OREANDA-NEWS. May 12, 2016. CareTrust REIT, Inc. (NASDAQ:CTRE) today reported operating results for the first quarter of 2016, as well as other recent events. Quarter and other highlights include:

  • Net income for the quarter was \\$0.11 per diluted weighted average share, with normalized FFO of \\$0.27 and normalized FAD of \\$0.29 per diluted weighted average share;
  • CareTrust successfully raised new equity in a \\$111 million follow-on offering;
  • The company increased its quarterly dividend by 6.3% to \\$0.17 per share;
  • The company retired the last of its legacy secured term debt, and increased its unsecured revolving facility to \\$400 million with an accordion feature which allows CareTrust to increase the line to \\$650 million;
  • During the quarter and since, CareTrust announced new investments of approximately \\$116 million, at a blended going-in cash yield of 9.1%, with an additional \\$46 million of new investments under contract to close within the second quarter or shortly thereafter; and
  • After quarter-end, CareTrust announced that Standard & Poor's raised its corporate credit rating on CareTrust to “B+” from “B,” with a stable outlook, and also raised its issue rating on CareTrust's 5.875% Senior Unsecured Notes to “BB-“ from "B+.”

Major Milestones Reached

Greg Stapley, CareTrust’s Chairman and Chief Executive Officer commented on the quarter and other recent highlights. “The first quarter saw our team hit more critical milestones than ever,” he said. He cited the March overnight offering and strong demand for the company’s equity, retirement of the legacy GE secured debt and the costs savings it represents, getting leverage down into the company’s long-term target range, achieving ratings upgrades from Standard & Poor’s and increasing the dividend as major accomplishments in moving the company forward. “With these achievements, our team is very optimistic about both the company’s near-term prospects and long-term potential,” he added.  

Mr. Stapley also noted that CareTrust added four new tenant relationships in the quarter and since, and further diversified its portfolio into four new states, bring its total footprint to 143 properties in 19 states. He further reported that the company’s nationwide acquisition pipeline remains strong, with ample opportunities for continued growth at superior returns.

Financial Results & Financing Activities

Discussing the quarter’s financial results, Chief Financial Officer Bill Wagner reported that the company generated normalized FFO of \\$13.1 million or \\$0.27 per diluted common share, and normalized FAD of \\$14.1 million or \\$0.29 per diluted common share.  

Mr. Wagner commented on the company’s March equity raise, noting that the \\$111 million overnight offering was more than 2x oversubscribed within the first hours, was upsized by one million shares, and that the underwriters exercised their full overallotment the same day. “We were gratified to see that demand for CareTrust shares was so strong, resulting in the upsizing and a file-to-offer discount of only 3.7%, which was miles ahead of our first follow-on last August,” he said. He noted that the offering netted the company approximately \\$106 million in new capital, and added several new institutional shareholders. Proceeds were primarily used to pay down the company’s revolving credit line in advance of funding approximately \\$97 million in acquisitions then under contract, which were pre-announced at the time of the offering.

Mr. Wagner also discussed the Company’s expansion of its revolver capacity and debt refinancing activity in the quarter. The company expanded its unsecured revolving facility to \\$400 million, with an accordion feature which allows CareTrust the option to increase the line to \\$650 million. CareTrust also replaced all of its remaining secured debt with lower-cost 7-year unsecured term debt, and further staggered its debt maturities. He noted that CareTrust now has no property-level debt and, taking into account existing extension rights, no debt maturing before 2020. He reported that, proforma for completed and announced transactions, the company’s debt-to-EBITDA ratio stands at approximately 4.95x, down from more than 6.7x at the company’s inception less than two years ago.

Mr. Wagner added that, at quarter end only \\$5.0 million was drawn on the Company’s \\$400 million unsecured revolver, with approximately \\$51 million deployed since the late March equity offering and another \\$46 million in announced transactions remaining to close in the coming weeks, leaving ample room for additional investments in the near term. 

