CareTrust REIT Announces Fourth Quarter and Full Year 2016 Operating Results

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SAN CLEMENTE, Calif., Feb. 07, 2017 (GLOBE NEWSWIRE) — CareTrust REIT, Inc. (NASDAQ:CTRE) reported today operating results for the fourth quarter of 2016 and for the full year 2016, as well as other recent events.

For the quarter, CareTrust REIT:

  • Posted net income of $0.14, normalized FFO of $0.28 and normalized FAD of $0.29, all per diluted weighted-average common share;

  • Raised $80.9 million net proceeds in an underwritten public equity offering;
  • Acquired four properties (consisting of three skilled nursing facilities and one skilled nursing campus) and initiated a new net-lease tenant relationship with Priority Management Group; and
  • Invested approximately $95.9 million (inclusive of transaction costs) at a blended initial cash yield of 8.9%.

For the full year 2016, CareTrust REIT:

  • Posted net income of $0.52, normalized FFO of $1.10 and normalized FAD of $1.17, all per diluted weighted-average common share;

  • Raised $186.7 million net proceeds in two underwritten public equity offerings;
  • Acquired 33 properties (consisting of 17 skilled nursing facilities, 13 assisted living facilities, and three skilled nursing campuses), initiated seven new net-lease tenant relationships, and expanded four existing net-lease tenant relationships;
  • Made two preferred equity investments to develop two skilled nursing facilities, both of which are currently under construction;
  • Invested approximately $288.0 million (inclusive of transaction costs) at a blended initial cash yield of 9.0%; and
  • Garnered multiple credit rating increases, with Moody’s raising both its corporate credit rating on CareTrust REIT and its rating on CareTrust REIT’s 5.875% Senior Unsecured Notes to B1 (from B2), each with a stable outlook, and Standard & Poor’s raising both its corporate credit rating on CareTrust to B+ (from B), with a stable outlook, and its issue rating on CareTrust REIT’s 5.875% Senior Unsecured Notes to BB- (from B+).

Subsequent to year-end, CareTrust REIT acquired two assisted living facilities for approximately $26.1 million (inclusive of transaction costs), generating an initial cash yield of 8.3%.

Approximately $288.0 Million in Full Year 2016 New Investments

Discussing CareTrust REIT’s progress during the quarter and full year 2016, Chairman and Chief Executive Officer Greg Stapley remarked, “Our fourth quarter Texas acquisition and related new operator relationship, together with our equity raise to match-fund the acquisition, brought a great finish to the year.” He noted that 2016 saw the company further its disciplined growth and diversification strategy, nearly doubling its operator bullpen, reducing run-rate debt-to-EBITDA to 4.6x, and crossing the $100 million run-rate rental revenue mark. “We look forward to leveraging our operating experience and platform to again generate solid returns for our shareholders in 2017.”

Financial Results for the Fourth Quarter and Full Year 2016

Chief Financial Officer Bill Wagner reported that for the quarter, CareTrust REIT generated net income of $8.4 million, or $0.14 per diluted weighted-average common share, normalized FFO of $17.2 million or $0.28 per diluted weighted-average common share, and normalized FAD of $18.0 million or $0.29 per diluted weighted-average common share.

For the full year 2016, Mr. Wagner reported that CareTrust REIT generated net income of $29.4 million, or $0.52 per diluted weighted-average common share, normalized FFO of $62.0 million or $1.10 per diluted weighted-average common share, and normalized FAD of $65.6 million or $1.17 per diluted weighted-average common share.  

Capital Events and Liquidity

Mr. Wagner also discussed CareTrust REIT’s liquidity, reviewing its 2016 underwritten public equity offerings and at-the-market program activity. With its March and November 2016 public equity offerings, CareTrust REIT issued and sold approximately 16.1 million shares of common stock at average prices of $11.35 and $13.35 per share respectively, for an aggregate $186.7 million in net proceeds.  With its 2016 at-the-market offerings, CareTrust REIT issued approximately 0.9 million shares of common stock at an average price of $15.31 per share for $14.1 million in gross proceeds. Subsequent to year-end, CareTrust REIT issued approximately 1.1 million shares at an average price of $15.46 per share for $16.6 million in gross proceeds under the at-the-market program.

