• CareTrust REIT Announces Third Quarter 2021 Operating Results

    Source: Nasdaq GlobeNewswire / 08 Nov 2021 09:02:52   America/New_York

    SAN CLEMENTE, Calif., Nov. 08, 2021 (GLOBE NEWSWIRE) -- CareTrust REIT, Inc. (Nasdaq:CTRE) today reported operating results for the quarter ended September 30, 2021, as well as other recent events.

    For the quarter, CareTrust REIT reported:

    • 96.2% of contractual rents collected;
    • Net income of $11.9 million and net income per share of $0.12;
    • Normalized FFO of $36.7 million, a 13.0% increase over the prior year, and normalized FFO per share of $0.38;
    • Normalized FAD of $39.0 million, a 15.1% increase over the prior year, and normalized FAD per share of $0.40;
    • A quarterly dividend of $0.265 per share, representing a payout ratio of approximately 66% on normalized FAD; and
    • A $0.01 per share increase on the low end to previously-released 2021 guidance, to normalized FFO of approximately $1.49 to $1.50 per share and normalized FAD of approximately $1.58 to $1.59 per share.

    Occupancy Recovery Continues

    “The occupancy recovery that began earlier this year for our skilled nursing providers has continued though the third quarter,” said Greg Stapley, CareTrust’s Chairman and Chief Executive Officer. He reported that skilled nursing census grew from June's 69.7% to 71.5% in September. “Skilled nursing occupancy is growing steadily month by month towards the pre-pandemic level of 77.7%,” he noted. He also reported that almost 60% of CareTrust’s skilled nursing facilities are now within 90% of their pre-pandemic census or better, and that overall skilled mix remained elevated at 18.4% in September, about 300 basis points over pre-pandemic levels. “Our outstanding operators and their teams are doing a fantastic job of turning the corner on the pandemic,” he said.

    He sounded a note of caution, however, stating that while gains on the census and revenue front are welcome news, they are only half of the equation. He warned that a shortage of qualified workers and a sharp increase in labor costs is a growing challenge, especially as patient and resident counts rise. “Several of our tenants report turning patients away, simply because they lack the necessary staff to care for more,” Mr. Stapley said.

    Discussing progress on the labor front, Dave Sedgwick, CareTrust’s President and Chief Operating Officer, reported that as of October, several CareTrust tenants have successfully reduced their use of expensive temporary or “agency” labor by significant amounts. “Providers who now apply the same intensity and systems to acquiring talent that they have used in the past to acquire patients are starting to see significant increases to hiring and to reducing staff turnover despite the widespread labor shortages,” he added.

    Mr. Sedgwick also commented on the upcoming Phase 4 release of additional provider relief funding. “The provider relief funding has been critical for most of our tenants and several still need it,” he said. “This Phase 4 round is especially important for our assisted living operators who haven’t benefited previously to the same degree as our skilled nursing tenants,” he added. Noting that the exact amount of funding for individual providers has not yet been determined, Mr. Sedgwick expressed optimism that the funding will be highly beneficial for the operators who are still working their way back to profitability.

    Financial Results for Quarter Ended September 30, 2021

    Chief Financial Officer Bill Wagner reported that, for the third quarter, CareTrust generated net income of $11.9 million, or $0.12 per diluted weighted-average common share, normalized FFO of $36.7 million, or $0.38 per diluted weighted-average common share, and normalized FAD of $39.0 million, or $0.40 per diluted weighted-average common share.

    Liquidity

    As of quarter end, CareTrust reported net debt-to-annualized normalized run rate EBITDA of 3.7x, well under the Company's target leverage range of 4.0x to 5.0x, and a net debt-to-enterprise value of approximately 25.1%. Mr. Wagner stated that as of today the Company had approximately $80 million outstanding on its $600 million revolving credit line, with no scheduled debt maturities prior to 2024. He also disclosed that CareTrust currently has more than $22 million in cash on hand. He further noted that the Company currently has approximately $476.5 million in available authorization remaining on its at-the-market equity program. "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.