2016 FFO Guidance Revised Upward

Mr. Wagner updated and increased the Company’s previously-issued 2016 earnings guidance, projecting normalized FFO per diluted share of approximately \\$1.06 to \\$1.08, and normalized FAD per diluted share of approximately \\$1.14 to \\$1.16. The increased guidance assumes no new acquisitions beyond those made and announced to date, with announced acquisitions funded by additional draws on the company’s credit facility but no other new debt incurrences, no new equity issuances, and no rent escalations on the company’s long-term leases.

Dividend Increase

During the quarter, CareTrust increased its quarterly dividend by 6.3% to \\$0.17 per common share. “On an annualized basis, our increased quarterly dividend represents a payout ratio of approximately 59% based on the midpoint of our projected normalized FAD for 2016,” 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.

Ratings Upgrades

CareTrust also announced that, earlier this month, Standard & Poor's Rating Services raised its corporate credit rating on CareTrust to "B+" from "B," with a stable outlook, and its rating on CareTrust's 5.875% Senior Unsecured Notes to "BB-" from "B+." Commenting on the changes, Mr. Stapley said, “We appreciate the recognition inherent in these upgrades of our continuous efforts to grow intelligently, while simultaneously improving our key credit metrics and further strengthening our balance sheet.” CareTrust and its bonds are also rated by Moody’s Investor Service.

Conference Call

An earnings webcast will be held on Thursday, May 12, 2016, at 1:00 p.m. Eastern Time, during which CareTrust’s management will discuss the Company’s first quarter 2016 results, recent developments and other matters affecting the Company’s business and prospects. To listen to the webcast, or to view any financial or other statistical information required by SEC Regulation G, please visit the Investors section of the CareTrust website at http://investor.caretrustreit.com/. The webcast will be recorded, and will be available for replay via the website for one year following the event.

About CareTrustTM

CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust that is engaged in the ownership, acquisition and leasing of seniors housing and healthcare-related properties. With 140 net-leased healthcare properties and three operated seniors housing properties in 19 states, CareTrust is pursuing opportunities nationwide to acquire additional 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 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 and webcast will include, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding future financing plans, business and acquisition strategies, growth prospects and operating and financial performance.

Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These 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 Management believes that the assumptions underlying the forward-looking statements are reasonable, they are not guarantees and the Company can give no assurance that their 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 ability to achieve some or all of the expected benefits from the completed spin-off;  (ii) the ability and willingness of Ensign to meet and/or perform its obligations under the contractual arrangements that it entered into with the Company in connection with the spin-off, including the Ensign Master Leases, and any of its obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities; (iii) the ability and willingness of the Company’s tenants to (a) comply with laws, rules and regulations in the operation of the properties the Company leases to them, and (b) renew their leases with the Company upon expiration, or in the alternative, (c) the Company’s ability to reposition and re-let the Company’s 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 the Company 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 the Company’s 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 qualify or maintain the Company’s 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 included in this report and any included in the section entitled “Risk Factors” in Item 1A of Part I of the Company’s most recently filed Form 10-K.

Forward-looking statements speak only as of the date made, whether in this press release or the related conference call and webcast. Except in the normal course of the Company’s public disclosure obligations, the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any statement is based.

 

       
CARETRUST REIT, INC. 
CONSOLIDATED INCOME STATEMENTS 
(in thousands, except per share data) 
(unaudited) 
       
       
  Three Months Ended March 31,  
   2016   2015   
Revenues:     
 Rental income\\$  20,897  \\$  14,842   
 Tenant reimbursements   1,797     1,258   
 Independent living facilities   681     635   
 Interest and other income   254     223   
   Total revenues   23,629     16,958   
Expenses:     
 Depreciation and amortization   7,293     5,599   
 Interest expense   6,187     5,901   
 Property taxes   1,797     1,258   
 Independent living facilities   620     602   
 General and administrative   2,230     1,560   
   Total expenses   18,127     14,920   
Net income \\$  5,502  \\$  2,038   
       
Earnings per common share:     
 Basic\\$  0.11  \\$  0.06   
 Diluted\\$  0.11  \\$  0.06   
       
