-----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, PFCbMVRktP5d/uOb/Zmxn3FqrYqAo4Fc2zRxewXCbxPPhiKOIL2HTqiK02z1WBsH 0ioXRjP9PWftDSYOVEZQlg== 0000950152-99-003835.txt : 19990504 0000950152-99-003835.hdr.sgml : 19990504 ACCESSION NUMBER: 0000950152-99-003835 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE REIT INC /DE/ CENTRAL INDEX KEY: 0000766704 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341096634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08923 FILM NUMBER: 99608361 BUSINESS ADDRESS: STREET 1: ONE SEAGATE STE 1500 STREET 2: P O BOX 1475 CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192472800 10-Q 1 HEALTH CARE REIT, INC. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (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, 1999 ------------------------------------------------- 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 1-8923 HEALTH CARE REIT, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 34-1096634 ------------------------------ ------------------- (State or jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One SeaGate, Suite 1500, Toledo, Ohio 43604 - -------------------------------------- ------------------- (Address of principal executive office) (Zip Code) (Registrant's telephone number, including area code) (419) 247-2800 --------------------------- - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No ______. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _____. No _____. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 29, 1999. Class: Shares of Common Stock, $1.00 par value Outstanding 28,317,335 shares 2 HEALTH CARE REIT, INC. INDEX Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - March 31, 1999 and December 31, 1998 3 Consolidated Statements of Income - Three months ended March 31, 1999 and 1998 4 Consolidated Statements of Shareholders' Equity - Three months ended March 31, 1999 and 1998 5 Consolidated Statements of Cash Flows- Three months ended March 31, 1999 and 1998 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosure About Market Risk 13 Part II. OTHER INFORMATION Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 EXHIBIT INDEX 16 -2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (UNAUDITED) HEALTH CARE REIT, INC. AND SUBSIDIARIES
MARCH 31 DECEMBER 31 1999 1998 (UNAUDITED) (NOTE) ---------- ---------- (IN THOUSANDS) ASSETS Real estate investments: Real property owned: Land $ 57,763 $ 44,722 Buildings & improvements 588,713 443,574 Construction in progress 80,285 151,317 ---------- ---------- 726,761 639,613 Less accumulated depreciation (23,179) (19,624) ---------- ---------- Total real property owned 703,582 619,989 Loans receivable 412,368 405,963 Direct financing leases 1,139 6,741 ---------- ---------- 1,117,089 1,032,693 Less allowance for loan losses (5,137) (4,987) ---------- ---------- Net real estate investments 1,111,952 1,027,706 Other Assets: Direct investments 25,888 26,180 Marketable securities 2,233 4,106 Cash and cash equivalents 1,231 1,269 Deferred loan expenses 3,440 2,389 Receivables and other assets 15,301 11,774 ---------- ---------- 48,093 45,718 ---------- ---------- TOTAL ASSETS $1,160,045 $1,073,424 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Borrowings under line of credit obligations $ 89,200 $ 171,550 Senior unsecured notes 290,000 240,000 Secured debt 51,408 7,429 Accrued expenses and other liabilities 22,743 20,686 ---------- ---------- TOTAL LIABILITIES 453,351 439,665 Shareholders' equity: Preferred Stock, $1.00 par value: Authorized - 10,000,000 shares Issued and outstanding - 6,000,000 in 1999 150,000 75,000 Common Stock, $1.00 par value: Authorized - 40,000,000 shares Issued and outstanding - 28,317,335 in 1999 and 28,240,025 in 1998 28,317 28,240 Capital in excess of par value 519,982 520,692 Undistributed net income 10,834 10,434 Accumulated other comprehensive income 2,109 3,982 Unamortized restricted stock (4,548) (4,589) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 706,694 633,759 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,160,045 $1,073,424 ========== ==========
NOTE: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to unaudited consolidated financial statements -3- 4 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) HEALTH CARE REIT, INC. AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31 1999 1998 ----------------------------------- (IN THOUSANDS EXCEPT PER SHARE DATA) REVENUES: Rental income $14,240 $ 7,858 Interest income 11,795 12,116 Commitment fees and other income 1,946 1,252 Prepayment fees 183 0 ------- ------- Total revenue 28,164 21,226 EXPENSES: Interest expense 4,269 4,240 Loan expense 166 176 Provision for depreciation 3,555 1,870 Provision for losses 150 150 General and administrative expenses 1,674 1,381 ------- ------- Total expenses 9,814 7,817 ------- ------- Net income before gains on sale of properties 18,350 13,409 Gain on sale of properties 628 0 ------- ------- Net income 18,978 13,409 Preferred stock dividends 2,759 0 ------- ------- Net Income Available to Common Shareholders $16,219 $13,409 ======= ======= Average number of shares outstanding: Basic 28,077 24,259 Diluted 28,393 24,642 Net income per share: Basic $ 0.58 $ 0.55 Diluted 0.57 0.54 Dividends declared and paid per common share $ 0.56 $ 0.54
See notes to unaudited consolidated financial statements -4- 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) HEALTH CARE REIT, INC. AND SUBSIDIARIES
Three months ended March 31, 1999 ------------------------------------------------------------------------------------------- Capital In Unamortized Accum. Other Preferred Common Excess of Restricted Undistributed Comprehensive In thousands Stock Stock Par Value Stock Net Income Income Total ------------------------------------------------------------------------------------------- Balance at beginning of period $75,000 $28,240 $520,692 $(4,589) $ 10,434 $ 3,982 $633,759 Comprehensive income: Net income 18,978 18,978 Unrealized gains on securities (1,873) (1,873) -------- Comprehensive income 17,105 -------- Proceeds from issuance of shares from dividend reinvestment plan and stock incentive plans 77 1,745 (228) 1,594 Proceeds from sale of shares 75,000 (2,455) 72,545 Amortization of restricted stock grants 269 269 Cash dividends paid (18,578) (18,578) -------- ------- -------- ------- -------- -------- -------- Balance at end of period $150,000 $28,317 $519,982 $(4,548) $ 10,834 $ 2,109 $706,694 ======== ======= ======== ======= ======== ======== ======== Three months ended March 31, 1998 ------------------------------------------------------------------------------------------- Capital In Unamortized Accum. Other Preferred Common Excess of Restricted Undistributed Comprehensive In thousands Stock Stock Par Value Stock Net Income Income Total ------------------------------------------------------------------------------------------- Balance at beginning of period $ $24,341 $435,603 $(3,532) $ 8,841 $ 4,671 $469,924 Comprehensive income: Net income 13,409 13,409 Unrealized gains on securities 339 339 ------- Comprehensive income 13,748 ------- Proceeds from issuance of shares from dividend reinvestment plan and stock incentive plans 114 2,691 (64) 2,741 Proceeds from sale of shares 913 22,808 23,721 Amortization of restricted stock grants 115 115 Cash dividends paid (13,148) (13,148) ------- ------- -------- ------- -------- -------- -------- Balance at end of period $ 0 $25,368 $461,102 $(3,481) $ 9,102 $ 5,010 $497,101 ======= ======= ======== ======= ======== ======== ========