    Continued Portfolio Growth

    During the quarter, CareTrust acquired the 119-bed Sedona Trace Health & Wellness Center in Austin, Texas and the 122-bed Cedar Pointe Health & Wellness Center in nearby Cedar Park. The properties were leased to affiliates of The Ensign Group, Inc. The approximately $32.5 million purchase price was funded using CareTrust’s $600 million unsecured revolving credit facility. The investment brought CareTrust’s year-to-date capital deployment to approximately $184.2 million, almost all sourced in off-market transactions.

    Mark Lamb, CareTrust's Chief Investment Officer, reported that pricing for both skilled nursing and seniors housing assets continues to be disconnected from current and historical operating performance. “We understand perfectly why recent performance is less relevant, but recovery projections and other future operating assumptions being used by some buyers appear to be very aggressive,” said Mr. Lamb. “For our part, we continue to underwrite carefully and look for good opportunities, and are content to let overpriced assets go to less experienced and ultra-high leverage buyers,” he added. Mr. Lamb quoted CareTrust’s active deal pipeline as being in the $125 million to $150 million range, noting that it is mostly comprised of single assets and smaller portfolios, and is currently weighted roughly equally between skilled nursing and seniors housing assets.

    2021 Guidance Updated

    CareTrust updated its annual guidance for 2021, on a per-diluted weighted-average common share basis, increasing net income on the low end to approximately $0.80 to $0.81, and increasing normalized FFO to approximately $1.49 to $1.50 and normalized FAD to approximately $1.58 to $1.59. The guidance is based on a diluted weighted-average common share count of 96.5 million shares, and per CareTrust's standard practice includes all investments, dispositions and loan repayments made to date, and assumes no new acquisitions, dispositions, new loans or loan repayments beyond those completed or announced to date, no new debt incurrences or new equity issuances, and estimated 2.0% CPI-based rent escalators under CareTrust's long-term net leases escalating in the remainder of 2021.

    Mr. Wagner sounded a note of caution, however, alluding to the ongoing effects of the global pandemic and the operating headwinds still facing the Company’s tenants, especially assisted living providers that have received little to no government financial support to date. “Naturally, we note that material changes in economic and other factors related to the COVID-19 pandemic, the government’s responses thereto and the resulting impact on our tenants’ abilities to timely pay rent could alter our outlook at any time,” Mr. Wagner concluded.

    Dividend Maintained

    During the quarter, CareTrust declared a quarterly dividend of $0.265 per common share. On an annualized basis, the payout ratio was approximately 70% based on third quarter 2021 normalized FFO, and 66% based on normalized FAD.

    Conference Call

    A conference call will be held on Monday, November 8, 2021, at 2:00 p.m. Eastern Time (11:00 a.m. Pacific Time), during which CareTrust’s management will discuss third quarter 2021 results, recent developments and other matters. The dial-in number for this call is (844) 220-4972 (U.S.) or (317) 973-4053 (International). The conference ID number is 4158737. 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 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 future financial and financing plans, business and acquisition strategies, growth prospects, operating and financial performance, expectations regarding the making of distributions, 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 COVID-19 pandemic, including the risk of additional surges of COVID-19 infections due to the rate of public acceptance and efficacy of COVID-19 vaccines or to new and more contagious and/or vaccine resistant variants, and the measures taken to prevent the spread of COVID-19 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 ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (iv) 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; (v) 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; (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 law 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) additional factors included in our Annual Report on Form 10-K for the year ended December 31, 2020, including in the section entitled “Risk Factors” in Item 1A of Part I of such report, 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 September 30, 2021 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.