Weighted average shares outstanding:     
 Basic   48,101     31,317   
 Diluted   48,101     31,317   
       
       

 

       
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
 (in thousands, except per share data) 
 (unaudited) 
       
 
    Quarter Quarter
    Ended Ended
    March 31, 2016 March 31, 2015
       
Net income \\$  5,502  \\$  2,038 
 Depreciation and amortization    7,293     5,599 
 Interest expense    6,187     5,901 
 Amortization of stock-based compensation    431     366 
EBITDA    19,413     13,904 
Adjusted EBITDA \\$  19,413  \\$  13,904 
       
Net income \\$  5,502  \\$  2,038 
 Real estate related depreciation and amortization    7,270     5,593 
Funds from Operations (FFO)    12,772     7,631 
 Write-off of deferred financing fees    326     -  
Normalized FFO \\$  13,098  \\$  7,631 
       
Net income \\$  5,502  \\$  2,038 
 Real estate related depreciation and amortization    7,270     5,593 
 Amortization of deferred financing fees    556     547 
 Amortization of stock-based compensation    431     366 
Funds Available for Distribution (FAD)    13,759     8,544 
 Write-off of deferred financing fees    326     -  
Normalized FAD \\$  14,085  \\$  8,544 
       
FFO per share \\$  0.26  \\$  0.24 
Normalized FFO per share \\$  0.27  \\$  0.24 
       
FAD per share \\$  0.29  \\$  0.27 
Normalized FAD per share \\$  0.29  \\$  0.27 
       
Diluted weighted average shares outstanding (1)    48,258     31,446 
       
  (1) For the periods presented, the diluted weighted average shares have been calculated using the treasury stock method. 
       
       

 

       
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF INCOME - 5 QUARTER TREND
(in thousands, except per share data)
(unaudited)
       
       
  QuarterQuarterQuarterQuarterQuarter
  EndedEndedEndedEndedEnded
  March 31, 2015  June 30, 2015  September 30, 2015  December 31, 2015  March 31, 2016
Revenues:     
 Rental income\\$  14,842 \\$  15,249 \\$  15,778 \\$  20,110 \\$  20,897 
 Tenant reimbursements   1,258    1,288    1,320    1,631    1,797 
 Independent living facilities   635    607    626    642    681 
 Interest and other income   223    232    261    249    254 
   Total revenues   16,958    17,376    17,985    22,632    23,629 
Expenses:     
 Depreciation and amortization   5,599    5,679    5,815    7,040    7,293 
 Interest expense   5,901    5,989    7,221    6,145    6,187 
 Property taxes   1,258    1,288    1,320    1,631    1,797 
 Independent living facilities   602    566    610    598    620 
 General and administrative   1,560    1,588    2,292    2,215    2,230 
   Total expenses   14,920    15,110    17,258    17,629    18,127 
Net income\\$  2,038 \\$  2,266 \\$  727 \\$  5,003 \\$  5,502 
       
Diluted earnings per share\\$  0.06 \\$  0.07 \\$  0.02 \\$  0.10 \\$  0.11 
       
Diluted weighted average shares outstanding   31,317    31,278    39,125    47,660    48,101 
       
       

 

         
CARETRUST REIT, INC.
RECONCILIATIONS OF NET INCOME TO NON-GAAP FINANCIAL MEASURES - 5 QUARTER TREND
 (in thousands, except per share data) 
 (unaudited) 
         
 
    QuarterQuarterQuarterQuarterQuarter
    EndedEndedEndedEndedEnded
    March 31, 2015June 30, 2015September 30, 2015December 31, 2015  March 31, 2016
         
Net income \\$  2,038 \\$  2,266 \\$  727 \\$  5,003 \\$  5,502 
 Depreciation and amortization    5,599    5,679    5,815    7,040    7,293 
 Interest expense    5,901    5,989    7,221    6,145    6,187 
 Amortization of stock-based compensation    366    294    435    427    431 
EBITDA    13,904    14,228    14,198    18,615    19,413 
Adjusted EBITDA \\$  13,904 \\$  14,228 \\$  14,198 \\$  18,615 \\$  19,413 
         
