Conference Call Scheduled for Friday, August 4, 2023 at 1:00
pm ET
CareTrust REIT, Inc. (NYSE:CTRE) today reported operating
results for the quarter ended June 30, 2023, as well as other
recent events.
For the quarter, CareTrust REIT reported:
- 96.7% of contractual rents collected;
- Net loss of $0.5 million and net loss per share of $0.01;
- Normalized FFO of $34.6 million and normalized FFO per share of
$0.35;
- Normalized FAD of $36.1 million and normalized FAD per share of
$0.36;
- A quarterly dividend of $0.28 per share, representing a payout
ratio of approximately 78% on normalized FAD;
- Acquired 12 properties for $173.5 million;
- Commenced six new operator relationships;
- Originated a $26.0 million loan investment; and
- Sold 6.7 million shares on a forward basis under its ATM
Program for expected net proceeds of $131.1 million
CareTrust’s President and Chief Executive Officer, Dave
Sedgwick, expressed enthusiasm for the Company’s performance in the
second quarter. “We are pleased to not only report $173 million of
new investments and six new operator relationships but also to
report that we have largely funded those investments with equity
via ATM forward contracts.” Mr. Sedgwick continued, “We have
announced new investments every month since March and yet we sit
here today with ample dry powder to continue to grow the portfolio.
The investment pipeline today is roughly $150 million and is
composed mostly of skilled nursing acquisitions.”
The Company gave an update on its portfolio management
initiatives. Mr. Sedgwick said, “As of today, from last year’s
announced disposition plan, three facilities remain on the market.
Two of those are under contract to sell in the coming months
pending the standard diligence and licensing process. The third
facility is under a Letter of Intent.” With regards to the
delinquent operator that accounts for approximately $5 million of
annual contractual rent, the Company has classified those assets as
held-for-sale, removed the properties from its lease coverage
report in the quarterly supplemental, and is currently negotiating
a sale of the properties. The Company recognized $0.4 million of
rent from this operator in the quarter and reports receiving $0.3
million in July.
Turning to the portfolio performance in the quarter, the
Company's reported EBITDARM and EBITDAR lease coverage, excluding
Provider Relief Funds, improved to 2.70x and 2.13x, respectively.
Based on preliminary operator reports, June 2023 occupancy
(excluding properties held for sale) increased slightly to 76.2%
from 76.0% in March 2023 for skilled nursing and seniors housing
held steady at 74.9% in March and June 2023.
Financial Results for Quarter Ended June 30, 2023
Chief Financial Officer, Bill Wagner, reported that, for the
second quarter, CareTrust reported net loss of $0.5 million, or
$0.01 per diluted weighted-average common share, normalized FFO of
$34.6 million, or $0.35 per diluted weighted-average common share,
and normalized FAD of $36.1 million, or $0.36 per diluted
weighted-average common share.
Liquidity
As of quarter end, CareTrust reported net debt-to-annualized
normalized run rate EBITDA of 3.8x, which is below the Company's
target leverage range of 4.0x to 5.0x, and a net debt-to-enterprise
value of approximately 26.2%. Mr. Wagner stated that, as of today,
the Company has approximately $310 million outstanding on its $600
million revolving credit line, with no scheduled debt maturities
prior to 2026. He also disclosed that CareTrust currently has
approximately $12 million in cash on hand. He further noted that
the Company had $367.2 million and $290.7 million in available
authorization remaining on its at-the-market equity program as of
June 30, 2023 and August 3, 2023, respectively. During the three
months ended June 30, 2023, the Company executed sales under its
ATM Program with a financial institution acting as a forward
purchaser to sell 6,736,089 shares of common stock at a weighted
average sales price of $19.71 per share before commissions and
offering expenses. In July 2023, the Company executed sales under
its forward ATM Program to sell 3,839,348 shares of common stock at
a weighted average sales price of $19.94 per share before
commissions and offering expenses. "With substantial availability
on our revolver, and equity markets readily accessible to us at
present, we continue to have a wide range of capital options for
funding our opportunistic growth strategy," said Mr. Wagner.
Dividend Maintained
During the quarter, CareTrust declared a quarterly dividend of
$0.28 per common share. On an annualized basis, the payout ratio
was approximately 80% based on second quarter 2023 normalized FFO,
and 78% based on normalized FAD.
