2020 Q2 Form 10-Q Financial Statement

#000074026020000135 Filed on August 07, 2020

View on sec.gov

Income Statement

Concept 2020 Q2 2019 Q2
Revenue $943.2M $950.7M
YoY Change -0.79% 0.89%
Cost Of Revenue $499.1M $436.4M
YoY Change 14.37% 3.44%
Gross Profit $444.1M $514.3M
YoY Change -13.65% -1.17%
Gross Profit Margin 47.08% 54.1%
Selling, General & Admin $30.00M $43.10M
YoY Change -30.39% 17.44%
% of Gross Profit 6.76% 8.38%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $349.6M $226.2M
YoY Change 54.55% 1.16%
% of Gross Profit 78.72% 43.98%
Operating Expenses $270.3M $266.0M
YoY Change 1.62% 3.66%
Operating Profit $173.8M $248.3M
YoY Change -30.0% -5.88%
Interest Expense $123.1M $110.4M
YoY Change 11.56% -2.35%
% of Operating Profit 70.85% 44.45%
Other Income/Expense, Net -$5.286M $11.48M
YoY Change -146.04% -428.03%
Pretax Income -$102.9M $154.1M
YoY Change -166.77% 10.78%
Income Tax $56.36M -$57.75M
% Of Pretax Income -37.48%
Net Earnings -$159.2M $211.9M
YoY Change -175.15% 25.16%
Net Earnings / Revenue -16.88% 22.29%
Basic Earnings Per Share -$0.42 $0.58
Diluted Earnings Per Share -$0.42 $0.58
COMMON SHARES
Basic Shares Outstanding 373.0M shares 361.7M shares
Diluted Shares Outstanding 376.0M shares 365.6M shares

Balance Sheet

Concept 2020 Q2 2019 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $993.0M $82.00M
YoY Change 1110.98% -12.77%
Cash & Equivalents $1.000B $81.99M
Short-Term Investments
Other Short-Term Assets
YoY Change
Inventory
Prepaid Expenses
Receivables
Other Receivables
Total Short-Term Assets $993.0M $82.00M
YoY Change 1110.98% -12.77%
LONG-TERM ASSETS
Property, Plant & Equipment $20.89B $20.24B
YoY Change 3.25% 0.5%
Goodwill $1.050B $1.050B
YoY Change -0.03% 1.57%
Intangibles
YoY Change
Long-Term Investments $427.0M $161.0M
YoY Change 165.22% -56.25%
Other Assets $118.0M $58.00M
YoY Change 103.45% -27.5%
Total Long-Term Assets $23.60B $22.91B
YoY Change 3.01% 1.33%
TOTAL ASSETS
Total Short-Term Assets $993.0M $82.00M
Total Long-Term Assets $23.60B $22.91B
Total Assets $24.59B $22.99B
YoY Change 6.96% 1.28%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $998.0M $1.138B
YoY Change -12.3% 0.35%
Accrued Expenses $367.0M $345.0M
YoY Change 6.38% 270.97%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $1.365B $1.483B
YoY Change -7.96% 20.86%
LONG-TERM LIABILITIES
Long-Term Debt $12.53B $10.26B
YoY Change 22.17% -1.41%
Other Long-Term Liabilities $6.000M $1.000M
YoY Change 500.0% 0.0%
Total Long-Term Liabilities $12.54B $10.26B
YoY Change 22.22% -1.41%
TOTAL LIABILITIES
Total Short-Term Liabilities $1.365B $1.483B
Total Long-Term Liabilities $12.54B $10.26B
Total Liabilities $13.96B $11.89B
YoY Change 17.39% 0.15%
SHAREHOLDERS EQUITY
Retained Earnings -$3.816B -$3.173B
YoY Change 20.27% 25.47%
Common Stock $14.21B $14.03B
YoY Change 1.27% 6.65%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares 24.00K shares
Shareholders Equity $10.31B $10.82B
YoY Change
Total Liabilities & Shareholders Equity $24.59B $22.99B
YoY Change 6.96% 1.28%

Cashflow Statement

Concept 2020 Q2 2019 Q2
OPERATING ACTIVITIES
Net Income -$159.2M $211.9M
YoY Change -175.15% 25.16%
Depreciation, Depletion And Amortization $349.6M $226.2M
YoY Change 54.55% 1.16%
Cash From Operating Activities $405.5M $393.1M
YoY Change 3.15% -2.29%
INVESTING ACTIVITIES
Capital Expenditures -$112.9M -$101.0M
YoY Change 11.78% -2.13%
Acquisitions
YoY Change
Other Investing Activities -$56.20M -$338.9M
YoY Change -83.42% -151.47%
Cash From Investing Activities -$169.1M -$439.9M
YoY Change -61.56% -179.22%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -2.095B 44.90M
YoY Change -4764.81% -104.66%
NET CHANGE
Cash From Operating Activities 405.5M 393.1M
Cash From Investing Activities -169.1M -439.9M
Cash From Financing Activities -2.095B 44.90M
Net Change In Cash -1.858B -1.900M
YoY Change 97694.74% -63.46%
FREE CASH FLOW
Cash From Operating Activities $405.5M $393.1M
Capital Expenditures -$112.9M -$101.0M
Free Cash Flow $518.4M $494.1M
YoY Change 4.92% -2.26%

