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Section 1: 8-K (FORM 8-K)

Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 23, 2018

 

 

New Senior Investment Group Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-36499   80-0912734

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

1345 Avenue of the Americas, 45th Floor

New York, New York

  10105
(Address of principal executive offices)   (Zip code)

212-479-3140

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 Results of Operation and Financial Condition.

On February 23, 2018, New Senior Investment Group Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter and full year ended December 31, 2017. A copy of the Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit

Number

   Description
99.1    Press release dated February 23, 2018


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    NEW SENIOR INVESTMENT GROUP INC.
Date: February 23, 2018     By:  

/s/ Susan Givens

      Susan Givens
      Chief Executive Officer
(Back To Top)

Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO

Contact:

David Smith

(212) 515-7783

NEW SENIOR ANNOUNCES FOURTH QUARTER AND FULL YEAR 2017 RESULTS

Announces Exploration of Strategic Alternatives

 

 

NEW YORK — February 23, 2018 — New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE: SNR) announced today its results for the quarter and full year ended December 31, 2017 and that the Company’s Board of Directors has been exploring strategic alternatives to maximize shareholder value.

4Q 2017 FINANCIAL HIGHLIGHTS

 

    Declared cash dividend of $0.26 per common share

 

    Net income of $33.5 million, or $0.41 per basic and diluted share

 

    Total net operating income (“NOI”) of $53.7 million, compared to $57.1 million for 4Q’16

 

    Normalized Funds from Operations (“Normalized FFO”) of $22.9 million, or $0.28 per basic and diluted share

 

    AFFO of $20.1 million, or $0.24 per basic and diluted share

 

    Normalized Funds Available for Distribution (“Normalized FAD”) of $18.5 million, or $0.23 per basic share and $0.22 per diluted share

4Q 2017 AND RECENT BUSINESS HIGHLIGHTS

 

    Total same store cash NOI increased 1.0% vs. 4Q’16

 

    Managed same store cash NOI decreased 1.5% vs. 4Q’16 and increased 2.4% vs. 3Q’17

 

    Triple net same store cash NOI increased 4.4% vs. 4Q’16

 

    Completed the sale of 15 properties for $296 million comprised of nine managed AL/MC properties for $109.5 million and six triple net lease properties for $186.0 million

FOURTH QUARTER 2017 RESULTS

Dollars in thousands, except per share data

 

     For the Quarter Ended December 31, 2017      For the Quarter Ended December 31, 2016  
     Amount      Per Basic
Share
     Per Diluted
Share
     Amount     Per Basic
Share
    Per Diluted
Share
 

GAAP

               

Net Income (Loss)

   $ 33,521      $ 0.41      $ 0.41      $ (2,802   $ (0.03   $ (0.03

Non-GAAP(A)

               

NOI

   $ 53,732        N/A        N/A      $ 57,053       N/A       N/A  

FFO

     15,659      $ 0.19      $ 0.19        21,645     $ 0.26     $ 0.26  

Normalized FFO

     22,896      $ 0.28      $ 0.28        26,027     $ 0.32     $ 0.31  

AFFO

     20,070      $ 0.24      $ 0.24        22,463     $ 0.27     $ 0.27  

Normalized FAD(B)

     18,527      $ 0.23      $ 0.22        20,140     $ 0.25     $ 0.24  

 

(A) See end of press release for reconciliation of non-GAAP measures to net loss.
(B) Normalized FAD, which does not reflect debt principal payments and certain other expenses, does not represent cash available for distribution to shareholders.

