National Health Investors Management Discusses Q2 2012 Results - Earnings Call Transcript

National Health Investors (NHI)

Q2 2012 Earnings Call

August 06, 2012 9:00 am ET

Executives

Tripp Sullivan

J. Justin Hutchens - Chief Executive Officer, President and Director

Roger R. Hopkins - Chief Accounting Officer

Analysts

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

Todd Stender - Wells Fargo Securities, LLC, Research Division

Karin A. Ford - KeyBanc Capital Markets Inc., Research Division

Richard C. Anderson - BMO Capital Markets U.S.

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the National Health Investors' Second Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, August 6, 2012. I would now like to turn the conference over to Mr. Tripp Sullivan of Corporate Communications. Please go ahead, sir.

Tripp Sullivan

Thank you, Nelson. Good morning, everyone. Welcome to the National Health Investors' conference call to review the company's results for the second quarter of 2012. On the call today will be Justin Hutchens, President and Chief Executive Officer; and Roger Hopkins, Chief Accounting Officer. The results, as well as notice to the accessibility of this conference call on a listen-only basis over the Internet, were released earlier this morning in a press release that’s been covered by the financial media.

As we start, let me remind you, the statements in this conference call that are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-Q for the quarter ended June 30, 2012. Copies of these filings are available on the SEC's website at www.sec.gov or at NHI's website at www.nhireit.com.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables and schedules, which has been filed on Form 8-K with the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release.

I'll now turn the call over to Justin Hutchens. Please go ahead.

J. Justin Hutchens

Thank you, Tripp. Good morning, everyone, and thank you for joining us. With me today is Roger Hopkins, our Chief Accounting Officer. We stayed on plan during the quarter. We remained disciplined on our investments, closely managed our portfolio and kept plenty of dry power available for potential new investment activity planned in the second half of the year. As a result, we were able to raise our guidance and increase the quarterly dividend.

We'll talk more about all of those in more detail in a few minutes. First, let me turn the call over to Roger to walk through our financial results. Roger?

Roger R. Hopkins

Thanks, Justin. Good morning, everyone. My comments this morning are consistent with our disclosures in Form 10-Q, our earnings press release and our supplemental data report filed this morning with the SEC.

Normalized funds from operations for the second quarter of 2012 rose 6% over the same period in 2011, primarily as a result of revenues from our new investments funded at $82.4 million in 2011 and $29.6 million so far in 2012. Lease revenues from our tenant Legend Healthcare increased $1.2 million due to new investments made in the fourth quarter of 2011 and the second quarter of 2012. Normalized FFO for the second quarter of 2012 was $21,386,000 or $0.77 per diluted share compared with normalized FFO of $20,179,000 or $0.73 per diluted share in the second quarter of 2011.

Normalized funds available for distribution for the second quarter of 2012 was $21,010,000 or $0.76 per diluted share compared with $19,724,000 or $0.71 per diluted share for the same period in 2011. Normalized FFO and normalized FAD for the second quarter of 2012 excluded the impact on net income of write-offs and expenses related to an early lease termination, which I will discuss in a moment, and other adjustments of $155,000.

Normalized FFO and normalized FAD for the same period in 2011 excluded the impact on net income of gains of $8,655,000 on the sale of marketable securities and a $988,000 change in the fair value of a previous interest rate swap agreement. Net income for the second quarter of 2012 was $16,928,000 or $0.61 per diluted share compared with net income of $25,117,000 or $0.90 per diluted share for the same period in 2011. Net income for the second quarter of 2012 and 2011 includes the accounting impact of the adjustments, write-offs and other expenses mentioned above. Large transactions that are infrequent or unpredictable in nature that affect net income are adjusted in our reconciliation of our net income to normalized FFO and normalized FAD. It is included in our earnings release at Form 10-Q and the supplemental data report.

In June 2012, due to material noncompliance with our lease terms, we terminated our lease with a former tenant of 4 assisted living and memory care facilities in Minnesota and transitioned the least to a new tenant, White Pine Senior Living. As a result, during the second quarter, we realized lower cash payments of $450,000 from our former tenant. We wrote off an additional $126,000 in billed receivables. We incurred $171,000 in legal and other direct expenses and incurred a noncash write-off of straight line rent receivables for accounting purposes of $963,000.

Read the rest of this transcript for free on seekingalpha.com