LTC Properties Inc. Q3 2010 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2010. LTC Properties, Inc. is a self-administered Real Estate Investment Trust (REIT) investing primarily in senior housing and long-term care properties, including skilled nursing facilities (SNF), assisted living facilities (ALF), and independent living properties (ILF). The company operates through mortgage loans and triple-net lease transactions with third-party operators.
Key Financial Metrics
| Metric | Three Months Ended 9/30/10 | Nine Months Ended 9/30/10 | Nine Months Ended 9/30/09 |
|---|---|---|---|
| Total Revenues | $18.5 million | $54.3 million | $52.0 million |
| Net Income (Total) | $11.6 million | $33.8 million | $33.3 million |
| Net Income to Common Stockholders | $5.6 million | $20.0 million | $22.2 million |
| Diluted EPS (Common) | $0.22 | $0.83 | $0.96 |
| Cash from Operating Activities | N/A | $47.9 million | $44.9 million |
| Cash and Equivalents (End of Period) | $12.5 million | $12.5 million | $5.1 million |
| Total Debt Outstanding | $53.7 million | $53.7 million | $25.4 million |
Note: Total Debt includes $50.0 million in Senior Unsecured Notes and $3.7 million in Bonds Payable. Bank borrowings were $0 at period end.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 7.7% year-over-year for the nine months ended September 30, driven by a $3.2 million increase in rental income from acquisitions. This was partially offset by a $0.9 million decrease in interest income from mortgage loans due to payoffs and a foreclosure.
- Net Income Decline: Net income available to common stockholders decreased $2.2 million (9.9%) year-over-year. This decline was primarily due to a $2.4 million preferred stock redemption charge associated with the buyback of Series E and Series F preferred stock.
- Provision for Doubtful Accounts: Increased by $0.9 million year-over-year due to a specific provision related to a mortgage loan secured by a private school in Minnesota that filed for Chapter 7 bankruptcy. The property was acquired via deed in lieu of foreclosure.
- Capital Structure: The company issued $50.0 million in senior unsecured notes and raised approximately $67.3 million in common equity. Proceeds were used to redeem approximately $59.1 million of preferred stock and repay bank borrowings.
Outlook, Risks, and Unusual Items
- Dividend Increase: On October 20, 2010, the company increased its monthly common stock cash dividend by 7.7% to $0.14 per share for November and December 2010.
- Acquisitions: Subsequent to the reporting period, the company entered agreements to acquire four assisted living properties for $26.9 million, scheduled to close in late October 2010.
- Related Party Risk: The company holds $6.5 million in marketable securities (Senior Subordinated Notes) issued by Skilled Healthcare Group, Inc. (SHG). SHG recently settled litigation requiring a $50 million escrow deposit. Management believes the decline in fair value of these notes is temporary and does not intend to sell them.
- Regulatory Environment: The company notes risks associated with the Patient Protection and Affordable Care Act and potential changes in Medicare/Medicaid reimbursement rates, which could impact the financial condition of its operators.
- Liquidity: The company maintains $12.5 million in cash and $110.0 million in available borrowing capacity under its unsecured credit agreement.
Investor Verification Checklist
- Preferred Stock Redemption Impact: Verify the long-term effect of the $2.4 million redemption charge on future earnings per share calculations and the reduction in preferred dividend obligations.
- Minnesota Foreclosure: Monitor the status of the private school property acquired via deed in lieu of foreclosure and the timeline for its sale.
- SHG Securities Valuation: Track the fair value of the $6.5 million SHG notes given the recent litigation settlement and escrow requirements.
- Operator Concentration: Review the financial health of major operators (Extendicare REIT, ALC, Brookdale, Preferred Care), which collectively represent a significant portion of assets and revenue.
- Debt Maturity Profile: Confirm the repayment schedule for the new $50 million senior unsecured notes and the maturity of the $110 million credit facility (July 2011).