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Section 1: 10-Q (10-Q)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from ____ to ____

Commission file number 1-11314

LTC PROPERTIES, INC.

(Exact name of Registrant as specified in its charter)

Maryland

71-0720518

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

2829 Townsgate Road, Suite 350

Westlake Village, California 91361

(Address of principal executive offices, including zip code)

(805) 981-8655

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $.01 par value

LTC

New York Stock Exchange

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ

Accelerated filer

Non-accelerated filer

Smaller reporting company

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No þ

The number of shares of common stock outstanding on August 1, 2019 was 39,752,191.

Table of Contents

LTC PROPERTIES, INC.

FORM 10-Q

June 30, 2019

INDEX

PART I -- Financial Information

Page

Item 1.

Financial Statements

Consolidated Balance Sheets

3

Consolidated Statements of Income and Comprehensive Income

4

Consolidated Statements of Equity

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

43

Item 4.

Controls and Procedures

43

PART II -- Other Information

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 6.

Exhibits

45

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

    

    

 

June 30, 2019

December 31, 2018

(unaudited)

(audited)

ASSETS

Investments:

Land

$

126,028

$

125,358

Buildings and improvements

 

1,320,895

 

1,290,352

Accumulated depreciation and amortization

 

(332,364)

 

(312,959)

Operating real estate property, net

 

1,114,559

 

1,102,751

Properties held-for-sale, net of accumulated depreciation: 2019—$1,916; 2018—$1,916

 

3,830

 

3,830

Real property investments, net

 

1,118,389

 

1,106,581

Mortgage loans receivable, net of loan loss reserve: 2019—$2,539; 2018—$2,447

 

252,016

 

242,939

Real estate investments, net

 

1,370,405

 

1,349,520

Notes receivable, net of loan loss reserve: 2019—$204; 2018—$128

 

20,157

 

12,715

Investments in unconsolidated joint ventures

27,521

30,615

Investments, net

 

1,418,083

 

1,392,850

Other assets:

Cash and cash equivalents

 

3,207

 

2,656

Restricted cash

2,108

2,108

Debt issue costs related to bank borrowings

 

2,597

 

2,989

Interest receivable

 

23,640

 

20,732

Straight-line rent receivable, net of allowance for doubtful accounts: 2019—$0; 2018—$746

 

43,730

 

73,857

Lease incentives

2,652

14,443

Prepaid expenses and other assets

 

3,463

 

3,985

Total assets

$

1,499,480

$

1,513,620

LIABILITIES

Bank borrowings

$

146,900

$

112,000

Senior unsecured notes, net of debt issue costs: 2019—$862; 2018—$938

 

528,938

 

533,029

Accrued interest

 

5,290

 

4,180

Accrued expenses and other liabilities

 

30,742

 

31,440

Total liabilities

 

711,870

 

680,649

EQUITY

Stockholders’ equity:

Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2019—39,747; 2018—39,657

 

397

 

397

Capital in excess of par value

 

863,993

 

862,712

Cumulative net income

 

1,253,748

 

1,255,764

Cumulative distributions

 

(1,338,967)

 

(1,293,383)

Total LTC Properties, Inc. stockholders’ equity

 

779,171

 

825,490

Non-controlling interests

 

8,439

 

7,481

Total equity

 

787,610

 

832,971

Total liabilities and equity

$

1,499,480

$

1,513,620

See accompanying notes.

