TOLEDO, Ohio--(BW HealthWire)--Oct. 17, 2000--Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its third quarter and nine months ending September 30, 2000. The company's strategies to enhance the quality of its portfolio and reduce debt are successfully being implemented.
"We are pleased with our operating results for the quarter, and are on track to complete our $200 million asset divestiture program," commented George L. Chapman, chairman and chief executive officer. "Although the divestiture program has created a modest reduction in asset size and FFO results, this strategy has effectively preserved the company's fundamental credit qualities. The company's low leverage of 38 percent debt to total capitalization and EBITDA coverage at 3.5 times strongly support the interest and dividend payments. We intend to maintain the dividend at its current level, with increases to resume once capital becomes available at costs that permit accretive investment activity."
The Board of Directors voted to declare a dividend for the quarter ended September 30, 2000, of $0.585 per share as compared with $0.575 per share for the same period in 1999. The dividend represents the 118th consecutive dividend payment. The dividend will be payable November 20, 2000, to shareholders of record on October 31, 2000.
Summary of Third Quarter Results
--------------------------------
(in thousands, except per share numbers)
----------------------------------------------------------------------
Three Months Ended Three Months Ended
Sept. 30, 2000 Sept. 30, 1999
----------------------------------------------------------------------
Revenues $33,906 $34,160
----------------------------------------------------------------------
Net Income $13,785 $16,195
----------------------------------------------------------------------
FFO $19,215 $19,896
----------------------------------------------------------------------
Net Income Per Diluted Share $0.48 $0.57
----------------------------------------------------------------------
FFO Per Diluted Share $0.67 $0.70
----------------------------------------------------------------------
Dividend Per Share $0.585 $0.570
----------------------------------------------------------------------
FFO Payout Ratio 87% 81%
----------------------------------------------------------------------
Funds from operations (FFO), the generally accepted measure of operating performance for the real estate investment trust industry, totaled $19.2 million, or $0.67 per diluted share, for the latest three months, compared with $19.9 million, or $0.70 per diluted share, for the third quarter of 1999. Revenues were mostly unchanged as a result of increased rental income from newly converted construction properties offsetting the decline in the investment base as a result of asset dispositions.
Net income was reduced by about 15 percent during the quarter primarily as a result of an increase in the company's provision for depreciation, the level of non-recurring revenue recognized in the comparable periods in 1999, and an increase in interest expense. The provision for depreciation in the third quarter totaled $6.0 million compared with $4.6 million for the same period in 1999. The increased provision for depreciation primarily was the result of additional investments in properties owned directly by the company. Included in net income for the third quarter of 1999 were non-recurring gains and prepayment fees of $907,000 compared with $555,000 for the third quarter of 2000. Interest expense for the latest three months was $8.4 million compared with $7.7 million for the same period in 1999. The company capitalizes certain interest costs associated with funds used to finance the construction of properties owned directly by the company. The company's interest expense is reduced by the amount capitalized. As a result of reduced construction financing, capitalized interest for the 2000 third quarter totaled $600,000 compared with $1.9 million for the same period in 1999.
Summary of Year-to-Date Results
-------------------------------
(in thousands, except per share numbers)
----------------------------------------------------------------------
Nine Months Ended Nine Months Ended
Sept. 30, 2000 Sept. 30, 1999
----------------------------------------------------------------------
Revenues $103,178 $95,496
----------------------------------------------------------------------
Net Income $43,130 $48,201
----------------------------------------------------------------------
FFO $58,559 $58,547
----------------------------------------------------------------------
Net Income Per Diluted Share $1.51 $1.70
----------------------------------------------------------------------
FFO Per Diluted Share $2.05 $2.06
----------------------------------------------------------------------
Dividend Per Share $1.75 $1.695
----------------------------------------------------------------------
FFO Payout Ratio 85% 82%
----------------------------------------------------------------------
The decline in net income again was related primarily to an increase in the provision for depreciation, the level of non-recurring revenue recognized in the comparable periods in 1999, and increases in interest expense. For the nine months of 2000, the provision for depreciation totaled $16.6 million compared with $12.6 million for the same period in 1999. The increased provision for depreciation was the result of additional investments in properties owned directly by the company. Included in net income for the nine-month period of 2000 were non-recurring gains and prepayment fees of $1.1 million compared with $2.3 million for the nine-month period of 1999. During the recent nine-month period, interest expense totaled $26.1 million compared with $18.7 million for the same period last year, with capitalized interest totaling $2.7 million compared with $7.0 million for the same period in 1999.
