-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KT3CxCjgtVnrAZJlDcCOCoMr7/8bJh8zVs//6nlWPi+VfM8ETirrnI87ttQajvN4 PKwU9putBkuTshJdwfWmdw== 0000765880-95-000036.txt : 19951119 0000765880-95-000036.hdr.sgml : 19951119 ACCESSION NUMBER: 0000765880-95-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE PROPERTY INVESTORS INC CENTRAL INDEX KEY: 0000765880 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330091377 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08895 FILM NUMBER: 95591413 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD STE 1200 CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3104731990 10-Q 1 =========================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ..... TO ..... COMMISSION FILE NUMBER 1-8895 - -------------------------------------------------------------------------- HEALTH CARE PROPERTY INVESTORS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) - -------------------------------------------------------------------------- MARYLAND 33-0091377 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.) 10990 WILSHIRE BOULEVARD, SUITE 1200 LOS ANGELES, CALIFORNIA 90024 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (310) 473-1990 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ------------------------------ INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES /X/ NO / / AS OF NOVEMBER 14, 1995 THERE WERE 28,546,174 SHARES OF $1.00 PAR VALUE COMMON STOCK OUTSTANDING. =========================================================================== HEALTH CARE PROPERTY INVESTORS, INC. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets September 30, 1995 and December 31, 1994 Consolidated Statements of Income Nine Months and Three Months Ended September 30, 1995 and 1994 Consolidated Statements of Cash Flows Nine Months Ended September 30, 1995 and 1994 Notes to Consolidated Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Signatures HEALTH CARE PROPERTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (amounts in thousands)
September 30, December 31, 1995 1994 ------------ ------------ ASSETS Real Estate Properties Buildings and Improvements $ 534,774 $ 522,847 Accumulated Depreciation (118,917) (111,540) ------------ ------------ 415,857 411,307 Construction in Progress 11,024 5,674 Land 58,974 58,814 ------------ ------------ 485,855 475,795 Investments in and Advances to Partnerships 9,324 9,642 Loans Receivable 133,917 79,165 Other Assets 7,863 6,296 Cash and Cash Equivalents 2,070 2,928 ------------ ------------ TOTAL ASSETS $ 639,029 $ 573,826 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Bank Notes Payable $ 21,000 $ 11,200 Senior Notes due 1998-2015 130,493 150,882 Convertible Subordinated Notes due 2000 100,000 100,000 Mortgage Notes Payable 13,716 9,381 Accounts Payable and Accrued Expenses 14,114 13,483 Minority Interests in Partnerships 18,946 19,477 Stockholders' Equity Common Stock 28,546 26,733 Additional Paid-In Capital 352,794 305,049 Cumulative Net Income 305,329 239,063 Cumulative Dividends (345,909) (301,442) ------------ ------------- Total Stockholders' Equity 340,760 269,403 ------------ ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 639,029 $ 573,826 ============ ============= See accompanying Notes to Consolidated Condensed Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
HEALTH CARE PROPERTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (amounts in thousands, except per share amounts)
Three Months Nine Months Ended September 30, Ended September 30, --------------------------------- ---------------------------------- 1995 1994 1995 1994 ------------ ------------- ------------- ------------- REVENUE Base Rental Income $ 17,028 $ 16,365 $ 50,854 $ 48,238 Additional Rental and Interest Income 4,356 4,003 14,059 12,233 Interest and Other Income 4,890 3,547 13,259 11,341 Facility Operating Revenues --- 610 741 1,719 ------------- ------------- -------------- ------------- 26,274 24,525 78,913 73,531 ------------- ------------- -------------- ------------- EXPENSE Interest Expense 4,643 5,030 14,117 15,058 Depreciation/Noncash Charges 4,822 4,427 14,201 13,290 Other Expenses 1,279 1,177 4,326 3,787 Facility Operating Expenses --- 621 720 1,805 ------------- ------------- ------------ ------------ 10,744 11,255 33,364 33,940 ------------- ------------- ------------ ------------ INCOME FROM OPERATIONS 15,530 13,270 45,549 39,591 Minority Interests (886) (853) (2,833) (2,714) Gain on Sale of Real Estate Properties --- --- 23,550 --- ------------- ------------- ------------ ----------- NET INCOME $ 14,644 $ 12,417 $ 66,266 $ 36,877 ============= ============= ============ =========== NET INCOME PER SHARE $ 0.51 $ 0.46 $ 2.34 $ 1.38 ============= ============= ============ =========== WEIGHTED AVERAGE SHARES OUTSTANDING 28,544 26,672 28,279 26,665 ============= ============= ============ =========== See accompanying Notes to Consolidated Condensed Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
HEALTH CARE PROPERTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (amounts in thousands)