3

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(amounts in thousands, except per share, unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

  

2019

  

2018

  

2019

  

2018

 

Revenues:

Rental income

$

38,277

$

33,930

$

75,901

$

68,435

Interest income from mortgage loans

 

7,351

 

7,007

 

14,662

 

13,823

Interest and other income

 

638

 

535

 

1,159

 

1,024

Total revenues

 

46,266

 

41,472

 

91,722

 

83,282

Expenses:

Interest expense

 

7,710

 

7,655

 

15,177

 

15,484

Depreciation and amortization

 

9,860

 

9,268

 

19,467

 

18,712

Provision (recovery) for doubtful accounts

 

84

 

(38)

 

167

 

(30)

Transaction costs

200

6

200

10

Property tax expense

3,910

8,296

General and administrative expenses

 

4,596

 

4,716

 

9,167

 

9,513

Total expenses

 

26,360

 

21,607

 

52,474

 

43,689

Other operating income:

Gain on sale of real estate, net

500

48,345

500

48,345

Operating income

 

20,406

 

68,210

 

39,748

 

87,938

Income from unconsolidated joint ventures

128

726

1,213

1,357

Net income

20,534

68,936

40,961

89,295

Income allocated to non-controlling interests

 

(88)

 

 

(169)

 

Net income attributable to LTC Properties, Inc.

 

20,446

 

68,936

40,792

 

89,295

Income allocated to participating securities

 

(94)

 

(278)

 

(186)

 

(366)

Net income available to common stockholders

$

20,352

$

68,658

$

40,606

$

88,929

Earnings per common share:

Basic

$

0.51

$

1.74

$

1.03

$

2.25

Diluted

$

0.51

$

1.73

$

1.02

$

2.25

Weighted average shares used to calculate earnings per common share:

Basic

 

39,577

 

39,471

 

39,555

 

39,461

Diluted

 

39,769

 

39,765

 

39,747

 

39,750

Dividends declared and paid per common share

$

0.57

$

0.57

$

1.14

$

1.14

Comprehensive Income:

Net income

$

20,534

$

68,936

$

40,961

$

89,295

Comprehensive income

$

20,534

$

68,936

$

40,961

$

89,295

See accompanying notes.

4

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Capital in

Cumulative

Total

Non-

Common Stock

Excess of

Net

Cumulative

Stockholder's

Controlling

Total

Shares

Amount

Par Value

Income

Distributions

Equity

Interests

Equity

Balance—December 31, 2017

39,570

$

396

$

856,992

$

1,100,783

$

(1,203,011)

$

755,160

$

3,488

$

758,648

Common Stock cash distributions ($0.57 per share)

(22,578)

(22,578)

(22,578)

Issuance of restricted stock

82

Stock option exercises

5

123

123

123

Stock-based compensation expense

1,376

1,376

1,376

Net income

20,359

20,359

20,359

Other

(28)

(1,065)

(1,065)

(1,065)

Balance—March 31, 2018

39,629

$

396

$

857,426

$

1,121,142

$

(1,225,589)

$

753,375

$

3,488

$

756,863

Common Stock cash distributions ($0.57 per share)

(22,590)

(22,590)

(22,590)

Issuance of restricted stock

9

(8)

(8)

(8)

Stock-based compensation expense

1,521

1,521

1,521

Net income

68,936

68,936

68,936

Non-controlling interest contributions

1,081

1,081

Other

(3)

(107)

(107)

(107)

Balance—June 30, 2018

39,635

$

396

$

858,832

$

1,190,078

$

(1,248,179)

$

801,127

$

4,569

$

805,696

Common Stock cash distributions ($0.57 per share)

(22,600)

(22,600)

(22,600)

Proceeds from common stock issued, net of issuance costs

22

1

928

929

929

Stock-based compensation expense

1,487

1,487

1,487

Net income

34,920

34,920

17

34,937

Non-controlling interest contributions

2,882

2,882

Non-controlling interest distributions

(17)

(17)

Other

(21)

(21)

(21)

Balance—September 30, 2018

39,657

$

397

$

861,226

$

1,224,998

$

(1,270,779)

$

815,842

$

7,451

$

823,293

Common Stock cash distributions ($0.57 per share)

(22,604)

(22,604)

(22,604)

Stock-based compensation expense

1,486

1,486

1,486

Net income

30,766

30,766

78

30,844

Non-controlling interest distributions

(48)

(48)

Balance—December 31, 2018

39,657

$

397

$

862,712

$

1,255,764

$

(1,293,383)

