposition of other real estate investment

     —          —         —         —         (3,538
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Funds Available for Distribution (FAD)

     16,496        16,877       17,986       20,356       9,777  

Acquisition costs

     —          203       2       —         —    

Deferred preferred return

     —          —         —         —         (544

Effect of the senior unsecured notes payable redemption

     —          —         —         —         12,475  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Normalized FAD

   $ 16,496      $ 17,080     $ 17,988     $ 20,356     $ 21,708  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

FFO per share

   $ 0.27      $ 0.28     $ 0.28     $ 0.29     $ 0.12  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Normalized FFO per share

   $ 0.27      $ 0.28     $ 0.28     $ 0.29     $ 0.28  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

FAD per share

   $ 0.29      $ 0.29     $ 0.29     $ 0.30     $ 0.13  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Normalized FAD per share

   $ 0.29      $ 0.30     $ 0.29     $ 0.30     $ 0.30  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average shares outstanding [1]

     57,667        57,739       61,028       67,133       72,803  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

[1] For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.


CARETRUST REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     June 30, 2017     December 31, 2016  
     (unaudited)        

Assets

    

Real estate investments, net

   $ 972,832     $ 893,918  

Other real estate investments

     5,192       13,872  

Cash and cash equivalents

     35,066       7,500  

Accounts and other receivables

     9,425       5,896  

Prepaid expenses and other assets

     5,282       1,369  

Deferred financing costs, net

     2,260       2,803  
  

 

 

   

 

 

 

Total assets

   $ 1,030,057     $ 925,358  
  

 

 

   

 

 

 

Liabilities and Equity

    

Senior unsecured notes payable, net

   $ 294,043     $ 255,294  

Senior unsecured term loan, net

     99,469       99,422  

Unsecured revolving credit facility

     —         95,000  

Accounts payable and accrued liabilities

     14,521       12,137  

Dividends payable

     14,048       11,075  
  

 

 

   

 

 

 

Total liabilities

     422,081       472,928  
  

 

 

   

 

 

 

Equity:

    

Common stock

     755       648  

Additional paid-in capital

     782,073       611,475  

Cumulative distributions in excess of earnings

     (174,852     (159,693
  

 

 

   

 

 

 

Total equity

     607,976       452,430  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,030,057     $ 925,358  
  

 

 

   

 

 

 


CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

     Six Months Ended June 30,  
     2017     2016  

Cash flows from operating activities:

    

Net income

   $ 12,311     $ 13,133  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization (including a below-market ground lease)

     18,419       15,191  

Amortization of deferred financing costs

     1,131       1,117  

Loss on extinguishment of debt

     11,883       326  

Amortization of stock-based compensation

     1,136       868  

Straight-line rental income

     (115     —    

Non-cash interest income

     (320     (515

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

     (3,414     (1,743

Prepaid expenses and other assets

     (311     (291

Accounts payable and accrued liabilities

     1,791       27  
  

 

 

   

 

 

 

Net cash provided by operating activities

     44,901       28,113  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisitions of real estate

     (96,641     (144,149

Improvements to real estate

     (598     (170

Purchases of equipment, furniture and fixtures

     (233     —    

Sale of other real estate investment

     7,500       (89

Escrow deposits for acquisitions of real estate

     (4,335     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (94,307     (144,408
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from the issuance of common stock, net

     170,485       105,889  

Proceeds from the issuance of senior unsecured notes payable

     300,000       —    

Proceeds from the issuance of senior unsecured term loan

     —         100,000  

Borrowings under unsecured revolving credit facility

     63,000       115,000  

Payments on senior unsecured notes payable

     (267,639     —    

Payments on unsecured revolving credit facility

     (158,000     (92,000

Payments on the mortgage notes payable

     —         (95,022

Payments of deferred financing costs

     (5,511     (1,332

Net-settle adjustment on restricted stock

     (866     (515

Dividends paid on common stock

     (24,497     (17,548
  

 

 

   

 

 

 

Net cash provided by financing activities

     76,972       114,472  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     27,566       (1,823

Cash and cash equivalents beginning of period

     7,500       11,467  
  

 

 

   

 

 

 

Cash and cash equivalents end of period

   $ 35,066     $ 9,644  
  

 

 

   

 

 

 


CARETRUST REIT, INC.