Asset Sales Effective in Reducing Debt.
During the first nine months of 2000, the company completed asset sales totaling $161 million. The proceeds derived from the sales were used to meet debt maturities, satisfy unfunded commitment obligations, and pay down the company's line of credit arrangements. The asset sales contributed to an 8 percent reduction in total assets, which at September 30, 2000, totaled $1.16 billion.
At September 30, 2000, the company had a total outstanding debt balance of $439 million compared with $539 million at December 31, 1999, and shareholders' equity of $703 million, which represents a debt to total capitalization ratio of 0.38 to 1.0. During the first nine months of 2000, the company's coverage ratio of EBITDA to interest was 3.5 to 1.0.
Summerville Restructuring.
The company also announced that it has reached agreement with Summerville Senior Living, Inc. ("Summerville"), subject to usual and customary closing conditions, for restructuring its investment in Summerville and its facilities. The restructuring results from Summerville's decision to refocus its operations in targeted markets where it can achieve operating efficiencies, such as in its California markets. Health Care REIT's facilities are dispersed predominately in the Eastern U.S. and consist of 11 assisted living facilities and one development site with an investment balance of approximately $136 million. The agreement provides for the company to substitute operators at 10 of the Summerville facilities, Summerville to substantially repay existing company subdebt, and the company to make an equity investment in the reorganized Summerville. The company has reached agreements to re-lease 10 facilities to regional operators.
"We are pleased with this agreement that balances the interests of Summerville and Health Care REIT," said Chapman. "It is logical that Summerville focus its efforts predominately in the Western U.S., an area in which its current CEO built a strong portfolio with a high percentage of stabilized properties. The company will take the opportunity to make a new investment in Summerville. Most importantly, with Summerville's full cooperation and support, the company will be able to re-lease our facilities to five proven, regionally focused operators with whom we have had a positive, long-term relationship."
Outlook Remains Favorable for Fourth Quarter 2000.
Based on current market conditions, the company expects FFO per diluted share of $0.66 to $0.67 for the fourth quarter of 2000. Based on recurring construction funding and existing commitments to operators, the company anticipates new investments of $15 to $20 million with an average yield of 11.5 to 12.0 percent. The company currently is working with several potential buyers and expects to close on asset dispositions totaling $30 to $50 million by the end of the fourth quarter 2000.
Conference Call Information.
Health Care REIT has scheduled a conference call on October 18, 2000 at 11:00 a.m. EST to discuss its third quarter 2000 performance, the Summerville restructuring, industry trends, and its outlook for the fourth quarter and year-end. To participate, log on to www.hcreit.com or www.streetevents.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through StreetEvents' website.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily nursing homes and assisted living facilities. At September 30, 2000, the company had investments in 209 health care facilities in 34 states and had total assets of approximately $1.2 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 and supporting schedules may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in the future to differ materially from expected results. These risks and uncertainties include, among others, general economic conditions, the availability of capital, competition within the financial services and real estate markets, the performance of operators within Health Care REIT's portfolio, and regulatory and other changes in the health care sector, as described in the company's filings with the Securities and Exchange Commission.