 

1


FULL YEAR 2017 RESULTS

Dollars in thousands, except per share data

 

     For the Year Ended December 31, 2017      For the Year Ended December 31, 2016  
     Amount      Per Basic
Share
     Per Diluted
Share
     Amount     Per Basic
Share
    Per Diluted
Share
 

GAAP

               

Net Income (Loss)

   $ 12,208      $ 0.15      $ 0.15      $ (72,249   $ (0.88   $ (0.88

Non-GAAP(A)

               

NOI

   $ 219,085        N/A        N/A      $ 229,411       N/A       N/A  

FFO

     80,387      $ 0.98      $ 0.97        98,941     $ 1.20     $ 1.19  

Normalized FFO

     94,340      $ 1.15      $ 1.14        105,899     $ 1.29     $ 1.28  

AFFO

     85,159      $ 1.04      $ 1.03        94,400     $ 1.15     $ 1.14  

Normalized FAD(B)

     78,253      $ 0.95      $ 0.95        86,177     $ 1.05     $ 1.04  

 

(A) See end of press release for reconciliation of non-GAAP measures to net loss.
(B) Normalized FAD, which does not reflect debt principal payments and certain other expenses, does not represent cash available for distribution to shareholders.

FOURTH QUARTER 2017 GAAP RESULTS

New Senior recorded GAAP net income of $33.5 million, or $0.41 per basic and diluted share, for the fourth quarter of 2017, compared to GAAP net loss of $2.8 million, or $(0.03) per basic and diluted share, for the fourth quarter of 2016. The year over year increase in the fourth quarter of 2017 net income was primarily driven by a gain on sale of real estate of $49.2 million compared to a gain on sale of real estate of $13.4 million in the fourth quarter of 2016.

FOURTH QUARTER 2017 PORTFOLIO PERFORMANCE

Total NOI decreased 5.8% to $53.7 million compared to $57.1 million for 4Q 2016. Total same store cash NOI increased 1.0% vs. 4Q 2016.

For the managed portfolio, same store average occupancy decreased 150 basis points to 86.8% compared to 88.3% for 4Q 2016, and same store RevPOR increased 1.6% to $3,100 compared to $3,050 for 4Q 2016. Year over year, same store cash NOI decreased 1.5% to $24.9 million compared to $25.2 million for 4Q 2016. Quarter over quarter, same store cash NOI increased 2.4% to $25.3 million compared to $24.7 million for 3Q 2017.

For the triple net portfolio, same store cash NOI increased 4.4% to $19.9 million compared to $19.1 million for 4Q 2016. Same store triple net average occupancy decreased 230 basis points to 87.7% compared to 90.0% for 4Q 2016. Same store EBITDARM coverage as of December 31, 2017 was 1.17x, down from 1.21x as of December 31, 2016. Triple net average occupancy and EBITDARM coverage are presented one quarter in arrears on a trailing twelve month basis.

ASSET SALE UPDATE

During the fourth quarter, the Company completed the sale of $296 million of assets comprised of the following:

 

    $109.5 million sale of nine managed AL/MC properties, which closed in November 2017. In connection with the sale, the Company repaid $78.7 million of debt and realized a gain on sale of $6.9 million, net of selling costs.

 

    $186.0 million sale of six triple net leased properties, comprised of four CCRC, one IL property and one AL/MC property, as well as termination of the related lease with LCS, which closed in December 2017. In connection with the sale, the Company repaid $98.1 million of debt and realized a gain on sale of $42.3 million, net of selling costs.

FOURTH QUARTER DIVIDEND

On February 22, 2018, the Company’s Board of Directors declared a cash dividend of $0.26 per share for the quarter ended December 31, 2017. The dividend is payable on March 22, 2018 to shareholders of record on March 8, 2018.

 

2


EXPLORATION OF STRATEGIC ALTERNATIVES

The Company also announced that the Company’s Board of Directors, together with its management team and legal and financial advisors, has been conducting a process to explore and evaluate a full range of strategic alternatives to maximize shareholder value.

There can be no assurance that this process will result in a transaction or, if a transaction is undertaken, its terms or timing. The Company does not intend to make any further public comment regarding the review until it has been completed. The Company retained J.P. Morgan Securities LLC as its financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor to assist in this ongoing review.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for investors, please refer to the presentation posted in the Investor Relations section of the Company’s website, www.newseniorinv.com.