See notes to unaudited consolidated financial statements -5- 6 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) HEALTH CARE REIT, INC. AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31 1999 1998 ---------------------------- (IN THOUSANDS) OPERATING ACTIVITIES Net income $ 18,978 $ 13,409 Adjustments to reconcile net income to net cash Provision for depreciation 3,650 1,897 Provision for losses 150 150 Amortization 443 291 Loan and commitment fees earned less than cash received 529 523 Direct financing lease income less than cash received 35 110 Rental income in excess of cash received (1,573) (569) Interest and other income in excess of cash received (107) (5) Increase in accrued expenses and other liabilities 1,527 3,400 (Increase)/decrease in receivables and other assets (1,730) 86 ------- -------- NET CASH PROVIDED FROM OPERATING ACTIVITIES 21,902 19,292 INVESTING ACTIVITIES Investment in real properties (84,829) (68,419) Investment in loans receivable (13,039) (38,040) Other investments (1,919) (3,716) Principal collected on loans 6,634 7,774 Proceeds from sale of properties 5,567 Other (318) 6 -------- --------- NET CASH USED IN INVESTING ACTIVITIES (87,904) (102,395) FINANCING ACTIVITIES Net (payments)/advances under line of credit arrangements (82,350) (29,400) Principal payments on long-term obligations (21) (19) Net proceeds from the issuance of Common Stock 1,594 26,462 Net proceeds from the issuance of Preferred Stock 72,545 Proceeds from issuance of Senior Notes 50,000 100,000 Proceeds from issuance of Secured Debt 44,000 Increase in deferred loan expense (1,226) (484) Cash distributions to shareholders (18,578) (13,148) -------- --------- NET CASH PROVIDED FROM FINANCING ACTIVITIES 65,964 83,411 -------- --------- Increase/(decrease) in cash and cash equivalents (38) 308 Cash and cash equivalents at beginning of period 1,269 1,381 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,231 $ 1,689 ======== ========= Supplemental Cash Flow Information -- Interest Paid $ 6,523 $ 1,973 ======== =========
See notes to unaudited consolidated financial statements -6- 7 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS HEALTH CARE REIT, INC. AND SUBSIDIARIES NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered for a fair presentation have been included. Operating results for the three months ended March 31, 1999, are not necessarily an indication of the results that may be expected for the year ending December 31, 1999. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. NOTE B - REAL ESTATE INVESTMENTS During the three months ended March 31, 1999, the Company invested $35,974,000 in real property, made construction advances of $60,217,000, provided permanent mortgage financings of $1,220,000, and funded $1,882,000 of equity related investments. During the three months ended March 31, 1999, the Company received principal payments on real estate mortgages of $6,634,000 and had net advances on working capital loans of $458,000. With respect to the above-mentioned construction advances, funding for construction in progress in connection with 48 properties owned directly by the Company totaled $48,856,000, and funding associated with 13 construction loans represented $11,361,000. During the three months ended March 31, 1999, 14 of the construction properties in progress completed the construction phase of the Company's investment process and were converted to permanent operating leases, with an aggregate investment balance of $119,887,000. Also, during the three months ended March 31, 1999, four of the construction loans completed the construction phase of the Company's investment process and were converted to investments in permanent mortgage loans, with an aggregate investment of $28,909,000. NOTE C - INDEBTEDNESS In February 1999, the Company entered into a $50,000,000 Secured Credit Agreement. The Credit Agreement bears interest at the lender's prime rate or LIBOR plus 2.0%, with a floor interest rate of 7.0%. At March 31, 1999, $44,000,000 was advanced under this Credit Agreement. In March 1999, the Company completed the sale of $50 million of 8.17% Senior Unsecured Notes due March 15, 2006. The Company has a total of $190,000,000 in unsecured credit facilities bearing interest at the lenders' prime rate or LIBOR plus 1.0%. A total of approximately $100,800,000 was available at March 31, 1999, subject to compliance with the terms and conditions of the unsecured credit facilities. -7- 8 NOTE D - SHAREHOLDERS' EQUITY In January 1999, the Company announced the sale of 3,000,000 shares of cumulative convertible preferred stock. These shares have a liquidation value of $25.00 per share and will pay dividends equivalent to the greater of (i) the annual dividend rate of $2.25 per share (a quarterly dividend rate of $0.5625 per share); or (ii) the quarterly dividend then payable per common share on an as converted basis. The preferred shares are convertible into common stock at a conversion price of $25.625 per share. The Company has the right to redeem the preferred shares after five years. In May 1998, the Company sold 3,000,000 shares of 8.875% Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $25.00 per share. On and after May 1, 2003, the Preferred Stock may be redeemed for cash at the option of the Company, in whole or in part, at $25.00 per share, plus accrued and unpaid dividends thereon to the redemption date. NOTE E - DIRECT INVESTMENTS Management determines the appropriate classification of a direct investment at the time of acquisition and reevaluates such designation as of each balance sheet date. Debt securities which are classified as held to maturity are stated at historical cost. Equity investments are stated at historical cost. At March 31, 1999, direct investments included the preferred stock of one private corporation and subordinated debt in nine private corporations, and ownership representing a 31% interest in Atlantic Healthcare Finance L.P., a property investment group that specializes in the financing, through sale and leaseback transactions, of nursing homes located in the United Kingdom and continental Europe. NOTE