FINANCIAL SCHEDULES FOLLOW
v
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(Amounts in thousands)
September 30
--------------------------
2000 1999
--------------------------
Assets
Real estate investments:
Real property owned
Land $ 71,289 $ 63,627
Buildings & improvements 739,437 687,429
Construction in progress 23,744 77,717
----------- -----------
834,470 828,773
Less accumulated depreciation (46,820) (32,113)
----------- -----------
Total real property owned 787,650 796,660
Loans receivable
Real property loans 314,570 411,842
Subdebt investments 27,551 22,242
----------- -----------
342,121 434,084
Less allowance for losses on
loans receivable (6,337) (5,437)
----------- -----------
335,784 428,647
----------- -----------
Net real estate investments 1,123,434 1,225,307
Other assets:
Equity investments 5,556 7,570
Deferred loan expenses 3,065 3,342
Cash and cash equivalents 3,516 7,779
Receivables and other assets 26,712 17,861
----------- -----------
38,849 36,552
----------- -----------
Total assets $ 1,162,283 $ 1,261,859
----------- -----------
----------- -----------
Liabilities and shareholders' equity
Liabilities:
Borrowings under line of
credit obligations $ 118,850 $ 178,100
Senior unsecured notes 255,000 290,000
Secured debt 64,867 61,364
Accrued expenses and
other liabilities 20,554 24,269
----------- -----------
Total liabilities $ 459,271 $ 553,733
Shareholders' equity:
Preferred Stock 150,000 150,000
Common Stock 28,691 28,413
Capital in excess of par value 526,307 522,057
Undistributed net income 2,001 10,642
Accumulated other
comprehensive income (715) 875
Unamortized restricted stock (3,272) (3,861)
----------- -----------
Total shareholders' equity $ 703,012 $ 708,126
----------- -----------
Total liabilities and
shareholders' equity $ 1,162,283 $ 1,261,859
----------- -----------
----------- -----------
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands except per share data)
Three months ended Nine months ended
September 30 September 30
------------------- -------------------
2000 1999 2000 1999
------------------- -------------------
Revenues:
Operating lease rents $ 22,266 $ 19,554 $ 65,984 $ 51,828
Interest income 9,695 12,419 31,408 36,502
Commitment fees and
other income 1,390 1,280 4,657 4,898
Prepayment fees 0 907 57 1,565
Gain on sale of
properties 555 0 1,072 703
-------- -------- -------- --------
Gross Revenues 33,906 34,160 103,178 95,496
Expenses:
Interest expense $ 8,411 $ 7,733 $ 26,093 $ 18,682
Provision for
depreciation 5,985 4,608 16,558 12,614
General and
administrative 1,823 1,881 5,654 5,427
Loan expense 276 242 879 660
Provision for losses 250 150 750 450
-------- -------- -------- --------
Total Expenses 16,745 14,614 49,934 37,833
-------- -------- -------- --------
Net Income 17,161 19,546 53,244 57,663
Preferred stock dividends 3,376 3,351 10,114 9,462
-------- -------- -------- --------
Net Income Available to
Common Shareholders $ 13,785 $ 16,195 $ 43,130 $ 48,201
-------- -------- -------- --------
-------- -------- -------- --------
Average number of
common shares
outstanding:
Basic 28,507 28,196 28,460 28,141
Diluted 28,650 28,418 28,603 28,403
Net income per share:
Basic $ 0.48 $ 0.57 $ 1.52 $ 1.71
Diluted 0.48 0.57 1.51 1.70
Funds from operations $ 19,215 $ 19,896 $ 58,559 $ 58,547
Funds from operations
per share:
Basic $ 0.67 $ 0.71 $ 2.06 $ 2.08
Diluted 0.67 0.70 2.05 2.06
Dividends per share $ 0.585 $ 0.570 $ 1.750 $ 1.695
HEALTH CARE REIT, INC.
Financial Supplement - September 30, 2000
Portfolio Composition ($000's) Exhibit 1
------------------------------
Balance Sheet Data No. No.
Properties Beds/Units Balance %Balance
------------------------------------------------
Real Property 153 12,220 $ 787,650 70%
Loans Receivable 56 5,779 314,570 28%
Subdebt Investments -na- -na- 27,551 2%
------------------------------------------------
Total Investments 209 17,999 $ 1,129,771 100%
Investment Data No. No.
Properties Beds/Units Investment(1) %Investment
------------------------------------------------
Assisted Living
Facilities 154 10,372 $ 758,975 66%
Nursing Homes 47 6,625 292,186 26%
Specialty Care
Facilities 6 708 83,147 7%
Behavioral Care 2 294 7,408 1%
------------------------------------------------
Real Estate Investments 209 17,999 $ 1,141,716 100%
Investment by No. No.