EARNINGS CONFERENCE CALL

Management will host a conference call on February 23, 2018 at 9:00 A.M. Eastern Time. The conference call may be accessed by dialing (877) 694-6694 (from within the U.S.) or (970) 315-0985 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “New Senior Fourth Quarter and Full Year 2017 Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newseniorinv.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on March 26, 2018 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside the U.S.); please reference access code “4744689.”

ABOUT NEW SENIOR

New Senior Investment Group (NYSE: SNR) is a publicly-traded real estate investment trust with a diversified portfolio of senior housing properties located across the United States. As of December 31, 2017, New Senior is one of the largest owners of senior housing properties, with 133 properties across 37 states. New Senior is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm. More information about New Senior can be found at www.newseniorinv.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain items in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the Company’s exploration of strategic alternatives. These statements are not historical facts. They represent management’s current expectations regarding future events and are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties relating to contemplated asset sales and the Company’s review of strategic alternatives and announcement thereof. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of these and other risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual and quarterly reports filed with the Securities and Exchange Commission, which are available on the Company’s website (www.newseniorinv.com). New risks and uncertainties emerge from time to time, and it is not possible for New Senior to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and New Senior expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in New Senior’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

 

3


Consolidated Balance Sheets

(dollars in thousands, except share data)

 

     December 31,  
     2017     2016  

Assets

    

Real estate investments:

    

Land

   $ 182,238     $ 220,317  

Buildings, improvements and other

     2,329,524       2,552,862  

Accumulated depreciation

     (275,794     (218,968
  

 

 

   

 

 

 

Net real estate property

     2,235,968       2,554,211  
  

 

 

   

 

 

 

Acquired lease and other intangible assets

     264,438       319,929  

Accumulated amortization

     (249,198     (255,452
  

 

 

   

 

 

 

Net real estate intangibles

     15,240       64,477  
  

 

 

   

 

 

 

Net real estate investments

     2,251,208       2,618,688  

Cash and cash equivalents

     137,327       58,048  

Straight-line rent receivables

     82,445       73,758  

Receivables and other assets, net

     37,047       71,234  
  

 

 

   

 

 

 

Total Assets

   $ 2,508,027     $ 2,821,728  
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

Mortgage notes payable, net

   $ 1,907,928     $ 2,130,387  

Due to affiliates

     9,550       11,623  

Accrued expenses and other liabilities

     84,664       100,823  
  

 

 

   

 

 

 

Total Liabilities

   $ 2,002,142     $ 2,242,833  
  

 

 

   

 

 

 

Commitments and contingencies

    

Equity

    

Preferred Stock $0.01 par value, 100,000,000 shares authorized and none issued or outstanding as of both December 31, 2017 and 2016

   $ —       $ —    

Common stock $0.01 par value, 2,000,000,000 shares authorized, 82,148,869 and 82,127,247 shares issued and outstanding as of December 31, 2017 and 2016, respectively

     821       821  

Additional paid-in capital

     898,132       897,918  

Accumulated deficit

     (393,068     (319,844
  

 

 

   

 

 

 

Total Equity

   $ 505,885     $ 578,895  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,508,027     $ 2,821,728  
  

 

 

   

 

 

 

 

4


Consolidated Statement of Operations

(dollars in thousands, except share data)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2017      2016     2017      2016  
     (unaudited)               

Revenues

          

Resident fees and services

   $ 79,266      $ 89,252     $ 336,739      $ 359,472  

Rental revenue

     27,650        28,243       112,391        112,966  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenues

     106,916        117,495       449,130        472,438  
  

 

 

    

 

 

   

 

 

    

 

 

 

Expenses

          

