-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, H4IWwyEI+rtuZ3gKPlHqE5Z6K4xoKdkUoM1NNKlmVWKALMujG/gZljUbYXo5oR2t N9p9bM1l/vWqirPKLyAZAg== 0000765880-94-000015.txt : 19940517 0000765880-94-000015.hdr.sgml : 19940517 ACCESSION NUMBER: 0000765880-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE PROPERTY INVESTORS INC CENTRAL INDEX KEY: 0000765880 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94526655 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD STE 1200 CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3104731990 10-Q 1 1ST QTR. 10Q-LIVE ======================================================================== UNITED STATES 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 MARCH 31, 1994. 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 MAY 9, 1994 THERE WERE 26,669,574 SHARES OF $1.00 PAR VALUE COMMON STOCK OUTSTANDING. =========================================================================== INDEX PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements: Consolidated Balance Sheets March 31, 1994 and December 31, 1993.................. 2 Consolidated Statements of Income Three Months Ended March 31, 1994 and 1993............ 3 Consolidated Statements of Cash Flows Three Months Ended March 31, 1994 and 1993............ 4 Notes to Consolidated Condensed Financial Statements............................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 7 PART II. OTHER INFORMATION Signatures......................................................... 9 HEALTH CARE PROPERTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (amounts in thousands)
March 31, December 31, 1994 1993 ------------ ------------ ASSETS Real Estate Properties Buildings and Improvements $ 484,945 $ 474,181 Accumulated Depreciation (100,149) (96,350) ------------ ------------ 384,796 377,831 Construction in Progress 6,946 4,974 Land 52,607 52,012 ------------ ------------ 444,349 434,817 Investments in and Advances to Partnerships 10,402 10,709 Loans Receivable 69,724 70,471 Other Assets 6,765 6,431 Cash and Short-Term Investments 16,026 27,210 ------------ ------------ TOTAL ASSETS $ 547,266 $ 549,638 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Senior Notes due 1998-2003 $ 135,854 $ 135,845 Convertible Subordinated Notes Due 2000 100,000 100,000 Mortgage Notes Payable 7,815 9,446 Accounts Payable and Accrued Expenses 14,171 14,233 Minority Interests in Joint Ventures 20,070 20,241 Commitments Stockholders' Equity Common Stock 26,673 26,633 Additional Paid-In Capital 303,749 302,765 Cumulative Net Income 200,338 189,086 Cumulative Dividends (261,404) (248,611) ------------ ------------- Total Stockholders' Equity 269,356 269,873 ------------ ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 547,266 $ 549,638 ============ ============= 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 Ended March 31, ----------------------------------- 1994 1993 ------------- ------------- REVENUES Base Rental Income $ 15,694 $ 14,810 Additional Rental and Interest Income 4,021 3,509 Interest and Other Income 3,357 3,841 Facility Operating Revenues 545 563 -------------- ------------- 23,617 22,723 -------------- ------------- EXPENSES Interest Expense 5,020 4,828 Depreciation/Noncash Charges 4,490 4,483 Other Expenses 1,367 1,299 Facility Operating Expenses 564 614 -------------- ------------- 11,441 11,224 -------------- ------------- INCOME FROM OPERATIONS 12,176 11,499 Minority Interests (924) (901) -------------- ------------- NET INCOME 11,252 10,598 ============== ============= NET INCOME PER SHARE 0.42 0.40 ============== ============= WEIGHTED AVERAGE SHARES OUTSTANDING 26,653 26,491 ============== ============= 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, except per share amounts)
Three Months Ended March 31, ----------------------------------------- 1994 1993 -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 11,252 $ 10,598 Depreciation/Noncash Charges 4,490 4,483 Distribution from Partnerships in Excess of Income 72 275 Distribution to Minority Interests in Excess of Income (212) (232) ------------- ------------- FUNDS FROM OPERATIONS 15,602 15,124 Change in Other Assets/Liabilities 147 1,831 ------------- ------------- 15,749 16,955 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of Real Estate (13,331) (5,612) Advances Repaid by Partnerships 21 5,619 Other Investments and Loans 742 175 ------------- -------------- (12,568) 182 ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Net Decrease in Bank Notes Payable --- (12,700) Issuance of Senior Notes Due 2003 --- 10,000 Cash Proceeds from Issuing Common Stock 427 1,869 Final Payments of Mortgages (1,371) --- Periodic Payments on Mortgages (266) (304) Dividends Paid (12,793) (11,916) Other Financing Activities (362) 1,417 ------------- -------------- (14,365) (11,634) ------------- -------------- NET (DECREASE)/INCREASE IN CASH AND SHORT-TERM INVESTMENTS $ (11,184) $ 5,503 ============= ============== 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 March 31, 1994 (UNAUDITED) (1) SIGNIFICANT ACCOUNTING POLICIES The unaudited financial information furnished herein in the opinion of management reflects all adjustments which are necessary to fairly state 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, 1993 and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure 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 26,672,774 shares outstanding as of March 31, 1994. Funds From Operations In the context of Cash Flows from Operating Activities, the Company has adopted the following definition for Funds From Operations that has been prescribed by the National Association of Real Estate Investment Trusts (NAREIT). 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 and joint ventures. Adjustments for unconsolidated partnerships and joint ventures 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 During the first quarter of 1994, the following approximate percentages of the Company's revenue were received from subsidiaries of: National Medical Enterprises, Inc. ("NME") - 8%, The Hillhaven Corporation ("Hillhaven") - 26% and Healthsouth Corporation ("Healthsouth") - 5%. All of the leases with NME, Hillhaven and Healthsouth are unconditionally guaranteed by NME. In addition, 12% of the Company's revenue was received from leases guaranteed by Beverly Enterprises, Inc. The following tabulation is a summary of the activity for the Stockholders' Equity account for the three months ended March 31, 1994 (amounts in thousands):
Par Additional Total Number of Value Paid In Cumulative Cumulative Stockholders' Shares Amount Capital Net Income Dividends Equity ----------------------------------------------------------------------------- Balance, Dec. 31, 1993 26,633 $26,633 $302,765 $189,086 ($248,611) $269,873 Issuance of Stock 19 19 578 597 Exercise of Stock Options 21 21 406 427 Net Income 11,252 11,252 Dividends Paid (12,793) (12,793) ----------------------------------------------------------------------------- Balance, March 31, 1994 26,673 $26,673 $303,749 $200,338 ($261,404) $269,356 =============================================================================
(4) COMMITMENTS The Company has remaining outstanding commitments to fund construction costs and acquire health care facilities aggregating approximately $30,000,000. (5) SUBSEQUENT EVENT On April 21, 1994 the Board of Directors declared a quarterly dividend of $0.49 per share payable on May 20, 1994, to stockholders of record on the close of business on May 3, 1994. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1994, the Company's portfolio of properties, including equity investments, was comprised of 138 long term care facilities, 14 assisted living and congregate care centers, six acute care hospitals, six rehabilitation hospitals, nine medical office buildings and one psychiatric care facility. The gross acquisition price of the properties, which includes partnership acquisitions, was approximately $668,000,000. The Company had a direct investment in 122 facilities; investments in the remaining 52 were owned through partnerships in which the Company is the managing general partner. The Company has financed its acquisitions through the sale of Common Stock, the issuance of long-term debt, the assumption of mortgage notes payable and the use of short-term bank credit lines. In November 1993, the Company issued $100,000,000 6% Subordinated Convertible Notes due 1998. With these proceeds, the Company redeemed $60,000,000 9-1/2% Senior Notes due 1996, without penalty. This financing enabled the Company to significantly reduce its average borrowing rates. As of March 31, 1994, the Company had issued a total of $61,000,000 under its Medium-Term Note Programs. On March 31, 1994, the Company instituted a new $100,000,000 three year revolving line of credit with a group of seven banks. The Company has a strong financial position with $269,356,000 in stockholders' equity as of March 31, 1994, a total debt-to-equity ratio of approximately 0.90:1 and committed and unused bank lines of credit aggregating $100,000,000. As of March 31, 1994, the Company had commitments to purchase and construct health care facilities totaling $30,000,000 which are expected to be funded during 1994 and 1995. 