EX-99.1 2 l21291aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
(HEALTH CARE REIT LOGO)
FOR IMMEDIATE RELEASE
July 19, 2006
For more information contact:
Scott Estes — (419) 247-2800
Mike Crabtree — (419) 247-2800
Health Care REIT, Inc.
Reports Second Quarter Results
Toledo, Ohio, July 19, 2006........Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its second quarter ended June 30, 2006.
Second Quarter Highlights.
  •   Net new investments total $80.7 million for quarter and $167.1 million for year to date
 
  •   Increases net investment guidance to $375 to $500 million from $300 to $450 million
 
  •   Adjusted FFO and FAD increase 6% and 10% quarter-over-quarter
 
  •   Increases 2006 FAD guidance to $2.95-$3.03 per diluted share from $2.91-$2.99 per diluted share
 
  •   Total portfolio coverage remains strong at 1.93x
 
  •   Debt to undepreciated capitalization ratio down sequentially to 44% from 47% last quarter
Key Performance Indicators.
                                                 
    Quarter   Quarter           Year   Year    
    Ended   Ended   Percentage   To Date   To Date   Percentage
    6/30/06   6/30/05   Change   6/30/06   6/30/05   Change
Net Income Available to Common Stockholders per Diluted Share
   $ 0.37     $ (0.03 )     n/a     $ 0.70     $ 0.30       133 %
FFO per Diluted Share
   $ 0.74     $ 0.36       106 %   $ 1.45     $ 1.08       34 %
FFO per Diluted Share — Adjusted (1)
   $ 0.74     $ 0.70       6 %   $ 1.45     $ 1.42       2 %
FAD per Diluted Share
   $ 0.75     $ 0.34       121 %   $ 1.59     $ 1.00       59 %
FAD per Diluted Share — Adjusted (1)
   $ 0.75     $ 0.68       10 %   $ 1.59     $ 1.35       18 %
Common Dividends per Share
   $ 0.64     $ 0.62       3 %   $ 1.26     $ 1.22       3 %
FFO Payout Ratio
     86 %     172 %             87 %     113 %        
FFO Payout Ratio — Adjusted (1)
     86 %     89 %             87 %     86 %        
FAD Payout Ratio
     85 %     182 %             79 %     122 %        
FAD Payout Ratio — Adjusted (1)
     85 %     91 %             79 %     90 %        
 
(1)   Adjusted for loss on extinguishment of debt in 2Q05.
2Q06 Earnings Discussion. The second quarter 2006 reported net income available to common stockholders of $0.37 per diluted share includes $1.0 million ($0.015 per diluted share) of gains on sales of real property. The second quarter 2005 net loss to common stockholders of $0.03 per share included $18.4 million ($0.34 per diluted share) of loss on extinguishment of debt. FAD for second quarter 2006 was higher than FFO by $0.5 million ($0.01 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to
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2Q06 Earnings Release
July 19, 2006
common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
2Q06 FFO and FAD.
                                                 
    Quarter   Quarter           Quarter   Quarter    
    Ended   Ended           Ended   Ended    
    6/30/06   6/30/05   Percentage   6/30/06   6/30/05   Percentage
    FFO   FFO   Change   FAD   FAD   Change
Per Diluted Share
   $ 0.74     $ 0.36       106 %   $ 0.75     $ 0.34       121 %
Debt extinguishment charges, net
           $ 0.34                     $ 0.34          
Per Diluted Share — Adjusted
   $ 0.74     $ 0.70       6 %   $ 0.75     $ 0.68       10 %
Included items:
                                                
Cash receipts-prepaid/straight-line rent
                           $ 0.04     $ 0.04          
Per Diluted Share — Normalized
                           $ 0.71     $ 0.64       11 %
2006 Earnings Discussion. The reported net income available to common stockholders of $0.70 per diluted share for the six months ended June 30, 2006 includes $2.5 million ($0.04 per diluted share) of gains on sales of real property. The 2005 net income available to common stockholders of $0.30 per diluted share included $18.4 million ($0.34 per diluted share) of loss on extinguishment of debt. FAD for 2006 was higher than FFO by $8.4 million ($0.14 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
                                                 
