TOLEDO, Ohio--(BUSINESS WIRE)--July 19, 2006--Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its second quarter ended June 30, 2006.
Second Quarter Highlights.
- Net new investments total $80.7 million for quarter and $167.1 million for year to date
- Increases net investment guidance to $375 to $500 million from $300 to $450 million
- Adjusted FFO and FAD increase 6% and 10% quarter-over-quarter
- Increases 2006 FAD guidance to $2.95-$3.03 per diluted share from $2.91-$2.99 per diluted share
- Total portfolio coverage remains strong at 1.93x
- Debt to undepreciated capitalization ratio down sequentially to 44% from 47% last quarter
Key Performance Indicators.
Quarter Quarter Year Year
Ended Ended Percentage To Date To Date Percentage
6/30/06 6/30/05 Change 6/30/06 6/30/05 Change
----------------------------------------------------------------------
Net Income
Available to
Common
Stockholders
per Diluted
Share $0.37 ($0.03) n/a $0.70 $0.30 133%
----------------------------------------------------------------------
FFO per
Diluted
Share $0.74 $0.36 106% $1.45 $1.08 34%
----------------------------------------------------------------------
FFO per
Diluted
Share -
Adjusted (1) $0.74 $0.70 6% $1.45 $1.42 2%
----------------------------------------------------------------------
FAD per
Diluted
Share $0.75 $0.34 121% $1.59 $1.00 59%
----------------------------------------------------------------------
FAD per
Diluted
Share -
Adjusted (1) $0.75 $0.68 10% $1.59 $1.35 18%
----------------------------------------------------------------------
Common
Dividends
per Share $0.64 $0.62 3% $1.26 $1.22 3%
----------------------------------------------------------------------
FFO Payout
Ratio 86% 172% 87% 113%
----------------------------------------------------------------------
FFO Payout
Ratio -
Adjusted (1) 86% 89% 87% 86%
----------------------------------------------------------------------
FAD Payout
Ratio 85% 182% 79% 122%
----------------------------------------------------------------------
FAD Payout
Ratio -
Adjusted (1) 85% 91% 79% 90%
----------------------------------------------------------------------
(1) Adjusted for loss on extinguishment of debt in 2Q05.
2Q06 Earnings Discussion. The second quarter 2006 reported net income available to common stockholders of $0.37 per diluted share includes $1.0 million ($0.015 per diluted share) of gains on sales of real property. The second quarter 2005 net loss to common stockholders of $0.03 per share included $18.4 million ($0.34 per diluted share) of loss on extinguishment of debt. FAD for second quarter 2006 was higher than FFO by $0.5 million ($0.01 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
2Q06 FFO and FAD.
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
6/30/06 6/30/05 Percentage 6/30/06 6/30/05 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted Share $0.74 $0.36 106% $0.75 $0.34 121%
----------------------------------------------------------------------
Debt
extinguishment
charges, net $0.34 $0.34
----------------------------------------------------------------------
Per Diluted Share
- Adjusted $0.74 $0.70 6% $0.75 $0.68 10%
----------------------------------------------------------------------
Included items:
----------------------------------------------------------------------
Cash receipts
- prepaid/
straight-line
rent $0.04 $0.04
----------------------------------------------------------------------
Per Diluted Share
- Normalized $0.71 $0.64 11%
----------------------------------------------------------------------
2006 Earnings Discussion. The reported net income available to common stockholders of $0.70 per diluted share for the six months ended June 30, 2006 includes $2.5 million ($0.04 per diluted share) of gains on sales of real property. The 2005 net income available to common stockholders of $0.30 per diluted share included $18.4 million ($0.34 per diluted share) of loss on extinguishment of debt. FAD for 2006 was higher than FFO by $8.4 million ($0.14 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
Year Year Year Year
To Date To Date To Date To Date
6/30/06 6/30/05 Percentage 6/30/06 6/30/05 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted Share $1.45 $1.08 34% $1.59 $1.00 59%
----------------------------------------------------------------------
Debt
extinguishment
charges, net $0.34 $0.34
----------------------------------------------------------------------
Per Diluted Share
- Adjusted $1.45 $1.42 2% $1.59 $1.35 18%
----------------------------------------------------------------------
Included items:
----------------------------------------------------------------------
Cash receipts
- prepaid/
straight-line
rent $0.22 $0.06
----------------------------------------------------------------------
SFAS 123(R)
accelerated
vesting
impact ($0.02) ($0.02)
----------------------------------------------------------------------
Per Diluted Share
- Normalized $1.37 $1.29 6%
----------------------------------------------------------------------
Dividends for Second Quarter 2006. As previously announced, the Board of Directors declared a dividend for the quarter ended June 30, 2006 of $0.64 per share as compared to $0.62 per share for the same period in 2005. The dividend represents the 141st consecutive dividend payment. The dividend will be payable August 21, 2006 to stockholders of record on July 31, 2006.
