Spirit Realty Capital, Inc. (SRC)

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Spirit Realty Capital (SRC)

Q2 2014 Earnings Conference Call

August 5, 2014 5:00 p.m. ET

Executives

Michael A. Bender – Senior Vice President and Chief Financial Officer

Thomas H. Nolan Jr. – Chairman and Chief Executive Officer

Peter M. Mavoides – President and Chief Operating Officer

Analysts

Vikram Malhotra – Morgan Stanley

Juan C. Sanabria – Bank of America, Merrill Lynch

Alexander Goldfarb – Sandler O’Neill

Vincent Chao – Deutsche Bank

Rich Moore – RBC Capital Markets

Chris Lucas – Capital One Security

Daniel Donlan – Ladenburg Thalmann

Presentation

Operator

Good afternoon, ladies and gentlemen and welcome to Spirit Realty Capital's Second Quarter 2014 Financial Results Conference Call. At this time, all lines have been placed in listen-only mode. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions)

This conference is being recorded and a replay of the call will be available for one week beginning at 6 PM Eastern Time today. The dial-in details for the replay can be found in today's press release. Additionally, there will be an audio webcast available for the next 30 days on Spirit Realty Capital's website.

It is now my pleasure to turn the call over to Mr. Michael Bender, Executive Vice President and Chief Financial Officer of Spirit Realty Capital. Mr. Bender, please proceed.

Michael A. Bender

Thank you, Philip, and good afternoon everyone. Thank you for joining us. Here with me today are Tom Nolan, our Chairman and Chief Executive Officer, and Pete Mavoides, our President and Chief Operating Officer.

Tom will start with some introductory comments and then I’ll provide some color on our financial results. Pete will then discuss our portfolio and investment program, and Tom will conclude with summary remarks prior to the Q&A portion of the call.

I would like to note that during this conference call, we will make certain statements that may be considered to be forward-looking statements under federal securities law. These statements are based on management's current expectation and the company's actual future results may differ significantly.

In our periodic reports on file with the SEC, we set forth certain factors that could cause our future results to vary from management's forward-looking statements. All information presented on this call is current as of today, August 5, 2014, and Spirit does not intend and undertakes no duty to update forward-looking statements unless required by law.

In addition, reconciliations of non-GAAP financial measures presented on this call such as FFO, AFFO, and FAD can be found in the company's earnings release from earlier today, which is available in the Investor Relations section of our website. And with that, here is Tom.

Thomas H. Nolan

Thank you, Mike. And thank you everyone for joining us today. We are very pleased with our results for the second quarter and for the first half of 2014. This call will be eighth time we have discussed our results since we went public in September of 2012. Those of you who are with us at that time at the IPO may recall we said about tangible and intangible goals for the company. We said, we wanted to be one of most transparent and respected companies in the triple net sector. We also set out very real and tangible portfolio objectives.

We wanted to manage and improve our tenant concentration. We wanted to reduce leverage over time and importantly conservatively manage our debt obligations through long term laddering of maturities. Finally, we wanted to be a smart and strategic acquirer of additional assets. These remain ongoing objectives for the company, but as we sit here today on this eighth quarterly call, we hope and trust that we are gaining the confidence of the investment community that we took these IPO objective seriously and then we’re committed to their ongoing implementation.

From a capital markets perspective, this was a very significant quarter, as we raised over $1 billion through the public issuance of convertible notes and equity. We have used the net proceeds to strengthen our balance sheet, provide additional capacity for our acquisition program, and to give us financing flexibility and expanded options to manage tenant exposures in our portfolio. Also, this transaction further diversified our capital sources and mitigated the cost and risks of delivering sustainable and growing cash flow to our shareholders.

Turning to operations, once again, our results are consistent with our expectations and demonstrate the predictable and consistent financial performance we’ve established as our goal. We remain focus on our organic and disciplined growth strategy of investing in operationally essential single tenant, triple net lease property primarily through sale leaseback transactions with middle market operators. We’ve the scale and capacity to execute our strategy and to adapt to changing market dynamics.

We’re optimistic about the future because among other things, we continue to see a very attractive acquisition environment and our portfolio remains in excellent shape. As a result of our strong year-to-date performance and our expectations for the remainder of the year, we’re raising our AFFO guidance for 2014 from the initial range of $0.77 to $0.82 per share to a new range of $0.80 to $0.83 per share.

With that I’ll turn things over to Mike, who will walk you through the financial highlights for our second quarter and first half of the year. Mike?

Michael A. Bender

Thank you, Tom. As Tom mentioned, we’re very pleased with our second quarter 2014 results which reflect our commitment to delivering consistent and attractive cash flows to our shareholders. As we’ve outlined our second quarter and first half financial results in today’s press release so I won’t repeat them in detail here. Instead I’ll review the highlights of the quarter including the progress we made during the quarter in strengthening our balance sheet, enhancing our acquisition capacity and providing additional flexibility in financing and managing the portfolio. Lastly, I’ll discuss our guidance for the remainder of the year.

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