Nine Months Ended September 30, ----------------------------------------- 1995 1994 -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 66,266 $ 36,877 Real Estate Depreciation 12,328 11,890 Noncash Charges 1,873 1,400 Partnership Adjustments (376) (396) Gain on Sale of Real Estate Properties (23,550) --- ------------- -------------- Funds From Operations 56,541 49,771 Change in Other Assets/Liabilities (133) (843) ------------- -------------- 56,408 48,928 ------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of Real Estate Properties, Net (38,140) (25,856) Proceeds from Sale of Real Estate Properties 8,387 --- Advances Repaid by Partnerships --- 64 Other Investments and Loans (17,500) (8,214) ------------- -------------- (47,253) (34,006) ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Net Increase in Bank Notes Payable 9,800 2,000 Repayment of Senior Notes (75,000) --- Issuance of Senior Notes Due 2000-2015, Net 54,107 --- Cash Proceeds from Issuing Common Stock 47,109 412 Contribution from Minority Interests 64 67 Final Payments on Mortgages (637) (1,665) Periodic Payments on Mortgages (844) (879) Dividends Paid (44,467) (39,197) Other Financing Activities (145) (237) ------------- -------------- (10,013) (39,499) ------------- -------------- NET DECREASE IN CASH AND CASH EQUIVALENTS $ (858) $ (24,577) ============= ============== See accompanying Notes to Consolidated Condensed Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
HEALTH CARE PROPERTY INVESTORS, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS September 30, 1995 (UNAUDITED) (1) SIGNIFICANT ACCOUNTING POLICIES The unaudited financial information furnished herein, in the opinion of management, reflects all adjustments that are necessary to state fairly the Company's financial position, the results of its operations and its cash flows. The Company presumes that users of the interim financial information herein have read or have access to the audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for the preceding fiscal year ended December 31, 1994 and that the adequacy of additional disclosures needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures that would substantially duplicate the disclosures contained in the Company's most recent annual report to security holders have been omitted. The interim financial information contained herein is not necessarily representative of a full year's operations for various reasons including acquisitions, changes in rents, interest rates and the timing of debt and equity financings. These same considerations apply to all year-to-year comparisons. Net Income Per Share Net income per share is calculated by dividing net income by the weighted average common shares outstanding during the period. There were 28,546,174 shares outstanding as of September 30, 1995. Funds From Operations Funds From Operations is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships. Adjustments for unconsolidated partnerships are calculated to reflect Funds From Operations on the same basis. Funds From Operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to net income. (2) MAJOR LESSEES On September 28, 1995 The Hillhaven Corporation and Vencor, Inc. ("Vencor") completed the merger of the corporations with Vencor as the surviving entity. During the third quarter of 1995, the following approximate percentages of the Company's revenue were received from subsidiaries of: Tenet Healthcare Corporation ("Tenet"), formerly National Medical Enterprises, Inc. - 8%; Vencor - 22%; and from HealthSouth Corporation ("HealthSouth") - 6%. All of the leases with subsidiaries of Tenet and Vencor, and certain leases with HealthSouth are unconditionally guaranteed by Tenet. In addition, 11% of the Company's revenue was received from leases and loans guaranteed by Beverly Enterprises, Inc. The merger of two of the Company's lessees, Horizon Healthcare Corporation and Continental Medical Systems, Inc., in July 1995 created Horizon/CMS Healthcare Corporation ("Horizon"). For the quarter ended September 30, 1995, 10% of the Company's revenue was generated from leases guaranteed by Horizon. (3) STOCKHOLDERS' EQUITY The following tabulation is a summary of the activity for the Stockholders' Equity account for the nine months ended September 30, 1995 (amounts in thousands):
Common Stock ------------------ Par Additional Total Number of Value Paid In Cumulative Cumulative Stockholders' Shares Amount Capital Net Income Dividends Equity ----------------------------------------------------------------------------- Balance, December 31, 1994 26,733 $26,733 $305,049 $239,063 ($301,442) $269,403 Issuance of Stock, Net 1,805 1,805 47,613 49,418 Exercise of Stock Options 8 8 132 140 Net Income 66,266 66,266 Dividends Paid (44,467) (44,467) ----------------------------------------------------------------------------- Balance, September 30, 1995 28,546 $28,546 $352,794 $305,329 ($345,909) $340,760 =============================================================================