Development Initiative. Under the company's new development initiative, management expects to fund $175 to $250 million for development during 2006. The company expects to fund $164 million for development during 2006 on projects which are already underway, with an additional $11 to $86 million anticipated from projects which have yet to commence. The $164 million of anticipated funding from existing projects is comprised of $72 million which was funded during the six months ended June 30, 2006 and $92 million projected to be funded over the remainder of 2006. The information contained in Exhibit 8 relates only to development projects for which initial funding has commenced as of June 30, 2006 and does not include any additional development projects which may commence later in 2006.
Outlook for 2006. The company is increasing its gross investment guidance to a range of $525 to $600 million from $450 to $550 million for 2006. Gross investments are comprised of $350 million of acquisitions and advances on existing assets and $175 to $250 million of funded new development. The company expects $100 to $150 million of dispositions, resulting in net investments of $375 to $500 million. Due primarily to the second quarter gains on sales of properties of $1.0 million, the company is increasing its 2006 guidance for net income available to common stockholders from a range of $1.33 to $1.41 per diluted share to $1.34 to $1.42 per diluted share. The company is reaffirming its 2006 FFO guidance in the range of $2.88 to $2.96 per diluted share. The company is increasing its 2006 FAD guidance from a range of $2.91 to $2.99 per diluted share to $2.95 to $3.03 per diluted share primarily due to the cash receipts of $2.7 million during the second quarter of 2006.
The company's guidance excludes any impairments, unanticipated additions to the loan loss reserve or other additional one-time items, including any additional cash payments outside the normal monthly rental payments. Please see Exhibit 15 for a reconciliation of the outlook for net income available to common stockholders to FFO and FAD.
Conference Call Information. The company has scheduled a conference call on July 20, 2006 at 9:00 a.m. Eastern time to discuss its second quarter and year to date results, industry trends, portfolio performance and outlook for 2006. Telephone access will be available by dialing 800-811-0667 or 913-981-4901 (international). For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the call through August 3, 2006. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 7840792. To participate in the webcast, log on to www.hcreit.com or www.earnings.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through the same Web sites. This earnings release is posted on the company's Web site under the heading Press Releases.
Supplemental Reporting Measures. The company believes that net income, as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FAD represents FFO excluding the net straight-line rental adjustments.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. The company believes that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of its operations. Additionally, restrictive covenants in the company's long-term debt arrangements contain financial ratios based on EBITDA. The company primarily utilizes EBITDA to measure its interest coverage ratio, which represents EBITDA divided by interest expense, and its fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include interest expense and preferred stock dividends.
In April 2002, the Financial Accounting Standards Board issued Statement No. 145 that requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement No. 4. The company adopted the standard effective January 1, 2003 and has properly reflected the prior year loss on extinguishment of debt which may not be added back to net income in the calculation of FFO, FAD or EBITDA. Although the company has adopted this treatment, it has also disclosed FFO, FAD and EBITDA adjusted for the loss on extinguishment of debt for enhanced clarity.