F - MARKETABLE SECURITIES Marketable securities are stated at market value with unrealized gains and losses reported in a separate component of shareholders' equity. At March 31, 1999, marketable securities reflected the market value of the common stock of two publicly owned corporations, which were obtained by the Company at no cost, and the fair value of the common stock related to warrants in one publicly owned corporation in excess of the exercise price. NOTE G - CONTINGENT LIABILITIES As disclosed in the financial statements for the year ended December 31, 1998, the Company was contingently liable for certain obligations amounting to $9,365,000. No significant change in these contingencies had occurred as of March 31, 1999. NOTE H - DISTRIBUTIONS PAID TO COMMON SHAREHOLDERS On February 22, 1999, the Company paid a dividend of $0.56 per share to shareholders of record on February 2, 1999. This dividend related to the period from October 1, 1998 through December 31, 1998. -8- 9 NOTE I - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Three months ended March 31 --------------------------- 1999 1998 ------- ------- Numerator for basic and diluted earnings per share-income available to common shareholders $16,219 $13,409 ======= ======= Denominator for basic earnings per share - weighted average shares 28,077 24,259 Effect of dilutive securities: Employee stock options 116 143 Nonvested restricted shares 200 240 ------- ------- Dilutive potential common shares 316 383 ------- ------- Denominator for diluted earnings per share - adjusted weighted average shares 28,393 24,642 ======= ======= Basic earnings per share $ 0.58 $ 0.55 Diluted earnings per share $ 0.57 $ 0.54
-9- 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- LIQUIDITY AND CAPITAL RESOURCES At March 31, 1999, the Company's net real estate investments totaled approximately $1,111,952,000, which included 154 assisted living facilities, 53 skilled nursing facilities, 17 retirement centers, six specialty care facilities and two behavioral care facilities. The Company funds its investments through a combination of long-term and short-term financing, utilizing both debt and equity. As of March 31, 1999, the Company had shareholders' equity of $706,694,000 and a total outstanding debt balance of $430,608,000, which represents a debt to equity ratio of 0.61 to 1.0. In January 1999, the Company announced the sale of 3,000,000 shares of cumulative convertible preferred stock. These shares have a liquidation value of $25.00 per share and will pay quarterly dividends equivalent to the greater of $0.5625 or the quarterly dividend then payable per common share on an as converted basis. The preferred shares are convertible into common stock at a conversion price of $25.625 per share. The Company has the right to redeem the preferred shares after five years. In February 1999, the Company entered into a $50,000,000 Secured Credit Facility. The Credit Facility bears interest at the lender's prime rate or LIBOR plus 2.0%, with a floor of 7.0%. At March 31, 1999, $44,000,000 was advanced under this Credit Agreement. In March 1999, the Company completed the sale of $50 million of 8.17% Senior Unsecured Notes due March 15, 2006. During the three months ended March 31, 1999, the proceeds derived from the Company's capital raising activities were used to invest in additional health care properties and reduce bank debt under the Company's revolving lines of credit arrangements. As of March 31, 1999, the Company has effective shelf registrations on file with the Securities and Exchange Commission under which the Company may issue up to $330,319,000 of securities including debt, convertible debt, common and preferred stock. The Company anticipates issuing securities under such shelf registrations to invest in additional health care facilities and to repay borrowings under the Company's line of credit arrangements. As of March 31, 1999, the Company had approximately $263,511,000 in unfunded commitments. Under the Company's line of credit arrangements, available funding totaled $100,800,000, subject to compliance with the terms and conditions of the line of credit arrangements. The Company believes its liquidity and various sources of available capital are sufficient to fund operations, meet debt service and dividend requirements, and finance future investments. RESULTS OF OPERATIONS Revenues for the three months ended March 31, 1999, were $28,164,000 as compared with $21,226,000 for the three months ended March 31, 1998. Revenue growth was generated primarily by increased rental income of $6,382,000 and increased commitment fees and other income of $694,000, as a result of additional real estate investments made during the past twelve months. In addition, the Company recognized $628,000 in gains on sale of properties during the first three months in 1999. There were no such gains during the same period in 1998. Expenses for the three months ended March 31, 1999, totaled $9,814,000, an increase of $1,997,000 from expenses of $7,817,000 for the same period in 1998. The increase in total expenses for the three month period ended March 31, 1999, was related to an increase in interest expense, an additional expense associated with the provision for depreciation and an increase in general and administrative expenses. -10- 11 Interest expense for the three months ended March 31, 1999, was $4,269,000 as compared with $4,240,000 for the same period in 1998. The increase in the 1999 period was primarily due to the issuance of $50,000,000 Senior Unsecured Notes in March, 1999. The increase in the 1999 period was offset by the amount of capitalized interest recorded during the first three months of 1999. The Company capitalizes certain interest costs associated with funds used to finance the construction of properties owned directly by the Company. The amount capitalized is based upon the borrowings outstanding during the construction period using the rate of interest which approximates the Company's cost of financing. The Company's interest expense is reduced by the amount capitalized. Capitalized interest for the three month period in 1999 totaled $3,159,000, as compared with $1,226,000 for the same period in 1998. The provision for depreciation for the three month period ended March 31, 1999, totaled $3,555,000, an increase of $1,685,000 over the comparable period in 1998 as a result of additional investments in properties owned directly by the Company. General and administrative expense for the three month period ended March 31, 1999, totaled $1,674,000, as compared with $1,381,000 for the same period in 1998. The expenses for the three month period in 1999 were 5.81% of revenues as compared with 6.51% for the same period in 1998. Dividends associated with the Company's outstanding preferred stock totaled $2,759,000 