    Year   Year           Year   Year    
    To Date   To Date           To Date   To Date    
    6/30/06   6/30/05   Percentage   6/30/06   6/30/05   Percentage
    FFO   FFO   Change   FAD   FAD   Change
Per Diluted Share
   $ 1.45     $ 1.08       34 %   $ 1.59     $ 1.00       59 %
Debt extinguishment charges, net
           $ 0.34                     $ 0.34          
Per Diluted Share — Adjusted
   $ 1.45     $ 1.42       2 %   $ 1.59     $ 1.35       18 %
Included items:
                                                
Cash receipts-prepaid/straight-line rent
                           $ 0.22     $ 0.06          
SFAS 123(R) accelerated vesting impact
   ($ 0.02 )                   ($ 0.02 )                
Per Diluted Share — Normalized
                           $ 1.37     $ 1.29       6 %
Dividends for Second Quarter 2006. As previously announced, the Board of Directors declared a dividend for the quarter ended June 30, 2006 of $0.64 per share as compared to $0.62 per share for the same period in 2005. The dividend represents the 141st consecutive dividend payment. The dividend will be payable August 21, 2006 to stockholders of record on July 31, 2006.
Development Initiative. Under the company’s new development initiative, management expects to fund $175 to $250 million for development during 2006. The company expects to fund $164 million for development during 2006 on projects which are already underway, with an additional $11 to $86 million anticipated from projects which have yet to commence. The $164 million of anticipated funding from existing projects is comprised of $72 million which was funded during the six months ended June 30, 2006 and $92 million projected to be funded over the remainder of 2006. The information contained in Exhibit 8 relates only to development projects for which initial funding has commenced as of June 30, 2006 and does not include any additional development projects which may commence later in 2006.
Outlook for 2006. The company is increasing its gross investment guidance to a range of $525 to $600 million from $450 to $550 million for 2006. Gross investments are comprised of $350 million of acquisitions and advances on existing assets and $175 to $250 million of funded new development. The
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2Q06 Earnings Release
July 19, 2006
company expects $100 to $150 million of dispositions, resulting in net investments of $375 to $500 million. Due primarily to the second quarter gains on sales of properties of $1.0 million, the company is increasing its 2006 guidance for net income available to common stockholders from a range of $1.33 to $1.41 per diluted share to $1.34 to $1.42 per diluted share. The company is reaffirming its 2006 FFO guidance in the range of $2.88 to $2.96 per diluted share. The company is increasing its 2006 FAD guidance from a range of $2.91 to $2.99 per diluted share to $2.95 to $3.03 per diluted share primarily due to the cash receipts of $2.7 million during the second quarter of 2006.
The company’s guidance excludes any impairments, unanticipated additions to the loan loss reserve or other additional one-time items, including any additional cash payments outside the normal monthly rental payments. Please see Exhibit 15 for a reconciliation of the outlook for net income available to common stockholders to FFO and FAD.
Conference Call Information. The company has scheduled a conference call on July 20, 2006 at 9:00 a.m. Eastern time to discuss its second quarter and year to date results, industry trends, portfolio performance and outlook for 2006. Telephone access will be available by dialing 800-811-0667 or 913-981-4901 (international). For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the call through August 3, 2006. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 7840792. To participate in the webcast, log on to www.hcreit.com or www.earnings.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.
Supplemental Reporting Measures. The company believes that net income, as defined by U.S. generally accepted accounting principles (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 net straight-line rental adjustments.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. 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, and its fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include interest expense and preferred stock dividends.
In April 2002, the Financial Accounting Standards Board issued Statement No. 145 that requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement No. 4. The company adopted the standard effective January 1, 2003 and has properly reflected the prior year loss on extinguishment of debt which may not be added back to net income in the calculation of FFO, FAD or EBITDA. Although the company has adopted this treatment, it has also disclosed FFO, FAD and EBITDA adjusted for the loss on extinguishment of debt for enhanced clarity.
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 and in making operating decisions. Additionally, FFO and FAD are 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
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2Q06 Earnings Release
July 19, 2006
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 12, 13 and 14 for reconciliations of EBITDA, FAD and FFO to net income.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care and senior housing properties. At June 30, 2006, the company had investments in 464 facilities in 37 states with 57 operators and had total assets of approximately $3.1 billion. The portfolio included 35 independent living/continuing care retirement communities, 203 assisted living facilities, 213 skilled nursing facilities and 13 specialty care facilities. 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 sale of properties; the performance of its operators and properties; its ability to enter into agreements with new viable tenants for properties that the company takes back from financially troubled tenants, if any; its ability to make distributions; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; 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,” “project,” “estimate” 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; 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; 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; the failure of closings to occur as and when anticipated; acts of God affecting the company’s properties; the company’s ability to reinvest sale proceeds at similar rates to assets sold; operator bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates; liability claims and insurance costs for operators; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company’s properties; delays in reinvestment of sale proceeds; changes in rules or practices governing the company’s financial reporting; and structure related factors, including real estate investment trust qualification, anti-takeover provisions and key management personnel. 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
#####
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2Q06 Earnings Release
July 19, 2006
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
                 
