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Nov. 2, 2021, 5:04 p.m. EDT

10-Q: COMMUNITY HEALTHCARE TRUST INC

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, statements that are "forward-looking statements" within the meaning of

The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.

Overview

We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers.

Trends and Matters Impacting Operating Results Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Subsequent to September 30, 2021, the Company acquired a 27,000 square foot medical office building for a purchase price and cash consideration of approximately $3.5 million. The property was 83.4% leased with lease expirations through 2030 at acquisition and was funded with cash on hand and proceeds from the Company's Revolving Credit Facility.

Acquisition Pipeline

The Company also has four properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $94.0 million. The Company's expected returns on these investments are approximately 10.25%. The Company anticipates closing on these properties from the first quarter of 2022 through the second quarter of 2023; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

Asset Held for Sale

Leased square footage

COVID-19 pandemic

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

New Accounting Pronouncements

Results of Operations







        Three Months Ended September 30, 2021 Compared to Three Months Ended
        September 30, 2020
        The table below shows our results of operations for the three months ended
        September 30, 2021 compared to the same period in 2020 and the effect of changes
        in those results from period to period on our net income.
                                                                                                   Increase (decrease) to
                                                          Three Months Ended September 30,               Net income
        (dollars in thousands)                                2021                2020                 $             %
        REVENUES
        Rental income                                     $   22,447          $  18,939          $     3,508         18.5  %
        Other operating interest                                 807                405                  402         99.3  %
                                                              23,254             19,344                3,910         20.2  %
        EXPENSES
        Property operating                                     4,051              3,563                 (488)       (13.7) %
        General and administrative                             3,206              2,191               (1,015)       (46.3) %
        Depreciation and amortization                          7,812              6,295               (1,517)       (24.1) %
                                                              15,069             12,049               (3,020)       (25.1) %
        INCOME BEFORE INCOME TAXES AND OTHER ITEMS             8,185              7,295                  890         12.2  %
        Interest expense                                      (2,788)            (2,064)                (724)       (35.1) %
        Deferred income tax expense                              (45)               (20)                 (25)       125.0  %
        Interest and other income                                  2                  -                    2             n/m
        NET INCOME                                        $    5,354          $   5,211          $       143          2.7  %
        n/m-not meaningful
        


Revenues

Expenses

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Depreciation and amortization expense increased approximately $1.5 million, or 24.1%, for the three months ended September 30, 2021 compared to the same period in 2020. Acquisitions accounted for an increase of approximately $1.6 million, offset by a decrease of approximately $0.3 million in amortization due to fully amortized real estate lease intangibles which generally have a shorter depreciable life than a building. The remaining increase is generally due to the depreciation of building and tenant improvements.

Interest expense

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020







                                                          Nine Months Ended September            Increase (decrease) to
                                                                      30,                              Net income
        (dollars in thousands)                               2021              2020                 $             %
        REVENUES
        Rental income                                    $  65,233          $ 54,197          $   11,036           20.4  %
        Other operating interest                             2,104             1,363                 741           54.4  %
                                                            67,337            55,560              11,777           21.2  %
        EXPENSES
        Property operating                                  11,623            10,129              (1,494)         (14.7) %
        General and administrative                           8,958             6,282              (2,676)         (42.6) %
        Depreciation and amortization                       22,576            18,473              (4,103)         (22.2) %
                                                            43,157            34,884              (8,273)         (23.7) %
        INCOME BEFORE INCOME TAXES AND OTHER ITEMS          24,180            20,676               3,504           16.9  %
        Loss on sale of real estate                              -              (313)                313          100.0  %
        Interest expense                                    (7,753)           (6,496)             (1,257)         (19.4) %
        Deferred income tax expense                           (104)              (40)                (64)        (160.0) %
        Interest and other income                               56                10                  46         (460.0) %
        NET INCOME                                       $  16,379          $ 13,837          $    2,542           18.4  %
        


Revenues

Expenses

General and administrative expenses increased approximately $2.7 million, or 42.6%, for the nine months ended September 30, 2021 compared to the same period in 2020 due mainly to compensation-related expenses related to new employees and annual salary increases and stock issuances totaling approximately $2.5 million, including the non-cash amortization of non-vested restricted common shares of approximately $1.8 million which includes $0.2 million of accelerated amortization due to the elimination of a position and employee terminations in the third quarter of 2021.

Depreciation and amortization expense increased approximately $4.1 million, or 22.2%, for the nine months ended September 30, 2021 compared to the same period in 2020. Acquisitions accounted for an increase of approximately $4.8 million, offset by a decrease of approximately $1.1 million in amortization due to fully amortized real estate lease intangibles which generally have a shorter depreciable life than a building. The remaining increase is generally due to the depreciation of building and tenant improvements.

Loss on sale of real estate

Interest expense

Non-GAAP Financial Measures and Key Performance Indicators Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. The Company reports non-GAAP financial measures because these measures are observed by management to also be among the most predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these non-GAAP financial measures. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of those measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal to net income (calculated in accordance with GAAP), excluding gains or

In addition to FFO, the Company presents AFFO and AFFO per share. The Company defines AFFO as FFO, excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded, excluding straight-line rent and the amortization of stock-based compensation, and including or excluding other non-cash items from time to time. AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definition.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO, AFFO, FFO per share and AFFO per share provide an understanding of the operating performance of the Company's properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and AFFO per share can facilitate comparisons of operating performance between periods.

The table below reconciles net income to FFO and AFFO for the three months ended September 30, 2021 compared to the same period in 2020.







                                                                          Three Months Ended
                                                                            September 30,
          (In thousands, excepts per share amounts)                       2021           2020
          Net income                                                  $    5,354      $  5,211
          Real estate depreciation and amortization                        7,871         6,387
          FFO                                                         $   13,225      $ 11,598
          Straight-line rent                                                (895)         (914)
          Stock-based compensation                                         2,004         1,284
          AFFO                                                        $   14,334      $ 11,968
          FFO per diluted common share                                $     0.55      $   0.52
          AFFO per diluted common share                               $     0.59      $   0.53
          Weighted average common shares outstanding - diluted (1)        24,220        22,468
        ___________________
        


Net Operating Income ("NOI")

The table below reconciles net income to NOI for the three months ended September 30, 2021 compared to the same period in 2020.







                                                         Three Months Ended
                                                           September 30,
        (In thousands)                                   2021           2020
        Net income                                   $    5,354      $  5,211
                    General and administrative            3,206         2,191
                    Depreciation and amortization         7,812         6,295
                    Interest expense                      2,788         2,064
                    Deferred income tax expense              45            20
        NOI                                          $   19,205      $ 15,781
        


EBITDAre and Adjusted EBITDAre

We consider EBITDAre and Adjusted EBITDAre important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.

The table below reconciles net income to EBITDAre and Adjusted EBITDAre for the three months ended September 30, 2021 compared to the same period in 2020.







                                                                     Three Months Ended
                                                                       September 30,
        (In thousands)                                               2021           2020
        Net income                                               $    5,354      $  5,211
                    Interest expense                                  2,788         2,064
                    Depreciation and amortization                     7,812         6,295
                    Deferred income tax expense                          45            20
        EBITDAre                                                 $   15,999      $ 13,590
                    Non-cash stock-based compensation expense         2,004         1,284
        Adjusted EBITDAre                                        $   18,003      $ 14,874
        


Liquidity and Capital Resources

Nov 02, 2021

COMTEX_396246124/2041/2021-11-02T17:03:39

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