Owner Type Properties Beds/Units Investment(1) %Investment
------------------------------------------------
Publicly Traded 73 4,408 $ 272,537 24%
Key Private 91 8,919 665,919 58%
Privately Held 45 4,672 203,260 18%
------------------------------------------------
Real Estate Investments 209 17,999 $ 1,141,716 100%
Note:
(1) Real Estate Investments include gross real estate investments and
credit enhancements which amounted to $1,129,771,000 and
$11,945,000, respectively.
Revenue Composition ($000's) Exhibit 2
----------------------------
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
------------------- -------------------
Revenue by Investment Type
Real Property $ 23,456 69% $ 69,925 68%
Loans Receivable & Other 9,846 29% 32,124 31%
Subdebt Investments 604 2% 1,127 1%
------------------ ------------------
Total $ 33,906 100% $103,178 100%
Revenue by Facility Type
Assisted Living Facilities $ 22,284 66% $ 69,478 67%
Nursing Homes 8,785 26% 25,254 25%
Specialty Care Facilities 2,837 8% 8,446 8%
Behavioral Care 0 0% 0 0%
------------------ ------------------
Total $ 33,906 100% $103,178 100%
Revenue by Owner Type
Publicly Traded $ 8,126 24% $ 23,948 23%
Key Private 20,665 61% 63,826 62%
Privately Held 5,115 15% 15,404 15%
------------------ ------------------
Total $ 33,906 100% $103,178 100%
Revenue Composition (Continued) ($000's) Exhibit 3
----------------------------------------
Operating Lease Expirations & Loan Maturities
Current
Current Lease Interest Interest and
Year Revenue (1) Revenue (1) Lease Revenue % of Total
-----------------------------------------------------------------
2000 $ 1,783 $ 375 $ 2,158 2%
2001 0 1,804 1,804 2%
2002 1,738 6,142 7,880 6%
2003 2,770 1,484 4,254 3%
2004 410 5,068 5,478 4%
Thereafter 83,980 22,922 106,902 83%
------------------------------------------------------
Total $90,681 $37,795 $ 128,476 100%
Notes: (1) Revenue impact by year, annualized
Committed Investment Balances Exhibit 4
-----------------------------
($000's except Investment per Bed/Unit)
No. No. Committed Investment
Properties Beds/Units Balance(1) per Bed/Unit
----------------------------------------------------
Assisted Living
Facilities 154 10,372 $ 780,152 $ 75,217
Nursing Homes 47 6,625 292,186 44,104
Specialty Care
Facilities 6 708 83,147 117,439
Behavioral Care 2 294 7,409 25,201
----------------------------------------------------
Total 209 17,999 $1,162,894 -na-
Notes:
(1) Committed Balance includes real estate investments, credit
enhancements and unfunded commitments for which initial funding
had commenced.
Operator Concentration ($000's) Exhibit 5
-------------------------------
Concentration by Investment No.
Properties Investment % Investment
-----------------------------------------
Summerville Healthcare 12 $ 144,831 13%
Life Care Centers of
America, Inc. 13 87,214 8%
Alterra Healthcare 38 86,569 8%
Atria Senior Quarters 9 83,783 7%
Merrill Gardens 15 67,311 6%
Remaining Operators 122 672,008 58%
-----------------------------------------
Total 209 $ 1,141,716 100%
Concentration by Revenue No.
Properties Revenue (1) % Revenue
-----------------------------------------
Summerville Healthcare 12 $ 11,328 11%
Atria Senior Quarters 9 7,991 8%
Life Care Centers of
America, Inc. 13 6,044 6%
Alterra Healthcare 38 7,823 8%
Merrill Gardens 15 4,739 5%
Remaining Operators 122 65,253 62%
-----------------------------------------
Total 209 $ 103,178 100%
Notes: (1) Nine months ended September 30, 2000
Selected Facility Data Exhibit 6
----------------------
% Payor Mix Coverage Data
------------------- --------------------
Before After
Census Private Medicare Mgt. Fees Mgt. Fees
------------------------------------------------------
Nursing Homes 83% 24% 13% 1.90x 1.33x
Assisted Living
Facilities 91% 100% 0% 1.35x 1.16x
Specialty Care
Facilities 58% 17% 29% 1.99x 1.50x
Behavioral Care 53% 30% 70% 2.53x 1.24x
------------------
Weighted Averages 1.66x 1.27x
Notes: Data as of June 30, 2000
Security Deposits & Other Credit Support ($000's) Exhibit 7
-------------------------------------------------
Balance % Investment
------------------------------
Cross Defaulted $1,045,897 92% of gross real
estate investments
Cross Collateralized 292,962 93% of mortgage loans
Bank Letters of
Credit & Cash 30,548 3% of investment balance
Current Capitalization Balance % Balance Leverage & Performance
($000's) Ratios
---------------------- -------------------- ----------------------
Borrowings Under
Bank Lines $ 118,850 10% Debt/Total Book Cap 38%
Long-Term Debt
Obligations 319,867 28% Debt/Equity 62%
Shareholders' Equity 703,012 62% Interest
Coverage 3.59x 3rd Qtr.