Mr. Wagner further reported a year-end outstanding balance of approximately $95.0 million under CareTrust REIT’s $300 million unsecured revolving credit facility. Currently, there is approximately $110.0 million outstanding under the revolver. He added that CareTrust REIT’s run-rate debt-to-EBITDA ratio was approximately 4.6x, and its debt-to-enterprise value was approximately 32%, each at year-end. He also noted that CareTrust continues to have no property-level debt and, taking into account existing extension rights, no debt maturing before 2020.

2017 Net Income, FFO and FAD Guidance Issued

Mr. Wagner provided CareTrust REIT’s 2017 earnings guidance projecting, on a per-diluted weighted-average common share basis, net income of approximately $0.60 to $0.62, normalized FFO of approximately $1.11 to $1.13, and normalized FAD of approximately $1.18 to $1.20. This 2017 guidance assumes no new acquisitions beyond those made to date, no new debt incurrences or new equity issuances, and no future CPI-based rent escalators under CareTrust REIT’s long-term net-leases.

Dividend Declared

During the quarter, CareTrust declared a quarterly dividend of $0.17 per common share, bringing the full year 2016 dividend to $0.68 per common share. “Our 2016 dividends represent a FFO payout ratio of approximately 62% based on our actual 2016 FFO,” 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 Wednesday, February 8, at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time), during which CareTrust REIT’s management will discuss fourth quarter and full year 2016 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 65149740. 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 153 net-leased healthcare properties and three operated seniors housing properties in 20 states, CareTrust 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 (a) comply with laws, rules and regulations in the operation of the properties we lease to them, and (b) renew their leases with us upon expiration, or in the alternative, (c) our ability to reposition and re-let our properties on the same or better terms in the event of nonrenewal or replacement of an existing tenant and any obligations, including indemnification obligations, that we may incur in replacing an existing tenant; (iv) the availability of, and the ability to identify and acquire, suitable acquisition opportunities and lease the same to reliable tenants on accretive terms; (v) the ability to generate sufficient cash flows to service our outstanding indebtedness; (vi) access to debt and equity capital markets; (vii) fluctuating interest rates; (viii) the ability to retain and properly incentivize key management personnel; (ix) the ability to maintain our status as a real estate investment trust (“REIT”); (x) changes in the U.S. tax laws and other state, federal or local laws, whether or not specific to REITs; (xi) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xii) 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.”

Information in this press release or the related conference call is provided as of December 31, 2016, 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)
                   
                   
    Three Months Ended December 31,   Year Ended December 31,  
    2016   2015   2016   2015  
                         
    (unaudited)          
Revenues:            
  Rental income $ 25,269     $ 20,110   $ 93,126     $ 65,979  
  Tenant reimbursements   2,031       1,631     7,846       5,497  
  Independent living facilities   793       642     2,970       2,510  
  Interest and other income   150       249     737       965  
  Total revenues   28,243       22,632     104,679       74,951  
Expenses:                
  Depreciation and amortization   8,532       7,040     31,965       24,133  
  Interest expense   5,829       6,145     23,199       25,256  
  Property taxes   2,031       1,631     7,846       5,497  
  Independent living facilities   623       598     2,549       2,376  
  Acquisition costs   2       -     205       -  
  General and administrative   2,573       2,215     9,297       7,655  
  Total expenses   19,590       17,629     75,061       64,917  
Other income (expense):                
  Loss on sale of real estate   (265 )     -     (265 )     -  
Net income  $ 8,388     $ 5,003   $ 29,353     $ 10,034  
                   
Earnings per common share:                
  Basic $ 0.14     $ 0.10   $ 0.52     $ 0.26  
  Diluted $ 0.14     $ 0.10   $ 0.52     $ 0.26  
                   
Weighted average shares outstanding:                
  Basic   60,875       47,660     56,030       37,380  
  Diluted   60,875       47,660     56,030       37,380  
                   
Dividends declared per common share $ 0.17     $ 0.16   $ 0.68     $ 0.64