TOLEDO, Ohio--(BUSINESS WIRE)--May 5, 2005--Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its first quarter ended March 31, 2005.
"Our investment activity and operating results were substantially as anticipated," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "We had strong recurring FAD growth and significant portfolio payment coverage improvement over the previous year. After three excellent years for investing, we were cautious about investment prospects for 2005 given aggressive valuations, especially in the high end assisted living sector. As we continue to diligently pursue quality investments, we will maintain our underwriting and asset management discipline. The liquidity in the long-term care sector should also permit us to further strengthen our portfolio by repositioning our capital with the best assets and operators."
As previously announced, the Board of Directors declared a dividend for the quarter ended March 31, 2005 of $0.62 per share as compared to $0.60 per share for the same period in 2004. The dividend represents the 136th consecutive dividend payment. The dividend will be payable May 20, 2005 to stockholders of record on April 29, 2005.
Summary of First Quarter Results
--------------------------------------------
(In thousands, except per share data)
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Three Months Three Months
Ended Ended
March 31, March 31,
2005 2004
----------------------------------------------------------------------
Revenues $68,379 $59,645
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Net Income Available to Common Stockholders $17,803 $18,655
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Funds From Operations $38,309 $35,789
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Funds Available for Distribution $35,454 $29,125
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Net Income Per Diluted Share $ 0.33 $ 0.36
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FFO Per Diluted Share $ 0.72 $ 0.70
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FAD Per Diluted Share $ 0.66 $ 0.57
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Dividend Per Share $ 0.60 $ 0.585
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FFO Payout Ratio 83% 84%
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FAD Payout Ratio 91% 103%
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The company had a total outstanding debt balance of $1.2 billion at March 31, 2005, as compared with $1.0 billion at March 31, 2004, and stockholders' equity of $1.3 billion. At March 31, 2005, the company's debt to total book capitalization ratio was 48 percent and the debt to total market capitalization was 38 percent. For the three months ended March 31, 2005, the company's coverage ratio of EBITDA to interest was 3.26 to 1.00 and the coverage ratio of EBITDA to fixed charges was 2.56 to 1.00.
Straight-line Rent. The company recorded $2.9 million of straight-line rent for the three months ended March 31, 2005. Straight-line rent is net of $852,000 in cash payments outside normal monthly rental payments for the three month period.
Outlook for 2005. The company affirms its 2005 guidance and expects to report net income available to common stockholders in the range of $1.39 to $1.47 per diluted share and FFO in the range of $2.90 to $2.98 per diluted share. The guidance assumes net new investments of $200 million with leases that will not require rents to be straight-lined. The company continues to anticipate that general and administrative expenses will total between $17.5 million and $18.5 million for the full year 2005. The company now expects to record straight-line rent of approximately $13 million for the full year 2005, before any additional cash payments outside normal monthly rental payments, and expects to report FAD in the range of $2.66 to $2.74 per diluted share.
The company's guidance does not account for any impairments or unanticipated additions to the loan loss reserve. Additionally, the company plans to manage itself to maintain investment grade status with a capital structure consistent with its current profile. Please see Exhibit 15 for a reconciliation of the outlook for net income to FFO and FAD.
Supplemental Reporting Measures. The company believes that net income, as defined by accounting principles generally accepted in the United States (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 non-cash straight-line rental adjustments.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. Additionally, the company excludes the non-cash provision for loan losses. 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.
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, in making operating decisions and for budget planning purposes. Additionally, FFO and FAD are internal evaluation metrics 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 13, 14 and 16 for reconciliations of FAD, FFO and EBITDA to net income.
