Business Context and Reporting Period
Company: Care Investment Trust Inc. (Note: Metadata listed "TIPTREE INC." but the filing is for Care Investment Trust Inc., which was acquired by Tiptree Financial Partners, L.P.)
Filing Type: Form 10-Q
Period Ended: September 30, 2010
Business Overview: A Real Estate Investment Trust (REIT) investing in healthcare-related real estate and mortgage debt. The reporting period is split into "Predecessor" (prior to August 13, 2010) and "Successor" (post-August 13, 2010) due to a change in control.
Key Financial Metrics
| Metric | Successor Period (Aug 13 - Sep 30, 2010) |
Predecessor Period (Jan 1 - Aug 12, 2010) |
Nine Months Ended Sep 30, 2009 |
|---|---|---|---|
| Total Revenue | $2.0 million | $9.2 million | $16.2 million |
| Net Loss | $(0.4) million | $(16.9) million | $1.5 million (Income) |
| Cash and Equivalents | $7.6 million | $122.5 million (Dec 31, 2009) | $94.7 million (Sep 30, 2009) |
| Total Assets | $172.8 million | $315.4 million (Dec 31, 2009) | N/A |
| Total Liabilities | $90.1 million | $88.6 million (Dec 31, 2009) | N/A |
| Stockholders' Equity | $82.7 million | $226.8 million (Dec 31, 2009) | N/A |
| Net Cash Used in Operating Activities | $(4.6) million | $(3.2) million | $4.6 million (Provided) |
Note: Due to the change in control and "push-down" accounting, Predecessor and Successor periods are not directly comparable. The table above reflects the specific periods reported in the filing.
Material Changes vs. Prior Period
- Change in Control: On August 13, 2010, the Company completed a sale of control to Tiptree Financial Partners, L.P. via a $55.7 million equity investment and a cash tender offer. This triggered a new basis of accounting (Successor period).
- Asset Reduction: Total assets decreased from $315.4 million (Dec 31, 2009) to $172.8 million (Sep 30, 2010). This was driven by the tender offer (reducing cash) and the sale of loan assets to CIT Healthcare and third parties.
- Revenue Decline: Combined revenue for the nine months ended Sep 30, 2010 (Predecessor + Successor) was $11.2 million, compared to $16.2 million in the prior year. This decrease is primarily due to the strategic shift away from mortgage investments (which generated significant interest income in 2009) toward real estate equity.
- Expense Spike: Marketing, general, and administrative expenses increased significantly in the nine months ended Sep 30, 2010 ($12.0 million vs. $8.4 million in 2009) due to legal and advisory fees associated with the Tiptree transaction and ongoing litigation.
- Management Transition: The Company terminated its management agreement with CIT Healthcare LLC (effective Nov 16, 2010) and entered into a new services agreement with TREIT Management LLC.
Guidance, Outlook, Risks, and Unusual Items
- Unusual Items:
- Buyout Payment: A $7.4 million buyout payment to CIT Healthcare was recognized in the nine months ended Sep 30, 2010, with $2.4 million remaining accrued as of period end.
- Stock Split: A three-for-two stock split was executed in September 2010 to increase the number of publicly held shares following the tender offer.
- Liquidity: Cash and cash equivalents dropped to $7.6 million. Management believes this is adequate for the next 12 months, but notes a commitment to pay $2.4 million to CIT Healthcare in November 2010.
- Delisting Risk: The Company's common stock was suspended from the NYSE on August 26, 2010, due to falling below the 600,000 publicly held share threshold. The appeal was rejected on October 21, 2010, and the stock now trades on the OTCQX marketplace under ticker CVTR.
- Legal Contingencies:
- Class-Action Litigation: Ongoing lawsuit regarding IPO disclosures; summary judgment briefing completed, ruling pending. No loss provision accrued.
- Cambridge Litigation: Dispute with Saada Parties regarding the Cambridge portfolio. Counterclaims seek damages of $100 million or more. Mediation occurred in October 2010 with no resolution. No loss provision accrued.
- Outlook: The Company is transitioning to internal management and a new advisory structure. No specific financial guidance was provided for future periods.
Key Facts for Investor Verification
- Accounting Basis: Verify the distinction between "Predecessor" and "Successor" financials; they are not GAAP-comparable due to the push-down accounting adjustment on August 13, 2010.
- Cash Position: Confirm the $7.6 million cash balance against the immediate $2.4 million liability due to CIT Healthcare in November 2010.
- Trading Status: Verify current trading status on OTCQX (CVTR) following the NYSE delisting.
- Litigation Exposure: Monitor the status of the Cambridge litigation (potential $100M+ claim) and the IPO class-action lawsuit, as no reserves have been set aside.
- Asset Composition: Note the shift in portfolio strategy from mortgage loans (which have been largely sold off) to wholly-owned real estate and joint ventures.