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 to finance a portion of the construction. At the completion of construction and commencement of the lease, short term borrowings used are refinanced with new long-term debt or equity offerings. The Company has the option to prepay without penalty its $75,000,000 9-7/8% Senior Notes due 1998 at any time after February 15, 1995; it may refinance the foregoing by raising new long term funds in 1994 if it appears advantageous to do so. The Company has unconditional guarantees from National Medical Enterprises, Inc. in respect of Lease obligations of subsidiaries of NME (3 facilities), subsidiaries of Hillhaven (63 facilities) and Healthsouth Corporation (2 facilities) which are discussed in Footnote (3) to the consolidated financial statements of the Company as of December 31, 1993. NME's operating results according to published reports distributed by NME were significantly and negatively affected by (1) adverse media coverage, investigations in certain states, and certain claims and lawsuits, all in connection with allegations that NME's psychiatric facilities engaged in certain improper practices and (2) industry-wide weaknesses in the psychiatric hospital business, including increased payor restrictions on psychiatric hospitalization and on amounts paid for psychiatric care. In the past several months NME has announced that it has (1) settled or agreed in principle to settle lawsuits with certain insurance companies for payments by NME aggregating $214,900,000, (2) settled or reached agreements in principle to settle approximately half of its psychiatric patient care cases, (3) sold most of its rehabilitation hospitals and clinics for approximately $350,000,000, and (4) agreed to dispose of the majority of its psychiatric hospitals and substance abuse facilities to Charter Medical Corporation as of May 31, 1994 and (5) agreed in principle with the U.S. Department of Justice and Health and Human Services to close all open investigations against NME for net payments of approximately $375,000,000. Based upon public filings, during the nine months ended February 28, 1994, NME generated Income from continuing operations, before cumulative effect of a change in accounting, of $205,000,000. Its Net Loss for the same period was $431,000,000, which took into account the agreements to settle substantially all lawsuits and governmental investigations discussed above and other costs to dispose of the majority of its psychiatric care and rehabilitation hospitals. As of February 28, 1994, NME's balance sheet reflects stockholders' equity of $1.3 billion and a ratio of long-term debt to equity of 0.55:1. The Company currently has approximately $30,199,000 in irrevocable letters of credit from commercial banks to back the obligations of the majority of its lessees' lease obligations not affiliated with NME, Hillhaven and Healthsouth. The largest such letter of credit is for $11,850,000 from Morgan Guaranty Trust Company, which, like the other letters of credit, allows the Company to draw down the letter of credit to the extent of any delinquencies of monetary obligations required under the leases. The first quarter 1994 dividend of $0.48 per share or $12,793,000 in the aggregate was paid on February 18, 1994. Total dividends paid during the three months ended March 31, 1994 as a percentage of Funds From Operations for the corresponding period was 82%. 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 three months ended March 31, 1994 totaled $11,252,000, or $0.42 per share, on revenues of $23,617,000 compared to Net Income of $10,598,000, or $0.40 per share, on revenues of $22,723,000 for the corresponding quarter in 1993. Funds From Operations, the key measure of real estate investment trust performance prescribed by the National Association of Real Estate Investment Trusts, of $15,602,000 were up from $15,124,000 for the comparable quarter of the prior year. The increase in earnings and Funds From Operations for the current quarter over the comparable quarter in the prior year are significant considering that the first quarter of 1993 included approximately $800,000 of non-recurring income. Significantly lower average interest rates on long term debt, higher additional rents and rents and interest from investments consummated in 1993 and 1994 contributed to the improved results. Future earnings and Funds From Operations will be positively impacted as first quarter average short-term investments of approximately $25,000,000 are deployed into long-term investments. These short-term investments represent funds remaining from the $100,000,000 6% Subordinated Convertible Notes issued by the Company in November 1993. PART II. OTHER INFORMATION Items 1. through 6. Not applicable - - ------------------- 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: May 9, 1994 HEALTH CARE PROPERTY INVESTORS, INC. (REGISTRANT) James G. Reynolds ------------------------------ James G. Reynolds Senior Vice President and Chief Financial Officer (Principal Financial Officer) Devasis Ghose ------------------------------ Devasis Ghose Vice President-Finance and Treasurer (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----