-------------------- 3.46x L12M
Total Book
Capitalization $1,141,729 100% FFO Payout
Ratio 87% 3rd Qtr.
85% L12M
Debt Maturities and Principal Payments ($000's) Exhibit 8
-----------------------------------------------
Lines of
Year Credit (1) Senior Notes Secured Debt Total
---------------------------------------------------------------------
2000 $ 0 $ 0 $ 16 $ 16
2001 200,000 10,000 67 210,067
2002 0 20,000 75 20,075
2003 0 35,000 84 35,084
2004 0 40,000 64,133 104,133
2005 0 0 492 492
2006 0 0 0 0
Thereafter 0 150,000 0 150,000
---------------------------------------------------------
Total $200,000 $255,000 $ 64,867 $ 519,867
Notes: (1) Lines of Credit reflect 100% capacity
Investment Activity ($000's) Exhibit 9
----------------------------
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
---------------- ----------------
Funding by Investment Type
Real Property $ 3,086 27% $14,856 28%
Mortgage & Other Loans 0 0% 0 0%
Construction Advances 7,298 64% 27,833 52%
Direct Investments 1,071 9% 11,012 20%
---------------- ----------------
Total $11,455 100% $53,701 100%
Real Estate Investments
Assisted Living Facilities $ 8,491 74% $44,002 82%
Nursing Homes 2,964 26% 9,699 18%
Behavioral Care 0 0% 0 0%
Specialty Care Facilities 0 0% 0 0%
---------------- ----------------
Total $11,455 100% $53,701 100%
Geographic Concentration ($000's) Exhibit 10
---------------------------------
Concentration by Region No. Properties Investment % Investment
------------------------------------------
South 119 $ 556,542 49%
Northeast 31 258,314 23%
West 33 197,970 17%
Midwest 26 128,890 11%
------------------------------------------
Total 209 $ 1,141,716 100%
Concentration by State No. Properties Investment % Investment
------------------------------------------
Texas 34 $ 138,548 12%
Florida 28 138,327 12%
Massachusetts 14 113,251 10%
North Carolina 12 68,467 6%
New York 6 64,676 6%
Remaining States 127 618,447 54%
------------------------------------------
Total 209 $ 1,141,716 100%
Revenue by State No. Properties Revenue (1) % Revenue
------------------------------------------
Texas 34 $ 14,765 14%
Florida 28 10,839 11%
Massachusetts 14 9,309 9%
North Carolina 12 6,728 7%
New York 6 5,403 5%
Remaining States 127 56,134 54%
------------------------------------------
Total 209 $ 103,178 100%
Notes: (1) Nine months ended September 30, 2000
Funds From Operations Computation ($000's) Exhibit 11
------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
--------------------------------------
Net Income Available to Common
Shareholders $ 13,785 $ 43,130
Add: Depreciation Expense 5,985 16,558
Loss on Sale of Assets 0 0
Asset Impairment Charges 0 0
Deduct: Gain on Sale of Assets (555) (1,072)
Prepayment Fees (0) (57)
--------------------------------------
Funds From Operations (FFO) $ 19,215 $ 58,559
Average Common Shares Outstanding:
Basic 28,507 28,460
Diluted 28,650 28,603
FFO Per Common Share:
Basic $ .67 $ 2.06
Diluted $ .67 $ 2.05
| CONTACT: | Health Care REIT, Inc. |
|---|---|
| Ray Braun, 419/247-2800 | |
| Mike Crabtree, 419/247-2800 |