DEBT SUMMARY

(dollars in thousands)

(unaudited)

 

                June 30, 2017  

Debt

  Interest
Rate
    Maturity
Date
    Principal      % of
Principal
    Deferred
Loan Costs
    Net Carrying
Value
 

Fixed Rate Debt

            

Senior unsecured notes payable

    5.250     2025     $ 300,000        75.0   $ (5,957   $ 294,043  

Floating Rate Debt

            

Senior unsecured term loan

    3.176 % [1]      2023       100,000        25.0     (531     99,469  

Unsecured revolving credit facility

    2.976 % [2]      2020  [3]      —          0.0     —     [4]      —    
 

 

 

     

 

 

    

 

 

   

 

 

   

 

 

 
    3.176       100,000        25.0     (531     99,469  
 

 

 

     

 

 

    

 

 

   

 

 

   

 

 

 

Total Debt

    4.732     $ 400,000        100.0   $ (6,488   $ 393,512  
 

 

 

     

 

 

    

 

 

   

 

 

   

 

 

 

 

[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)

2017 Guidance

 

     Low     High  

Net income

   $ 0.50     $ 0.52  

Real estate related depreciation and amortization

     0.51       0.51  

Impairment of real estate investment

     0.01       0.01  

Gain on disposition of other real estate investment

     (0.05     (0.05
  

 

 

   

 

 

 

Funds from Operations (FFO)

     0.97       0.99  

Deferred preferred return

     (0.01     (0.01

Effect of the senior unsecured notes payable redemption

     0.17       0.17  
  

 

 

   

 

 

 

Normalized FFO

   $ 1.13     $ 1.15  
  

 

 

   

 

 

 

Net income

   $ 0.50     $ 0.52  

Real estate related depreciation and amortization

     0.51       0.51  

Amortization of deferred financing fees

     0.03       0.03  

Amortization of stock-based compensation

     0.03       0.03  

Straight-line rental income

     (0.00     (0.00

Impairment of real estate investment

     0.01       0.01  

Gain on disposition of other real estate investment

     (0.05     (0.05
  

 

 

   

 

 

 

Funds Available for Distribution (FAD)

     1.03       1.05  

Deferred preferred return

     (0.01     (0.01

Effect of the senior unsecured notes payable redemption

     0.17       0.17  
  

 

 

   

 

 

 

Normalized FAD

   $ 1.19     $ 1.21  
  

 

 

   

 

 

 

Weighted average shares outstanding:

    

Diluted

     72,959       72,959  
  

 

 

   

 

 

 


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, expensed acquisition costs, certain preferred returns, losses on the extinguishment of debt, and gains or losses from dispositions of real estate or other real estate. 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, 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 costs 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 written-off deferred financing fees, expensed acquisition costs, certain 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 and indebtedness, 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 costs, 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.

CareTrust REIT, Inc.

(949) 542-3130

ir@caretrustreit.com

 

EX-99.2

Slide 1

CARETRUST REIT, INC. SECOND QUARTER 2017 FINANCIAL SUPPLEMENT INVESTING IN THE FUTURE OF HEALTHCARE The Rio at Cabezon (Rio Rancho, NM) Exhibit 99.2