for the three months ended March 31, 1999. There were no such dividend payments for the same period in 1998. As a result of the various factors mentioned above, net income available to common shareholders for the three month period ended March 31, 1999, was $16,219,000, or $0.57 per diluted share, as compared with $13,409,000, or $0.54 per diluted share, for the comparable period in 1998. IMPACT OF INFLATION During the past three years, inflation has not significantly affected the earnings of the Company because of the moderate inflation rate. Additionally, earnings of the Company are primarily long-term investments with fixed interest rates. These investments are mainly financed with a combination of equity, senior notes and borrowings under the revolving lines of credit. During inflationary periods, which generally are accompanied by rising interest rates, the Company's ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, the Company believes that equity and debt financing will continue to be available. YEAR 2000 COMPLIANCE The Year 2000 compliance issue concerns the inability of certain systems and devices to properly use or store dates beyond December 31, 1999. This could result in system failures, malfunctions, or miscalculations that disrupt normal operations. This issue affects most companies and organizations to large and small degrees, at least to the extent that potential exposures must be evaluated. The Company believes its own internal operations, technology infrastructure, information systems and software applications are Year 2000 compliant. The Company is reviewing the impact of outside vendors and tenants/borrowers. The Company initially focused this review on mission-critical operations, recognizing that other potential effects are expected to be less material. In those cases where there are external compliance issues, these are considered to be minor in nature. Expenditures for any remedies will not be material. With respect to the Company's tenants, borrowers and properties, the Company is assessing the tenants and borrowers compliance efforts, the possibility of any interface difficulties or electromechanical problems relating to compliance by material vendors, the effects of potential non-compliance, and remedies that may mitigate or -11- 12 obviate such effects. The Company plans to process information from tenant surveys beginning in 1999 and complete its assessment by mid-1999. Because the Company's evaluation of these issues has been conducted by its own personnel or by selected inquiries of its vendors and tenants in connection with their routine servicing operations, the Company believes that its expenditures for assessing Year 2000 issues, though difficult to quantify, have not been material. In addition, the Company is not aware of any issues that will require material expenditures by the Company in the future. Based upon current information, the Company believes that the risk posed by foreseeable Year 2000 related problems with its internal systems (including both information and non-information systems) is minimal. Year 2000 related problems with the Company's software applications and internal operational programs are unlikely to cause more than minor disruptions in the Company's operations. Year 2000 related problems at certain of its third-party service providers, such as its banks, payroll processor, and telecommunications provider is marginally greater, though, based upon current information, the Company does not believe any such problems would have a material effect on its operations. For example, Year 2000 related problems at such third-party service providers could delay the processing of financial transactions and the Company's payroll and could disrupt the Company's internal and external communications. The Company believes that the risk posed by Year 2000 related problems at its properties or with its tenants is marginally greater, though, based upon current information, the Company does not believe any such problems would have a material effect on its operations. Year 2000 related problems at certain governmental agencies and third-party payers could delay the processing of tenant financial transactions, though, based upon current information, the Company does not believe any such problems would have a material long-term effect on its operations. Year 2000 related problems with the electromechanical systems at its properties are unlikely to cause more than minor disruptions in the Company's operations. The Company intends to complete outstanding assessments, implement identified remedies, continue to monitor Year 2000 issues, and develop contingency plans if, and to the extent deemed, necessary. However, based upon current information and barring developments, the Company does not anticipate developing any substantive contingency plans with respect to Year 2000 issues. In addition, the Company has no plans to seek independent verification or review of its assessments. While the Company believes that it will be Year 2000 compliant by December 31, 1999, there can be no assurance that the Company will be successful in identifying and assessing all compliance issues, or that the Company's efforts to remedy all Year 2000 compliance issues will be effective such that they will not have a material adverse effect on the Company's business or results of operations. OTHER INFORMATION 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, competition in the financing of health care facilities, the availability of capital, and regulatory and other changes in the health care sector, as described in the Company's filings with the Securities and Exchange Commission. -12- 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ---------------------------------------- ABOUT MARKET RISK ----------------- The Company is exposed to various market risks, including the potential loss arising from adverse changes in interest rates. The Company seeks to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings to the extent possible. The market value of the Company's long-term fixed rate borrowings is subject to interest rate risk. Generally, the market value of fixed rate financial instruments will decrease as interest rates rise and increase as interest rates fall. The estimated fair value of the Company's total long-term borrowings at March 31, 1999, was $284 million. A 1% increase in interest rates would result in a decrease in fair value of long-term borrowings by approximately $13 million. The Company is subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of such refinancing may not be as favorable as the terms of current indebtedness. The majority of the Company's borrowings were completed pursuant to indentures or contractual agreements which limit the amount of indebtedness the Company may incur. Accordingly, in the event that the