Conference Call Information. The company has scheduled a conference call on May 6, 2005, at 9:00 a.m. Eastern time to discuss its first quarter results, industry trends, portfolio performance and outlook for 2005. To participate on the webcast, log on to www.hcreit.com or www.fulldisclosure.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.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests primarily in skilled nursing and assisted living facilities. At March 31, 2005, the company had investments in 398 facilities in 35 states with 51 operators and had total assets of approximately $2.6 billion. The portfolio included 237 assisted living facilities, 153 skilled nursing facilities and eight specialty care hospitals. 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 performance of its operators and properties; its ability to make distributions; its policies and plans regarding investments, financings and other matters; 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," 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; serious 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; changes in federal, state and local legislation; 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; inaccuracies in any of the company's assumptions; and changes in rules or practices governing the company's financial reporting. 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)
March 31
-----------------------
2005 2004
-----------------------
Assets
Real estate investments:
Real property owned
Land $ 210,014 $ 174,888
Buildings & improvements 2,217,871 1,786,296
Construction in progress 26,699 17,924
----------- -----------
2,454,584 1,979,108
Less accumulated depreciation (236,950) (169,574)
----------- -----------
Total real property owned 2,217,634 1,809,534
Loans receivable
Real property loans 218,202 218,434
Subdebt investments 23,308 45,173
----------- -----------
241,510 263,607
Less allowance for losses on loans receivable (5,561) (8,125)
----------- -----------
235,949 255,482
----------- -----------
Net real estate investments 2,453,583 2,065,016
Other assets:
Equity investments 3,298 3,298
Deferred loan expenses 6,419 9,554
Cash and cash equivalents 17,429 47,063
Receivables and other assets 79,633 61,390
----------- -----------
106,779 121,305
----------- -----------
Total assets $2,560,362 $2,186,321
=========== ===========
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 163,500 $ 0
Senior unsecured notes 875,000 865,000
Secured debt 169,506 147,616
Accrued expenses and other liabilities 17,951 13,342
----------- -----------
Total liabilities 1,225,957 1,025,958
Stockholders' equity:
Preferred stock 283,751 119,631
Common stock 53,314 51,051
Capital in excess of par value 1,152,670 1,091,896
Treasury stock (1,766) (850)
Cumulative net income 769,056 681,371
Cumulative dividends (922,241) (781,046)
Accumulated other comprehensive income 1 1
Other equity (380) (1,691)
----------- -----------
Total stockholders' equity 1,334,405 1,160,363
----------- -----------
Total liabilities and stockholders' equity $2,560,362 $2,186,321
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended
March 31
-----------------------
2005 2004
-----------------------
Revenues:
Rental income $ 61,974 $ 53,219
Interest income 4,983 5,713
Transaction fees and other income 1,422 713
----------- -----------
Gross revenues 68,379 59,645
Expenses:
Interest expense 19,601 18,148
Provision for depreciation 20,298 16,534
General and administrative 4,017 3,159
Loan expense 863 891
Provision for loan losses 300 300
----------- -----------
Total expenses 45,079 39,032
----------- -----------
Income from continuing operations 23,300 20,613
Discontinued operations:
Gain (loss) on sales of properties (110) 0
Income (loss) from discontinued
operations, net 49 312
----------- -----------
(61) 312
----------- -----------
Net income 23,239 20,925
Preferred dividends 5,436 2,270
----------- -----------
Net income available to common stockholders $ 17,803 $ 18,655
=========== ===========
Average number of common shares outstanding:
Basic 52,963 50,580
Diluted 53,454 51,358
Net income available to common stockholders
per share:
Basic $ 0.34 $ 0.37
Diluted 0.33 0.36
Dividends per share $ 0.60 $ 0.585
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Portfolio Composition ($000's) Exhibit 1
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# #
Balance Sheet Data Properties Beds/Units Balance % Balance
-------------------------------------------------
Real Property 376 35,322 $2,217,634 90%
Loans Receivable (1) 22 2,651 218,202 9%
Subdebt Investments 0 0 23,308 1%
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Total Investments 398 37,973 $2,459,144 100%
# #
Investment Data Properties Beds/Units Investment(2) % Investment
----------------------------------------------------
Assisted Living
Facilities 237 15,936 $1,346,442 55%
Skilled Nursing
Facilities 153 20,926 961,013 39%
Specialty Care
Facilities 8 1,111 157,334 6%
----------------------------------------------------
Real Estate
Investments 398 37,973 $2,464,789 100%
Notes: (1) Includes $35,862,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$2,459,144,000 and $5,645,000, respectively.