Property operating expense

     53,184        60,442       230,045        243,027  

Depreciation and amortization

     31,355        37,803       139,942        184,546  

Interest expense

     23,128        23,122       93,597        91,780  

Acquisition, transaction, and integration expense

     984        2,172       2,453        3,942  

Management fees and incentive compensation to affiliate

     3,823        5,946       18,225        18,143  

General and administrative expense

     3,612        3,594       15,307        15,194  

Loss on extinguishment of debt

     3,230        245       3,902        245  

Other expense (income)

     57        (79     1,702        727  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total expenses

   $ 119,373      $ 133,245     $ 505,173      $ 557,604  

Gain on sale of real estate

     49,217        13,356       71,763        13,356  
  

 

 

    

 

 

   

 

 

    

 

 

 

Income (Loss) Before Income Taxes

     36,760        (2,394     15,720        (71,810

Income tax expense

     3,239        408       3,512        439  
  

 

 

    

 

 

   

 

 

    

 

 

 

Net Income (Loss)

   $ 33,521      $ (2,802   $ 12,208      $ (72,249
  

 

 

    

 

 

   

 

 

    

 

 

 

Net Income (Loss) Per Share of Common Stock

          

Basic (A)

   $ 0.41      $ (0.03   $ 0.15      $ (0.88
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted (A)

   $ 0.41      $ (0.03   $ 0.15      $ (0.88
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted Average Number of Shares of Common Stock Outstanding

          

Basic

     82,148,869        82,127,247       82,145,295        82,357,349  
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted (B)

     82,632,232        82,127,247       82,741,322        82,357,349  
  

 

 

    

 

 

   

 

 

    

 

 

 

Dividends Declared Per Share of Common Stock

     0.26        0.26     $ 1.04      $ 1.04  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(A) Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period.
(B) All outstanding options were excluded from the diluted share calculation for the three months and year ended December 31, 2016 as their effect would have been anti-dilutive.

 

5


Consolidated Statement of Cash Flows

(dollars in thousands)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2017     2016     2017     2016  
     (unaudited)              

Cash Flows From Operating Activities

        

Net income (loss)

   $ 33,521     $ (2,802   $ 12,208     $ (72,249

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation of tangible assets and amortization of intangible assets

     31,380       37,837       140,078       184,689  

Amortization of deferred financing costs

     2,093       2,366       9,090       9,582  

Amortization of deferred revenue, net

     (604     (92     (385     1,903  

Amortization of (premium) discount on mortgage notes payable

     (56     (156     (512     (603

Non-cash straight-line rent

     (4,338     (5,379     (17,865     (21,842

Gain on sale of real estate

     (49,217     (13,356     (71,763     (13,356

Loss on extinguishment of debt

     3,230       245       3,902       245  

Equity-based compensation

     —         —         75       144  

Provision for bad debt

     509       598       2,228       2,150  

Remeasurement of deferred tax assets

     2,966       —         2,966       —    

Other non-cash expense

     (53     37       1,168       702  

Changes in:

        

Receivables and other assets, net

     7,258       5,578       (658     (3,069

Due to affiliates

     (6,018     837       (2,073     1,979  

Accrued expenses and other liabilities

     (24,252     (6,100     (16,948     9,024  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Cash Provided by (Used In) Operating Activities

   $ (3,581   $ 19,613     $ 61,511     $ 99,299  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows From Investing Activities

        

Proceeds from the sale of real estate, net

   $ 292,270     $ 22,711     $ 339,624     $ 22,711  

Capital expenditures, net of insurance proceeds

     (5,253     (5,398     (19,729     (21,151

Reimbursements (escrows) for capital expenditures, net

     2,275       (1,157     6,871       (2,423

Deposits refunded (paid) for real estate investments

     —         —         —         584  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Cash Provided by (Used In) Investing Activities

   $ 289,292     $ 16,156     $ 326,766     $ (279
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows From Financing Activities

        