Net income \\$  2,038 \\$  2,266 \\$  727 \\$  5,003 \\$  5,502 
 Real estate related depreciation and amortization    5,593    5,668    5,796    7,018    7,270 
Funds from Operations (FFO)    7,631    7,934    6,523    12,021    12,772 
 Write-off of deferred financing fees    -     -     1,208    -     326 
Normalized FFO \\$  7,631 \\$  7,934 \\$  7,731 \\$  12,021 \\$  13,098 
         
Net income \\$  2,038 \\$  2,266 \\$  727 \\$  5,003 \\$  5,502 
 Real estate related depreciation and amortization    5,593    5,668    5,796    7,018    7,270 
 Amortization of deferred financing fees    547    555    547    551    556 
 Amortization of stock-based compensation    366    294    435    427    431 
Funds Available for Distribution (FAD)    8,544    8,783    7,505    12,999    13,759 
 Write-off of deferred financing fees    -     -     1,208    -     326 
Normalized FAD \\$  8,544 \\$  8,783 \\$  8,713 \\$  12,999 \\$  14,085 
         
FFO per share \\$  0.24 \\$  0.25 \\$  0.17 \\$  0.25 \\$  0.26 
Normalized FFO per share \\$  0.24 \\$  0.25 \\$  0.20 \\$  0.25 \\$  0.27 
         
FAD per share \\$  0.27 \\$  0.28 \\$  0.19 \\$  0.27 \\$  0.29 
Normalized FAD per share \\$  0.27 \\$  0.28 \\$  0.22 \\$  0.27 \\$  0.29 
         
Diluted weighted average shares outstanding (1)    31,446    31,462    39,271    47,802    48,258 
         
  (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) 
         
         
     March 31, December 31, 
      2016    2015   
Assets      
Real estate investments, net \\$  722,217  \\$  645,614  
Other real estate investments    8,731     8,477  
Cash and cash equivalents    4,663     11,467  
Accounts receivable    2,227     2,342  
Prepaid expenses and other assets    2,072     2,083  
Deferred financing costs, net    3,598     3,183  
   Total assets \\$  743,508  \\$  673,166  
         
Liabilities and Equity     
Senior unsecured notes payable, net \\$  254,495  \\$  254,229  
Senior unsecured term loan, net    99,361     -   
Unsecured revolving credit facility    5,000     45,000  
Mortgage notes payable, net    -      94,676  
Accounts payable and accrued liabilities    10,696     9,269  
Dividends payable    9,845     7,704  
   Total liabilities  379,397   410,878  
         
Equity:      
Common stock    575     477  
Additional paid-in capital    516,285     410,217  
Cumulative distributions in excess of earnings    (152,749)    (148,406) 
   Total equity  364,111   262,288  
   Total liabilities and equity \\$  743,508  \\$  673,166  
         
         

 

     
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
     
  Three Months Ended March 31,
   2016   2015 
     
Cash flows from operating activities:   
 Net income\\$  5,502  \\$  2,038 
 Adjustments to reconcile net income to net cash provided by   
   operating activities:   
 Depreciation and amortization   7,293     5,599 
 Amortization of deferred financing costs   556     547 
 Write-off of deferred financing costs   326     -  
 Amortization of stock-based compensation   431     366 
 Non cash interest income   ( 254)    ( 223)
 Change in operating assets and liabilities:   
 Accounts receivable   115     ( 42)
 Accounts receivable due from related party   -      322 
 Prepaid expenses and other assets   12     50 
 Accounts payable and accrued liabilities   1,013     2,398 
Net cash provided by operating activities   14,994     11,055 
Cash flows from investing activities:   
 Acquisition of real estate   ( 68,000)    ( 17,499)
 Improvements to real estate   ( 27)    ( 74)
 Purchases of equipment, furniture and fixtures   ( 17)    ( 63)
 Escrow deposits for acquisition of real estate   ( 15,730)    ( 500)
Net cash used in investing activities   ( 83,774)    ( 18,136)
Cash flows from financing activities:   
 Proceeds from the issuance of common stock, net   106,026     -  
 Proceeds from the issuance of senior unsecured term loan   100,000     -  
 Borrowings under unsecured credit facility   52,000     -  
 Payments on unsecured credit facility   ( 92,000)    -  
 Payments on the mortgage notes payable   ( 95,022)    ( 685)
 Payments of deferred financing costs   ( 1,324)    ( 14)
 Dividends paid on common stock   ( 7,704)    ( 3,946)
Net cash provided by (used in) financing activities   61,976     ( 4,645)
Net decrease in cash and cash equivalents   ( 6,804)    ( 11,726)
Cash and cash equivalents, beginning of period   11,467     25,320 
Cash and cash equivalents, end of period\\$  4,663  \\$  13,594 
     
