TOLEDO, Ohio--(BUSINESS WIRE)--May 1, 2003--Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its first quarter ended March 31, 2003. We continue to meet our financial and operational expectations.
"We are pleased to report the third consecutive quarter of strong FFO growth, due in large part to our ability to access reasonably priced capital that enables us to fund our investment strategy. Our continued ability to attract capital was evident this quarter with the $100 million unsecured debt offering, an add-on to the original issuance we made during the third quarter of 2002, for an aggregate principal amount of $250 million," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "We invested $51.6 million with quality operators in competitive facilities. Given our strong pipeline and continued access to the capital markets, we are increasing our gross investment goal for the year to $325 to $350 million."
As previously announced, the Board of Directors declared a dividend for the quarter ended March 31, 2003, of $0.585 per share. The dividend represents the 128th consecutive dividend payment. The dividend will be payable May 20, 2003, to stockholders of record on April 30, 2003.
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Summary of First Quarter Results
--------------------------------
(In thousands, except per share numbers)
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Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
----------------------------------------------------------------------
Revenues $46,292 $36,083
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Net Income Available to Common
Stockholders $16,451 $12,511
----------------------------------------------------------------------
Funds From Operations (FFO) $28,074 $21,188
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Net Income Per Diluted Share $0.41 $0.37
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FFO Per Diluted Share $0.69 $0.63
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Dividend Per Share $0.585 $0.585
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FFO Payout Ratio 85% 93%
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Net income available to common stockholders totaled $16.5 million, or $0.41 per diluted share for the first quarter of 2003, compared with $12.5 million, or $0.37 per diluted share, for the same period in 2002. Funds from operations (FFO) totaled $28.1 million, or $0.69 per diluted share, for the first quarter of 2003, compared with $21.2 million, or $0.63 per diluted share, for the same period in 2002. A reconciliation of net income and FFO is presented in Exhibit 14.
We had a total outstanding debt balance of $740.8 million at March 31, 2003, as compared with $571.4 million at March 31, 2002, and stockholders' equity of $893.4 million, which represents a debt to total book capitalization ratio of 45 percent. The debt to total market capitalization at March 31, 2003 was 38 percent. Our coverage ratio of EBITDA to interest was 3.65 to 1.00 for the twelve months ended March 31, 2003.
Portfolio Update. One assisted living facility stabilized during the quarter and four assisted living facilities in fill-up were acquired. We ended the quarter with 20 assisted living facilities remaining in fill-up, representing nine percent of revenues. Only one of these facilities, representing one percent of revenues, has occupancy of less than 50 percent.
We recently reported the bankruptcy filing of Doctors Community Health Care Corporation. Based upon a recent appraisal and the historical performance of our facility, we expect to receive payment in full before December 31, 2003, of the outstanding principal and accrued interest, which we believe we are entitled to as an oversecured creditor. Doctors did not make an interest payment for the first quarter. As previously announced, we do not currently intend to recognize any interest on the loan if payment is not received.
We also recently reported the bankruptcy filing of Alterra Healthcare Corporation. Alterra has remained current on rental payments through April 2003 and has acceptable master lease payment coverage of 1.5 times. Alterra filed its plan of reorganization and disclosure statement on March 27, 2003 and indicated its intention to assume the master lease at current rental levels. Based on Alterra's plan and disclosure statement, we expect confirmation in the third quarter.
Stock Option Expensing. As previously announced, we commenced recognizing compensation expense related to employee stock options on a prospective basis, effective January 1, 2003. We will record the expense related to the 2003 options issued over the option vesting period of five years and will follow the same policy for future stock option issuances. The current year charge is estimated to be $200,000.
Supplemental Reporting Measure. We believe that FFO is an important supplemental measure because it is the generally accepted measure of operating performance for the real estate investment trust industry. Along with cash flow provided from operating activities, we consider FFO a supplemental measure of our ability to service debt, to make dividend payments and to fund other cash needs. We primarily utilize FFO to analyze the relationship between dividend payments and FFO to measure our desired payout ratio.
