Business Wire | Jul 30, 2020 04:30PM EDT

LTC Reports 2020 Second Quarter Results

Jul. 30, 2020

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Jul. 30, 2020--LTC Properties, Inc. (NYSE: LTC), a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for its second quarter ended June 30, 2020.

Net income available to common stockholders was $1.8 million, or $0.05 per diluted share, for the 2020 second quarter, compared with $20.4 million, or $0.51 per diluted share, for the same period in 2019. The decrease in net income was primarily due to a non-recurring $17.7 million write-off of straight-line rent receivable and lease incentive balances related to an affiliate of Senior Lifestyle Corporation ("Senior Lifestyle") and a $0.6 million loss on the liquidation of an unconsolidated joint venture with another affiliate of Senior Lifestyle, partially offset by higher rental and interest income from acquisitions and mortgage funding in 2020. The write-off of Senior Lifestyle straight-line rent receivable and lease incentive balances was due to a shortfall in payments of May and June 2020 rent obligations.

Funds from Operations ("FFO") was $12.0 million for the 2020 second quarter, compared with $29.7 million for the comparable 2019 period. FFO per diluted common share was $0.31 and $0.75 for the quarters ended June 30, 2020 and 2019, respectively. The decrease in FFO and FFO per diluted common share was primarily due to the $17.7 million non-recurring write-off discussed above. Excluding the $17.7 million non-recurring write-off, FFO per diluted common share for the quarters ended June 30, 2020 and 2019 was $0.76 and $0.75, respectively.

During the second quarter of 2020, LTC funded additional loan proceeds of $2.0 million under an existing mortgage loan. The incremental funding bears interest at 8.89% escalating annually by 2.25%.

Subsequent to June 30, 2020, LTC completed the following:

* Consolidated its four leases with Brookdale Senior Living Communities, Inc. into one master lease and extended the term by one year to December 31, 2021. The master lease provides three renewal options consisting of a four-year renewal option, a five-year renewal option and a 10-year renewal option. The notice period for the first renewal option is January 1, 2021 to April 30, 2021. The economic terms of rent remain the same as the consolidated rent terms under the previous four separate lease agreements.

Conference Call Information

LTC will conduct a conference call on Friday, July 31, 2020, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide commentary on its performance and operating results for the quarter ended June 30, 2020. The call also will include special guest Lynne Katzmann, Founder and Chief Executive Officer of Juniper Communities. Both LTC's earnings release and supplemental information package for the current period and Ms. Katzmann's slide presentation will be available at: http://ir.ltcreit.com/Presentations.

The conference call is accessible by telephone and the internet. Interested parties may access the live conference call via the following:

Webcast www.LTCreit.com

USA Toll-Free Number 1-877-510-2862

International Toll-Free Number 1-412-902-4134

Canada Toll-Free Number 1-855-669-9657

Additionally, an audio replay of the call will be available one hour after the live call and through August 14, 2020 via the following:

USA Toll-Free Number 1-877-344-7529

International Toll-Free Number 1-412-317-0088

Canada Toll-Free Number 1-855-669-9658

Conference Number 10145214

About LTC

LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC holds 180 investments in 27 states with 29 operating partners. The portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.

Forward Looking Statements

This press release includes statements that are not purely historical and are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward looking statements. These forward-looking statements involve a number of risks and uncertainties. Please see LTC's most recent Annual Report on Form 10-K, its subsequent Quarterly Reports on Form 10-Q, and its other publicly available filings with the Securities and Exchange Commission for a discussion of these and other risks and uncertainties. All forward looking statements included in this press release are based on information available to the Company on the date hereof, and LTC assumes no obligation to update such forward looking statements. Although the Company's management believes that the assumptions and expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward-looking statements due to the risks and uncertainties of such statements.