     

 

            
CARETRUST REIT, INC.
DEBT SUMMARY
(dollars in thousands)
(unaudited)
            
            
        March 31, 2016
    Interest Rate/ Maturity  Deferred Net Carrying
Debt Collateral Spread Date PrincipalLoan Costs Value
            
Fixed Rate Debt           
            
Senior unsecured notes payable Unsecured  5.875% 2021 \\$  260,000 \\$  (5,505) \\$  254,495 
            
Floating Rate Debt           
            
Senior unsecured term loan (1) Unsecured L + 1.95%-2.60%2023    100,000    (639)    99,361 
            
Unsecured revolving credit facility (2)Unsecured L + 1.75%-2.40%2019    5,000    -    (3)   5,000 
           105,000    (639)    104,361 
            
Total Debt       \\$  365,000 \\$  (6,144) \\$  358,856 
            
Debt Statistics           
% Fixed Rate Debt        71.2%   
% Floating Rate Debt        28.8%   
Total        100.0%   
            
Weighted Average Interest Rates:           
Fixed        5.9%   
Floating         2.5%   
Blended        4.9%   
            
(1) Funds can also be borrowed at the Base Rate (as defined) plus 0.95% to 1.6%.     
(2) Funds can also be borrowed at the Base Rate (as defined) plus 0.75% to 1.4%.     
(3) 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) 
    
    
 2016 Guidance 
    
    
  LowHigh
Net income\\$  0.53 \\$  0.55 
 Real estate related depreciation and amortization   0.52    0.52 
Funds from Operations (FFO)   1.05    1.07 
 Write-off of deferred financing fees   0.01    0.01 
Normalized FFO\\$  1.06 \\$  1.08 
    
Net income\\$  0.53 \\$  0.55 
 Real estate related depreciation and amortization   0.52    0.52 
 Amortization of deferred financing fees   0.04    0.04 
 Amortization of stock-based compensation   0.04    0.04 
Funds Available for Distribution (FAD)   1.13    1.15 
 Write-off of deferred financing fees   0.01    0.01 
Normalized FAD\\$  1.14 \\$  1.16 
Weighted average shares outstanding:  
 Diluted   55,600    55,600 
 


Discussion of Non-GAAP Financial Measures

EBITDA represents net income before interest expense, amortization of deferred financing costs and stock-based compensation, and depreciation and amortization. Adjusted 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 costs associated with the spin-off, impairments, and gains or losses on the sale of real estate.  EBITDA and Adjusted 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 Adjusted 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 Adjusted EBITDA may not be comparable to EBITDA and Adjusted 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.  However, 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 real estate dispositions, real estate depreciation and amortization and 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 non-cash expenses, such as stock-based compensation expense, amortization of deferred financing costs 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 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 costs associated with the spin-off and other unanticipated charges. 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 the use of EBITDA, Adjusted 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 Adjusted EBITDA useful in understanding the Company’s operating results independent of its capital structure and indebtedness, 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 non-cash expenses such as stock-based compensation expense and amortization of deferred financing costs, FFO, normalized FFO, FAD and normalized FAD can help investors compare the Company’s operating performance between periods and to other REITs.