Conference Call
A conference call will be held on Friday, August 4, 2023, at
1:00 p.m. Eastern Time (10:00 a.m. Pacific Time), during which
CareTrust’s management will discuss second quarter results, recent
developments and other matters. The toll-free dial-in number is 1
(888) 510-2379 or toll dial-in number is 1 (646) 960-0691 and the
conference ID number is 6808360. 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. This
call will be recorded, and will be available for replay via the
website for 30 days following the call.
About CareTrustTM
CareTrust REIT, Inc. is a self-administered, publicly-traded
real estate investment trust engaged in the ownership, acquisition,
development and leasing of skilled nursing, seniors housing and
other healthcare-related properties. With a nationwide portfolio of
long-term net-leased properties, and a growing portfolio of quality
operators leasing them, CareTrust REIT is pursuing both external
and organic growth opportunities across the United States. 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 the following: future financial and financing plans;
strategies related to the Company's business and its portfolio,
including acquisition opportunities and disposition plans; growth
prospects; operating and financial performance; expectations
regarding the making of distributions and payment of dividends; 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 impact of possible additional surges of
COVID-19 infections or the risk of other pandemics, epidemics or
infectious disease outbreaks, measures taken to prevent the spread
of such outbreaks and the related impact on our business or the
businesses of our tenants; (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, including,
without limitation, their respective obligations to indemnify,
defend and hold us harmless from and against various claims,
litigation and liabilities; (iii) the risk that we may have to
incur additional impairment charges related to our assets held for
sale if we are unable to sell such assets at the prices we expect;
(iv) the ability of our tenants to comply with applicable laws,
rules and regulations in the operation of the properties we lease
to them; (v) the ability and willingness of our tenants to renew
their leases with us upon their 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, as
well as any obligations, including indemnification obligations, we
may incur in connection with the replacement of an existing tenant;
(vi) the availability of and the ability to identify (a) tenants
who meet our credit and operating standards, and (b) suitable
acquisition opportunities, and the ability to acquire and lease the
respective properties to such tenants on favorable terms; (vii) the
ability to generate sufficient cash flows to service our
outstanding indebtedness; (viii) access to debt and equity capital
markets; (ix) fluctuating interest rates and inflation; (x) the
ability to retain our key management personnel; (xi) the ability to
maintain our status as a real estate investment trust (“REIT”);
(xii) changes in the U.S. tax law and other state, federal or local
laws, whether or not specific to REITs; (xiii) other risks inherent
in the real estate business, including potential liability relating
to environmental matters and illiquidity of real estate
investments; and (xiv) additional factors included in our Annual
Report on Form 10-K for the year ended December 31, 2022 and
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023
and June 30, 2023, including in the sections entitled “Risk
Factors” in Item 1A of such reports, as such risk factors may be
amended, supplemented or superseded from time to time by other
reports we file with the SEC.
This press release and the related conference call provides
information about the Company's financial results as of and for the
quarter ended June 30, 2023 and is provided as of the date hereof,
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.
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per
share data)
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2023
2022
2023
2022
Revenues:
Rental income
$
47,745
$
46,806
$
93,908
$
92,813
Interest and other income
3,808
747
8,251
1,216
Total revenues
51,553
47,553
102,159
94,029
Expenses:
Depreciation and amortization
12,716
12,559
24,954
26,134
Interest expense
11,040
6,303
20,867
12,045
Property taxes
1,390
1,254
2,270
2,674
Impairment of real estate investments
21,392
1,701
23,278
61,384
Provision for loan losses, net
—
—
—
3,844
Property operating expenses
658
89
1,621
536
General and administrative
4,718
4,978
9,779
10,193
Total expenses
51,914
26,884
82,769
116,810
Other (loss) income:
Gain on sale of real estate, net
2,028
—
1,958
186
Unrealized losses on other real estate
related investments, net
(2,151
)
—
(2,605
)
—
Total other (loss) income
(123
)
—
(647
)
186
Net (loss) income
$
(484
)
$
20,669
$
18,743
$
(22,595
)
(Loss) earnings per common
share:
Basic
$
(0.01
)
$
0.21
$
0.19
$
(0.24
)
Diluted
$
(0.01
)
$
0.21
$
0.19
$
(0.24
)
Weighted-average number of common
shares:
Basic
99,117
96,564
99,090
96,487
Diluted
99,117
96,598
99,194
96,487
Dividends declared per common
share
$
0.28
$
0.275
$
0.56
$
0.55
CARETRUST REIT, INC.