FFO, FAD and EBITDA are financial measures that are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The company's management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, FFO and FAD are utilized by the Board of Directors to evaluate management. FFO, FAD and EBITDA do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, FFO, FAD and EBITDA, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Please see Exhibits 12, 13 and 14 for reconciliations of EBITDA, FAD and FFO to net income.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care and senior housing properties. At June 30, 2006, the company had investments in 464 facilities in 37 states with 57 operators and had total assets of approximately $3.1 billion. The portfolio included 35 independent living/continuing care retirement communities, 203 assisted living facilities, 213 skilled nursing facilities and 13 specialty care facilities. More information is available on the Internet at www.hcreit.com.
This document may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company's portfolio; the sale of properties; the performance of its operators and properties; its ability to enter into agreements with new viable tenants for properties that the company takes back from financially troubled tenants, if any; its ability to make distributions; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; and its ability to meet its earnings guidance. When the company uses words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company's expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including prevailing interest rates; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies and operators' difficulty in obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and senior housing industries; negative developments in the operating results or financial condition of operators, including, but not limited to, their ability to pay rent and repay loans; the company's ability to transition or sell facilities with a profitable result; the failure of closings to occur as and when anticipated; acts of God affecting the company's properties; the company's ability to reinvest sale proceeds at similar rates to assets sold; operator bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates; liability claims and insurance costs for operators; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company's properties; delays in reinvestment of sale proceeds; changes in rules or practices governing the company's financial reporting; and structure related factors, including real estate investment trust qualification, anti-takeover provisions and key management personnel. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements.
FINANCIAL SCHEDULES FOLLOW
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
June 30
-------------------------
2006 2005
------------ ------------
Assets
Real estate investments:
Real property owned
Land $ 270,810 $ 228,077
Buildings & improvements 2,758,358 2,420,555
Construction in progress 75,822 449
------------ ------------
3,104,990 2,649,081
Less accumulated depreciation (317,869) (257,543)
------------ ------------
Total real property owned 2,787,121 2,391,538
Loans receivable 178,282 244,169
Less allowance for losses on loans
receivable (6,961) (5,861)
------------ ------------
171,321 238,308
------------ ------------
Net real estate investments 2,958,442 2,629,846
Other assets:
Equity investments 5,070 3,298
Deferred loan expenses 11,523 9,172
Cash and cash equivalents 15,200 15,067
Receivables and other assets 71,877 82,556
------------ ------------
103,670 110,093
------------ ------------
Total assets $ 3,062,112 $ 2,739,939
============ ============
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 146,000 $ 318,000
Senior unsecured notes 1,193,355 894,830
Secured debt 131,178 168,790
Accrued expenses and other liabilities 45,641 44,354
------------ ------------
Total liabilities 1,516,174 1,425,974
Stockholders' equity:
Preferred stock 276,875 283,751
Common stock 62,446 53,772
Capital in excess of par value 1,450,531 1,166,234
Treasury stock (2,714) (1,766)
Cumulative net income 883,082 772,887
Cumulative dividends (1,125,810) (960,850)
Accumulated other
comprehensive income 0 1
Other equity 1,528 (64)
------------ ------------
Total stockholders' equity 1,545,938 1,313,965
------------ ------------
Total liabilities and stockholders' equity $ 3,062,112 $ 2,739,939
============ ============
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues:
Rental income $ 74,031 $ 59,577 $146,817 $118,371
Interest income 4,480 5,269 8,742 10,252
Transaction fees and other
income 1,665 547 2,030 1,970
--------- --------- --------- ---------
Gross revenues 80,176 65,393 157,589 130,593
Expenses:
Interest expense 23,058 19,073 47,101 37,770
Provision for depreciation 24,131 19,309 47,183 37,890
General and administrative 5,089 4,337 11,291 8,355
Loan expense 707 673 1,418 1,535
Loss on extinguishment of
debt 0 18,448 0 18,448
Provision for loan losses 250 300 500 600
--------- --------- --------- ---------
Total expenses 53,235 62,140 107,493 104,598
--------- --------- --------- ---------
Income from continuing
operations 26,941 3,253 50,096 25,995
Discontinued operations:
Gain (loss) on sales of
properties 929 (24) 2,482 (134)
Income from discontinued
operations, net 131 601 401 1,209
--------- --------- --------- ---------
1,060 577 2,883 1,075
--------- --------- --------- ---------
Net income 28,001 3,830 52,979 27,070
Preferred dividends 5,333 5,436 10,666 10,872
--------- --------- --------- ---------
Net income (loss) available to
common stockholders $ 22,668 $ (1,606) $ 42,313 $ 16,198
========= ========= ========= =========
Average number of common shares
outstanding:
Basic 61,548 53,429 59,871 53,207
Diluted 61,868 53,429 60,201 53,616
Net income (loss) available to
common stockholders per share:
Basic $ 0.37 $ (0.03) $ 0.71 $ 0.30
Diluted 0.37 (0.03) 0.70 0.30
Common dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
Portfolio Composition Exhibit 1
---------------------
($000's except Investment per Bed/Unit)
Balance Sheet
Data # Properties # Beds/Units Balance % Balance
-----------------------------------------------------
Real Property 446 45,474 $2,787,121 94%
Loans
Receivable (1) 18 2,208 178,282 6%
-----------------------------------------------------
Totals 464 47,682 $2,965,403 100%
Investment
Balances # Properties # Beds/Units Investment (2) % Investment
-----------------------------------------------------
Independent/
CCRCs 35 4,961 $447,825 15%
Assisted Living
Facilities 203 12,597 984,600 33%
Skilled Nursing
Facilities 213 28,876 1,340,106 45%
Specialty Care
Facilities 13 1,248 195,322 7%
-----------------------------------------------------
Totals 464 47,682 $2,967,853 100%
Committed Committed Investment
Investments # Properties # Beds/Units Balance (3) per Bed/Unit
-----------------------------------------------------
Independent/
CCRCs 35 4,961 $555,360 $111,945
Assisted Living
Facilities 203 12,597 1,118,553 88,795
Skilled Nursing
Facilities 213 28,876 1,358,757 47,055
Specialty Care
Facilities 13 1,248 195,322 156,508
-----------------------------------------------------
Totals 464 47,682 $3,227,992 -na-
Notes: (1) Includes $15,316,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$2,965,403,000 and $2,450,000, respectively.
(3) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
Selected Facility Data Exhibit 2
----------------------
Coverage Data
% Payor Mix -------------------
-------------------------- Before After
Census Private Medicare Medicaid Mgt. Fees Mgt. Fees
-------------------------------------------------------
Independent/
CCRCs 91% 97% 1% 2% 1.47x 1.25x
Assisted Living
Facilities 89% 83% 0% 17% 1.53x 1.31x
Skilled Nursing
Facilities 86% 17% 16% 67% 2.16x 1.58x
Specialty Care
Facilities 69% 21% 58% 21% 3.02x 2.42x
-------------------
Weighted Averages 1.93x 1.51x
Notes: Data as of March 31, 2006.