Company is unable to raise additional equity or borrow money because of these limitations, the Company's ability to acquire additional properties may be limited. At March 31, 1999, the Company's variable interest rate debt exceeded its variable interest rate assets, presenting an exposure to rising interest rates. The Company may or may not elect to use financial derivative instruments to hedge variable interest rate exposure. Such decisions are principally based on the Company's policy to match its variable rate investments with comparable borrowings, but is also based on the general trend in interest rates at the applicable dates and the Company's perception of future volatility of interest rate. -13- 14 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION ----------------- On January 19, 1999, the Company issued a press release in which it announced an increase in quarterly dividend. On January 19, 1999, the Company issued a press release in which it announced the private placement of $75 million of convertible preferred stock. On January 20, 1999, the Company issued a press release in which it announced Peter J. Grua as a new Director. On January 21, 1999, the Company issued a press release in which it announced record new investments of $397 million for 1998. On February 2, 1999, the Company issued a press release in which it announced operating results for year ended December 31, 1998. On March 16, 1999, the Company issued a press release in which it announced the sale of $50 million of senior unsecured notes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits 27 Financial Data Schedule 99.1 Press release dated January 19, 1999 99.2 Press release dated January 19, 1999 99.3 Press release dated January 20, 1999 99.4 Press release dated January 21, 1999 99.5 Press release dated February 2, 1999 99.6 Press release dated March 16, 1999 (b) Reports on Form 8-K On March 17, 1999, the Company filed a Report on Form 8-K regarding the issuance of $50 million of senior unsecured notes. -14- 15 Pursuant to the requirement of the Securities and Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HEALTH CARE REIT, INC. Date: April 30, 1999 By: /S/ GEORGE L. CHAPMAN ------------------ -------------------------------------------- George L. Chapman, Chairman, Chief Executive Officer, and President Date: April 30, 1999 By: /S/ EDWARD F. LANGE, JR. ----------------- -------------------------------------------- Edward F. Lange, Jr., Chief Financial Officer Date: April 30, 1999 By: /S/ MICHAEL A. CRABTREE ----------------- -------------------------------------------- Michael A. Crabtree, Chief Accounting Officer -15- 16 EXHIBIT INDEX The following documents are included in this Form 10-Q as Exhibits: DESIGNATION NUMBER UNDER ITEM 601 OF REGULATION S-K EXHIBIT DESCRIPTION -------------- ------------------------------------ 27 Financial Data Schedule 99.1 Press release dated January 19, 1999 99.2 Press release dated January 19, 1999 99.3 Press release dated January 20, 1999 99.4 Press release dated January 21, 1999 99.5 Press release dated February 2, 1999 99.6 Press release dated March 16, 1999 -16- EX-27 2 EXHIBIT 27
5 0000766704 HEALTH CARE REIT 1,000 3-MOS DEC-31-1999 MAR-31-1999 1,231 2,233 15,301 5,137 0 0 726,761 23,179 1,160,045 0 430,608 0 150,000 28,317 528,377 1,160,045 0 28,164 0 0 3,721 150 4,269 16,219 0 16,219 0 0 0 16,219 0.58 0.57
EX-99.1 3 EXHIBIT 99.1 1 Exhibit 99.1 F O R I M M E D I A T E R E L E A S E January 19, 1999 For more information contact: Erin Ibele - (419) 247-2800 Ed Lange - (419) 247-2800 HEALTH CARE REIT, INC. ANNOUNCES INCREASE IN QUARTERLY DIVIDEND Toledo, Ohio, January 19, 1999...HEALTH CARE REIT, INC. (NYSE/HCN) announced today that upon a review of the company's operating results and financial condition, the Board of Directors voted to declare a dividend for the quarter ended December 31, 1998 of $0.56 per share as compared to $0.54 per share for the same period in 1997. The dividend is a one-half cent increase from the dividend paid for the third quarter of 1998 and represents the 111th consecutive dividend payment. The dividend will be payable February 22, 1999 to shareholders of record on February 2, 1999. Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust which invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 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. ##### EX-99.2 4 EXHIBIT 99.2 1 Exhibit 99.2 F O R I M M E D I A T E R E L E A S E January 19, 1999 For more information contact: Erin Ibele - (419) 247-2800 Ed Lange - (419) 247-2800 HEALTH CARE REIT, INC. ANNOUNCES PRIVATE PLACEMENT OF $75 MILLION CONVERTIBLE PREFERRED STOCK Toledo, Ohio, January 19, 1999...HEALTH CARE REIT, INC. (NYSE/HCN) announced today that it has entered into an agreement with Five Arrows Realty Securities II, L.L.C., an investment fund managed by Rothschild Realty, Inc., a member of the Rothschild Group, providing for the sale of up to $75 million of cumulative convertible preferred stock. The Series C Preferred Stock will pay dividends equivalent to the greater of $0.5625 or the quarterly dividend then payable per common share. Each share of preferred stock is convertible into common stock at a conversion price of $25.625 per share. The preferred shares or any shares of common stock obtained upon conversion cannot be sold or transferred for a period of one year from the date of issuance. The company has the right to redeem the preferred shares after five years. Net proceeds to the company from the private placement will be approximately $73 million. The proceeds derived from the placement will be used to repay borrowings under the company's revolving line of credit arrangements and to invest in additional health care properties. BT Alex. Brown Incorporated provided financial advisory services to the company in connection with this transaction. "We welcome the investment by Five Arrows in our company," stated George L. Chapman, chairman and chief executive officer of Health Care REIT, Inc. "We believe they are astute real estate investors and look forward to a long and mutually beneficial relationship. This private equity capital provides us with additional financial flexibility to support our investment program of providing growth capital to emerging health care companies." "We've been watching the assisted living and long-term care industries for the past three years in search of the right platform for our foray into the health care field," said Matthew W. Kaplan, Managing Director, Rothschild Realty. "In Health Care REIT, Inc., we found a focused and deep management team with a sound perspective on risk and reward and a progressive investment program directed at the changes underway in the industry. We are very excited about Health Care REIT, Inc.'s future." 