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)



Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(unaudited) (unaudited)

Revenues:

Rental income $ 20,275 ^ $ 38,277 $ 58,310 ^ $ 75,901 (1) (1)

Interest income from mortgage 7,820 7,351 15,597 14,662 loans

Interest and other income 386 638 984 1,159

Total revenues 28,481 46,266 74,891 91,722



Expenses:

Interest expense 7,546 7,710 15,256 15,177

Depreciation and amortization 9,797 9,860 19,466 19,467

Provision for doubtful - 84 1 167 accounts

Transaction costs 64 200 134 200

Property tax expense 4,111 3,910 8,334 8,296

General and administrative 4,580 4,596 9,680 9,167 expenses

Total expenses 26,098 26,360 52,871 52,474



Other operating income:

Gain on sale of real estate, 189 500 44,043 500 net

Operating income 2,572 20,406 66,063 39,748

Loss on unconsolidated joint (620) - (620) - ventures

Income from unconsolidated - 128 231 1,213 joint ventures

Net income 1,952 20,534 65,674 40,961

Income allocated to (82) (88) (171) (169) non-controlling interests

Net income attributable to 1,870 20,446 65,503 40,792 LTC Properties, Inc.

Income allocated to (97) (94) (278) (186) participating securities

Net income available to $ 1,773 $ 20,352 $ 65,225 $ 40,606 common stockholders



Earnings per common share:

Basic $ 0.05 $ 0.51 $ 1.66 $ 1.03

Diluted $ 0.05 $ 0.51 $ 1.66 $ 1.02



Weighted average shares used to calculate earnings per

common share:

Basic 39,055 39,577 39,298 39,555

Diluted 39,137 39,769 39,380 39,747



Dividends declared and paid $ 0.57 $ 0.57 $ 1.14 $ 1.14 per common share

Decreased primarily due to a $17,742 adjustment for collectibility of rental income and lease incentives during the second quarter of 2020 and(1) reduction in rent related to the sale of the Preferred Care portfolio, partially offset by increased rent from acquisitions and lease transitions.

Supplemental Reporting Measures

FFO and Funds Available for Distribution ("FAD") are supplemental measures of a real estate investment trust's ("REIT") financial performance that are not defined by U.S. generally accepted accounting principles ("GAAP"). Investors, analysts and the Company use FFO and FAD as supplemental measures of operating performance. The Company believes FFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO and FAD facilitate like comparisons of operating performance between periods. Occasionally, the Company may exclude non-recurring items from FFO and FAD in order to allow investors, analysts and our management to compare the Company's operating performance on a consistent basis without having to account for differences caused by unanticipated items.

FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company's computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company's FFO to that of other REITs.

We define FAD as FFO excluding the effects of straight-line rent, amortization of lease inducement, effective interest income, deferred income from unconsolidated joint ventures, non-cash compensation charges, capitalized interest and non-cash interest charges. GAAP requires rental revenues related to non-contingent leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. This method results in rental income in the early years of a lease that is higher than actual cash received, creating a straight-line rent receivable asset included in our consolidated balance sheet. At some point during the lease, depending on its terms, cash rent payments exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable asset included in the interest receivable line item in our consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.

While the Company uses FFO and FAD as supplemental performance measures of our cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

Reconciliation of FFO and FAD

The following table reconciles GAAP net income available to common stockholders to each of NAREIT FFO attributable to common stockholders and FAD (unaudited, amounts in thousands, except per share amounts):



Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019



GAAP net income ^ ^available to common $ 1,773 (1) $ 20,352 $ 65,225 (1) $ 40,606 stockholders

Add: Depreciation 9,797 9,860 19,466 19,467 and amortization

Add: Loss onunconsolidated joint 620 - 620 - ventures

Less: Gain on sale (189) (500) (44,043) (500) of real estate, net

NAREIT FFOattributable to 12,001 29,712 41,268 59,573 common stockholders



Add: Non-recurring ^ ^ ^items 17,742 (2) - 17,742 (2) 576 (4) (3) (3) (5)

FFO attributable tocommon stockholders, $ 29,743 $ 29,712 $ 59,010 $ 60,149 excludingnon-recurring items





NAREIT FFOattributable to $ 12,001 $ 29,712 $ 41,268 $ 59,573 common stockholders

Non-cash income:

Less: straight-line (634) (1,275) (1,473) (2,513) rental income

Add: amortization of 293 ^ 94 394 ^ 181 lease costs (3) (3)

Add: Other non-cash 17,557 ^ - 17,557 ^ 1,926 ^expense^ (2) (2) (4)

Less: Effectiveinterest income from (1,555) (1,418) (3,078) (2,833) mortgage loans

Less: Deferredincome from - (6) - (13) unconsolidated jointventures

Net non-cash income 15,661 (2,605) 13,400 (3,252)