    June 30  
    2006     2005  
     
Assets
                
Real estate investments:
                
Real property owned
                
Land
   $ 270,810     $ 228,077  
Buildings & improvements
     2,758,358       2,420,555  
Construction in progress
     75,822       449  
 
            
 
     3,104,990       2,649,081  
Less accumulated depreciation
     (317,869 )     (257,543 )
 
            
Total real property owned
     2,787,121       2,391,538  
 
                
Loans receivable
     178,282       244,169  
Less allowance for losses on loans receivable
     (6,961 )     (5,861 )
 
            
 
     171,321       238,308  
 
            
Net real estate investments
     2,958,442       2,629,846  
 
                
Other assets:
                
Equity investments
     5,070       3,298  
Deferred loan expenses
     11,523       9,172  
Cash and cash equivalents
     15,200       15,067  
Receivables and other assets
     71,877       82,556  
 
            
 
     103,670       110,093  
 
            
Total assets
   $ 3,062,112     $ 2,739,939  
 
            
 
                
Liabilities and stockholders’ equity
                
Liabilities:
                
Borrowings under unsecured lines of credit arrangements
   $ 146,000     $ 318,000  
Senior unsecured notes
     1,193,355       894,830  
Secured debt
     131,178       168,790  
Accrued expenses and other liabilities
     45,641       44,354  
 
            
Total liabilities
     1,516,174       1,425,974  
 
                
Stockholders’ equity:
                
Preferred stock
     276,875       283,751  
Common stock
     62,446       53,772  
Capital in excess of par value
     1,450,531       1,166,234  
Treasury stock
     (2,714 )     (1,766 )
Cumulative net income
     883,082       772,887  
Cumulative dividends
     (1,125,810 )     (960,850 )
Accumulated other comprehensive income
     0       1  
Other equity
     1,528       (64 )
 
            
Total stockholders’ equity
     1,545,938       1,313,965  
 
            
Total liabilities and stockholders’ equity
   $ 3,062,112     $ 2,739,939  
 
            
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2Q06 Earnings Release
July 19, 2006
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2006     2005     2006     2005  
         
Revenues:
                                
Rental income
   $ 74,031     $ 59,577     $ 146,817     $ 118,371  
Interest income
     4,480       5,269       8,742       10,252  
Transaction fees and other income
     1,665       547       2,030       1,970  
 
                        
Gross revenues
     80,176       65,393       157,589       130,593  
 
                                
Expenses:
                                
Interest expense
     23,058       19,073       47,101       37,770  
Provision for depreciation
     24,131       19,309       47,183       37,890  
General and administrative
     5,089       4,337       11,291       8,355  
Loan expense
     707       673       1,418       1,535  
Loss on extinguishment of debt
     0       18,448       0       18,448  
Provision for loan losses
     250       300       500       600  
 
                        
Total expenses
     53,235       62,140       107,493       104,598  
 
                        
Income from continuing operations
     26,941       3,253       50,096       25,995  
 
                                
Discontinued operations:
                                
Gain (loss) on sales of properties
     929       (24 )     2,482       (134 )
Income from discontinued operations, net
     131       601       401       1,209  
 
                        
 
     1,060       577       2,883       1,075  
 
                        
Net income
     28,001       3,830       52,979       27,070  
 
                                
Preferred dividends
     5,333       5,436       10,666       10,872  
 
                        
 
                                
Net income (loss) available to common stockholders
   $ 22,668     $ (1,606 )   $ 42,313     $ 16,198  
 
                        
 
                                
Average number of common shares outstanding:
                                
Basic
     61,548       53,429       59,871       53,207  
Diluted
     61,868       53,429       60,201       53,616  
 