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Revenue Composition ($000's) Exhibit 2
----------------------------------------------------------------------
Three Months Ended
March 31, 2005
------------------
Revenue by Investment Type (1)
Real Property $ 63,431 93%
Loans Receivable 4,220 6%
Subdebt Investments 919 1%
------------------------------------------------------
Total $ 68,570 100%
Revenue by Facility Type (1)
Assisted Living Facilities $ 36,130 53%
Skilled Nursing Facilities 27,953 41%
Specialty Care Facilities 4,487 6%
------------------------------------------------------
Total $ 68,570 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
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Operator Concentration ($000's) Exhibit 3
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Concentration by Investment # Properties Investment % Investment
---------------------------------------
Emeritus Corporation 49 $ 360,610 15%
Southern Assisted Living, Inc. 43 199,764 8%
Commonwealth Communities
Management LLC 13 196,496 8%
Delta Health Group, Inc. 25 176,930 7%
Home Quality Management, Inc. 32 175,328 7%
Remaining operators (46) 236 1,355,661 55%
---------------------------------------
Total 398 $ 2,464,789 100%
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Geographic Concentration ($000's) Exhibit 4
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Concentration by Region # Properties Investment % Investment
------------- ---------- -------------
South 244 $1,294,862 53%
Northeast 60 520,670 21%
West 49 306,018 12%
Midwest 45 343,239 14%
------------- ---------- -------------
Total 398 $2,464,789 100%
Concentration by State # Properties Investment % Investment
------------- ---------- -------------
Florida 59 $ 371,570 15%
Massachusetts 36 359,116 15%
North Carolina 42 196,018 8%
Ohio 17 157,748 6%
Tennessee 27 141,403 6%
Remaining States (30) 217 1,238,934 50%
------------- ---------- -------------
Total 398 $2,464,789 100%
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Committed Investment Balances Exhibit 5
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($000's except Investment per Bed/Unit)
Committed Investment
# Properties # Beds/Units Balance(1) per Bed/Unit
----------------------------------------------------
Assisted Living
Facilities 237 15,936 $1,351,469 $ 84,806
Skilled Nursing
Facilities 153 20,926 961,013 45,924
Specialty Care
Facilities 8 1,111 157,334 141,615
--------------------------------------------------
Total 398 37,973 $2,469,816 -na-
Notes: (1) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
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Selected Facility Data Exhibit 6
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Coverage Data
---------------
% Payor Mix Before After
-------------------------- Mgt. Mgt.
Census Private Medicare Medicaid Fees Fees
------------------------------------------------
Assisted Living
Facilities 88% 85% 0% 15% 1.47x 1.25x
Skilled Nursing
Facilities 87% 16% 14% 70% 2.15x 1.64x
Specialty Care
Facilities 61% 23% 42% 35% 3.00x 2.37x
---------------
Weighted Averages 1.84x 1.48x
Notes: Data as of December 31, 2004.
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Credit Support ($000's) Exhibit 7
----------------------------------------------------------------------
Balance % Investment
-------------------------
Cross Defaulted $2,373,797 97% of gross real estate investments
Cross Collateralized 187,332 86% of real property loans receivable
Master Leases 1,867,554 84% of real property owned
Current Capitalization Leverage & Performance
($000's except share price) Ratios
--------------------------- -------------------------
Balance % Balance
--------------------
Borrowings Under Bank
Lines $ 163,500 7% Debt/Total Book Cap 48%
Long-Term Debt
Obligations 1,044,506 41%
Stockholders' Equity 1,334,405 52% Debt/Total Market Cap 38%
--------------------
Total Book
Capitalization $2,542,411 100%
Interest
Coverage 3.26x 1st Qtr.