$

825,490

$

7,481

$

832,971

Cumulative effect of the adoption of the ASC 842

(42,808)

(42,808)

(42,808)

As Adjusted Balance at January 1, 2019

39,657

$

397

$

862,712

$

1,212,956

$

(1,293,383)

$

782,682

$

7,481

$

790,163

Common Stock cash distributions ($0.57 per share)

48

(22,931)

(22,931)

(22,931)

Issuance of restricted stock

78

(1)

(1)

(1)

Stock-based compensation expense

1,689

1,689

1,689

Net income

20,346

20,346

81

20,427

Non-controlling interest contributions

919

919

Non-controlling interest distributions

(89)

(89)

Other

(44)

(2,024)

(2,024)

(2,024)

Balance—March 31, 2019

39,739

$

397

$

862,376

$

1,233,302

$

(1,316,314)

$

779,761

$

8,392

$

788,153

Common Stock cash distributions ($0.57 per share)

$

$

$

$

(22,653)

$

(22,653)

$

$

(22,653)

Issuance of restricted stock

8

(6)

(6)

(6)

Stock-based compensation expense

1,623

1,623

1,623

Net income

20,446

20,446

88

20,534

Non-controlling interest contributions

46

46

Non-controlling interest distributions

(87)

(87)

Balance—June 30, 2019

39,747

$

397

$

863,993

$

1,253,748

$

(1,338,967)

$

779,171

$

8,439

$

787,610

5

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, unaudited)

Six Months Ended June 30, 

 

  

2019

  

2018

 

OPERATING ACTIVITIES:

    

    

Net income

$

40,961

$

89,295

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

19,467

 

18,712

Stock-based compensation expense

 

3,312

 

2,897

Gain on sale of real estate, net

 

(500)

 

(48,345)

Income from unconsolidated joint ventures

 

(1,213)

 

(1,357)

Income distributions from unconsolidated joint ventures

1,402

1,256

Insurance proceeds for damaged property

2,619

Payment for remediation of damaged property

(173)

Straight-line rental income

(2,513)

 

(5,440)

Adjustment for collectibility of rental income

1,926

Lease incentives funded

(283)

(1,017)

Amortization of lease incentives

181

1,091

Provision (recovery) for doubtful accounts

 

167

 

(30)

Non-cash interest related to contingent liabilities

 

 

251

Other non-cash items, net

 

505

 

663

Increase in interest receivable

 

(2,908)

 

(2,814)

Increase (decrease) in accrued interest payable

 

1,110

 

(171)

Net change in other assets and liabilities

 

58

 

(1,966)

Net cash provided by operating activities

 

61,672

 

55,471

INVESTING ACTIVITIES:

Investment in real estate properties

 

(16,112)

 

(25,902)

Investment in real estate developments

 

(13,012)

 

(18,623)

Investment in real estate capital improvements

 

(1,068)

 

(1,763)

Capitalized interest

(333)

(552)

Proceeds from sale of real estate, net

 

231

 

64,386

Investment in real estate mortgage loans receivable

 

(9,736)

 

(11,654)

Principal payments received on mortgage loans receivable

 

565

 

1,636

Investments in unconsolidated joint ventures

 

(293)

 

(497)

Proceeds from dissolution of unconsolidated joint ventures

3,400

Advances and originations under notes receivable

 

(7,766)

 

Principal payments received on notes receivable

 

49

 

2,352

Net cash (used in) provided by investing activities

 

(44,075)

 

9,383

FINANCING ACTIVITIES:

Bank borrowings

 

36,900

 

54,000

Repayment of bank borrowings

 

(2,000)

 

(65,000)

Principal payments on senior unsecured notes

(4,167)

(4,166)

Stock option exercises

 

 

123

Distributions paid to stockholders

 

(45,583)

 

(45,168)

Contribution from non-controlling interests

 

46

 

1,081

Distributions paid to non-controlling interests

 

(177)