                                
Net income (loss) available to common stockholders per share:
                                
Basic
   $ 0.37     $ (0.03 )   $ 0.71     $ 0.30  
Diluted
     0.37       (0.03 )     0.70       0.30  
 
                                
Common dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
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July 19, 2006
2Q06 Earnings Release
HEALTH CARE REIT, INC.
Financial Supplement — June 30, 2006
     
Portfolio Composition
  Exhibit 1
($000’s except Investment per Bed/Unit)
    
                                 
Balance Sheet Data   # Properties   # Beds/Units   Balance   % Balance
     
Real Property
     446       45,474     $ 2,787,121       94 %
Loans Receivable (1)
     18       2,208       178,282       6 %
     
Totals
     464       47,682     $ 2,965,403       100 %
 
                                
                                 
Investment Balances   # Properties   # Beds/Units   Investment (2)   % Investment
     
Independent/CCRCs
     35       4,961     $ 447,825       15 %
Assisted Living Facilities
     203       12,597       984,600       33 %
Skilled Nursing Facilities
     213       28,876       1,340,106       45 %
Specialty Care Facilities
     13       1,248       195,322       7 %
     
Totals
     464       47,682     $ 2,967,853       100 %
 
                                
                                 
                    Committed   Investment
Committed Investments   # Properties   # Beds/Units   Balance (3)   per Bed/Unit
     
Independent/CCRCs
     35       4,961     $ 555,360     $ 111,945  
Assisted Living Facilities
     203       12,597       1,118,553       88,795  
Skilled Nursing Facilities
     213       28,876       1,358,757       47,055  
Specialty Care Facilities
     13       1,248       195,322       156,508  
     
Totals
     464       47,682     $ 3,227,992     -na-
 
                                
             
Notes:
    (1 )   Includes $15,316,000 of loans on non-accrual.
 
    (2 )   Real Estate Investments include gross real estate investments and credit enhancements which amounted to $2,965,403,000 and $2,450,000, respectively.
 
    (3 )   Committed Balance includes gross real estate investments, credit enhancements and unfunded construction commitments for which initial funding had commenced.
     
Selected Facility Data
  Exhibit 2
                                                 
                                    Coverage Data
            % Payor Mix   Before   After
    Census   Private   Medicare   Medicaid   Mgt. Fees   Mgt. Fees
     
Independent/CCRCs
     91 %     97 %     1 %     2 %     1.47x       1.25x  
Assisted Living Facilities
     89 %     83 %     0 %     17 %     1.53x       1.31x  
Skilled Nursing Facilities
     86 %     17 %     16 %     67 %     2.16x       1.58x  
Specialty Care Facilities
     69 %     21 %     58 %     21 %     3.02x       2.42x  
 
                                                
                                     
                    Weighted Averages
     1.93x       1.51x  
Notes: Data as of March 31, 2006.

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July 19, 2006
2Q06 Earnings Release
     
Investment Concentrations ($000’s)
  Exhibit 3
                         
Concentration by Operator   # Properties     Investment     % Investment  
Emeritus Corporation
     50     $ 358,423       12 %
Brookdale Living Communities, Inc.
     87       288,662       10 %
Life Care Centers of America, Inc.
     26       223,505       8 %
Merrill Gardens L.L.C.
     13       202,012       7 %
Tara Cares, LLC
     34       170,583       6 %
Remaining operators (52)
     254       1,724,668       57 %
 
                  
Totals
     464     $ 2,967,853       100 %
 
                        
                         
Concentration by Region   # Properties     Investment     % Investment  
South
     275     $ 1,475,493       50 %
Northeast
     61       485,936       16 %
West
     64       497,284       17 %
Midwest
     64       509,140       17 %
 
                  
Totals
     464     $ 2,967,853       100 %
 
                        
                         
Concentration by State   # Properties     Investment     % Investment  
Florida
     62     $ 402,289       14 %
Massachusetts
     35       331,422       11 %
Ohio
     30       255,994       9 %
Texas
     55       229,442       8 %
North Carolina
     43       200,594       7 %
Remaining States (32)
     239       1,548,112       51 %
 
                  
Totals
     464     $ 2,967,853       100 %
 
                        
     