2 JANUARY 19, 1999 HEALTH CARE REIT, INC. PAGE 2 - -------------------------------------------------------------------------------- Rothschild Realty Inc. was founded in 1981 as a division of the Rothschild Group, a privately owned global banking network with offices in over 20 countries in all of the world's major financial centers. With a 16-year proven track record as an investment advisor and provider of financial advisory services, Rothschild Realty formed Five Arrows Realty Securities LLC in July of 1996. Its objective is to provide growth capital to real estate operating companies. Capitalized with $900 million, Five Arrows presently has investments in seven companies of which four are publicly-traded and three are privately-held. Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust which invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 billion. This document 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, competition in the financing of health care facilities, the availability of capital, and regulatory and other changes in the health care sector, as described in the company's filings with the Securities and Exchange Commission. For more information on Health Care REIT, Inc., via facsimile at no cost, Dial 1-800-PRO-INFO and enter the company code -- HCN. ##### EX-99.3 5 EXHIBIT 99.3 1 Exhibit 99.3 F O R I M M E D I A T E R E L E A S E January 20, 1999 For more information contact: Erin Ibele - (419) 247-2800 Ed Lange - (419) 247-2800 HEALTH CARE REIT, INC. ANNOUNCES APPOINTMENT OF NEW DIRECTOR Toledo, Ohio, January 20, 1999...HEALTH CARE REIT, INC. (NYSE/HCN) announced the appointment of Peter J. Grua as a Class I director, increasing the total number of company directors to 10. Mr. Grua's term will continue through April 1999, at which time he will stand for reelection for a three-year term. Mr. Grua is a Principal and President of HLM Management Co., Inc., a registered investment adviser. From 1986 until 1992 Mr. Grua was a Managing Director and Senior Analyst of Alex. Brown & Sons, Incorporated. "Peter brings to the Health Care REIT, Inc. Board a wealth of investment knowledge in the health care and financial services areas," commented George L. Chapman, chairman and chief executive officer. "We look forward to Peter's long-term association with our company." Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 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. ##### EX-99.4 6 EXHIBIT 99.4 1 Exhibit 99.4 F O R I M M E D I A T E R E L E A S E January 21, 1999 For more information contact: Erin Ibele - (419) 247-2800 Ed Lange - (419) 247-2800 HEALTH CARE REIT, INC. ANNOUNCES RECORD NEW INVESTMENTS OF $397 MILLION FOR 1998 TOTAL ASSETS EXCEED $1.0 BILLION Toledo, Ohio, January 21, 1999..... HEALTH CARE REIT, INC. (NYSE/HCN) announced today investment activity for the fourth quarter of 1998 totalled $111,749,000. For the year ended December 31, 1998, the company funded investments of $397,500,000. The 1998 investment activity contributed to a 46 percent increase in total assets which totalled $1,073,000,000 at December 31, 1998, as compared with $734,327,000 at December 31, 1997. Investment activity during 1998 included real property investments of $270,015,000, mortgage loans of $105,282,000 and equity related investments of $22,203,000. Funding during 1998 included $263,253,000 for 78 assisted living facilities, $94,128,000 for 28 nursing homes, $16,217,000 for eight retirement centers and $1,699,000 for two behavioral care facilities. The company funded equity related investments in eight privately held health care related companies. Aggregate funding was provided to 31 operators in 24 states. During 1998, 20 construction projects completed the construction phase of the company's investment process. Ten facilities were converted to permanent real property investments, with an aggregate investment of $55,315,000. Ten facilities were converted to permanent mortgage loans with an aggregate investment balance of $37,515,000. Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust, which invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 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. ##### EX-99.5 7 EXHIBIT 99.5 1 Exhibit 99.5 F O R I M M E D I A T E R E L E A S E FEBRUARY 2, 1999 FOR MORE INFORMATION CONTACT: ERIN IBELE - (419) 247-2800 ED LANGE - (419) 247-2800 HEALTH CARE REIT, INC. REPORTS RECORD FFO FOR 1998 12 CONSECUTIVE QUARTERS OF GREATER THAN 9% FFO GROWTH 1998 YEAR END RESULTS 1998 YEAR END HIGHLIGHTS --------------------- ------------------------ - $1.1 billion total assets - $397 million new investments - $98 million gross income - 46% asset growth - $2.57 per diluted share FFO - 10% per share FFO growth - $2.19 per share dividends - 85% FFO payout ratio Toledo, Ohio, February 2, 1999........HEALTH CARE REIT, INC. (NYSE/HCN) today announced the operating results for the year ended December 31, 1998. Funds From Operations (FFO), the generally accepted measure of operating performance for the real estate investment trust industry, achieved a record level of $66,766,000, or $2.57 per diluted share in 1998, a 9.8 percent per diluted share increase from $51,236,000, or $2.34 per diluted share in the prior year. "We are delighted with the company's 1998 operating results. Driven by outstanding investment activity and consistent portfolio performance, the results exceeded our business plan," commented George L. Chapman, chairman and chief executive officer. "During 1998 we capitalized on current market conditions that generated high yielding, accretive investments for the company. Our strong balance sheet continues to give the company the flexibility to finance its commitments and opportunities, while retaining excellent leverage and coverage ratios. We believe the strength of our existing portfolio and the execution of our investment strategy of providing growth capital to emerging health care companies should lead to increased earnings and profitability for the company during 1999 and beyond." Net income available to common shareholders for the year totaled $58,149,000, or $2.24 per diluted share, on revenue of $97,992,000 as compared with net income available to common shareholders of $46,478,000, or $2.12 per diluted share, on revenue of $73,308,000 for the year ended 1997. For the 1998 fourth quarter, FFO totaled $18,380,000, or $0.66 per diluted share, as compared with FFO of $14,375,000, or $0.60 per diluted share, for the same period in 1997, an increase of 10 percent per diluted share. Net income available to common shareholders for the fourth quarter of 1998 totaled $16,468,000, or $0.59 per diluted share, on revenue of $27,770,000, as compared with net income available to common shareholders of $12,950,000, or $0.54 per diluted share, on revenue of $19,731,000 for the three months ended December 31, 1997. 