Slide 2

INVESTING IN THE FUTURE OF HEALTHCARE Disclaimers This supplement contains 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 our 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 our 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. Our forward-looking statements are based on our 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 we believe that the assumptions underlying these forward-looking statements are reasonable, they are not guarantees and we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our 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 our tenants to meet and/or perform their obligations under the triple-net leases we have 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 us in connection with such spin-off, including its triple-net long-term leases with us, and any of its obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (iii) the ability and willingness of our tenants to comply with laws, rules and regulations in the operation of the properties we lease to them; (iv) the ability and willingness of our tenants, including Ensign, to renew their leases with us upon expiration and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, and obligations, including indemnification obligations, that we 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 our outstanding indebtedness; (vii) access to debt and equity capital markets; (viii) fluctuating interest rates; (ix) the ability to retain our key management personnel; (x) the ability to maintain our 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 our filings with the Securities and Exchange Commission (“SEC”), including those in our Annual Report on Form 10-K for the year ended December 31, 2016 under the heading entitled “Risk Factors,” as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC. This supplement contains certain non-GAAP financial information relating to CareTrust REIT including EBITDA, Normalized EBITDA, FFO, Normalized FFO, FAD, Normalized FAD, and certain related ratios. Explanatory footnotes and a glossary explaining this non-GAAP information are included in this supplement. Reconciliations of these non-GAAP measures are also included in this supplement. Other financial information, including GAAP financial information, is also available on our website. Non-GAAP financial information does not represent financial performance under GAAP and should not be considered in insolation, as a measure of liquidity, as an alternative to net income, or as an indicator of any other performance measure determined in accordance with GAAP. You should not rely on non-GAAP financial information as a substitute for GAAP financial information, and should recognize that non-GAAP information presented herein may not compare to similarly-termed non-GAAP information of other companies (i.e., because they do not use the same definitions for determining any such non-GAAP information). This supplement also includes certain information regarding operators of our properties (such as EBITDARM Coverage, EBITDAR Coverage, and Occupancy), most of which are not subject to audit or SEC reporting requirements. The operator information provided in this supplement has been provided by the operators. We have not independently verified this information, but have no reason to believe that such information is inaccurate in any material respect. We are providing this information for informational purposes only. Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s financial statements, as filed with the SEC, can be found at Ensign’s website http://www.ensigngroup.net. Information in this supplement is provided as of June 30, 2017, unless specifically stated otherwise. We expressly disclaim any obligation to update or revise any information in this supplement (including forward-looking statements), whether to reflect any change in our expectations, any change in events, conditions or circumstances, or otherwise. As used in this supplement, unless the context requires otherwise, references to “CTRE,” “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.


Slide 3

INVESTING IN THE FUTURE OF HEALTHCARE Company Profile Table of Contents CareTrust REIT is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition and leasing of seniors housing and healthcare-related properties. CareTrust REIT generates revenues primarily by leasing properties to a diverse group of local, regional and national seniors housing operators, healthcare services providers, and other healthcare-related businesses. Since its debut as a standalone public company on June 1, 2014, and as of July 31, 2017, CareTrust REIT has expanded its tenant roster to 18 operators, and has grown its portfolio real estate portfolio to 164 net-leased healthcare properties and three operated seniors housing properties across 23 states, consisting of 16,342 operating beds/units. Management Greg Stapley Chairman and Chief Executive Officer Bill Wagner Chief Financial Officer Dave Sedgwick Vice President of Operations Mark Lamb Director of Investments Contact Information CareTrust REIT, Inc. 905 Calle Amanecer, Suite 300 San Clemente, CA 92673 (949) 542-3130 | ir@caretrustreit.com www.caretrustreit.com Transfer Agent Broadridge Corporate Issuer Solutions P.O. Box 1342 Brentwood, NY 11717 (800) 733-1121 | shareholder@broadridge.com Board of Directors KeyBanc Capital Markets Jordan Sadler | (917) 318-2280 Raymond James Jonathan Hughes | (727) 567-2438 Wells Fargo Securities Todd Stender | (562) 637-1371 RBC Capital Markets Michael Carroll | (440) 715-2649 Stifel, Nicolaus & Company Chad Vanacore | (518) 587-2581 BMO Capital Markets John Kim | (212) 885-4115 Canaccord Genuity Paul Morgan | (415) 229-7181 JMP Research Peter Martin | (415) 835-8904 Stephens Dana Hambly, CFA | (615) 279-4329 Analyst Coverage Company Profile 3 CareTrust at a Glance 4 Investments 5 Portfolio Overview Portfolio Performance 6 Tenant Summary 7 Rent Diversification by Tenant 8 Geographic Diversification 9 Rent Diversification by State 10 Lease Maturities 11 Financial Overview Consolidated Income Statements 13 Reconciliation of EBITDA, FFO and FAD 14 Consolidated Balance Sheets 16 Key Debt Metrics 17 Debt Summary 18 2017 Guidance 19 Equity Capital Transactions 20 Other Financial Highlights 21 Glossary 22 Greg Stapley Chairman David Lindahl Jon Kline Allen Barbieri Spencer Plumb