Revenue Composition ($000’s)
  Exhibit 4
                                 
    Three Months Ended   Six Months Ended
    June 30, 2006   June 30, 2006
         
Revenue by Investment Type (1)
                                
Real Property
   $ 75,792       94 %   $ 149,551       94 %
Loans Receivable
     4,544       6 %     8,872       6 %
         
Totals
   $ 80,336       100 %   $ 158,423       100 %
 
                                
Revenue by Facility Type (1)
                                
Independent/CCRCs
   $ 9,395       12 %   $ 18,695       12 %
Assisted Living Facilities
     29,636       37 %     58,119       37 %
Skilled Nursing Facilities
     36,926       46 %     72,540       46 %
Specialty Care Facilities
     4,379       5 %     9,069       5 %
         
Totals
   $ 80,336       100 %   $ 158,423       100 %
Notes: (1) Revenues include gross revenues and revenues from discontinued operations.

Page 8 of 15

 

July 19, 2006
2Q06 Earnings Release
     
Revenue Maturities ($000’s)
  Exhibit 5
 
    
Operating Lease Expirations & Loan Maturities
    
                                 
    Current Lease   Current Interest   Lease and    
Year   Revenue (1)   Revenue (1)   Interest Revenue   % of Total
 
2006   $ 0     $ 1,313     $ 1,313       0 %
2007     0       691       691       0 %
2008     0       2,468       2,468       1 %
2009     906       1,999       2,905       1 %
2010     1,726       2,174       3,900       1 %
Thereafter     304,318       5,893       310,211       97 %
     
Totals   $ 306,950     $ 14,538     $ 321,488       100 %
Notes: (1) Revenue impact by year, annualized.
     
Debt Maturities and Principal Payments ($000’s)
  Exhibit 6
                                 
Year   Lines of Credit (1)   Senior Notes (2)   Secured Debt   Total
 
2006   $ 0     $ 0     $ 1,561     $ 1,561  
2007     40,000       52,500       15,074       107,574  
2008     500,000       42,330       10,289       552,619  
2009     0       0       33,807       33,807  
2010     0       0       8,733       8,733  
2011     0       0       20,472       20,472  
2012     0       250,000       14,851       264,851  
Thereafter     0       850,000       26,391       876,391  
     
Totals   $ 540,000     $ 1,194,830     $ 131,178     $ 1,866,008  
             
Notes:
    (1 )   Reflected at 100% capacity.
 
    (2 )   Amounts above represent principal amounts due and do not reflect unamortized premiums/discounts or the fair value of interest-rate swap agreements as reflected on the balance sheet.

Page 9 of 15

 

July 19, 2006
2Q06 Earnings Release
     
Investment Activity ($000’s)
  Exhibit 7
                                 
    Three Months Ended   Six Months Ended
    June 30, 2006   June 30, 2006
         
Funding by Investment Type
                                
Real Property
   $ 88,914       92 %   $ 204,254       93 %
Loans Receivable
     8,036       8 %     15,779       7 %
         
Total
   $ 96,950       100 %   $ 220,033       100 %
 
                                
Funding by Facility Type
                                
Independent/CCRCs
   $ 30,990       32 %   $ 35,778       16 %
Assisted Living Facilities
     37,261       38 %     70,825       32 %
Skilled Nursing Facilities
     25,407       26 %     109,710       50 %
Specialty Care Facilities
     3,292       4 %     3,720       2 %
         
Total
   $ 96,950       100 %   $ 220,033       100 %
     
Development Activity ($000’s)
  Exhibit 8
                                         
    Balance at     2006 YTD     Balance at     Committed     Unfunded  
Facility Type   December 31, 2005     Fundings     June 30, 2006     Balances     Commitments  
Independent/CCRCs
   $ 0     $ 21,354     $ 21,354     $ 114,635     $ 93,281  
Assisted Living Facilities
     2,995       39,428       42,423       194,311       151,888  
Skilled Nursing Facilities
     911       11,134       12,045       27,015       14,970  
 
                              
Totals
   $ 3,906     $ 71,916     $ 75,822     $ 335,961     $ 260,139  
Development Funding Projections ($000’s)
                                         
                    Projected Future Fundings        
                    2006     Fundings     Unfunded  
Facility Type   Projects     # Beds/Units     Fundings     Thereafter     Commitments  
Independent/CCRCs
     3       467     $ 27,656     $ 65,625     $ 93,281  
Assisted Living Facilities
     20       1,292       55,318       96,570       151,888  
Skilled Nursing Facilities
     3       263       9,454       5,516       14,970  
 