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

     
    CARETRUST REIT, INC.
    CONDENSED CONSOLIDATED INCOME STATEMENTS
    (in thousands, except per share data)
    (Unaudited)
      For the Three Months Ended
    September 30,    		 For the Nine Months Ended
    September 30,
      2021 2020 2021 2020
    Revenues:       
     Rental income$48,087   $45,036  $141,077   $130,007  
     Independent living facilities—   634  —   1,874  
     Interest and other income518   17  1,537   2,314  
     Total revenues48,605   45,687  142,614   134,195  
    Expenses:       
     Depreciation and amortization13,968   13,086  41,284   39,485  
     Interest expense5,692   5,519  17,988   18,082  
     Property taxes1,004   857  2,466   2,179  
     Independent living facilities—   568  —   1,660  
     General and administrative5,196   4,105  16,136   12,921  
     Total expenses25,860   24,135  77,874   74,327  
    Other loss:       
     Loss on extinguishment of debt(10,827)  —  (10,827)  —  
     Loss on sale of real estate—   —  (192)  (56) 
     Total other losses(10,827)  —  (11,019)  (56) 
    Net income$11,918   $21,552  $53,721   $59,812  
             
    Earnings per common share:       
     Basic$0.12   $0.23  $0.56   $0.63  
     Diluted$0.12   $0.23  $0.56   $0.63  
             
    Weighted-average number of common shares:       
     Basic96,297   95,214  95,922   95,195  
     Diluted96,297   95,214  95,937   95,195  
             
    Dividends declared per common share$0.265   $0.25  $0.795   $0.75  


     
     
    CARETRUST REIT, INC.
    RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
    (in thousands)
    (Unaudited)
       Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
       2021 2020 2021 2020
              
    Net income $11,918  $21,552   $53,721   $59,812  
     Depreciation and amortization 13,968  13,086   41,284   39,485  
     Interest expense 5,692  5,519   17,988   18,082  
     Amortization of stock-based compensation 1,802  972   5,197   2,819  
    EBITDA 33,380  41,129   118,190   120,198  
     Recovery of previously reversed rent —  (1,047)  —   (1,047) 
     Lease termination revenue —  (1,106)  (63)  (1,106) 
     Property operating expenses —  —   —   (248) 
     Loss on extinguishment of debt 10,827  —   10,827   —  
     Loss on sale of real estate —  —   192   56  
    Normalized EBITDA $44,207  $38,976   $129,146   $117,853  
              
    Net income $11,918  $21,552   $53,721   $59,812  
     Real estate related depreciation and amortization 13,964  13,078   41,267   39,445  
     Loss on sale of real estate —  —   192   56  
    Funds from Operations (FFO) 25,882  34,630   95,180   99,313  
     Effect of the senior unsecured notes payable redemption —  —   642   —  
     Recovery of previously reversed rent —  (1,047)  —   (1,047) 
     Lease termination revenue —  (1,106)  (63)  (1,106) 
     Property operating expenses —  —   —   (248) 
     Loss on extinguishment of debt 10,827  —   10,827   —  
    Normalized FFO $36,709  $32,477   $106,586   $96,912  


     
     
    CARETRUST REIT, INC.
    RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES (continued)
    (in thousands, except per share data)
    (Unaudited)
       Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
       2021 2020 2021 2020
              
    Net income $11,918   $21,552   $53,721   $59,812  
     Real estate related depreciation and amortization 13,964   13,078   41,267   39,445  
     Amortization of deferred financing fees 519   487   1,501   1,462  
     Amortization of stock-based compensation 1,802   972   5,197   2,819  
     Straight-line rental income (6)  (17)  (26)  (65) 
     Loss on sale of real estate —   —   192   56  
    Funds Available for Distribution (FAD) 28,197   36,072   101,852   103,529  
     Effect of the senior unsecured notes payable redemption —   —   642   —  
     Recovery of previously reversed rent —   (1,047)  —   (1,047) 
     Lease termination revenue —   (1,106)  (63)  (1,106) 
     Property operating expenses —   —   —   (248) 
     Loss on extinguishment of debt 10,827   —   10,827   —  
    Normalized FAD $39,024   $33,919   $113,258   $101,128  
              
    FFO per share $0.27   $0.36   $0.99   $1.04  
    Normalized FFO per share $0.38   $0.34   $1.11   $1.02  
              
    FAD per share $0.29   $0.38   $1.06   $1.09  
    Normalized FAD per share $0.40   $0.36   $1.18   $1.06  
              
     Diluted weighted average shares outstanding [1] 96,592   95,353   96,196   95,318  
              
     [1] For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method.


