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Ventas Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed February 26, 2003
Period End
December 31, 2002
Security
VTR
In the record · 2016–202610-K1110-Q348-K128

VTR filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 128 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Apr ’17Apr ’17
  2. Leadership change8-K · Oct ’19Oct ’19
  3. Leadership change8-K · Mar ’22Mar ’22
  4. Material agreement8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed February 26, 2003. Cited figures are marked; the original filing is the authoritative source.

Ventas, Inc. (VTR) is a healthcare REIT that leases 44 hospitals, 220 nursing facilities and nine other healthcare and senior housing facilities in 37 states under triple-net leases.

Kindred Healthcare, Inc. leases 210 of the nursing facilities and all but one hospital and accounted for approximately 98.4% of 2002 rental revenues, so Kindred's ability to perform under its lease and spin-off agreements is the central risk for investors. Rental income for 2002 was $189.5 milliona, and net income was $65.7 million, or $0.93 per diluted share, including $23.8 million of discontinued operations and an $11.1 million extraordinary loss. Funds from operations (FFO) was $95.2 million, and normalized FFO was $95.6 million.

The company faces several near-term pressures. Kindred announced substantially higher professional liability costs in Florida and proposed subleasing its 15 Florida skilled nursing facilities to Senior Health Management, LLC; Ventas believes its consent is required and is discussing an exit with Kindred, with possible litigation if no agreement is reached. The market value of Ventas's Kindred common stock fell from $34.1 millionb at September 30, 2002 to about $16.7 million at year-end.

Moody's placed the company's ratings under review for possible downgrade in October 2002. Total debt was $707.7 millionc at December 31, 2002, and stockholders' equity was a deficit of $53.6 million.

During 2002 the company completed a $120.0 milliond transaction with Trans Healthcare, Inc. (a $53.0 million sale-leaseback and a $67.0 million loan), sold the THI senior loan for $49.0 million, issued $400.0 million of Senior Notes, and completed a 9.0 million share equity offering at $11.00 per share, with net proceeds of $93.6 million. The company declared a 2003 dividend of $1.07 per share annualized, with the first quarterly payment of $0.2675 per share.

02—Key points

Key Highlights

  1. Kindred Healthcare accounted for approximately 98.4% of 2002 rental revenues, making Ventas highly dependent on a single tenant that emerged from bankruptcy on April 20, 2001.
  2. Rental income was $189.5 million in 2002, compared with $183.3 million in 2001; net income was $65.7 million, or $0.93 per diluted share.
  3. FFO was $95.2 million in 2002, and normalized FFO was $95.6 million, compared with $78.1 million in 2001 after excluding the Kindred stock gain and swap breakage loss.
  4. Kindred plans to exit 15 Florida skilled nursing facilities leased from Ventas; Ventas believes its consent is required and is evaluating legal alternatives if no agreement is reached.
  5. The THI Transaction totaled $120.0 million, with a $53.0 million sale-leaseback and a $67.0 million loan; the senior loan was sold to GE Capital Credit Corporation for $49.0 million net proceeds.
  6. Total debt was $707.7 million at December 31, 2002, and total stockholders' equity was a deficit of $53.6 million; Moody's placed the company's ratings under review for possible downgrade in October 2002.
  7. The 2003 dividend was set at an annual rate of $1.07 per share, with the first quarterly dividend of $0.2675 per share declared February 21, 2003.

03—Questions

Frequently Asked Questions

  1. How dependent is Ventas on Kindred Healthcare?

    Very dependent. Kindred accounted for approximately 98.4% of 2002 rental revenues and leases 210 nursing facilities and all but one hospital. The company states that Kindred's inability or unwillingness to meet its obligations could have a material adverse effect on the company and its ability to pay dividends and remain a REIT.

  2. What is the status of the Florida skilled nursing facility dispute?

    Kindred announced a non-binding letter of intent to transfer operations of its 18 Florida facilities, including 15 leased from Ventas, to Senior Health Management, LLC. Ventas believes its consent is required and intends to defend vigorously any legal action arising from withholding that consent. The company is discussing with Kindred an exit from the Florida market on acceptable terms, and no outcome is assured.

  3. What did the company earn and pay out in 2002?

    Net income was $65.7 million, or $0.93 per diluted share, including $23.8 million from discontinued operations. Dividends declared were $0.95 per share for 2002. For 2003 the company intends to pay $1.07 per share, not less than 100% of 2003 taxable income, with the first quarterly dividend of $0.2675 per share.

  4. How is the company's leverage and credit position?

    Total debt was $707.7 million at December 31, 2002, with $185.3 million available under the revolving credit facility. The company holds a Ba3 senior debt rating from Moody's and a BB- corporate credit rating from S&P, and Moody's placed its ratings under review for possible downgrade in October 2002. Stockholders' equity was a deficit of $53.6 million.

  5. What risks could affect the company's REIT status?

    The filing identifies several risks, including Kindred's failure to pay rent, violation of the 10% securities test or 5% asset test because of the Kindred common stock held (920,814 shares at year-end), and the outcome of the IRS audit of 1997 and 1998 tax years. Loss of REIT status would have a material adverse effect on the company.

04—Continue

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