RECONCILIATIONS OF NET (LOSS)
INCOME TO NON-GAAP FINANCIAL MEASURES
(in thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net (loss) income
$
(484
)
$
20,669
$
18,743
$
(22,595
)
Depreciation and amortization
12,716
12,559
24,954
26,134
Interest expense
11,040
6,303
20,867
12,045
Amortization of stock-based
compensation
924
1,394
1,860
2,915
EBITDA
24,196
40,925
66,424
18,499
Impairment of real estate investments
21,392
1,701
23,278
61,384
Provision for loan losses, net
—
—
—
3,844
Provision for doubtful accounts and lease
restructuring
—
—
—
977
Property operating expenses
831
631
1,965
1,862
Gain on sale of real estate, net
(2,028
)
—
(1,958
)
(186
)
Unrealized losses on other real estate
related investments, net
2,151
—
2,605
—
Normalized EBITDA
$
46,542
$
43,257
$
92,314
$
86,380
Net (loss) income
$
(484
)
$
20,669
$
18,743
$
(22,595
)
Real estate related depreciation and
amortization
12,712
12,553
24,945
26,124
Impairment of real estate investments
21,392
1,701
23,278
61,384
Gain on sale of real estate, net
(2,028
)
—
(1,958
)
(186
)
Funds from Operations (FFO)
31,592
34,923
65,008
64,727
Provision for loan losses, net
—
—
—
3,844
Provision for doubtful accounts and lease
restructuring
—
—
—
977
Property operating expenses
831
631
1,965
1,862
Unrealized losses on other real estate
related investments, net
2,151
—
2,605
—
Normalized FFO
$
34,574
$
35,554
$
69,578
$
71,410
CARETRUST REIT, INC.
RECONCILIATIONS OF NET (LOSS)
INCOME TO NON-GAAP FINANCIAL MEASURES (continued)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net (loss) income
$
(484
)
$
20,669
$
18,743
$
(22,595
)
Real estate related depreciation and
amortization
12,712
12,553
24,945
26,124
Amortization of deferred financing
fees
608
520
1,217
1,040
Amortization of stock-based
compensation
924
1,394
1,860
2,915
Straight-line rental income
7
(5
)
14
(11
)
Impairment of real estate investments
21,392
1,701
23,278
61,384
Gain on sale of real estate, net
(2,028
)
—
(1,958
)
(186
)
Funds Available for Distribution
(FAD)
33,131
36,832
68,099
68,671
Provision for loan losses, net
—
—
—
3,844
Provision for doubtful accounts and lease
restructuring
—
—
—
977
Property operating expenses
831
631
1,965
1,862
Unrealized losses on other real estate
related investments, net
2,151
—
2,605
—
Normalized FAD
$
36,113
$
37,463
$
72,669
$
75,354
FFO per share
$
0.32
$
0.36
$
0.65
$
0.67
Normalized FFO per share
$
0.35
$
0.37
$
0.70
$
0.74
FAD per share
$
0.33
$
0.38
$
0.69
$
0.71
Normalized FAD per share
$
0.36
$
0.39
$
0.73
$
0.78
Diluted weighted average shares
outstanding [1]
99,360
96,672
99,278
96,687
[1] For the periods presented, the diluted
weighted average shares have been calculated using the treasury
stock method.
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS - 5 QUARTER TREND
(in thousands, except per
share data)
(Unaudited)
Quarter
Quarter
Quarter
Quarter
Quarter
Ended
Ended
Ended
Ended
Ended
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
June 30, 2023
Revenues:
Rental income
$
46,806
$
47,018
$
47,675
$
46,163
$
47,745
Interest and other income
747
3,275
4,135
4,443
3,808
Total revenues
47,553
50,293
51,810
50,606
51,553
Expenses:
Depreciation and amortization
12,559
12,256
11,926
12,238
12,716
Interest expense
6,303
8,355
9,608
9,827
11,040
Property taxes
1,254
691
968
880
1,390
Impairment of real estate investments
1,701
12,322
5,356
1,886
21,392
Property operating expenses
89
3,808
695
963
658
General and administrative
4,978
5,159
4,813
5,061
4,718
Total expenses
26,884
42,591
33,366
30,855
51,914
Other loss:
(Loss) gain on sale of real estate,
net
—
(2,287
)
(1,668
)
(70
)
2,028
Unrealized losses on other real estate
related investments, net
—
(4,706
)
(2,396
)
(454
)
(2,151
)
Total other loss
—
(6,993
)
(4,064
)
(524
)
(123
)
Net income (loss)
$
20,669
$
709
$
14,380
$
19,227
$
(484
)
Diluted earnings (loss) per
share
$
0.21
$
0.01
$
0.15
$
0.19
$
(0.01
)
Diluted weighted average shares
outstanding
96,598
96,625
97,272
99,087
99,117
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME
(LOSS) TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND
(in thousands)
(Unaudited)
Quarter
Quarter