     
     
    CARETRUST REIT, INC.
    CONSOLIDATED INCOME STATEMENTS - 5 QUARTER TREND
    (in thousands, except per share data)
    (Unaudited)
     QuarterQuarterQuarterQuarterQuarter
     EndedEndedEndedEndedEnded
     September 30,
    2020    		December 31,
    2020    		March 31,
    2021    		June 30,
    2021    		September 30,
    2021
    Revenues:     
    Rental income$45,036 $43,605 $45,246  $47,744 $48,087  
    Independent living facilities634 203 —  — —  
    Interest and other income17 329 505  514 518  
    Total revenues45,687 44,137 45,751  48,258 48,605  
    Expenses:     
    Depreciation and amortization13,086 13,275 13,473  13,843 13,968  
    Interest expense5,519 5,579 5,762  6,534 5,692  
    Property taxes857 657 696  766 1,004  
    Independent living facilities568 209 —  — —  
    General and administrative4,105 3,381 5,142  5,798 5,196  
    Total expenses24,135 23,101 25,073  26,941 25,860  
    Other income (loss):    
    Loss on extinguishment of debt— — —  — (10,827) 
    Gain (loss) on sale of real estate— 19 (192) — —  
    Total other losses— 19 (192) — (10,827) 
    Net income$21,552 $21,055 $20,486  $21,317 $11,918  
          
    Diluted earnings per share$0.23 $0.22 $0.21  $0.22 $0.12  
          
    Diluted weighted average shares outstanding95,214 95,244 95,385  96,120 96,297  


     
     
    CARETRUST REIT, INC.
    RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND
    (in thousands)
    (Unaudited)
     QuarterQuarterQuarterQuarterQuarter
     EndedEndedEndedEndedEnded
     September 30,
    2020    		December 31,
    2020    		March 31,
    2021    		June 30,
    2021    		September 30,
    2021
          
    Net income$21,552  $21,055  $20,486  $21,317 $11,918 
    Depreciation and amortization13,086  13,275  13,473  13,843 13,968 
    Interest expense5,519  5,579  5,762  6,534 5,692 
    Amortization of stock-based compensation972  971  1,585  1,810 1,802 
    EBITDA41,129  40,880  41,306  43,504 33,380 
    Recovery of previously reversed rent(1,047) —  —  — — 
    Lease termination revenue(1,106) (73) (63) — — 
    Loss on extinguishment of debt—  —  —  — 10,827 
    (Gain) loss on sale of real estate—  (19) 192  — — 
    Normalized EBITDA$38,976  $40,788  $41,435  $43,504 $44,207 
          
    Net income$21,552  $21,055  $20,486  $21,317 $11,918 
    Real estate related depreciation and amortization13,078  13,268  13,466  13,837 13,964 
    (Gain) loss on sale of real estate—  (19) 192  — — 
    Funds from Operations (FFO)34,630  34,304  34,144  35,154 25,882 
    Effect of the senior unsecured notes payable redemption—  —  —  642 — 
    Recovery of previously reversed rent(1,047) —  —  — — 
    Lease termination revenue(1,106) (73) (63) — — 
    Loss on extinguishment of debt—  —  —  — 10,827 
    Normalized FFO$32,477  $34,231  $34,081  $35,796 $36,709 


     
     
    CARETRUST REIT, INC.
    RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND (continued)
    (in thousands, except per share data)
    (Unaudited)
     QuarterQuarterQuarterQuarterQuarter
     EndedEndedEndedEndedEnded
     September 30,
    2020    		December 31,
    2020    		March 31,
    2021    		June 30,
    2021    		September 30,
    2021
          