2 Revenue growth was generated primarily by new investment activity in 1997 and 1998, which totaled $262,646,000 and $397,500,000, respectively. Investment activity contributed to a 46 percent increase in total assets, which at December 31, 1998, totaled $1,073,424,000 as compared with total assets of $734,327,000 at December 31, 1997. Dividend payments to common shareholders for the year ended December 31, 1998, totaled $56,556,000, or $2.19 per share, as compared with dividend payments of $45,804,000, or $2.11 per share, during 1997. Correspondingly, the FFO payout ratio for 1998 was 85 percent as compared with a FFO payout ratio of 90 percent for 1997, evidence of the company's commitment to reduce its FFO payout ratio to a level below 80 percent during the next 12 to 15 months. On January 19, 1999, the company announced the private placement of three million shares of convertible preferred stock providing net proceeds of $73 million. The net proceeds of the offering were used to repay borrowings under the company's revolving line of credit arrangements and invest in additional health care properties. Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 billion. 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, competition in the financing of health care facilities, the availability of capital, 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 For more information on Health Care REIT, Inc., via facsimile at no cost, dial 1-800-PRO-INFO and enter the company code - HCN ##### 3 FINANCIAL SUPPLEMENT CONSOLIDATED BALANCE SHEETS (UNAUDITED) (AMOUNTS IN THOUSANDS)
DECEMBER 31 ----------------------------- 1998 1997 ----------------------------- ASSETS Real estate investments: Real property owned: Land $ 44,722 $ 22,445 Buildings & improvements 443,574 239,549 Construction in progress 151,317 47,050 ---------- -------- 639,613 309,044 Less accumulated depreciation (19,624) (11,769) ---------- -------- Total real property owned 619,989 297,275 Loans receivable 405,963 412,734 Direct financing leases 6,741 7,935 ---------- -------- 1,032,693 717,944 Less allowance for losses on loans receivable (4,987) (4,387) ---------- -------- Net real estate investments 1,027,706 713,557 Other assets: Direct investments 26,180 4,964 Marketable securities 4,106 4,671 Deferred loan expenses 2,389 2,275 Cash and cash equivalents 1,269 1,381 Receivables and other assets 11,774 7,479 ---------- -------- 45,718 20,770 ---------- -------- TOTAL ASSETS $1,073,424 $734,327 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Borrowings under line of credit obligations $ 171,550 $ 78,400 Senior unsecured notes 240,000 162,000 Mortgages payable 7,429 8,670 Accrued expenses and other liabilities 20,686 15,333 ---------- -------- Total liabilities $ 439,665 $264,403 Shareholders' equity: Preferred Stock, $1.00 par value: Authorized - 10,000,000 shares Issued and outstanding - 3,000,000 in 1998 75,000 Common Stock, $1.00 par value: Authorized - 40,000,000 shares Issued and outstanding - 28,240,165 in 1998 and 24,341,030 in 1997 28,240 24,341 Capital in excess of par value 520,692 435,603 Undistributed net income 10,434 8,841 Accumulated other comprehensive income 3,982 4,671 Unamortized restricted stock (4,589) (3,532) ---------- -------- TOTAL SHAREHOLDERS' EQUITY $ 633,759 $469,924 ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,073,424 $734,327 ========== ========
HEALTH CARE REIT, INC. 4 FINANCIAL SUPPLEMENT CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31 DECEMBER 31 ------------------- -------------------- 1998 1997 1998 1997 ------------------- -------------------- Revenues: Interest income $12,274 $12,370 $47,515 $45,999 Prepayment fees 167 52 588 529 Operating leases: Rents 12,471 6,060 41,953 22,178 Gain on exercise of options 1,049 0 1,049 0 Direct financing leases: Lease income 214 166 973 1,238 Gain on exercise of options 0 0 0 0 Loan and commitment fees 1,344 995 5,281 3,036 Other income 251 128 633 328 ------- ------- ------- ------- $27,770 $19,731 $97,992 $73,308 Expenses: Interest expense $ 4,451 $ 3,732 $18,030 $15,365 Provision for depreciation 3,128 1,477 10,254 5,287 General and administrative 1,757 1,252 6,114 4,858 Loan expense 152 170 685 720 Provision for losses 150 150 600 600 ------- ------- ------- ------- 9,638 6,781 35,683 26,830 ------- ------- ------- ------- Net Income $18,132 $12,950 $62,309 $46,478 Preferred stock dividends 1,664 0 4,160 0 ------- ------- ------- ------- Net Income Available to Common Shareholders $16,468 $12,950 $58,149 $46,478 ======= ======= ======= ======= Average number of shares outstanding: Basic 27,572 23,434 25,579 21,594 Diluted 27,930 23,805 25,954 21,929 Net income per share: Basic $ 0.60 $ 0.55 $ 2.27 $ 2.15 Diluted 0.59 0.54 2.24 2.12 Funds from operations $18,380 $14,375 $66,766 $51,236 Funds from operations per share: Basic $ 0.67 $ 0.61 $ 2.61 $ 2.37 Diluted 0.66 0.60 2.57 2.34 Dividends per share $ 0.555 $ 0.535 $ 2.190 $ 2.110
HEALTH CARE REIT, INC. FINANCIAL SUPPLEMENT - DECEMBER 31, 1998 5
PORTFOLIO COMPOSITION ($000'S) EXHIBIT 1 - ------------------------------ BALANCE SHEET DATA # Properties # Beds/Units Balance (1) % Balance ------------------------------------------------------------------------------- Real Property 141 11,489 $ 619,989 59% Loans Receivable 81 7,520 405,963 38% Direct Financing Leases 2 193 6,741 1% Direct Investments -na- -na- 26,180 2% ------------------------------------------------------------------------------- Total Investments 224 19,202 $1,058,873 100% INVESTMENT DATA # Properties # Beds/Units Investment (2) % Investment ------------------------------------------------------------------------------- Assisted Living Facilities 147 9,824 $ 584,288 56% Nursing Homes 54 7,005 294,414 28% Specialty Care Facilities 6 713 91,994 9% Retirement Centers 15 1,366 60,876 6% Behavioral Care 2 294 10,486 1% ------------------------------------------------------------------------------- Real Estate Investments 224 19,202 $1,042,058 100% INVESTMENT BY OWNER TYPE # Properties # Beds/Units Investment (2) % Investment ------------------------------------------------------------------------------- Publicly Traded 74 5,191 $ 273,391 26% Key Private 99 9,377 574,408 55% Privately Held 51 4,634 194,259 19% ------------------------------------------------------------------------------- Real Estate Investments 224 19,202 $1,042,058 100% NOTES: (1) TOTAL INVESTMENTS INCLUDE GROSS REAL ESTATE INVESTMENTS AND DIRECT INVESTMENTS WHICH AMOUNTED TO $1,032,693,000 AND $26,180,000, RESPECTIVELY. (2) REAL ESTATE INVESTMENTS INCLUDE GROSS REAL ESTATE INVESTMENTS AND CREDIT ENHANCEMENTS WHICH AMOUNTED TO $1,032,693,000 AND $9,365,000, RESPECTIVELY. REVENUE COMPOSITION ($000'S) EXHIBIT 2 - ---------------------------- Three Months Ended Twelve Months Ended December 31, 1998 December 31, 1998 ---------------------------- --------------------------- REVENUE BY INVESTMENT TYPE Mortgage & Other Loans $12,388 45% $48,415 49% Real Property 14,522 52% 46,517 48% Direct Investments 644 1% 2,081 2% Direct Financing Leases 216 2% 979 1% ---------------------------- --------------------------- Total $27,770 100% $97,992 100% REVENUE BY FACILITY TYPE Assisted Living Facilities $13,289 48% $46,828 48% Nursing Homes 9,498 34% 33,935 35% Specialty Care Facilities 2,992 11% 11,823 12% Retirement Centers 1,991 7% 5,206 5% Behavioral Care 0 0% 200 0% ---------------------------- --------------------------- Total $27,770 100% $97,992 100% REVENUE BY OWNER TYPE Publicly Traded $ 8,578 31% $29,649 30% Key Private 13,210 48% 46,495 48% Privately Held 5,982 21% 21,848 22% ---------------------------- --------------------------- Total $27,770 100% $97,992 100% HEALTH CARE REIT, INC. FINANCIAL SUPPLEMENT - DECEMBER 31, 1998