Investment Concentrations ($000's) Exhibit 3
----------------------------------
Concentration by Operator # Properties Investment % Investment
------------ ------------ ------------
Emeritus Corporation 50 $ 358,423 12%
Brookdale Living
Communities, Inc. 87 288,662 10%
Life Care Centers of
America, Inc. 26 223,505 8%
Merrill Gardens L.L.C. 13 202,012 7%
Tara Cares, LLC 34 170,583 6%
Remaining operators (52) 254 1,724,668 57%
------------ ------------ ------------
Totals 464 $ 2,967,853 100%
Concentration by Region # Properties Investment % Investment
------------ ------------ ------------
South 275 $ 1,475,493 50%
Northeast 61 485,936 16%
West 64 497,284 17%
Midwest 64 509,140 17%
------------ ------------ ------------
Totals 464 $ 2,967,853 100%
Concentration by State # Properties Investment % Investment
------------ ------------ ------------
Florida 62 $ 402,289 14%
Massachusetts 35 331,422 11%
Ohio 30 255,994 9%
Texas 55 229,442 8%
North Carolina 43 200,594 7%
Remaining States (32) 239 1,548,112 51%
------------ ------------ ------------
Totals 464 $ 2,967,853 100%
Revenue Composition ($000's) Exhibit 4
----------------------------
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
------------------- -------------------
Revenue by Investment Type (1)
Real Property $ 75,792 94% $ 149,551 94%
Loans Receivable 4,544 6% 8,872 6%
------------------- -------------------
Totals $ 80,336 100% $ 158,423 100%
Revenue by Facility Type (1)
Independent/CCRCs $ 9,395 12% $ 18,695 12%
Assisted Living Facilities 29,636 37% 58,119 37%
Skilled Nursing Facilities 36,926 46% 72,540 46%
Specialty Care Facilities 4,379 5% 9,069 5%
------------------- -------------------
Totals $ 80,336 100% $ 158,423 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
Revenue Maturities ($000's) Exhibit 5
---------------------------
Operating Lease Expirations & Loan Maturities
Current Lease Current Interest Lease and % of
Year Revenue (1) Revenue (1) Interest Revenue Total
----------------------------------------------------------------------
2006 $ 0 $ 1,313 $ 1,313 0%
2007 0 691 691 0%
2008 0 2,468 2,468 1%
2009 906 1,999 2,905 1%
2010 1,726 2,174 3,900 1%
Thereafter 304,318 5,893 310,211 97%
------------------------------------------------------------
Totals $ 306,950 $ 14,538 $ 321,488 100%
Notes: (1) Revenue impact by year, annualized.
Debt Maturities and Principal Payments ($000's) Exhibit 6
-----------------------------------------------
Lines of Senior Secured
Year Credit (1) Notes (2) Debt Total
----------------------------------------------------------------------
2006 $ 0 $ 0 $ 1,561 $ 1,561
2007 40,000 52,500 15,074 107,574
2008 500,000 42,330 10,289 552,619
2009 0 0 33,807 33,807
2010 0 0 8,733 8,733
2011 0 0 20,472 20,472
2012 0 250,000 14,851 264,851
Thereafter 0 850,000 26,391 876,391
------------------------------------------------------
Totals $ 540,000 $1,194,830 $ 131,178 $1,866,008
Notes: (1) Reflected at 100% capacity.
(2) Amounts above represent principal amounts due and do not
reflect unamortized premiums/discounts or the fair value
of interest-rate swap agreements as reflected on the
balance sheet.
Investment Activity ($000's) Exhibit 7
----------------------------
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
------------------- -------------------
Funding by Investment Type
Real Property $ 88,914 92% $ 204,254 93%
Loans Receivable 8,036 8% 15,779 7%
------------------- -------------------
Total $ 96,950 100% $ 220,033 100%
Funding by Facility Type
Independent/CCRCs $ 30,990 32% $ 35,778 16%
Assisted Living Facilities 37,261 38% 70,825 32%
Skilled Nursing Facilities 25,407 26% 109,710 50%
Specialty Care Facilities 3,292 4% 3,720 2%
------------------- -------------------
Total $ 96,950 100% $ 220,033 100%
