Edgar Filing: LTC PROPERTIES INC

ltc_Current folio_10Q

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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 September 30, 2018

☐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)

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 ☑ 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 ☑ 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 ☑	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 ☑

The number of shares of common stock outstanding on November 1, 2018 was 39,656,737.

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LTC PROPERTIES, INC.

FORM 10-Q

September 30, 2018

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	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39
PART II -- Other Information

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41

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LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)


	September 30, 2018		December 31, 2017
	(unaudited)		(audited)
ASSETS
Investments:
Land	$	125,533	$	124,041
Buildings and improvements		1,280,491		1,262,335
Accumulated depreciation and amortization		(304,337)		(304,117)
Operating real estate property, net		1,101,687		1,082,259
Properties held-for-sale, net of accumulated depreciation: 2018—$2,887; 2017—$1,916		5,356		3,830
Real property investments, net		1,107,043		1,086,089

Mortgage loans receivable, net of loan loss reserve: 2018—$2,444; 2017—$2,255		242,609		223,907
Real estate investments, net		1,349,652		1,309,996
Notes receivable, net of loan loss reserve: 2018—$128; 2017—$166		12,642		16,402
Investments in unconsolidated joint ventures		30,511		29,898
Investments, net		1,392,805		1,356,296

Other assets:
Cash and cash equivalents		20,408		5,213
Restricted cash		2,163		—
Debt issue costs related to bank borrowings		3,202		810
Interest receivable		19,290		15,050
Straight-line rent receivable, net of allowance for doubtful accounts: 2018—$739; 2017—$814		73,114		64,490
Lease incentives		21,102		21,481
Prepaid expenses and other assets		3,767		2,230
Total assets	$	1,535,851	$	1,465,570
LIABILITIES
Bank borrowings	$	120,000	$	96,500
Senior unsecured notes, net of debt issue costs: 2018—$981; 2017—$1,131		550,986		571,002
Accrued interest		3,468		5,276
Accrued incentives and earn-outs		9,292		8,916
Accrued expenses and other liabilities		28,812		25,228
Total liabilities		712,558		706,922
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2018—39,657; 2017—39,570		397		396
Capital in excess of par value		861,226		856,992
Cumulative net income		1,224,998		1,100,783
Cumulative distributions		(1,270,779)		(1,203,011)
Total LTC Properties, Inc. stockholders’ equity		815,842		755,160
Non-controlling interests		7,451		3,488
Total equity		823,293		758,648
Total liabilities and equity	$	1,535,851	$	1,465,570

See accompanying notes.

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LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(amounts in thousands, except per share, unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Revenues:
Rental income	$	34,211	$	33,233	$	102,646	$	103,533
Interest income from mortgage loans		7,087		6,677		20,910		20,050
Interest and other income		478		1,336		1,502		2,753
Total revenues		41,776		41,246		125,058		126,336
Expenses:
Interest expense		7,497		7,644		22,981		22,266
Depreciation and amortization		9,447		9,519		28,159		28,186
Impairment charges		—		—		—		1,880
Provision (recovery) for doubtful accounts		106		(96)		76		(139)
Transaction costs		9		34		19		56
General and administrative expenses		4,879		4,144		14,392		13,270
Total expenses		21,938		21,245		65,627		65,519
Operating income		19,838		20,001		59,431		60,817
Income from unconsolidated joint ventures		746		615		2,103		1,635
Gain on sale of real estate, net		14,353		—		62,698		5,054
Net income		34,937		20,616		124,232		67,506
Income allocated to non-controlling interests		(17)		—		(17)		—
Net income attributable to LTC Properties, Inc.		34,920		20,616		124,215		67,506
Income allocated to participating securities		(138)		(80)		(504)		(281)
Net income available to common stockholders	$	34,782	$	20,536	$	123,711	$	67,225

Earnings per common share:
Basic	$	0.88	$	0.52	$	3.13	$	1.71
Diluted	$	0.88	$	0.52	$	3.12	$	1.70

Weighted average shares used to calculate earnings per common share:
Basic		39,487		39,428		39,470		39,403
Diluted		39,865		39,748		39,845		39,738

Dividends declared and paid per common share	$	0.57	$	0.57	$	1.71	$	1.71

Comprehensive Income:
Net income	$	34,937	$	20,616	$	124,232	$	67,506
Comprehensive income	$	34,937	$	20,616	$	124,232	$	67,506

See accompanying notes.