Common Shares
Outstanding (000's) 53,434
Period-End Share Price $ 32.00
-----------
Common Stock Market
Value $1,709,888 53% Fixed Charge
Preferred Stock 283,751 9% Coverage 2.56x 1st Qtr.
Borrowings Under Bank
Lines 163,500 5%
Long-Term Debt
Obligations 1,044,506 33%
--------------------
Total Market
Capitalization $3,201,645 100%
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Revenue Maturities ($000's) Exhibit 8
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Operating Lease Expirations & Loan Maturities
Current Current Lease and
Lease Interest Interest
Year Revenue (1) Revenue (1) Revenue % of Total
----------------------------------------------------------------------
2005 $ 0 $ 345 $ 345 0%
2006 0 1,928 1,928 1%
2007 0 1,452 1,452 1%
2008 0 3,463 3,463 1%
2009 6,355 2,033 8,388 3%
Thereafter 245,380 9,644 255,024 94%
-----------------------------------------------------------
Total $251,735 $ 18,865 $270,600 100%
Notes: (1) Revenue impact by year, annualized.
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Debt Maturities and Principal Payments ($000's) Exhibit 9
----------------------------------------------------------------------
Year Lines of Senior Secured
Credit (1) Notes (2) Debt Total
----------------------------------------------------------------------
2005 $ 30,000 $ 0 $ 2,370 $ 32,370
2006 310,000 50,000 3,292 363,292
2007 0 175,000 15,283 190,283
2008 0 100,000 10,527 110,527
2009 0 0 34,067 34,067
2010 0 0 8,900 8,900
2011 0 0 20,666 20,666
Thereafter 0 550,000 74,401 624,401
------------------------------------------------------------
Total $340,000 $875,000 $169,506 $1,384,506
Notes: (1) Reflected at 100% capacity.
(2) Amounts above do not reflect issuances, redemptions and
tender offers completed in the second quarter of 2005.
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Investment Activity ($000's) Exhibit 10
----------------------------------------------------------------------
Three Months Ended
March 31, 2005
----------------------
Funding by Investment Type
Real Property $ 50,986 80%
Loans Receivable 12,520 20%
Subdebt Investments
----------------------
Total $ 63,506 100%
Funding by Facility Type
Assisted Living Facilities $ 49,841 78%
Skilled Nursing Facilities 5,132 8%
Specialty Care Facilities 8,533 14%
----------------------
Total $ 63,506 100%
-------------------------------------------------------------
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Disposition Activity ($000's) Exhibit 11
----------------------------------------------------------------------
Three Months Ended
March 31, 2005
----------------------
Dispositions by Investment Type
Real Property $ 9,298 32%
Loans Receivable 0%
Subdebt Investments 19,467 68%
-------------------
Total $ 28,765 100%
Dispositions by Facility Type
Assisted Living Facilities $ 27,786 97%
Skilled Nursing Facilities 0%
Specialty Care Facilities 979 3%
-------------------
Total $ 28,765 100%
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Discontinued Operations ($000's) Exhibit 12
----------------------------------------------------------------------
Three Months Ended
March 31
------------------------
2005 2004
---------- ----------
Revenues
Rental income $ 191 $ 1,316
Expenses
Interest expense 44 404
Provision for depreciation 98 600
---------- ----------
Income (loss) from discontinued
operations, net $ 49 $ 312
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Funds Available For Distribution Reconciliation Exhibit 13
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended
March 31
------------------------
2005 2004
---------- ----------
Net income available to common
stockholders $ 17,803 $ 18,655
Provision for depreciation (1) 20,396 17,134
Loss (gain) on sales of properties 110 0
Rental income in excess of cash
received (2,855) (6,664)
---------- ----------