Development Activity ($000's) Exhibit 8
-----------------------------
Balance
at Balance at
Dec. 31, 2006 YTD June 30, Committed Unfunded
Facility Type 2005 Fundings 2006 Balances Commitments
------------- --------- ----------- ---------- ---------- -----------
Independent/
CCRCs $ 0 $ 21,354 $ 21,354 $ 114,635 $ 93,281
Assisted
Living
Facilities 2,995 39,428 42,423 194,311 151,888
Skilled
Nursing
Facilities 911 11,134 12,045 27,015 14,970
--------- ----------- ---------- ---------- -----------
Totals $ 3,906 $ 71,916 $ 75,822 $ 335,961 $ 260,139
Development Funding Projections ($000's)
----------------------------------------
Projected Future
Fundings
---------------------
2006 Fundings Unfunded
Facility Type Projects # Beds/Units Fundings Thereafter Commitments
------------- --------- ------------ ---------- ---------- -----------
Independent/
CCRCs 3 467 $ 27,656 $ 65,625 $ 93,281
Assisted
Living
Facilities 20 1,292 55,318 96,570 151,888
Skilled
Nursing
Facilities 3 263 9,454 5,516 14,970
--------- ------------ ---------- ---------- -----------
Totals 26 2,022 $ 92,428 $ 167,711 $ 260,139
Project Conversion Projections ($000's)
---------------------------------------
2006 Quarterly Projections Annual Projections
--------------------------------- ---------------------------------
Projected Projected
Average Average
Initial Initial
Quarter Amount Yields(1) Year Amount Yields(1)
----------- --------- ---------------------- ---------- -----------
1Q06 2006
actual $ 0 n/a projected $ 13,191 9.09%
2Q06 2007
actual 0 n/a projected 191,184 9.46%
3Q06 2008
projected 10,323 9.12% projected 52,618 9.11%
4Q06
projected 2,868 9.00% Thereafter 78,968 9.28%
--------- ----------- ---------- -----------
Totals $ 13,191 9.09% Totals $ 335,961 9.35%
Notes: All amounts include both cash advances and non-cash additions
such as capitalized interest.
(1) Actual initial yields may be higher if the underlying
market rates increase.
Disposition Activity ($000's) Exhibit 9
-----------------------------
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
------------------- -------------------
Dispositions by Investment
Type
Real Property $ 16,272 100% $ 31,665 60%
Loans Receivable 0% 21,240 40%
------------------- -------------------
Totals $ 16,272 100% $ 52,905 100%
Dispositions by Facility Type
Assisted Living Facilities $ 13,325 82% $ 25,487 48%
Skilled Nursing Facilities 2,947 18% 20,460 39%
Specialty Care Facilities 0% 6,958 13%
------------------- -------------------
Totals $ 16,272 100% $ 52,905 100%
Discontinued Operations ($000's) Exhibit 10
---------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues
Rental income $ 160 $ 3,214 $ 834 $ 6,586
Expenses
Interest expense 29 913 224 1,861
Provision for depreciation 0 1,700 209 3,516
--------- --------- --------- ---------
Income (loss) from
discontinued operations,
net $ 131 $ 601 $ 401 $ 1,209
Exhibit 11
Current Capitalization
($000's except share price) Leverage & Performance Ratios
---------------------------------------- -----------------------------
%
Balance Balance
-------------------
Borrowings Under
Bank Lines $ 146,000 5% Debt/Total Book Cap 49%
Long-Term Debt Debt/Undepreciated
Obligations 1,324,533 44% Book Cap 44%
Stockholders' Equity 1,545,938 51% Debt/Total Market Cap 37%
-------------------
Total Book
Capitalization $3,016,471 100%
Interest
Coverage 3.16x 2nd Qtr.
Common Shares 3.08x YTD
Outstanding (000's) 62,521
Period-End Share Interest
Price $ 34.95 Coverage 3.21x 2nd Qtr.
----------- - adjusted 3.16 YTD
Common Stock
Market Value $2,185,109 56%
Preferred Stock 276,875 7% Fixed Charge
Borrowings Under Coverage 2.59x 2nd Qtr.
Bank Lines 146,000 3% 2.52x YTD
Long-Term Debt Fixed Charge
Obligations 1,324,533 34% Coverage 2.63x 2nd Qtr.