    Net income$21,552  $21,055  $20,486  $21,317  $11,918  
    Real estate related depreciation and amortization13,078  13,268  13,466  13,837  13,964  
    Amortization of deferred financing fees487  488  487  495  519  
    Amortization of stock-based compensation972  971  1,585  1,810  1,802  
    Straight-line rental income(17) (12) (12) (8) (6) 
    (Gain) loss on sale of real estate—  (19) 192  —  —  
    Funds Available for Distribution (FAD)36,072  35,751  36,204  37,451  28,197  
    Effect of the senior unsecured notes payable redemption—  —  —  642  —  
    Recovery of previously reversed rent(1,047) —  —  —  —  
    Lease termination revenue(1,106) (73) (63) —  —  
    Loss on extinguishment of debt—  —  —  —  10,827  
    Normalized FAD$33,919  $35,678  $36,141  $38,093  $39,024  
          
    FFO per share$0.36  $0.36  $0.36  $0.36  $0.27  
    Normalized FFO per share$0.34  $0.36  $0.36  $0.37  $0.38  
          
    FAD per share$0.38  $0.37  $0.38  $0.39  $0.29  
    Normalized FAD per share$0.36  $0.37  $0.38  $0.40  $0.40  
          
    Diluted weighted average shares outstanding [1]95,353  95,429  95,621  96,366  96,592  
          
    [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)
        September 30, 2021 December 31, 2020
    Assets:    
    Real estate investments, net$1,590,418   $1,448,099  
    Other real estate investments15,150   15,000  
    Assets held for sale, net4,891   7,226  
    Cash and cash equivalents17,716   18,919  
    Accounts and other receivables3,474   1,823  
    Prepaid expenses and other assets, net10,710   10,450  
    Deferred financing costs, net1,307   2,042  
       Total assets$1,643,666   $1,503,559  
           
    Liabilities and Equity:   
    Senior unsecured notes payable, net$394,063   $296,669  
    Senior unsecured term loan, net199,084   198,925  
    Unsecured revolving credit facility80,000   50,000  
    Accounts payable, accrued liabilities and deferred rent liabilities26,740   19,572  
    Dividends payable26,164   24,251  
       Total liabilities726,051   589,417  
           
    Equity:    
    Common stock963   952  
    Additional paid-in capital1,191,204   1,164,402  
    Cumulative distributions in excess of earnings(274,552)  (251,212) 
       Total equity917,615   914,142  
       Total liabilities and equity$1,643,666   $1,503,559  


     
    CARETRUST REIT, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)
    (Unaudited)
     For the Nine Months Ended September 30,
     2021 2020
    Cash flows from operating activities:   
    Net income$53,721   $59,812  
    Adjustments to reconcile net income to net cash provided by operating activities:   
    Depreciation and amortization (including below-market ground leases)41,328   39,529  
    Amortization of deferred financing costs1,531   1,462  
    Loss on extinguishment of debt10,827   —  
    Amortization of stock-based compensation5,197   2,819  
    Straight-line rental income(26)  (65) 
    Loss on sale of real estate192   56  
    Interest income distribution from other real estate investment—   1,346  
    Change in operating assets and liabilities:   
         Accounts and other receivables(1,775)  543  
         Prepaid expenses and other assets, net(20)  267  
         Accounts payable, accrued liabilities and deferred rent liabilities7,388   2,616  
              Net cash provided by operating activities118,363   108,385  
    Cash flows from investing activities:   
    Acquisitions of real estate, net of deposits applied(180,323)  (42,075) 
    Purchases of equipment, furniture and fixtures and improvements to real estate(4,826)  (6,294) 
    Investment in real estate mortgage and other loans receivable(700)  (13,958) 
    Principal payments received on real estate mortgage and other loans receivable172   80,873  
    Repayment of other real estate investment—   2,327  
    Escrow deposits for potential acquisitions of real estate(3,100)  (1,000) 
    Net proceeds from sales of real estate6,814   2,189  
              Net cash (used in) provided by investing activities(181,963)  22,062  
    Cash flows from financing activities:   
    Proceeds from (costs paid for) the issuance of common stock, net22,946   (404) 
    Proceeds from the issuance of senior unsecured notes payable400,000   —  
    Borrowings under unsecured revolving credit facility220,000   15,000  
    Payments on senior unsecured notes payable(300,000)  —  
    Payments on unsecured revolving credit facility(190,000)  (75,000) 
    Payments on debt extinguishment and deferred financing costs(14,070)  —  
    Net-settle adjustment on restricted stock(1,331)  (1,986) 
    Dividends paid on common stock(75,148)  (69,283) 
              Net cash provided by (used in) financing activities62,397   (131,673) 
    Net decrease in cash and cash equivalents(1,203)  (1,226) 
    Cash and cash equivalents as of the beginning of period18,919   20,327  
    Cash and cash equivalents as of the end of period$17,716   $19,101  