(4) COMMITMENTS AND CONTINGENCIES As of September 30, 1995 the Company has remaining outstanding commitments to fund construction costs, acquire health care facilities and provide mortgages on health care facilities aggregating approximately $65,000,000. Since December 1985, the Company has been general partner and a 50% equity interest owner in Health Care Investors I, a California limited partnership ("HCI"). The aggregate equity investment of the Company and the five limited partners in HCI was $9,000,000 and the aggregate acquisition price of the Properties in HCI was approximately $24,970,000. HCI owns 11 long term care facilities in Missouri, Illinois and Arkansas and leases them to subsidiaries of Vencor. The sublessee of the nine Missouri properties has exercised options to purchase such facilities in early 1996. Certain of the limited partners in HCI have recently made claims adverse to the Company concerning disclosures made at the time HCI was formed and the Company's purported duties and obligations as general partner of HCI. To evaluate these claims, and because one of the five HCI limited partners is a director of the Company, the Company has formed a Special Committee of its Board of Directors (the "Special Committee"). The Special Committee is engaged in on-going discussions with certain of the HCI limited partners regarding these issues. No litigation has been commenced. Management of the Company believes that the limited partners' claims are without merit and that the ultimate outcome of this dispute will not have a material adverse effect on the Company's financial condition or its results of operations; however, no assurances can be given in this regard. (5) SUBSEQUENT EVENTS In September 1995, the Company registered $200,000,000 of debt and equity securities under a shelf registration statement (the "1995 Shelf Registration Statement") which was declared effective by the Securities and Exchange Commission in November 1995. On October 19, 1995 the Board of Directors declared a quarterly dividend of $0.55 per share payable on November 20, 1995, to stockholders of record on the close of business on November 3, 1995. HEALTH CARE PROPERTY INVESTORS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is in the business of acquiring health care facilities that it leases on a long-term basis to health care providers. On a more limited basis, the Company has provided mortgage financing for health care facilities. As of September 30, 1995, the Company's portfolio of properties, including equity investments, consists of 193 facilities that are located in 33 states. The portfolio is comprised of 144 long term care facilities, 22 congregate care and assisted living facilities, 12 medical office buildings, six acute care hospitals, six rehabilitation facilities, two physician group practice clinics and one psychiatric care facility. The gross acquisition price of the properties, including partnership acquisitions, is approximately $792,000,000 at September 30, 1995. During the quarter ended September 30, 1995, the Company expended approximately $38,000,000 on investments in health care facilities. As of September 30, 1995, the Company had commitments of approximately $65,000,000 to purchase, construct and provide mortgages on health care facilities. These commitments are expected to be funded during the rest of 1995 and 1996. LIQUIDITY AND CAPITAL RESOURCES The Company has financed acquisitions through the sale of common stock, the issuance of long-term debt, the assumption of limited amounts of mortgage debt, the use of short-term bank lines and through internally generated cash flow. Facilities under construction are generally financed by means of cash on hand or short-term borrowings under the Company's existing bank lines. In the future, the Company may use its Medium-Term Note program (described below) to finance a portion of the costs of construction. At the completion of construction and commencement of the lease, short-term borrowings used in the construction phase are generally refinanced with new long-term debt or equity. On February 9, 1995 the Company issued 1,725,000 shares of Common Stock at $29 per share with net proceeds of approximately $47,400,000. In February and March 1995, the Company issued a total of $27,000,000 of Medium-Term Notes (MTNs) bearing interest from 8.81% to 9.00% and maturing between 2000 and 2015. On March 13, 1995 the proceeds from the issuance of the stock and MTNs were used to retire $75,000,000 9-7/8% Senior Unsecured Notes due 1998 without penalty at par plus accrued interest. Between June and September 1995 the Company issued $27,500,000 of MTNs bearing interest from 7.23% to 7.79% and maturing in seven to ten years, the proceeds of which were used to fund new investments. At September 30, 1995, Stockholders Equity in the Company totaled $340,760,000 and the Debt to Stockholders Equity ratio was 0.78 to 1. For the nine months ended September 30, 1995, Funds From Operations covered Interest Expense 5 to 1. At September 30, 1995, the Company had approximately $74,000,000 available under its Medium Term Note program for future issuance of capital from time to time based on Company needs and then existing market conditions; in addition, there was approximately $79,000,000 unused on its $100,000,000 revolving line of credit. This line of credit with a group of seven domestic and international banks expires on March 31, 1998. The Company's Senior and Convertible Subordinated Notes have been rated investment grade by debt rating agencies since 1986. Current ratings are as follows: Moody's Duff & Phelps Investors Standard & Poor's Credit Rating Service, Inc. Rating Group