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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, 2016	39,221	$	392	$	839,005	$	1,013,443	$	(1,112,792)	$	740,048	$	—	$	740,048
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,552)		(22,552)		—		(22,552)
Proceeds from common stock issued, net of issuance costs	313		3		14,526		—		—		14,529		—		14,529
Issuance of restricted stock	75		1		(7)		—		—		(6)		—		(6)
Stock-based compensation expense	—		—		1,259		—		—		1,259		—		1,259
Net income	—		—		—		21,513		—		21,513		—		21,513
Other	(36)		—		(1,651)		—		—		(1,651)		—		(1,651)
Balance—March 31, 2017	39,573	$	396	$	853,132	$	1,034,956	$	(1,135,344)	$	753,140	$	—	$	753,140
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,558)		(22,558)		—		(22,558)
Issuance of restricted stock	8		—		—		—		—		—		—		—
Cancelation of restricted stock	(14)		—		—		—		—		—		—		—
Stock option exercises	3		—		79		—		—		79		—		79
Stock-based compensation expense	—		—		1,425		—		—		1,425		—		1,425
Net income	—		—		—		25,377		—		25,377		—		25,377
Other	(6)		—		(296)		—		—		(296)		—		(296)
Balance—June 30, 2017	39,564	$	396	$	854,340	$	1,060,333	$	(1,157,902)	$	757,167	$	—	$	757,167
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,554)		(22,554)		—		(22,554)
Issuance of restricted stock	3		—		—		—		—		—		—		—
Cancelation of restricted stock	(1)		—		—		—		—		—		—		—
Stock option exercises	5		—		123		—		—		123		—		123
Stock-based compensation expense	—		—		1,283		—		—		1,283		—		1,283
Net income	—		—		—		20,616		—		20,616		—		20,616
Balance—September 30, 2017	39,571	$	396	$	855,746	$	1,080,949	$	(1,180,456)	$	756,635	$	—	$	756,635
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,555)		(22,555)		—		(22,555)
Issuance of restricted stock	—		—		(14)		—		—		(14)		—		(14)
Stock-based compensation expense	—		—		1,282		—		—		1,282		—		1,282
Net income	—		—		—		19,834		—		19,834		—		19,834
Non-controlling interest contributions	—		—		—		—		—		—		3,488		3,488
Other	(1)		—		(22)		—		—		(22)		—		(22)
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

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LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, unaudited)


	Nine Months Ended September 30,
	2018		2017
OPERATING ACTIVITIES:
Net income	$	124,232	$	67,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,159		28,186
Stock-based compensation expense		4,384		3,967
Impairment charges		—		1,880
Gain on sale of real estate, net		(62,698)		(5,054)
Income from unconsolidated joint ventures		(2,103)		(1,635)
Income distributions from unconsolidated joint ventures		1,727		1,236
Insurance proceeds for damaged property		2,619		—
Payment for remediation of damaged property		(455)		—
Straight-line rental income		(8,629)		(7,362)
Lease incentives funded		(1,272)		(5,713)
Amortization of lease incentives		1,651		1,681
Provision for doubtful accounts		76		(139)
Non-cash interest related to contingent liabilities		377		476
Non-cash income related to earn-out and related lease inducement write-off		—		(842)
Other non-cash items, net		923		958
Increase in interest receivable		(4,240)		(3,967)
Decrease in accrued interest payable		(1,808)		(567)
Net change in other assets and liabilities		495		(4,477)
Net cash provided by operating activities		83,438		76,134
INVESTING ACTIVITIES:
Investment in real estate properties		(40,408)		(54,804)
Investment in real estate developments		(25,717)		(13,939)
Investment in real estate capital improvements		(2,063)		(2,308)
Capitalized interest		(850)		(627)
Proceeds from sale of real estate, net		82,340		14,106
Investment in real estate mortgage loans receivable		(20,530)		(9,333)
Principal payments received on mortgage loans receivable		1,636		17,351
Investments in unconsolidated joint ventures