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<div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:700;line-height:120%;">NOTE 1—DESCRIPTION OF BUSINESS </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">        Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”), an S&amp;P 500 company, is a real estate investment trust (“REIT”) with a highly diversified portfolio of senior housing, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of June 30, 2020, we owned or managed through unconsolidated joint ventures approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, medical office buildings (“MOBs”), research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), and health systems. We also had 20 properties under development, including two properties that are owned by unconsolidated real estate entities. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">        We primarily invest in senior housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">        As of June 30, 2020, we leased a total of 385 properties (excluding properties within our office operations reportable business segment) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (together with its subsidiaries, “Kindred”) leased from us 122 properties (excluding two properties managed by Brookdale Senior Living pursuant to long-term management agreements), 11 properties and 32 properties, respectively, as of June 30, 2020.</span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">        As of June 30, 2020, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 435 senior housing communities for us. </span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> </span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">        Through our Lillibridge Healthcare Services, Inc. subsidiary and our ownership interest in PMB Real Estate Services LLC, we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and non-mortgage loans and other investments relating to senior housing and healthcare operators or properties. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:700;line-height:120%;">COVID-19 Update</span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak has spread around the world, including throughout the United States. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> The COVID-19 pandemic and actions taken to prevent its spread continue to affect our business in a number of ways. In our senior living operating portfolio, occupancy, revenue and net operating income decreased as resident move-ins decreased and operating costs increased as a result of the pandemic. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> Our triple-net senior housing tenants experienced similar occupancy, revenue and cost pressure trends as our senior living operators. While we collected substantially all triple-net senior housing rent we expected to receive in the first and second quarters, we have given and may continue to provide financial support to our triple-net tenants in the form of rent deferrals and application of portions of lease deposits to fulfill payment obligations. We also recently made material changes to our senior housing triple-net leases with Holiday Retirement and Brookdale Senior Living, respectively, which will decrease our net operating income. Without financial support or other government assistance, certain of our triple-net senior housing tenants will likely experience worsening financial conditions through the third quarter, which would pressure their rent coverage ratios and may affect their ability to pay us contractual rent in full on a timely basis. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> In our healthcare triple-net leased properties portfolio, we collected substantially all rent due in the first and second quarters. This cohort of tenants has benefitted from significant government financial support to partially offset the direct financial impact of the COVID-19 pandemic on healthcare providers. Nationally, hospital inpatient admissions and surgeries have rebounded, although still below pre-COVID-19 levels, depending on the particular market. </span></div><div style="text-indent:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">In our office operations segment, we received 99% of contractual rents in the second quarter. Substantially all of our medical office buildings are in states that have either reopened for elective procedures or announced the resumption of elective procedures, which are an important driver of financial performance for many of our medical office tenants. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> In March 2020, we took precautionary steps to increase liquidity and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic by drawing $2.75 billion under our $3.0 billion unsecured revolving credit facility. Due to improved capital market conditions and the decisive actions described below, we have since repaid all borrowings under the facility. As of August 5, 2020, we had approximately $3.5 billion in liquidity, including availability under our revolving credit facility, cash and cash equivalents on hand, with no borrowings outstanding under our commercial paper program and negligible near-term debt maturing. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> In June 2020, our Board of Directors declared a second quarter 2020 dividend of $0.45 per share, which was paid in July and </span><span style="background-color:#ffffff;color:#231f20;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">represented a 43 percent reduction from the first quarter dividend of </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">$0.7925</span><span style="background-color:#ffffff;color:#231f20;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> per share.</span><span style="background-color:rgb(255,255,255, 0.0);color:#231f20;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> </span><span style="background-color:#ffffff;color:#231f20;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">This measure </span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">enabled us to conserve approximately $130 million of cash per quarter compared to the prior dividend level. In order to further conserve capital, we have reduced expected capital expenditures for 2020 by $0.3 billion to a new expected total of $0.5 billion, mainly through pausing certain ground-up developments that were not yet substantially underway. Also, </span><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">in June, we eliminated roles representing over 25% of our corporate positions, excluding onsite field personnel.</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> </span><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">For the secon</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">d half of 2020, the base salaries of our CEO and other executive officers was voluntarily reduced by 20% and 10%, respectively. As a result of these capital conservation actions, we expect that our third quarter 2020 annualized general and administrative expenses will be approximately $25 million to $30 million lower than our reported general and administrative expenses for full-year 2019. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> The federal government, as well as state and local governments, have implemented or announced programs to provide financial and other support to businesses affected by the COVID-19 pandemic, some of which benefit or could benefit our company, tenants, operators, borrowers and managers. For example, the Department of Health and Human Services (“HHS”) Provider Relief Fund for COVID-19 is currently providing grants to licensed senior living providers that bill Medicaid. Eligible providers will receive payments of at least 2% of all annual gross patient care revenues. If HHS funding is ultimately expanded to all licensed senior living providers, we expect most of our senior living communities to benefit. </span></div><div><span><br/></span></div><div><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> The future impact of the COVID-19 pandemic is highly uncertain. Many of the trends highlighted above have continued into the third quarter. The extent of the COVID-19 pandemic’s continued and ultimate effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the rate at which governments across the country lift restrictions and the extent and duration of any rollback of restrictions and the availability of government financial support to our business, tenants and operators. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows but it could be material.</span></div><div><span><br/></span></div><div style="text-indent:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">We have not identified the COVID-19 pandemic, on its own, as a "triggering event" for purposes of evaluating impairment of real estate assets, goodwill and other intangibles, investments in unconsolidated entities and financial instruments. However, as of June 30, 2020, we considered the effect of the pandemic on certain of our assets (described below) and our ability to recover the respective carrying values of these assets. We applied our considerations to existing critical accounting policies that require us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities. We based our estimates on our experience and on assumptions we believe to be reasonable under the circumstances. As a result, we have recognized the following charges for the quarter ended June 30, 2020:</span></div><div><span><br/></span></div><div style="text-indent:-18pt;padding-left:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">•</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;padding-left:14.5pt;">Adjustment to rental income:</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> As of June 30, 2020, we concluded that it is probable we would not collect substantially all rents from certain tenants, primarily within our triple-net leased properties segment. As a result, we recognized an adjustment to rental income of $54.2 million. Subsequent to June 30, 2020, rental payments from these tenants will be recognized in rental income when received.</span></div><div><span><br/></span></div><div style="text-indent:-18pt;padding-left:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">•</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;padding-left:14.5pt;">Impairment of real estate assets:</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> As of June 30, 2020, we concluded that our estimate of undiscounted cash flows, including a hypothetical terminal value, for certain real estate assets did not exceed the assets' respective carrying values. As such, during the quarter ended June 30, 2020 we recognized $108.8 million of impairments representing the difference between the assets' carrying value and estimated fair value of $192.8 million. The impaired assets, primarily senior housing communities, represent less than 1% of our consolidated net real estate property as of June 30, 2020. Impairments are recorded within depreciation and amortization in our Consolidated Statements of Income and are primarily related to our senior living operations reportable business segment. </span></div><div style="text-indent:-18pt;padding-left:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">•</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;padding-left:14.5pt;">Loss on financial instruments and impairment of unconsolidated entities:</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> As of June 30, 2020, we concluded that credit losses exist within certain of our non-mortgage loans receivables and government-sponsored pooled loan investments and impairments have occurred with respect to unconsolidated entities. As a result, (a) we established allowances of $20.8 million and $8.8 million, respectively, which reduces the amounts presented on our Consolidated Balance Sheets with a corresponding loss on financial instruments in our Consolidated Statements of Income, and (b) we recognized an impairment of $10.7 million in an equity investment in an unconsolidated entity. No allowances are recorded within our portfolios of secured mortgage loans or marketable debt securities.</span></div><div><span><br/></span></div><div style="text-indent:-18pt;padding-left:36pt;"><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;">•</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%;padding-left:14.5pt;">Deferred tax asset valuation allowance:</span><span style="background-color:rgb(255,255,255, 0.0);color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%;"> As of June 30, 2020, we concluded that it was not more likely than not that deferred tax assets (primarily US federal NOL carryforwards which begin to expire in 2032) would be realized based on our cumulative loss in recent years for certain of our taxable REIT subsidiaries. As a result, we recorded a valuation allowance of $56.4 million against these deferred tax assets on our Consolidated Balance Sheets with a corresponding charge to income tax (expense) benefit in our Consolidated Statements of Income.</span></div>
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CY2019Q2 vtr Income Loss From Equity Method Investments And Remeasurement Gain On Equity Interest In Acquiree
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CY2019Q2 us-gaap Gain Loss On Disposition Of Assets1
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CY2019Q2 us-gaap Income Tax Expense Benefit
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CY2019Q2 us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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CY2019Q2 us-gaap Profit Loss
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CY2019Q2 us-gaap Net Income Loss Attributable To Noncontrolling Interest
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us-gaap Operating Lease Lease Income
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CY2020Q2 us-gaap Payments For Capital Improvements
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us-gaap Payments For Capital Improvements
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CY2020Q2 us-gaap Real Estate Investment Property Net
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RealEstateInvestmentPropertyNet
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