Slide 4

INVESTING IN THE FUTURE OF HEALTHCARE At a Glance 15,894 Operating Beds/Units 22 States 161 Properties $1,136.0M Investments Note: Amounts are as of June 30, 2017 and exclude our three operated seniors housing properties and our two preferred equity investments. Credit Ratings S&P Corporate Rating: B+ (positive) Senior Unsecured Notes: BB- Moody’s Corporate Rating: B1 (positive) Senior Unsecured Notes: B1 CareTrust REIT, Inc. NASDAQ: CTRE Market Data (as of June 30, 2017) Closing Price: $18.54 52 Week Range: $19.86 – $12.70 Market Cap: $1,407M Enterprise Value: $1,807M Outstanding Shares: 75.9M Annualized Rent $116.8M 18 Operators


Slide 5

INVESTING IN THE FUTURE OF HEALTHCARE Investments Notes: [1] Initial Investment for pre-spin properties represents Ensign's gross book value. Initial Investment for post-spin properties represents CareTrust REIT’s purchase price and transaction costs. [2] Initial Operating Beds/Units as of the acquisition date. [3] Total Cost per Bed/Unit excludes preferred equity investments. [4] Initial Rent represents the annualized acquisition-date cash rent or deferred interest income on preferred equity investments. [5] Initial Yield represents Initial Rent divided by Initial Investment. [6] All amounts exclude our three operated seniors housing properties. (dollars in thousands)


Slide 6

INVESTING IN THE FUTURE OF HEALTHCARE Portfolio Performance (dollars in thousands) Notes: [1] Investment for pre-spin properties represents Ensign's gross book value. Investment for post-spin properties represents CareTrust REIT’s cumulative capital investment. Capital investment includes purchase price, transaction costs and landlord-funded capital expenditures, if any. [2] Rent represents June 2017 rent, annualized. [3] Current Yield represents Rent divided by Investment. [4] All amounts exclude our three operated seniors housing properties and our two preferred equity investments. [5] EBITDAR Coverage, EBITDARM Coverage and Occupancy include information provided by our tenants. We have not independently verified this information, but have no reason to believe that such information is inaccurate in any material respect. See “Glossary” for additional information. Applewood of New Berlin (New Berlin, WI)