Principal payments of mortgage notes payable

   $ (7,642     (4,446   $ (26,946   $ (16,240

Repayments of mortgage notes payable

     (176,762     (13,725     (204,730     (13,725

Payment of exit fee on extinguishment of debt

     (2,953     (189     (3,264     (189

Payment of common stock dividend

     (21,359     (21,353     (85,432     (85,412

Cash returned from (escrowed with) lender

     11,374       (11,374     11,374       (11,374

Repurchase of common stock

     —         (29     —         (30,913

Payment of deferred financing costs

     579       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Cash Used In Financing Activities

   $ (196,763   $ (51,116   $ (308,998   $ (157,853
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     88,948       (15,347     79,279       (58,833

Cash and cash equivalents, beginning of year

     48,379       73,395       58,048       116,881  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and Cash Equivalents, End of Year

   $ 137,327     $ 58,048     $ 137,327     $ 58,048  
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Disclosure of Cash Flow Information

        

Cash paid during the year for interest expense

   $ 21,513     $ 20,625     $ 85,373     $ 82,557  

Cash paid during the year for income taxes

     —         —         274       266  

Supplemental Schedule of Non-Cash Investing and Financing Activities

        

Issuance of common stock and exercise of options

   $ —       $ —       $ 214     $ 139  

 

6


Reconciliation of NOI to Net Income

(dollars in thousands)

 

     2016      2017  

NOI

   $ 229,411      $ 219,085  

Depreciation and amortization

     (184,546      (139,942

Interest expense

     (91,780      (93,597

Acquisition, transaction and integration expense

     (3,942      (2,453

Management fees and incentive compensation to affiliate

     (18,143      (18,225

General and administrative expense

     (15,194      (15,307

Loss on extinguishment of debt

     (245      (3,902

Other expense

     (727      (1,702

Gain on sale of real estate

     13,356        71,763  

Income tax expense

     (439      (3,512
  

 

 

    

 

 

 

Net Income (Loss)

   $ (72,249    $ 12,208  
  

 

 

    

 

 

 

Reconciliation of Net Income to FFO, Normalized FFO, AFFO and Normalized FAD

(dollars and shares in thousands, except per share data)

(unaudited)

 

     For the Quarter Ended      For the Year Ended  
     December 31, 2017      December 31, 2017  

Net Income

   $ 33,521      $ 12,208  

Adjustments:

     

Gain on sale of real estate

     (49,217      (71,763

Depreciation and amortization

     31,355        139,942  
  

 

 

    

 

 

 

FFO

   $ 15,659      $ 80,387  

FFO per diluted share

   $ 0.19      $ 0.97  
  

 

 

    

 

 

 

Acquisition, transaction and integration expense

     984        2,453  

Loss on extinguishment of debt

     3,230        3,902  

Incentive compensation on sale of real estate(1)

     —          2,930  

Remeasurement of deferred tax assets(2)

     2,966        2,966  

Other expense

     57        1,702  
  

 

 

    

 

 

 

Normalized FFO

   $ 22,896      $ 94,340  

Normalized FFO per diluted share

   $ 0.28      $ 1.14  
  

 

 

    

 

 

 

Straight-line rent

     (4,338      (17,865

Amortization of deferred financing costs

     2,093        9,090  

Amortization of deferred community fees and other(3)

     (581      (406
  

 

 

    

 

 

 

AFFO

   $ 20,070      $ 85,159  

AFFO per diluted share

   $ 0.24      $ 1.03  
  

 

 

    

 

 

 

Routine capital expenditures

     (1,543      (6,906
  

 

 

    

 

 

 

Normalized FAD

   $ 18,527      $ 78,253  

Normalized FAD per diluted share

   $ 0.22      $ 0.95  
  

 

 

    

 

 

 

Weighted average diluted shares outstanding

     82,632        82,741  

 