Non-cash expense:

Add: Non-cash 1,762 1,623 3,539 3,312 compensation charges

Less: Capitalized (86) (73) (277) (333) interest

Net non-cash expense 1,676 1,550 3,262 2,979



Funds available for 29,338 28,657 $57,930 $59,300 distribution (FAD)



Less: Non-recurring - - - (1,350) ^income (5)

Funds available fordistribution (FAD), $ 29,338 $ 28,657 $ 57,930 $ 57,950 excludingnon-recurring items



(1) Decreased primarily due to a $17,742adjustment for collectibility of rental income and lease incentives during the second quarterof 2020 and reduction in rent

related to the sale of the Preferred Careportfolio, partially offset by increased rentfrom acquisitions and lease transitions.

(2) Represents the write-off of Senior Lifestyle straight-line rent.

(3) Includes the write-off of Senior Lifestyle lease incentives.

(4) Represents the write-off of straight-linerent due to a lease termination and transition of two seniors housing communities to a newoperator.

(5) Represents deferred rent repayment from an operator.





NAREIT Basic FFOattributable to $ 0.31 $ 0.75 $ 1.05 $ 1.51 common stockholdersper share

NAREIT Diluted FFOattributable to $ 0.31 $ 0.75 $ 1.05 $ 1.50 common stockholdersper share



NAREIT Diluted FFOattributable to $ 12,001 $ 29,806 $ 41,268 $ 59,759 common stockholders

Weighted averageshares used tocalculate NAREIT diluted FFO pershare

attributable to 39,137 39,934 39,380 39,908 common stockholders





Diluted FFOattributable tocommon stockholders, $ 29,840 $ 29,806 $ 59,010 $ 60,335 excludingnon-recurring items

Weighted averageshares used to calculate dilutedFFO, excluding

non-recurring items,per share 39,309 39,934 39,380 39,908 attributable tocommon stockholders





Diluted FAD,excluding $ 29,435 $ 28,751 $ 57,930 $ 58,136 non-recurring items

Weighted averageshares used to calculate dilutedFAD, excluding

non-recurring items, 39,309 39,934 39,380 39,908 per share



LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)



June 30, 2020 December 31, 2019

ASSETS (unaudited) (audited)

Investments:

Land $ 127,774 $ 126,703

Buildings and improvements 1,317,917 1,295,899

Accumulated depreciation and amortization (330,098) (312,642)

Operating real estate property, net 1,115,593 1,109,960

Properties held-for-sale, net of accumulated - 26,856 depreciation: 2020-$0; 2019-$35,113

Real property investments, net 1,115,593 1,136,816

Mortgage loans receivable, net of loan loss 256,069 254,099 reserve: 2020-$2,580; 2019-$2,560

Real estate investments, net 1,371,662 1,390,915

Notes receivable, net of loan loss reserve: 16,093 17,927 2020-$163; 2019-$181

Investments in unconsolidated joint ventures 1,023 19,003

Investments, net 1,388,778 1,427,845



Other assets:

Cash and cash equivalents 50,370 4,244

Debt issue costs related to bank borrowings 1,766 2,164

Interest receivable 29,701 26,586

Straight-line rent receivable 29,619 45,703

Lease incentives 2,471 2,552

Prepaid expenses and other assets 7,467 5,115

Total assets $ 1,510,172 $ 1,514,209



LIABILITIES

Bank borrowings $ 89,900 $ 93,900

Senior unsecured notes, net of debt issue 599,565 599,488 costs: 2020-$735; 2019-$812

Accrued interest 4,587 4,983

Accrued expenses and other liabilities 28,815 30,412

Total liabilities 722,867 728,783



EQUITY

Stockholders' equity:

Common stock: $0.01 par value; 60,000 sharesauthorized; shares issued and outstanding: 392 398 2020-39,243; 2019-39,752

Capital in excess of par value 849,326 867,346

Cumulative net income 1,358,985 1,293,482

Cumulative distributions (1,429,809) (1,384,283)

Total LTC Properties, Inc. stockholders' 778,894 776,943 equity

Non-controlling interests 8,411 8,483

Total equity 787,305 785,426

Total liabilities and equity $ 1,510,172 $ 1,514,209

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