We generally use the definition of FFO prescribed by the National Association of Real Estate Investment Trusts (NAREIT). FFO should not be considered as an alternative to net income as a measure of profitability or cash flow provided from operating activities determined in accordance with generally accepted accounting principles. Additionally, FFO, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts.
Outlook for 2003. We expect to report net income available to common stockholders in the range of $1.69 to $1.74 per diluted share and FFO in the range of $2.78 to $2.83 per diluted share for the year 2003. The guidance assumes gross investments of $325 to $350 million, net investments of $250 million and non-recognition of interest income on the mortgage loan with Doctors Community Health Care Corporation. Please see Exhibit 15 for a reconciliation of the outlook for net income and FFO.
Dividend Reinvestment Plan. We have filed with the Securities and Exchange Commission a registration statement that amends our dividend reinvestment and stock purchase plan. Once the registration statement is effective, existing stockholders will be able to purchase up to $5,000 of common stock per month at a discount, currently set at 4%. Additionally, investors who are not stockholders of the company may use this plan to make an initial investment in the company. We have the discretion to grant waivers for purchases in excess of $5,000 per month.
Conference Call Information. We have scheduled a conference call on May 2, 2003, at 11:00 A.M. EDST to discuss our first quarter 2003 results, industry trends, portfolio performance and outlook for the remainder of 2003. To participate on the webcast, log on to www.hcreit.com or www.ccbn.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through the same websites. This earnings release is posted on our website under the heading Press Releases.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily skilled nursing and assisted living facilities. At March 31, 2003, we had investments in 248 health care facilities in 33 states with 46 operators and had total assets of approximately $1.6 billion. For more information on Health Care REIT, Inc., via facsimile at no cost, dial 1-800-PRO-INFO and enter the company code - HCN. More information is available on the Internet at http://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 the possible expansion of our portfolio; the performance of our operators and properties; our ability to enter into agreements with new viable tenants for properties which we take back from financially troubled tenants, if any; our ability to make distributions; our policies and plans regarding investments, financings and other matters; our tax status as a real estate investment trust; our ability to appropriately balance the use of debt and equity; and our ability to access capital markets or other sources of funds. When we use words such as "believe," "expect," "anticipate," or similar expressions, we are making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our expected results may not be achieved, and actual results may differ materially from our 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; compliance with and changes to regulations and payment policies within the health care industry; changes in financing terms; competition within the health care and senior housing industries; and changes in federal, state and local legislation. Finally, we assume 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)
(Amounts in thousands)
March 31
---------------------------
2003 2002
----------------------------
Assets
Real estate investments:
Real property owned
Land $ 120,640 $ 98,901
Buildings & improvements 1,312,218 1,044,243
Construction in progress 26,162 0
---------- ----------
1,459,020 1,143,144
Less accumulated depreciation (125,173) (89,221)
---------- ----------
Total real property owned 1,333,847 1,053,923
Loans receivable
Real property loans 205,634 240,128
Subdebt investments 17,613 24,212
---------- ----------
223,247 264,340
Less allowance for losses on
loans receivable (5,205) (7,111)
---------- ----------
218,042 257,229
---------- ----------
Net real estate investments 1,551,889 1,311,152
Other assets:
Equity investments 7,101 6,550
Deferred loan expenses 5,518 6,823
Cash and cash equivalents 33,878 8,122
Receivables and other assets 43,454 36,333
---------- ----------
89,951 57,828
---------- ----------
Total assets $1,641,840 $1,368,980
========== ==========