Co. ------------- ----------------- ------------- Senior Notes Baa1 BBB+ A- Convertible Subordinated Notes Baa2 BBB BBB+ Since inception in May 1985, the Company has recorded approximately $423,664,000 in cumulative Funds From Operations. Of this amount, a total of $345,909,000 has been distributed to stockholders as dividends. The balance of $77,755,000 has been retained as an additional source of capital for the Company. In September 1995 the Company registered $200,000,000 of debt and equity securities under a shelf registration statement filed with the Securities and Exchange Commission. At September 30, 1995, the Company had approximately $27,000,000 in irrevocable letters of credit from commercial banks to back the obligations of many of its Lessees' Lease and borrowers' Loan obligations. The Company may draw upon the letters of credit if there are any defaults under the Leases and/or Loans. Amounts available under letters of credit change from time to time; such changes may be material. The third quarter 1995 dividend of $0.54 per share or $15,414,000 in the aggregate was paid on August 19, 1995. Total dividends paid during the three months ended September 30, 1995 as a percentage of Funds From Operations for the corresponding period was 79%. The Company has declared a fourth quarter dividend of $0.55 per share or $15,700,000 in the aggregate, to be paid on November 20, 1995. Management believes that the Company's liquidity and sources of capital are adequate to finance its operations as well as its future investments in additional facilities. RESULTS OF OPERATIONS Net income for the nine months ended September 30, 1995 totaled $66,266,000 or $2.34 per share of common stock on revenue of $78,913,000 compared to $36,877,000 or $1.38 per share of common stock on revenue of $73,531,000 for the year earlier nine month period. For the nine months ended September 30, 1995, net income included a gain on the sale of certain properties (discussed below) of $23,550,000 or $0.83 per share of common stock. Before the sale of properties, net income amounted to a new high of $42,716,000, a per share increase of 9% over the prior year nine month period. For the nine months ended September 30, 1995, Funds From Operations increased to $56,541,000, compared with $49,771,000 for the corresponding period in the prior year. Earnings and Funds From Operations were higher in 1995 due to increases in rental and interest income. Increases in base rental income and interest income were generated from new investments closed in 1994 and 1995. Additional rental and interest income increased from $12,233,000 for the nine months ended September 30, 1994 to $14,059,000 in the corresponding period of 1995, which was attributable to revenue growth at many of the Company's facilities and from interest income increases on other investments. The decrease in interest expense reflects the benefit of the retirement of the $75,000,000 9-7/8% Senior Unsecured Notes in the first quarter of 1995. This reduction in interest expense is offset by the interest charges on the issuance of approximately $74,500,000 of Senior Notes under the Medium-Term Note program between November 1994 and September 1995. In April 1995 the Company sold ten leased properties to Beverly Enterprises, Inc. for $43,450,000 resulting in a gain of $23,550,000. Under the terms of the sale, the Company received net cash proceeds of $8,387,000 and is providing a 15 year mortgage to Beverly of $34,760,000. These new Beverly mortgage investments have changed the character of the returns on these assets from rental income to interest income. Additionally, the Company sold the Michigan facility that it had operated for the past three years. No gain or loss was recognized on this sale. RECENT DEVELOPMENTS The Company announced $58,300,000 of new investments during the nine months ended September 30, 1995. In October 1995, the Company acquired four assisted living facilities for a total of $22,600,000. Additionally, in October 1995, the Company began construction on a $10,700,000 assisted living facility. In the aggregate, investments year to date by the Company totaled $91,600,000. RECENT ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (SFAS121): "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of". The Company has performed a preliminary review of its long lived assets subject to SFAS 121 and believes that adoption of this new accounting standard will not have an impact on the Company's financial condition and results of operations. PART II. OTHER INFORMATION Item 6. Exhibits - ------- EX-27 Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 14, 1995 HEALTH CARE PROPERTY INVESTORS, INC. (REGISTRANT) /S/ James G. Reynolds ------------------------------ James G. Reynolds Executive Vice President and Chief Financial Officer (Principal Financial Officer) /S/ Devasis Ghose ------------------------------ Devasis Ghose Senior Vice President-Finance and Treasurer (Principal Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000765880 HEALTH CARE PROPERTY INVESTORS, INC. 1000 9-MOS DEC-31-1995 SEP-30-1995 2070 0 0 0 0 0 604772 118917 639029 0 265209 28546 0 0 312214 639029 0 78913 0 17754 4326 0 14117 66266 0 66266 0 0 0 66266 2.34 2.34
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