                              
Totals
     26       2,022     $ 92,428     $ 167,711     $ 260,139  
 
                                        
Project Conversion Projections ($000’s)
                                         
2006 Quarterly Projections     Annual Projections  
            Projected Average                     Projected Average  
Quarter   Amount     Initial Yields (1)     Year     Amount     Initial Yields (1)  
1Q06 actual
   $ 0       n/a     2006 projected   $ 13,191       9.09 %
2Q06 actual
     0       n/a     2007 projected     191,184       9.46 %
3Q06 projected
     10,323       9.12 %   2008 projected     52,618       9.11 %
4Q06 projected
     2,868       9.00 %   Thereafter     78,968       9.28 %
 
                              
Totals
   $ 13,191       9.09 %   Totals   $ 335,961       9.35 %
     
Notes:
  All amounts include both cash advances and non-cash additions such as capitalized interest.
 
  (1) Actual initial yields may be higher if the underlying market rates increase.

Page 10 of 15

 

July 19, 2006
2Q06 Earnings Release
     
Disposition Activity ($000’s)
  Exhibit 9
                                 
    Three Months Ended     Six Months Ended  
    June 30, 2006     June 30, 2006  
         
Dispositions by Investment Type
                                
Real Property
   $ 16,272       100 %   $ 31,665       60 %
Loans Receivable
             0 %     21,240       40 %
 
                        
Totals
   $ 16,272       100 %   $ 52,905       100 %
 
Dispositions by Facility Type
                                
Assisted Living Facilities
   $ 13,325       82 %   $ 25,487       48 %
Skilled Nursing Facilities
     2,947       18 %     20,460       39 %
Specialty Care Facilities
             0 %     6,958       13 %
 
                        
Totals
   $ 16,272       100 %   $ 52,905       100 %
     
Discontinued Operations ($000’s)
  Exhibit 10
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2006     2005     2006     2005  
Revenues
                                
Rental income
   $ 160     $ 3,214     $ 834     $ 6,586  
 
                                
Expenses
                                
Interest expense
     29       913       224       1,861  
Provision for depreciation
     0       1,700       209       3,516  
 
                        
 
                                
Income (loss) from discontinued operations, net
   $ 131     $ 601     $ 401     $ 1,209  
     
 
  Exhibit 11
                                 
Current Capitalization ($000’s except share price)     Leverage & Performance Ratios
    Balance     % Balance                  
Borrowings Under Bank Lines
   $ 146,000       5 %   Debt/Total Book Cap     49 %
Long-Term Debt Obligations
     1,324,533       44 %   Debt/Undepreciated Book Cap     44 %
Stockholders’ Equity
     1,545,938       51 %   Debt/Total Market Cap     37 %
                     
Total Book Capitalization
   $ 3,016,471       100 %                
 
                   Interest Coverage   3.16x  2nd Qtr.
Common Shares Outstanding (000’s)
     62,521                     3.08x  YTD
Period-End Share Price
   $ 34.95             Interest Coverage   3.21x  2nd Qtr.
 
                              
Common Stock Market Value
   $ 2,185,109       56 %   - adjusted   3.16x  YTD
Preferred Stock
     276,875       7 %   Fixed Charge Coverage   2.59x  2nd Qtr.
Borrowings Under Bank Lines
     146,000       3 %           2.52x  YTD
Long-Term Debt Obligations
     1,324,533       34 %   Fixed Charge Coverage   2.63x  2nd Qtr.
                       
Total Market Capitalization
   $ 3,932,517       100 %   - adjusted   2.59x  YTD

Page 11 of 15

 

2Q06 Earnings Release   July 19, 2006
     
EBITDA Reconciliation ($000’s)   Exhibit 12
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2006     2005     2006     2005  
Net income
   $ 28,001     $ 3,830     $ 52,979     $ 27,070  
Interest expense (1)
     23,087       19,986       47,325       39,631  
Tax expense
     12       216       12       219  
Provision for depreciation (1)
     24,131       21,009       47,392       41,406  
Amortization
     707       1,998       1,418       2,724  
 