Slide 7

INVESTING IN THE FUTURE OF HEALTHCARE Tenant Summary The Ensign Group (NASDAQ: ENSG) is a publicly-traded, nationwide operator of 226 skilled nursing and assisted living facilities, 92 of which are owned by CareTrust REIT. In addition to being a blue-chip operator, Ensign also operates 20 hospice agencies, 18 home health agencies, and three home care businesses. www.ensigngroup.com Trillium Healthcare Group is a privately-held Florida-based post-acute healthcare company which operates 29 post-acute and seniors housing facilities in Iowa, Nebraska, Florida, and Georgia, 11 of which are owned by CareTrust REIT. Premier Senior Living Group, LLC is a privately-held, New York-based assisted living and memory care operator with 20 facilities in New York, Florida, Michigan, North Carolina, Wisconsin, Pennsylvania, and Ohio, eight of which are owned by CareTrust REIT. www.pslgroupllc.com Top Five Tenants by Rent Run-Rate Rent Concentration December 31, 2016 December 31, 2015 December 31, 2014 Priority Management Group is a privately-held, Louisiana-based healthcare company which operates eight post-acute facilities in Texas and Louisiana, four of which are owned by CareTrust REIT. www.prioritymgt.com www.pristinesenior.com Pristine Senior Living is a privately-held, Indiana-based operator of over 1,500 beds across 17 seniors housing and skilled nursing facilities throughout Ohio, 16 of which are owned by CareTrust REIT. June 30, 2017 www.trilliumhcg.com


Slide 8

INVESTING IN THE FUTURE OF HEALTHCARE Rent Diversification by Tenant Notes: Underwriting DARMx and DARx apply for Tenants with less than 12 months operational data Notes: [1] Investment for pre-spin properties represents Ensign's gross book value. Investment for post-spin properties represents CareTrust REIT’s cumulative capital investment. Capital investment includes purchase price, transaction costs and capital expenditures, if any. [2] Rent represents June 2017 rent, annualized. [3] All amounts exclude our three operated seniors housing properties and our two preferred equity investments. (dollars in thousands)


Slide 9

INVESTING IN THE FUTURE OF HEALTHCARE Geographic Diversification 1 ALF 7 SNFs 3 ALFs 2 ALFs 1 ALFs 9 SNFs 1 Campus 3 ALFs 24 SNFs 2 Campuses 12 SNFs 4 Campuses 2 ALFs 1 SNF 2 ALFs 7 SNFs 1 Campus 3 ALFs 16 SNFs 3 Campuses 2 ALFs 4 SNFs 4 ALFs 1 SNF 13 SNFs 2 Campuses 3 ALFs 7 SNFs 1 Campus 1 ALF 1 ALF 3 SNFs 2 Campuses 1 ALF 2 ALFs 4 ALFs 161 Properties 22 States Run-Rate Rent 18 Operators Notes: Amounts are as of June 30, 2017 and exclude our three operated seniors housing properties and our two preferred equity investments. Top Five States Beds/Units Investment 5 SNFs 1 SNF


Slide 10

INVESTING IN THE FUTURE OF HEALTHCARE Rent Diversification by State Notes: [1] Investment for pre-spin properties represents Ensign's gross book value. For post-spin properties, Investment represents CareTrust REIT’s cumulative capital investment. Capital investment includes purchase price, transaction costs and capital expenditures, if any. [2] Rent represents June 2017 rent, annualized. [3] All amounts exclude our three operated seniors housing properties and our two preferred equity investments. (dollars in thousands)


Slide 11

INVESTING IN THE FUTURE OF HEALTHCARE Lease Maturities Lease Maturity Year % of Rent Notes: [1] Lease Maturity Year represents the scheduled expiration year of the primary term of the lease and does not include tenant extension options, if any. [2] Investment for pre-spin properties represents Ensign's gross book value. For post-spin properties, Investment represents CareTrust REIT’s cumulative capital investment, excluding our three operated seniors housing properties and our two preferred equity investments. Capital investment includes purchase price, transaction costs and capital expenditures, if any. [3] Rent represents June 2017 rent, annualized. (dollars in thousands) Broadmoor Medical Lodge (Rockwall, TX)


Slide 12

Financial Overview The Rio at Cabezon (Rio Rancho, NM)


Slide 13

INVESTING IN THE FUTURE OF HEALTHCARE Consolidated Income Statements (amounts in thousands, except per share data)


Slide 14

Reconciliation of EBITDA, FFO and FAD INVESTING IN THE FUTURE OF HEALTHCARE (amounts in thousands, except per share data)


Slide 15

Reconciliation of EBITDA, FFO and FAD (continued) INVESTING IN THE FUTURE OF HEALTHCARE (amounts in thousands, except per share data) [1] For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.