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured line
of credit obligations $ 74,100 $ 78,000
Senior unsecured notes 615,000 412,250
Secured debt 51,730 81,123
Accrued expenses and other
liabilities 7,637 16,047
---------- ----------
Total liabilities 748,467 587,420
Stockholders' equity:
Preferred stock 127,500 150,000
Common stock 40,207 33,947
Capital in excess of par value 793,541 637,920
Cumulative net income 599,793 528,725
Cumulative dividends (664,446) (563,473)
Accumulated other
comprehensive income (344) (995)
Other equity (2,878) (4,564)
---------- ----------
Total stockholders' equity 893,373 781,560
---------- ----------
Total liabilities and
stockholders' equity $1,641,840 $1,368,980
========== ==========
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
March 31
----------------------
2003 2002
----------------------
Revenues:
Rental income $40,760 $28,739
Interest income 4,940 6,787
Commitment fees and other income 592 557
------- -------
Gross revenues 46,292 36,083
Expenses:
Interest expense 11,875 9,479
Provision for depreciation 11,652 8,293
General and administrative 2,611 2,261
Loan expense 635 577
Provision for losses 250 250
------- -------
Total expenses 27,023 20,860
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Income from continuing operations 19,269 15,223
Discontinued operations:
Gain (loss) on sales of properties 34 0
Income (loss) from discontinued
operations, net (6) 665
------- -------
28 665
------- -------
Net income 19,297 15,888
Preferred dividends 2,846 3,377
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Net income available to
common stockholders $16,451 $12,511
======= =======
Average number of common shares
outstanding:
Basic 39,971 32,946
Diluted 40,473 33,693
Net income available to
common stockholders per share:
Basic $ 0.41 $ 0.38
Diluted 0.41 0.37
Funds from operations $28,074 $21,188
Funds from operations per share:
Basic $ 0.70 $ 0.64
Diluted 0.69 0.63
Dividends per share $ 0.585 $ 0.585
HEALTH CARE REIT, INC. Financial Supplement - March 31, 2003
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Portfolio Composition ($000's) Exhibit 1
------------------------------
Balance Sheet # Properties # Beds/Units Balance % Balance
Data
-----------------------------------------------------
Real Property 226 20,276 $1,333,847 86%
Loans
Receivable 22 2,631 205,634 13%
Subdebt
Investments 0 0 17,613 1%
-----------------------------------------------------
Total
Investments 248 22,907 $1,557,094 100%
Investment Data # Properties # Beds/Units Investment(1) % Investment
-----------------------------------------------------
Assisted Living
Facilities 162 10,815 $ 892,161 57%
Skilled Nursing
Facilities 78 10,788 545,165 35%
Specialty Care
Facilities 8 1,304 127,613 8%
-----------------------------------------------------
Real Estate
Investments 248 22,907 $1,564,939 100%
Notes: (1) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$1,557,094,000 and $7,845,000, respectively.
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Revenue Composition ($000's) Exhibit 2
----------------------------
Three Months Ended
March 31, 2003
----------------
Revenue by Investment Type (1)
Real Property $41,200 89%
Loans Receivable 4,833 10%
Subdebt Investments 259 1%
----------------
Total $46,292 100%
Revenue by Facility Type (1)
Assisted Living Facilities $25,835 56%
Skilled Nursing Facilities 17,505 38%
Specialty Care Facilities 2,952 6%
----------------
Total $46,292 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
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Operator Concentration ($000's) Exhibit 3
------------------------------
Concentration by Investment # Properties Investment % Investment
-----------------------------------------
Commonwealth Communities
L.L.C. 14 $ 196,240 12%
Merrill Gardens L.L.C. 15 124,633 8%
Life Care Centers of
America, Inc. 17 118,889 8%
Home Quality Management,
Inc. 19 115,518 7%
Alterra Healthcare
Corporation 45 105,562 7%
Remaining Operators (41) 138 904,097 58%
-----------------------------------------
Total 248 $1,564,939 100%
Concentration by Revenue # Properties Revenue (1) % Revenue
-----------------------------------------
Commonwealth Communities
L.L.C. 14 $ 6,696 14%
Merrill Gardens L.L.C. 15 4,053 9%
Life Care Centers of
America, Inc. 17 3,588 8%
Alterra Healthcare
Corporation 45 3,449 7%
Home Quality Management,
Inc. 19 3,261 7%
Remaining Operators (41) 138 25,245 55%
-----------------------------------------
Total 248 $ 46,292 100%
Notes: (1) Three months ended March 31, 2003.