                        
EBITDA
     75,938       47,039       149,126       111,050  
Stock-based compensation expense
     838       316       3,351       632  
Provision for loan losses
     250       300       500       600  
Loss on extinguishment of debt, net
     0       18,448       0       18,448  
 
                        
EBITDA — adjusted
   $ 77,026     $ 66,103     $ 152,977     $ 130,730  
 
                                
Interest Coverage Ratio
                                
Interest expense (1)
   $ 23,087     $ 19,986     $ 47,325     $ 39,631  
Capitalized interest
     909       348       1,111       614  
 
                        
Total interest
     23,996       20,334       48,436       40,245  
EBITDA
   $ 75,938     $ 47,039     $ 149,126     $ 111,050  
 
                        
Interest coverage ratio
     3.16x       2.31x       3.08x       2.76x  
 
                                
EBITDA — adjusted
   $ 77,026     $ 66,103     $ 152,977     $ 130,730  
 
                        
Interest coverage ratio — adjusted
     3.21x       3.25x       3.16x       3.25x  
 
                                
Fixed Charge Coverage Ratio
                                
Total interest (1)
   $ 23,996     $ 20,334     $ 48,436     $ 40,245  
Preferred dividends
     5,333       5,436       10,666       10,872  
 
                        
Total fixed charges
     29,329       25,770       59,102       51,117  
EBITDA
   $ 75,938     $ 47,039     $ 149,126     $ 111,050  
 
                        
Fixed charge coverage ratio
     2.59x       1.83x       2.52x       2.17x  
 
                                
EBITDA — adjusted
   $ 77,026     $ 66,103     $ 152,977     $ 130,730  
 
                        
Fixed charge coverage ratio - adjusted
     2.63x       2.57x       2.59x       2.56x  
Notes:   (1) Provision for depreciation and interest expense include provision for depreciation and interest expense from discontinued operations.

Page 12 of 15

 

2Q06 Earnings Release   July 19, 2006
     
Funds Available For Distribution Reconciliation   Exhibit 13
(Amounts in 000’s except per share data)    
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2006     2005     2006     2005  
Net income (loss) available to common stockholders
   $ 22,668     $ (1,606 )   $ 42,313     $ 16,198  
Provision for depreciation (1)
     24,131       21,009       47,392       41,406  
Loss (gain) on sales of properties
     (929 )     24       (2,482 )     134  
Gross straight-line rental income
     (2,216 )     (3,536 )     (4,616 )     (7,245 )
Prepaid/straight-line rent receipts
     2,710       2,360       13,020       3,213  
 
                        
Funds available for distribution
     46,364       18,251       95,627       53,706  
Loss on extinguishment of debt, net
     0       18,448       0       18,448  
 
                        
Funds available for distribution — adjusted
     46,364       36,699       95,627       72,154  
Prepaid/straight-line rent receipts
     (2,710 )     (2,360 )     (13,020 )     (3,213 )
 
                        
Funds available for distribution — normalized
   $ 43,654     $ 34,339     $ 82,607     $ 68,941  
 
                                
Average common shares outstanding:
                                
Basic
     61,548       53,429       59,871       53,207  
Diluted — for net income (loss) purposes
     61,868       53,429       60,201       53,616  
Diluted — for FAD purposes
     61,868       53,765       60,201       53,616  
 
                                
Per share data:
                                
Net income (loss) available to common stockholders
                                
Basic
   $ 0.37     $ (0.03 )   $ 0.71     $ 0.30  
Diluted
     0.37       (0.03 )     0.70       0.30  
 
                                
Funds available for distribution
                                
Basic
   $ 0.75     $ 0.34     $ 1.60     $ 1.01  
Diluted
     0.75       0.34       1.59       1.00  
 
                                
Funds available for distribution — adjusted
                                
Basic
   $ 0.75     $ 0.69     $ 1.60     $ 1.36  
Diluted
     0.75       0.68       1.59       1.35  
 
                                
Funds available for distribution — normalized
                                
Basic
   $ 0.71     $ 0.64     $ 1.38     $ 1.30  
Diluted
     0.71       0.64       1.37       1.29  
 
                                
FAD Payout Ratio
                                
Dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
FAD per diluted share
   $ 0.75     $ 0.34     $ 1.59     $ 1.00  
 
                        
FAD payout ratio
     85 %     182 %     79 %     122 %
 
                                
FAD Payout Ratio — Adjusted
                                
Dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
FAD per diluted share — adjusted
   $ 0.75     $ 0.68     $ 1.59     $ 1.35  
 
                        
FAD payout ratio — adjusted
     85 %     91 %     79 %     90 %
 
                                
FAD Payout Ratio — Normalized
                                
Dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
FAD per diluted share — normalized
   $ 0.71     $ 0.64     $ 1.37     $ 1.29  
 
                        
FAD payout ratio — normalized
     90 %     97 %     92 %     95 %
Notes:   (1) Provision for depreciation includes provision for depreciation from discontinued operations.