Slide 16

Consolidated Balance Sheets (dollars in thousands) INVESTING IN THE FUTURE OF HEALTHCARE


Slide 17

INVESTING IN THE FUTURE OF HEALTHCARE Key Debt Metrics [1] Debt to Normalized EBITDA compares total debt as of the last day of the quarter to the annualized Normalized EBITDA for the quarter. [2] Debt to Enterprise Value compares total debt as of the last day of the quarter to CareTrust REIT’s Enterprise Value as of the last day of the quarter. See “Glossary” for additional information. The Rio at Fox Hollow (Brownsville, TX) Debt to Normalized EBITDA [1] Debt to Enterprise Value [2]


Slide 18

INVESTING IN THE FUTURE OF HEALTHCARE Debt Summary (dollars in thousands) Notes: [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 at 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. Debt Maturity Year Principal


Slide 19

Updated 2017 Guidance INVESTING IN THE FUTURE OF HEALTHCARE (shares in thousands) See “Glossary” for additional information.


Slide 20

INVESTING IN THE FUTURE OF HEALTHCARE Equity Capital Transactions Notes: [1] Represents average follow-on equity offerings per-share price. Follow-On Equity Offering Activity At-the-Market Offering Activity


Slide 21

Other Financial Highlights 20 Notes: [1] Normalized FFO Payout Ratio represents dividends declared divided by Normalized FFO, in each case for the applicable quarter. See “Glossary” for additional information. INVESTING IN THE FUTURE OF HEALTHCARE Dividend History Normalized FFO Payout Ratio [1] Normalized FFO per Share Normalized FFO


Slide 22

INVESTING IN THE FUTURE OF HEALTHCARE 21 Glossary Assisted Living Facilities (“ALFs”) Licensed healthcare facilities that provide personal care services, support and housing for those who need help with daily living activities, such as bathing, eating and dressing, yet require limited medical care. The programs and services may include transportation, social activities, exercise and fitness programs, beauty or barber shop access, hobby and craft activities, community excursions, meals in a dining room setting and other activities sought by residents. These facilities are often in apartment-like buildings with private residences ranging from single rooms to large apartments. Certain ALFs may offer higher levels of personal assistance for residents requiring memory care as a result of Alzheimer’s disease or other forms of dementia. Levels of personal assistance are based in part on local regulations.  EBITDA Net income before interest expense, income tax, depreciation and amortization and amortization of stock-based compensation.[1] EBITDAR Net income before interest expense, income tax, depreciation, amortization and rent, after applying a standardized management fee (5% of facility operating revenues). EBITDAR Coverage Aggregate EBITDAR produced by all facilities under a master lease (or other grouping) divided by the base rent payable to CareTrust REIT under such master lease (or other grouping) for the same period. For this supplement, the reported period is the trailing twelve-month period ended March 31, 2017. Notwithstanding the foregoing, for any facility for which CareTrust REIT has not received four consecutive quarters of post-acquisition operating reports, the quarterly EBITDAR used in this calculation is the proforma EBITDAR utilized in CareTrust REIT’s underwriting process, annualized. Beginning with the fifth quarter of reported post-acquisition operating performance, each reported quarter EBITDAR replaces the oldest underwriting proforma quarter EBITDAR, until all previously-used proforma quarters EBITDAR amounts are eliminated from the calculation. EBITDARM Earnings before interest expense, income tax, depreciation, amortization, cash rent, and a standardized management fee (5% of facility operating revenues). EBITDARM Coverage Aggregate EBITDARM produced by all facilities under a master lease (or other grouping) divided by the base rent payable to CareTrust REIT under such master lease (or other grouping) for the same period. For this supplement, the reported period is the trailing twelve-month period ended March 31, 2017. Notwithstanding the foregoing, for any facility for which CareTrust REIT has not received four consecutive quarters of post-acquisition operating reports, the quarterly EBITDARM used in this calculation is the proforma EBITDARM utilized in CareTrust REIT’s underwriting process annualized. Beginning with the fifth quarter of reported post-acquisition operating performance, each reported quarter EBITDARM replaces the oldest underwriting proforma quarter EBITDARM, until all previously-used proforma quarters EBITDARM amounts are eliminated from the calculation. Enterprise Value Share price multiplied by the number of outstanding shares plus total outstanding debt, each as of a specified date. Funds Available for Distribution (“FAD”) FFO, excluding straight-line rental income adjustments and amortization of deferred financing fees and stock-based compensation expense.[2] Funds from Operations (“FFO”) Net income, excluding gains and losses from dispositions of real estate or other real estate, before real estate depreciation and amortization and real estate impairment charges. CareTrust REIT calculates and reports FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts.[2]