------------------- - adjusted 2.59x YTD
Total Market
Capitalization $3,932,517 100%
EBITDA Reconciliation ($000's) Exhibit 12
-------------------------------
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net income $ 28,001 $ 3,830 $ 52,979 $ 27,070
Interest expense (1) 23,087 19,986 47,325 39,631
Tax expense 12 216 12 219
Provision for
depreciation (1) 24,131 21,009 47,392 41,406
Amortization 707 1,998 1,418 2,724
---------- ---------- ---------- ----------
EBITDA 75,938 47,039 149,126 111,050
Stock-based compensation
expense 838 316 3,351 632
Provision for loan losses 250 300 500 600
Loss on extinguishment of
debt, net 0 18,448 0 18,448
---------- ---------- ---------- ----------
EBITDA - adjusted $ 77,026 $ 66,103 $ 152,977 $ 130,730
Interest Coverage Ratio
Interest expense (1) $ 23,087 $ 19,986 $ 47,325 $ 39,631
Capitalized interest 909 348 1,111 614
---------- ---------- ---------- ----------
Total interest 23,996 20,334 48,436 40,245
EBITDA $ 75,938 $ 47,039 $ 149,126 $ 111,050
---------- ---------- ---------- ----------
Interest coverage ratio 3.16x 2.31x 3.08x 2.76x
EBITDA - adjusted $ 77,026 $ 66,103 $ 152,977 $ 130,730
---------- ---------- ---------- ----------
Interest coverage ratio
- adjusted 3.21x 3.25x 3.16x 3.25x
Fixed Charge Coverage
Ratio
Total interest (1) $ 23,996 $ 20,334 $ 48,436 $ 40,245
Preferred dividends 5,333 5,436 10,666 10,872
---------- ---------- ---------- ----------
Total fixed charges 29,329 25,770 59,102 51,117
EBITDA $ 75,938 $ 47,039 $ 149,126 $ 111,050
---------- ---------- ---------- ----------
Fixed charge coverage
ratio 2.59x 1.83x 2.52x 2.17x
EBITDA - adjusted $ 77,026 $ 66,103 $ 152,977 $ 130,730
---------- ---------- ---------- ----------
Fixed charge coverage
ratio - adjusted 2.63x 2.57x 2.59x 2.56x
Notes: (1) Provision for depreciation and interest expense include
provision for depreciation and interest expense from
discontinued operations.
Funds Available For Distribution Reconciliation Exhibit 13
-----------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net income (loss)
available to common
stockholders $ 22,668 $ (1,606) $ 42,313 $ 16,198
Provision for
depreciation (1) 24,131 21,009 47,392 41,406
Loss (gain) on sales of
properties (929) 24 (2,482) 134
Gross straight-line rental
income (2,216) (3,536) (4,616) (7,245)
Prepaid/straight-line rent
receipts 2,710 2,360 13,020 3,213
---------- ---------- ---------- ----------
Funds available for
distribution 46,364 18,251 95,627 53,706
Loss on extinguishment of
debt, net 0 18,448 0 18,448
---------- ---------- ---------- ----------
Funds available for
distribution - adjusted 46,364 36,699 95,627 72,154
Prepaid/straight-line rent
receipts (2,710) (2,360) (13,020) (3,213)
---------- ---------- ---------- ----------
Funds available for
distribution
- normalized $ 43,654 $ 34,339 $ 82,607 $ 68,941
Average common shares
outstanding:
Basic 61,548 53,429 59,871 53,207
Diluted - for net income
(loss) purposes 61,868 53,429 60,201 53,616
Diluted - for FAD
purposes 61,868 53,765 60,201 53,616
Per share data:
Net income (loss)
available to common
stockholders
Basic $ 0.37 $ (0.03) $ 0.71 $ 0.30
Diluted 0.37 (0.03) 0.70 0.30
Funds available for
distribution
Basic $ 0.75 $ 0.34 $ 1.60 $ 1.01
Diluted 0.75 0.34 1.59 1.00
Funds available for
distribution - adjusted
Basic $ 0.75 $ 0.69 $ 1.60 $ 1.36
Diluted 0.75 0.68 1.59 1.35
Funds available for
distribution -
normalized
Basic $ 0.71 $ 0.64 $ 1.38 $ 1.30
Diluted 0.71 0.64 1.37 1.29
FAD Payout Ratio
Dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
FAD per diluted share $ 0.75 $ 0.34 $ 1.59 $ 1.00
---------- ---------- ---------- ----------
FAD payout ratio 85% 182% 79% 122%
FAD Payout Ratio
- Adjusted
Dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
FAD per diluted share
- adjusted $ 0.75 $ 0.68 $ 1.59 $ 1.35
---------- ---------- ---------- ----------
FAD payout ratio
- adjusted 85% 91% 79% 90%
FAD Payout Ratio
- Normalized
Dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
FAD per diluted share
- normalized $ 0.71 $ 0.64 $ 1.37 $ 1.29
---------- ---------- ---------- ----------
FAD payout ratio
- normalized 90% 97% 92% 95%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
Funds From Operations Reconciliation Exhibit 14
------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net income (loss)
available to common
stockholders $ 22,668 $ (1,606) $ 42,313 $ 16,198
Provision for
depreciation (1) 24,131 21,009 47,392 41,406
Loss (gain) on sales of
properties (929) 24 (2,482) 134
---------- ---------- ---------- ----------
Funds from operations 45,870 19,427 87,223 57,738
Loss on extinguishment of
debt, net 0 18,448 0 18,448
---------- ---------- ---------- ----------
Funds from operations
- adjusted $ 45,870 $ 37,875 $ 87,223 $ 76,186
Average common shares
outstanding:
Basic 61,548 53,429 59,871 53,207
Diluted - for net income
(loss) purposes 61,868 53,429 60,201 53,616
Diluted - for FFO
purposes 61,868 53,765 60,201 53,616
Per share data:
Net income (loss)
available to common
stockholders
Basic $ 0.37 $ (0.03) $ 0.71 $ 0.30
Diluted 0.37 (0.03) 0.70 0.30
Funds from operations
Basic $ 0.75 $ 0.36 $ 1.46 $ 1.09
Diluted 0.74 0.36 1.45 1.08
Funds from operations
- adjusted
Basic $ 0.75 $ 0.71 $ 1.46 $ 1.43
Diluted 0.74 0.70 1.45 1.42
FFO Payout Ratio
Dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
FFO per diluted share $ 0.74 $ 0.36 $ 1.45 $ 1.08
---------- ---------- ---------- ----------
FFO payout ratio 86% 172% 87% 113%
FFO Payout Ratio
- Adjusted
Dividends per share $ 0.64 $ 0.62 $ 1.26 $ 1.22
FFO per diluted share
- adjusted $ 0.74 $ 0.70 $ 1.45 $ 1.42
---------- ---------- ---------- ----------
FFO payout ratio
- adjusted 86% 89% 87% 86%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
Outlook Reconciliation Exhibit 15
----------------------
(Amounts in 000's except per share data)
Current Outlook Prior Outlook
Year Ended Year Ended
December 31, 2006 December 31, 2006
--------------------- ---------------------
Low High Low High
---------- ---------- ---------- ----------
Net income available to
common stockholders $ 83,292 $ 88,192 $ 82,363 $ 87,263
Loss (gain) on sales
of properties (2,482) (2,482) (1,553) (1,553)
Provision for
depreciation (1) 97,500 97,500 97,500 97,500
---------- ---------- ---------- ----------
Funds from operations 178,310 183,210 178,310 183,210
Rental income less than
(in excess of) cash
received 4,500 4,500 2,000 2,000
---------- ---------- ---------- ----------
Funds available for
distribution $ 182,810 $ 187,710 $ 180,310 $ 185,210
Average common shares
outstanding (diluted) 62,000 62,000 62,000 62,000
Per share data (diluted):
Net income available to
common stockholders $ 1.34 $ 1.42 $ 1.33 $ 1.41
Funds from operations 2.88 2.96 2.88 2.96
Funds available for
distribution 2.95 3.03 2.91 2.99
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
CONTACT: Health Care REIT, Inc.
Scott Estes, 419-247-2800
Mike Crabtree, 419-247-2800
SOURCE: Health Care REIT, Inc.