Page 13 of 15

 

2Q06 Earnings Release   July 19, 2006
     
Funds From Operations Reconciliation   Exhibit 14
(Amounts in 000’s except per share data)    
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2006     2005     2006     2005  
Net income (loss) available to common stockholders
   $ 22,668     $ (1,606 )   $ 42,313     $ 16,198  
Provision for depreciation (1)
     24,131       21,009       47,392       41,406  
Loss (gain) on sales of properties
     (929 )     24       (2,482 )     134  
 
                        
Funds from operations
     45,870       19,427       87,223       57,738  
Loss on extinguishment of debt, net
     0       18,448       0       18,448  
 
                        
Funds from operations — adjusted
   $ 45,870     $ 37,875     $ 87,223     $ 76,186  
 
                                
Average common shares outstanding:
                                
Basic
     61,548       53,429       59,871       53,207  
Diluted — for net income (loss) purposes
     61,868       53,429       60,201       53,616  
Diluted — for FFO purposes
     61,868       53,765       60,201       53,616  
 
                                
Per share data:
                                
Net income (loss) available to common stockholders
                                
Basic
   $ 0.37     $ (0.03 )   $ 0.71     $ 0.30  
Diluted
     0.37       (0.03 )     0.70       0.30  
 
                                
Funds from operations
                                
Basic
   $ 0.75     $ 0.36     $ 1.46     $ 1.09  
Diluted
     0.74       0.36       1.45       1.08  
 
                                
Funds from operations — adjusted
                                
Basic
   $ 0.75     $ 0.71     $ 1.46     $ 1.43  
Diluted
     0.74       0.70       1.45       1.42  
 
                                
FFO Payout Ratio
                                
Dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
FFO per diluted share
   $ 0.74     $ 0.36     $ 1.45     $ 1.08  
 
                        
FFO payout ratio
     86 %     172 %     87 %     113 %
 
                                
FFO Payout Ratio — Adjusted
                                
Dividends per share
   $ 0.64     $ 0.62     $ 1.26     $ 1.22  
FFO per diluted share — adjusted
   $ 0.74     $ 0.70     $ 1.45     $ 1.42  
 
                        
FFO payout ratio — adjusted
     86 %     89 %     87 %     86 %
Notes:   (1) Provision for depreciation includes provision for depreciation from discontinued operations.

Page 14 of 15

 

2Q06 Earnings Release   July 19, 2006
     
Outlook Reconciliation   Exhibit 15
(Amounts in 000’s except per share data)    
                                 
    Current Outlook     Prior Outlook  
    Year Ended     Year Ended  
    December 31, 2006     December 31, 2006  
    Low     High     Low     High  
Net income available to common stockholders
   $ 83,292     $ 88,192     $ 82,363     $ 87,263  
Loss (gain) on sales of properties
     (2,482 )     (2,482 )     (1,553 )     (1,553 )
Provision for depreciation (1)
     97,500       97,500       97,500       97,500  
 
                        
Funds from operations
     178,310       183,210       178,310       183,210  
Rental income less than (in excess of ) cash received
     4,500       4,500       2,000       2,000  
 
                        
Funds available for distribution
   $ 182,810     $ 187,710     $ 180,310     $ 185,210  
 
                                
Average common shares outstanding (diluted)
     62,000       62,000       62,000       62,000  
 
                                
Per share data (diluted):
                                
Net income available to common stockholders
   $ 1.34     $ 1.42     $ 1.33     $ 1.41  
Funds from operations
     2.88       2.96       2.88       2.96  
Funds available for distribution
     2.95       3.03       2.91       2.99  
Notes:   (1) Provision for depreciation includes provision for depreciation from discontinued operations.

Page 15 of 15