Slide 23

INVESTING IN THE FUTURE OF HEALTHCARE Glossary 22 Independent Living Facilities (“ILFs”) Also known as retirement communities or senior apartments, ILFs are not healthcare facilities. ILFs typically consist of entirely self-contained apartments, complete with their own kitchens, baths and individual living spaces, as well as parking for tenant vehicles. They are most often rented unfurnished, and generally can be personalized by the tenants, typically an individual or a couple over the age of 55. These facilities offer various services and amenities such as laundry, housekeeping, dining options/meal plans, exercise and wellness programs, transportation, social, cultural and recreational activities, and on-site security. Normalized EBITDA EBITDA, adjusted for certain income and expense items the Company does not believe are indicative of its ongoing results, such as certain acquisition costs, real estate impairment charges, losses on the extinguishment of debt, certain deferred preferred returns, and gains or losses from dispositions of real estate or other real estate.[1] Normalized FAD FAD, adjusted for certain income and expense items the Company does not believe are indicative of its ongoing results, such as certain acquisition costs, certain deferred preferred returns, and the effect of the senior unsecured notes payable redemption.[2] Normalized FFO FFO, adjusted for certain income and expense items the Company does not believe are indicative of its ongoing results, and certain acquisition costs, certain deferred preferred returns, and the effect of the senior unsecured notes payable redemption.[2] Occupancy A facility’s occupied operating beds/units divided by the total available operating beds/units for that facility, in each case for the trailing twelve-months ended March 31, 2017; provided that Occupancy for any facility acquired during such twelve-months period may be normalized. Seniors Housing Includes ALFs, ILFs, dedicated memory care facilities and similar facilities. Skilled Nursing Campus Facilities that include a combination of Skilled Nursing beds and Seniors Housing units. Skilled Nursing or Skilled Nursing Facilities (“SNFs”) Licensed healthcare facilities that provide restorative, rehabilitative and nursing care for people not requiring the more extensive and sophisticated treatment available at an acute care hospital or long-term acute care hospital. Treatment programs include physical, occupational, speech, respiratory, ventilator, and wound therapy. Notes: [1] 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. [2] CareTrust REIT believes FAD, FFO, Normalized FAD, and Normalized FFO (and their related per-share amounts) are important non-GAAP supplemental measures of its operating performance. 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, even though real estate values have historically risen or fallen with market and other conditions. Moreover, by excluding items not indicative of ongoing results, Normalized FAD and Normalized FFO can facilitate meaningful comparisons of operating performance between periods and between other companies. However, FAD, FFO, Normalized FAD, and Normalized FFO (and their per-share amounts) do not represent cash flows from operations or net income attributable to shareholders as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance.


Slide 24

CareTrust REIT, Inc. 905 Calle Amanecer, Suite 300 San Clemente, CA 92673 NASDAQ: CTRE www.caretrustreit.com INVESTING IN THE FUTURE OF HEALTHCARE Bridgeport Health & Rehab - Lobby (Bridgeport, TX)