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Geographic Concentration ($000's) Exhibit 4
--------------------------------
Concentration by Region # Properties Investment % Investment
----------------- -------------- -------------
South 136 $ 681,741 44%
Northeast 41 380,946 24%
Midwest 37 251,614 16%
West 34 250,638 16%
----------------- -------------- -------------
Total 248 $1,564,939 100%
Concentration by State # Properties Investment % Investment
----------------- -------------- -------------
Massachusetts 21 $ 237,127 15%
Florida 29 153,172 10%
Texas 31 114,433 7%
Ohio 13 109,641 7%
California 10 87,434 6%
Remaining States (28) 144 863,132 55%
----------------- -------------- -------------
Total 248 $1,564,939 100%
Revenue by State # Properties Revenue (1) % Revenue
----------------- -------------- -------------
Massachusetts 21 $ 8,328 18%
Florida 29 4,271 9%
Texas 31 3,829 8%
Ohio 10 3,401 7%
North Carolina 12 2,686 6%
Remaining States (28) 145 23,777 52%
----------------- -------------- -------------
Total 248 $ 46,292 100%
Notes: (1) Three months ended March 31, 2003.
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Committed Investment Balances Exhibit 5
-----------------------------
($000's except Investment per Bed/Unit)
Committed Investment
# Properties # Beds/Units Balance(1) per Bed/Unit
----------------------------------------------------
Assisted Living
Facilities 162 10,815 $ 913,517 $ 84,468
Skilled Nursing
Facilities 78 10,788 545,165 50,534
Specialty Care
Facilities 8 1,304 142,796 109,506
----------------------------------------------------
Total 248 22,907 $1,601,478 -na-
Notes: (1) Committed Balance includes gross real estate
investments, credit enhancements and unfunded
commitments for which initial funding had commenced.
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Lease Up Statistics on Assisted Living Facilities ($000's) Exhibit 6
----------------------------------------------------------
Average Months
Occupancy # Properties in Operation Revenue(1) % of Revenue
--------------------------------------------------------
0% - 50% 1 21 $ 557 1%
50% - 70% 7 28 2,225 5%
70% + 12 16 1,364 3%
--------------------------------------------------------
20 -na- $4,146 9%
Notes: (1) Interest and rental income for the three months ended
March 31, 2003.
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Selected Facility Data Exhibit 7
----------------------
Coverage Data
% Payor Mix ---------------------
---------------------- Before After
Census Private Medicare Mgt. Fees Mgt. Fees
------------------------------------------------------
Assisted Living
Facilities 86% 95% 0% 1.31x 1.11x
Skilled Nursing
Facilities 85% 20% 13% 1.69x 1.29x
Specialty Care
Facilities 66% 12% 20% 1.98x 1.57x
----------------------
Weighted Averages 1.50x 1.20x
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Credit Support ($000's) Exhibit 8
----------------------
Balance % Investment
-------------------------
Cross Defaulted $1,475,555 94% of gross real estate investments
Cross Collateralized 169,415 82% of loans receivable
Master Leases 1,163,545 87% of real property owned
Current Capitalization ($000's)
------------------------------ Leverage & Performance
Ratios
Balance % Balance ---------------------------
--------------------
Borrowings Under Bank Debt/Total Book Cap 45%
Lines $ 74,100 4% Debt/Total Market Cap 38%
Long-Term Debt Interest
Obligations 666,730 41% Coverage 3.62x 1st Qtr.
Stockholders' Equity 893,373 55% 3.65x L12M
------------------ FFO Payout
Total Book Ratio 85% 1st Qtr.