     
     
    CARETRUST REIT, INC.
    DEBT SUMMARY
    (dollars in thousands)
    (Unaudited)
                
         September 30, 2021
     Interest Maturity   % of Deferred Net
    Carrying
    DebtRate Date Principal Principal Loan Costs Value
                
    Fixed Rate Debt           
                
    Senior unsecured notes payable3.875% 2028 $400,000  58.8% $(5,937)  $394,063 
    Floating Rate Debt           
                
    Senior unsecured term loan1.584%[1]2026 200,000  29.4% (916)  199,084 
    Unsecured revolving credit facility1.184%[2]2024[3] 80,000  11.8% —  [4] 80,000 
     1.470%   280,000  41.2% (916)  279,084 
                
    Total Debt2.885%   $680,000  100.0% $(6,853)  $673,147 
                
    [1] Funds can be borrowed at applicable LIBOR 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 LIBOR 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.


     
     
    CARETRUST REIT, INC.
    RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
    (shares in thousands)
    (Unaudited)
        
        
    2021 Guidance Updated
        
        
      Full Year 2021 Guidance[1]
      LowHigh
    Net income$0.80 $0.81 
     Real estate related depreciation and amortization0.57 0.57 
     (Gain) loss on sale of real estate— — 
    Funds from Operations (FFO)1.37 1.38 
     Lease termination revenue— — 
     Effect of the senior unsecured notes payable redemption0.01 0.01 
     Loss on extinguishment of debt0.11 0.11 
    Normalized FFO$1.49 $1.50 
        
    Net income$0.80 $0.81 
     Real estate related depreciation and amortization0.57 0.57 
     Amortization of deferred financing fees0.02 0.02 
     Amortization of stock-based compensation0.07 0.07 
     Straight-line rental income— — 
     (Gain) loss on sale of real estate— — 
    Funds Available for Distribution (FAD)1.46 1.47 
     Lease termination revenue— — 
     Effect of the senior unsecured notes payable redemption0.01 0.01 
     Loss on extinguishment of debt0.11 0.11 
    Normalized FAD$1.58 $1.59 
    Weighted average shares outstanding:  
     Diluted96,466 96,466 
        
    [1] This guidance assumes and includes (i) all investments, dispositions and loan repayments made to date, (ii) no new acquisitions, dispositions, new loans or loan repayments beyond those completed or announced to date, (iii) no new debt incurrences or new equity issuances, (iv) estimated 2.00% CPI-based rent escalators under CareTrust's long-term net leases, and (v) assumes all contractual cash rents are paid by the end of the year. It does not contemplate future negative impacts, if any, that are related to the COVID-19 pandemic, which are highly uncertain and cannot be predicted at this time.
     

    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, loss on extinguishment of debt, 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 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, provision for doubtful accounts and lease restructuring, loss on extinguishment of debt, 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 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.


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