Quarter
Quarter
Quarter
Ended
Ended
Ended
Ended
Ended
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
June 30, 2023
Net income (loss)
$
20,669
$
709
$
14,380
$
19,227
$
(484
)
Depreciation and amortization
12,559
12,256
11,926
12,238
12,716
Interest expense
6,303
8,355
9,608
9,827
11,040
Amortization of stock-based
compensation
1,394
1,380
1,463
936
924
EBITDA
40,925
22,700
37,377
42,228
24,196
Impairment of real estate investments
1,701
12,322
5,356
1,886
21,392
Provision for doubtful accounts and lease
restructuring
—
—
390
—
—
Property operating expenses
631
3,821
914
1,134
831
Loss (gain) on sale of real estate,
net
—
2,287
1,668
70
(2,028
)
Unrealized losses on other real estate
related investments, net
—
4,706
2,396
454
2,151
Normalized EBITDA
$
43,257
$
45,836
$
48,101
$
45,772
$
46,542
Net income (loss)
$
20,669
$
709
$
14,380
$
19,227
$
(484
)
Real estate related depreciation and
amortization
12,553
12,251
11,921
12,233
12,712
Impairment of real estate investments
1,701
12,322
5,356
1,886
21,392
Loss (gain) on sale of real estate,
net
—
2,287
1,668
70
(2,028
)
Funds from Operations (FFO)
34,923
27,569
33,325
33,416
31,592
Provision for doubtful accounts and lease
restructuring
—
—
390
—
—
Property operating expenses
631
3,821
914
1,134
831
Unrealized losses on other real estate
related investments, net
—
4,706
2,396
454
2,151
Normalized FFO
$
35,554
$
36,096
$
37,025
$
35,004
$
34,574
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME
(LOSS) 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, 2022
September 30, 2022
December 31, 2022
March 31, 2023
June 30, 2023
Net income (loss)
$
20,669
$
709
$
14,380
$
19,227
$
(484
)
Real estate related depreciation and
amortization
12,553
12,251
11,921
12,233
12,712
Amortization of deferred financing
fees
520
520
535
609
608
Amortization of stock-based
compensation
1,394
1,380
1,463
936
924
Straight-line rental income
(5
)
(3
)
(3
)
7
7
Impairment of real estate investments
1,701
12,322
5,356
1,886
21,392
Loss (gain) on sale of real estate,
net
—
2,287
1,668
70
(2,028
)
Funds Available for Distribution
(FAD)
36,832
29,466
35,320
34,968
33,131
Provision for doubtful accounts and lease
restructuring
—
—
390
—
—
Property operating expenses
631
3,821
914
1,134
831
Unrealized losses on other real estate
related investments, net
—
4,706
2,396
454
2,151
Normalized FAD
$
37,463
$
37,993
$
39,020
$
36,556
$
36,113
FFO per share
$
0.36
$
0.28
$
0.34
$
0.34
$
0.32
Normalized FFO per share
$
0.37
$
0.37
$
0.38
$
0.35
$
0.35
FAD per share
$
0.38
$
0.30
$
0.36
$
0.35
$
0.33
Normalized FAD per share
$
0.39
$
0.39
$
0.40
$
0.37
$
0.36
Diluted weighted average shares
outstanding [1]
96,672
96,752
97,408
99,195
99,360
[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, 2023
December 31, 2022
Assets:
Real estate investments, net
$
1,528,234
$
1,421,410
Other real estate related investments, at
fair value (including accrued interest of $1,136 as of June 30,
2023 and $1,320 as of December 31, 2022)
166,822
156,368
Assets held for sale, net
21,554
12,291
Cash and cash equivalents
1,145
13,178
Accounts and other receivables
387
416
Prepaid expenses and other assets, net
14,029
11,690
Deferred financing costs, net
4,781
5,428
Total assets
$
1,736,952
$
1,620,781
Liabilities and Equity:
Senior unsecured notes payable, net
$
395,594
$
395,150
Senior unsecured term loan, net
199,454
199,348
Unsecured revolving credit facility
280,000
125,000
Accounts payable, accrued liabilities and
deferred rent liabilities
21,039
24,360
Dividends payable
27,843
27,550
Total liabilities
923,930
771,408
Equity:
Common stock
991
990
Additional paid-in capital
1,245,717
1,245,337
Cumulative distributions in excess of
earnings
(433,686
)
(396,954
)
Total equity
813,022
849,373
Total liabilities and equity
$
1,736,952
$
1,620,781
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(Unaudited)
For the Six Months Ended June
30,
2023
2022
Cash flows from operating activities:
Net income (loss)
$
18,743
$
(22,595
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization (including
below-market ground leases)
24,983
26,167
Amortization of deferred financing
costs
1,217