(1) Reflects incentive compensation directly related to the gain on sale of real estate, which may represent a portion of total incentive compensation earned by the Manager in a given quarter, as reported in “Management fees and incentive compensation to affiliate” in the Consolidated Statement of Operations. The calculation of gain on sale for purposes of the incentive compensation calculation differs significantly from gain on sale calculated in accordance with GAAP.
(2) Reflects the remeasurement of our deferred tax assets due to the reduction in the U.S. corporate income tax rate and is included in “Income tax expense (benefit)” in the Consolidated Statements of Operations.
(3) Includes amortization of above / below market lease intangibles, amortization of premium on mortgage notes payable and amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

 

7


Reconciliation of Year-over-Year Cash NOI (unaudited)

(dollars in thousands)

 

    4Q 2016     4Q 2017  
    Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
    Non-Same
Store
Managed
Properties
    Total     Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
    Non-Same
Store
Managed
Properties
    Total  

Cash NOI

  $ 19,080     $ 3,826     $ 25,249     $ 3,125     $ 51,280     $ 19,925     $ 3,414     $ 24,869     $ 661     $ 48,869  

Straight-line rent

    4,817       562       —         —         5,379       3,975       363       —         —         4,338  

Amortization of deferred community fees and other(1)

    (25     (17     251       185       394       (25     (2     175       377       525  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

  $ 23,872     $ 4,371     $ 25,500     $ 3,310     $ 57,053     $ 23,875     $ 3,775     $ 25,044     $ 1,038     $ 53,732  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Depreciation and amortization

            (37,803             (31,355

Interest expense

            (23,122             (23,128

Acquisition, transaction and integration expense

            (2,172             (984

Management fees and incentive compensation to affiliate

            (5,946             (3,823

General and administrative expense

            (3,594             (3,612

Loss on extinguishment of debt

            (245             (3,230

Other income (expense)

            79               (57

Gain on sale of real estate

            13,356               49,217  

Income tax expense

            (408             (3,239
         

 

 

           

 

 

 

Net Income (Loss)

          ($ 2,802           $ 33,521  
         

 

 

           

 

 

 

 

(1) Includes amortization of above / below market lease intangibles and amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

Reconciliation of Quarter-over-Quarter Cash NOI (unaudited)

(dollars in thousands)

 

    3Q 2017     4Q 2017  
    Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
    Non-Same
Store
Managed
Properties
    Total     Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
     Non-Same
Store
Managed
Properties
     Total  

Cash NOI

  $ 19,925     $ 3,969     $ 24,701     $ 1,503     $ 50,098     $ 19,925     $ 3,414     $ 25,287      $ 243      $ 48,869  

Straight-line rent

    3,975       419       —         —         4,394       3,975       363       —          —          4,338  

Amortization of deferred community fees and other(1)

    (25     (16     (132     27       (146     (25     (2     153        399        525  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

NOI

  $ 23,875     $ 4,372     $ 24,569     $ 1,530     $ 54,346     $ 23,875     $ 3,775     $ 25,440      $ 642      $ 53,732  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

    

 

 

    

Depreciation and amortization

            (35,126               (31,355

Interest expense

            (23,898               (23,128

Acquisition, transaction and integration expense

            (675               (984

Management fees and incentive compensation to affiliate

            (3,824               (3,823

General and administrative expense

            (3,958               (3,612

Loss on extinguishment of debt

            —                   (3,230

Other expense

            (1,484               (57

Gain on sale of real estate

            —                   49,217  

Income tax benefit (expense)

            80                 (3,239
         

 

 

             

 

 

 

Net Income (Loss)

          ($ 14,539             $ 33,521  
         

 

 

             

 

 

 

 

(1) Includes amortization of above / below market lease intangibles and amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

NON-GAAP FINANCIAL MEASURES

The tables above set forth reconciliations of non-GAAP measures to net income (loss), which is the most directly comparable GAAP financial measure.

 

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A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not excluded from or included in the most comparable GAAP measure. We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance. GAAP accounting for real estate assets assumes that the value of real estate assets diminishes predictably over time, even though real estate values historically have risen or fallen with market conditions. As a result, many industry investors look to non-GAAP financial measures for supplemental information about real estate companies.