Funds available for distribution 35,454 29,125
Non-recurring rental cash payments (852) (601)
---------- ----------
Funds available for distribution -
recurring $ 34,602 $ 28,524
Average common shares outstanding:
Basic 52,963 50,580
Diluted 53,454 51,358
Per share data:
Net income available to common
stockholders
Basic $ 0.34 $ 0.37
Diluted 0.33 0.36
Funds available for distribution
Basic $ 0.67 $ 0.58
Diluted 0.66 0.57
Funds available for distribution -
recurring
Basic $ 0.65 $ 0.56
Diluted 0.65 0.56
FAD Payout Ratio
Dividends per share $ 0.60 $ 0.585
FAD per diluted share $ 0.66 $ 0.57
---------- ----------
FAD payout ratio 91% 103%
FAD Payout Ratio - Recurring
Dividends per share $ 0.60 $ 0.585
FAD per diluted share - recurring $ 0.65 $ 0.56
---------- ----------
FAD payout ratio - recurring 92% 104%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
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Funds From Operations Reconciliation Exhibit 14
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended
March 31
------------------------
2005 2004
---------- ----------
Net income available to common
stockholders $ 17,803 $ 18,655
Provision for depreciation (1) 20,396 17,134
Loss (gain) on sales of properties 110 0
---------- ----------
Funds from operations $ 38,309 $ 35,789
Average common shares outstanding:
Basic 52,963 50,580
Diluted 53,454 51,358
Per share data:
Net income available to common
stockholders
Basic $ 0.34 $ 0.37
Diluted 0.33 0.36
Funds from operations
Basic $ 0.72 $ 0.71
Diluted 0.72 0.70
FFO Payout Ratio
Dividends per share $ 0.60 $ 0.585
FFO per diluted share $ 0.72 $ 0.70
---------- ----------
FFO payout ratio 83% 84%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
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Outlook Reconciliations Exhibit 15
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2005
------------------------
Low High
---------- ----------
Net income available to
common stockholders $ 76,390 $ 80,790
Loss (gain) on sales
of properties 110 110
Provision for depreciation (1) 83,000 83,000
---------- ----------
Funds from operations 159,500 163,900
Rental income in excess of
cash received (13,000) (13,000)
---------- ----------
Funds available for distribution $146,500 $150,900
Average common shares
outstanding (diluted) 55,000 55,000
Per share data (diluted):
Net income available to
common stockholders $ 1.39 $ 1.47
Funds from operations 2.90 2.98
Funds available for distribution 2.66 2.74
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
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EBITDA Reconciliation ($000's) Exhibit 16
----------------------------------------------------------------------
Three Months Ended
March 31
----------------------
2005 2004
---------- ----------
Net income $ 23,239 $ 20,925
Provision for depreciation (1) 20,396 17,134
Interest expense (1) 19,645 18,552
Capitalized interest 265 137
Amortization (2) 1,042 1,118
Provision for loan losses 300 300
---------- ----------
EBITDA $ 64,887 $ 58,166
Interest Coverage Ratio
Interest expense (1) $ 19,645 $ 18,552
Capitalized interest 265 137
---------- ----------
Total interest 19,910 18,689
EBITDA $ 64,887 $ 58,166
---------- ----------
Interest coverage ratio 3.26x 3.11x
Fixed Charge Coverage Ratio
Total interest (1) $ 19,910 $ 18,689
Preferred dividends 5,436 2,270
---------- ----------
Total fixed charges 25,346 20,959
EBITDA $ 64,887 $ 58,166
---------- ----------
Fixed charge coverage ratio 2.56x 2.78x
Notes: (1) Provision for depreciation and interest expense include
provision for depreciation and interest expense from
discontinued operations.
(2) Amortization includes amortization of deferred loan
expenses, restricted stock and stock options.
CONTACT: Health Care REIT, Inc.
Ray Braun, 419-247-2800
Mike Crabtree, 419-247-2800
Scott Estes, 419-247-2800
SOURCE: Health Care REIT, Inc.