1,040
Unrealized losses on other real estate
related investments, net
2,605
—
Amortization of stock-based
compensation
1,860
2,915
Straight-line rental income
14
(11
)
Adjustment for collectibility of rental
income
—
977
Noncash interest income
184
(13
)
Gain on sale of real estate, net
(1,958
)
(186
)
Impairment of real estate investments
23,278
61,384
Provision for loan losses, net
—
3,844
Change in operating assets and
liabilities:
Accounts and other receivables
14
578
Prepaid expenses and other assets, net
(330
)
(1,724
)
Accounts payable, accrued liabilities and
deferred rent liabilities
(3,624
)
(4,074
)
Net cash provided by operating
activities
66,986
68,302
Cash flows from investing activities:
Acquisitions of real estate, net of
deposits applied
(172,453
)
(21,915
)
Purchases of equipment, furniture and
fixtures and improvements to real estate
(6,380
)
(3,628
)
Investment in real estate related
investments and other loans receivable
(27,262
)
(102,086
)
Principal payments received on real estate
related investments and other loans receivable
15,287
1,026
Escrow deposits for potential acquisitions
of real estate
(300
)
—
Net proceeds from sales of real estate
14,464
959
Net cash used in investing activities
(176,644
)
(125,644
)
Cash flows from financing activities:
Proceeds from (costs paid for) the
issuance of common stock, net
(629
)
—
Borrowings under unsecured revolving
credit facility
155,000
125,000
Payments of deferred financing costs
(21
)
—
Net-settle adjustment on restricted
stock
(1,479
)
(4,469
)
Dividends paid on common stock
(55,246
)
(52,817
)
Net cash provided by financing
activities
97,625
67,714
Net (decrease) increase in cash and cash
equivalents
(12,033
)
10,372
Cash and cash equivalents as of the
beginning of period
13,178
19,895
Cash and cash equivalents as of the end
of period
$
1,145
$
30,267
CARETRUST REIT, INC.
DEBT SUMMARY
(dollars in thousands)
(Unaudited)
June 30, 2023
Interest
Maturity
% of
Deferred
Net Carrying
Debt
Rate
Date
Principal
Principal
Loan Costs
Value
Fixed Rate Debt
Senior unsecured notes payable
3.875
%
2028
$
400,000
45.5
%
$
(4,406
)
$
395,594
Floating Rate Debt
Senior unsecured term loan
6.691
%
[1]
2026
200,000
22.7
%
(546
)
199,454
Unsecured revolving credit facility
6.299
%
[2]
2028
[3]
280,000
31.8
%
—
[4]
280,000
6.462
%
480,000
54.5
%
(546
)
479,454
Total Debt
5.286
%
$
880,000
100.0
%
$
(4,952
)
$
875,048
[1] Funds can be borrowed at applicable
SOFR plus 1.50% to 2.20% or at the Base Rate (as defined) plus
0.50% to 1.20%.
[2] Funds can be borrowed at applicable
SOFR plus 1.10% to 1.55% or at the Base Rate (as defined) plus
0.10% to 0.55%.
[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.
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 recovery
of previously reversed rent, lease termination revenue, property
operating expenses, gains or losses from dispositions of real
estate, real estate impairment charges, provision for loan losses,
non-routine transaction costs, loss on extinguishment of debt,
unrealized loss on other real estate related investments and
provision for doubtful accounts and lease restructuring, as
applicable. 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. 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 investments, real estate related 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 noncash 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 provision for loan losses, non-routine
transaction costs, provision for doubtful accounts and lease
restructuring, loss on extinguishment of debt, unrealized loss on
other real estate related investments, recovery of previously
reversed rent, lease termination revenue and property operating
expenses. 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
other charges that are not indicative of its ongoing results,
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 related
depreciation and amortization, and, for FAD and Normalized FAD, by
excluding noncash 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802728901/en/
CareTrust REIT, Inc. (949) 542-3130 ir@caretrustreit.com
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