You should not consider non-GAAP measures as alternatives to GAAP net income, which is an indicator of our financial performance, or as alternatives to GAAP cash flow from operating activities, which is a liquidity measure, nor are non-GAAP measures necessarily indicative of our ability to satisfy our funding requirements. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP measures in conjunction with GAAP net income as presented in our Consolidated Financial Statements and other financial data included elsewhere in this report. Moreover, the comparability of non-GAAP financial measures across companies may be limited as a result of differences in the manner in which real estate companies calculate such measures, the capital structure of such companies or other factors.

Below is a description of the non-GAAP financial measures presented herein.

NOI and Cash NOI

The Company evaluates the performance of each of its two business segments based on NOI. The Company defines NOI as total revenues less property-level operating expenses, which include property management fees and travel cost reimbursements. The sum of the NOI for each segment is total NOI, which the Company uses to evaluate the aggregate performance of its segments.

The Company defines cash NOI as NOI excluding the effects of straight-line rent, amortization of above / below market lease intangibles and amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives. We believe that NOI and cash NOI serve as useful supplemental measures to net income because they allow investors, analysts and management to measure unlevered property-level operating results and to compare our operating results between periods and to the operating results of other real estate companies on a consistent basis.

Same store NOI and same store cash NOI include only properties owned for the entirety of comparable periods. Properties acquired, sold, transitioned to other operators or classified as held for sale during the comparable periods are excluded from the same store amounts.

FFO and Other Non-GAAP Measures

We use Funds From Operations (“FFO”) and Normalized FFO as supplemental measures of our operating performance. We use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as GAAP net income excluding gains (losses) from sales of depreciable real estate assets and impairment charges of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated entities and joint ventures to reflect FFO on the same basis. FFO does not account for debt principal payments and is not intended as a measure of a REIT’s ability to satisfy such payments or any other cash requirements.

Normalized FFO, as defined below, measures the financial performance of our portfolio of assets excluding items that, although incidental to, are not reflective of the day-to-day operating performance of our portfolio of assets. We believe that Normalized FFO is useful because it facilitates the evaluation of our portfolio’s operating performance (i) between periods on a consistent basis and (ii) to the operating performance of other real estate companies. However, comparability may be limited because our calculation of Normalized FFO may differ significantly from that of other companies, or because of features of our business that are not present in other companies.

We define Normalized FFO as FFO excluding the following income and expense items, as applicable: (a) acquisition, transaction

and integration related costs and expenses; (b) the write off of unamortized discounts, premiums, deferred financing costs, or additional costs, make whole payments and penalties or premiums incurred as the result of early repayment of debt (collectively

“Gain (Loss) on extinguishment of debt”); (c) incentive compensation recognized as a result of sales of property; (d) the remeasurement of deferred tax assets and (e) other items that we believe are not indicative of operating performance, generally reported as “Other (income) expense” in the Consolidated Statements of Operations.

Management also uses AFFO and Normalized FAD as supplemental measures of the Company’s operating performance.

 

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We define AFFO as Normalized FFO excluding the impact of the following: (a) straight-line rents; (b) amortization of above / below market lease intangibles; (c) amortization of deferred financing costs; (d) amortization of premium on mortgage notes payable and (e) amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives. We believe AFFO is useful because it facilitates the evaluation of (i) the current economic return on our portfolio of assets between periods on a consistent basis and (ii) our portfolio versus those of other real estate companies that report AFFO. However, comparability may be limited because our calculation of AFFO may differ significantly from that of other companies, or because of features of our business that are not present in other companies.

We define Normalized FAD as AFFO less routine capital expenditures, which we view as a cost associated with the current economic return. Normalized FAD, which does not reflect debt principal payments and certain other expenses, does not represent cash available for distribution to shareholders.

 

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