Capitalization $1,634,203 100% 86% L12M
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Revenue Maturities ($000's) Exhibit 9
--------------------------
Operating Lease Expirations & Loan Maturities
Current Lease Current Interest Interest and
Year Revenue (1) Revenue (1) Lease Revenue % of Total
---------------------------------------------------------------------
2003 $ 3,670 $ 420 $ 4,090 2%
2004 410 1,408 1,818 1%
2005 0 5,936 5,936 3%
2006 942 4,321 5,263 3%
2007 0 0 0 0%
Thereafter 154,698 9,289 163,987 91%
----------------------------------------------------
Total $159,720 $ 21,374 $181,094 100%
Notes: (1) Revenue impact by year, annualized.
Debt Maturities and Principal Payments ($000's) Exhibit 10
----------------------------------------------
Year Lines of Credit (1) Senior Notes Secured Debt (1) Total
---------------------------------------------------------------------
2003 $ 25,000 $ 0 $ 316 $ 25,316
2004 0 40,000 64,453 104,453
2005 175,000 0 494 175,494
2006 0 50,000 519 50,519
2007 0 175,000 552 175,552
2008 0 100,000 601 100,601
2009 0 0 641 641
Thereafter 0 250,000 44,154 294,154
-----------------------------------------------------------
Total $200,000 $615,000 $111,730 $926,730
Notes: (1) Reflected at 100% capacity.
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Investment Activity ($000's) Exhibit 11
----------------------------
Three Months Ended
March 31, 2003
---------------------
Funding by Investment Type
Real Property $ 38,798 75%
Loans Receivable 9,653 19%
Subdebt Investments 3,187 6%
---------------------
Total $ 51,638 100%
Funding by Facility Type
Assisted Living Facilities $ 31,979 62%
Skilled Nursing Facilities 14,061 27%
Specialty Care Facilities 5,598 11%
---------------------
Total $ 51,638 100%
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Disposition Activity ($000's) Exhibit 12
-----------------------------
Three Months Ended
March 31, 2003
---------------------
Dispositions by Investment Type
Real Property $ 110 1%
Loans Receivable 15,606 99%
---------------------
Total $ 15,716 100%
Dispositions by Facility Type
Assisted Living Facilities $ 15,716 100%
Skilled Nursing Facilities 0 0%
Specialty Care Facilities 0 0%
---------------------
Total $ 15,716 100%
Discontinued Operations ($000's) Exhibit 13
--------------------------------
Three Months Ended
March 31, 2003
--------------------
Revenues
Rental income $ 0
Expenses
Interest expense 1
Provision for depreciation 5
--------------------
Income (loss) from discontinued operations, net $ (6)
Funds From Operations Reconciliation Exhibit 14
------------------------------------
(Amounts in 000's except per share data)
Three Months Ended
March 31
---------------------
2003 2002
--------- ---------
Net income available to common stockholders $ 16,451 $ 12,511
Provision for depreciation (1) 11,657 8,677
Loss (gain) on sales of properties (34) 0
--------- ---------
Funds from operations $ 28,074 $ 21,188
Average common shares outstanding:
Basic 39,971 32,946
Diluted 40,473 33,693
Per share data:
Net income available to common stockholders
Basic $ 0.41 $ 0.38
Diluted 0.41 0.37
Funds from operations
Basic $ 0.70 $ 0.64
Diluted 0.69 0.63
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
FFO Outlook Reconciliation Exhibit 15
--------------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2003
-----------------------
Low High
----------- -----------
Net income available to common
stockholders $ 73,601 $ 75,699
Provision for depreciation 47,382 47,382
---------- ----------
Funds from operations $ 120,983 $ 123,081
Average common shares outstanding
(diluted) 43,505 43,505
Per share data (diluted):
Net income available to common
stockholders $ 1.69 $ 1.74
Funds from operations 2.78 2.83