6
REVENUE COMPOSITION (CONTINUED) ($000'S) EXHIBIT 3 - ---------------------------------------- OPERATING LEASE EXPIRATIONS & LOAN MATURITIES Current Lease Current Interest Interest and Year Revenue (1) Revenue (1) Lease Revenue % of Total - --------------------------------------------------------------------------------------------------- 1999 $ 1,260 $ 82 $ 1,342 1% 2000 0 1,716 1,716 2% 2001 0 2,507 2,507 2% 2002 873 609 1,482 1% 2003 3,408 2,858 6,266 6% Thereafter 63,555 36,174 99,729 88% ------------------------------------------------------------------------------- Total $69,096 $43,946 $113,042 100% NOTES: (1) REVENUE IMPACT BY YEAR, ANNUALIZED. COMMITTED INVESTMENT BALANCES EXHIBIT 4 - ----------------------------- ($000'S EXCEPT INVESTMENT PER BED/UNIT) Committed Balance Investment per # Properties # Beds/Units (1) Bed/Unit ----------------------------------------------------------------------------- Assisted Living Facilities 147 9,824 $ 710,619 $ 72,335 Nursing Homes 54 7,005 316,994 45,253 Retirement Centers 15 1,366 73,310 53,668 Specialty Care Facilities 6 713 91,994 129,024 Behavioral Care 2 294 10,486 35,667 ----------------------------------------------------------------------------- Total 224 19,202 $1,203,403 n/a 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 # Properties Investment % Investment ---------------------------------------------------------------------- Atria Senior Quarters 11 $ 94,066 9% CareMatrix Corp. 8 82,295 8% Olympus Healthcare Group, Inc. 13 78,549 8% Life Care Centers of America, Inc. 12 75,334 7% Alternative Living Services 29 50,514 5% Remaining Operators 151 661,301 63% ----------------------- ---------------------------------------------- Total 224 $1,042,059 100% CONCENTRATION BY REVENUE # Properties Revenue (1) % Revenue ---------------------------------------------------------------------- Atria Senior Quarters 11 $ 9,700 10% Olympus Healthcare Group, Inc. 13 8,153 8% Life Care Centers of America, Inc. 12 7,737 8% Doctors Corp. of America 3 6,108 6% Alternative Living Services 29 5,525 6% Remaining Operators 156 60,769 62% ---------------------------------------------------------------------- Total 224 $ 97,992 100% NOTES: (1) YEAR ENDED DECEMBER 31, 1998. HEALTH CARE REIT, INC. FINANCIAL SUPPLEMENT - DECEMBER 31, 1998
7
CAPITALIZATION DATA & OTHER CREDIT SUPPORT ($000'S) EXHIBIT 6 - --------------------------------------------------- Year Ended December 31 ------------------------------------- CURRENT CAPITALIZATION 1998 Adjusted (1) % Balance - ----------------------- ------------------------------------------------------ Long-Term Debt Obligations $ 247,429 $ 247,429 24% Borrowings Under Bank Lines 171,550 98,550 9% Shareholders' Equity 633,759 706,759 67% ------------------------------------------------------ Total Book Capitalization $1,052,738 $1,052,738 100% Equity Market Capitalization (2) $ 805,710 $ 880,710 LEVERAGE (1) & PERFORMANCE RATIOS - --------------------------------- Debt/Total Book Capitalization 33% Interest Coverage 3.97x 4th Qtr. Debt/Book Equity 49% 3.83x LTM Debt/Total Mkt. Capitalization 28% FFO Payout Ratio 84% 4th Qtr. Debt/Equity Mkt. Capitalization 39% 85% LTM CREDIT ENHANCEMENTS Balance % Investments - ----------------------------- ---------- -------------------------------------------- Cross Defaulted $ 932,206 89% of gross real estate investments Cross Collateralized 391,361 96% of mortgage loans Bank Letters of Credit & Cash 48,260 4% of committed balance NOTES: (1) ADJUSTED FOR 3.0 MILLION CONVERTIBLE PREFERRED SHARES ANNOUNCED JANUARY 19, 1999. (2) INCLUSIVE OF OUTSTANDING PREFERRED STOCK. DEBT MATURITIES AND PRINCIPAL PAYMENTS ($000'S) EXHIBIT 7 - ----------------------------------------------- Year Bank Lines of Credit (1) Senior Notes Other Debt Total - ----------------------------------------------------------------------------------------------------------------- 1999 0 0 90 90 2000 15,000 35,000 99 50,099 2001 175,000 10,000 109 185,109 2002 0 20,000 121 20,121 2003 0 35,000 133 35,133 2004 0 40,000 186 40,186 2005 0 0 549 549 Thereafter 0 100,000 6,142 106,142 ----------------------------------------------------------------------------------------------- Total $190,000 $240,000 $7,429 $437,429 NOTES: (1) REPRESENTS TOTAL LINE CAPACITY.
8
HEALTH CARE REIT, INC. FINANCIAL SUPPLEMENT - DECEMBER 31, 1998 SELECTED FACILITY DATA EXHIBIT 8 - ---------------------- % % Coverage Before Coverage After Occupancy Medicare Private Pay Mgt. Fees Mgt. Fees ------------------------------------------------------------------------------------- Nursing Homes 83% 13% 25% 1.84x 1.32x Assisted Living Facilities 90% 0% 95% 1.36x 1.18x Retirement Centers 94% 0% 97% 2.52x 2.22x Specialty Care Facilities n/a 31% 25% 4.04x 3.51x Behavioral Care n/a 89% 11% 2.93x 1.48x -------------------------------------- 2.07x 1.65x NOTES: FACILITY DATA REPORTED AS LTM THROUGH SEPTEMBER 30, 1998. INVESTMENT ACTIVITY ($000'S) EXHIBIT 9 - ---------------------------- Three Months Ended Twelve Months Ended December 31, 1998 December 31, 1998 ------------------------------ ------------------------------ FUNDING BY INVESTMENT TYPE Real Property $ 31,012 28% $110,432 28% Mortgage & Other Loans 15,309 14% 52,987 13% Construction Advances 63,053 56% 211,968 53% Direct Investments 2,375 2% 22,203 6% ------------------------------ ------------------------------ Total $111,749 100% $397,500 100% REAL ESTATE INVESTMENTS Assisted Living Facilities $ 74,592 68% $263,253 70% Nursing Homes 29,500 27% 94,128 25% Retirement Centers 5,282 5% 16,217 4% Behavioral Care 0 0% 1,699 1% Specialty Care Facilities 0 0% 0 0% ------------------------------ ------------------------------ Total $109,374 100% $375,297 100%
9
HEALTH CARE REIT, INC. FINANCIAL SUPPLEMENT - DECEMBER 31, 1998 GEOGRAPHIC CONCENTRATION ($000'S) EXHIBIT 10 - --------------------------------- CONCENTRATION BY REGION # Properties Investment % Investment ---------------------------------------------------------------------- South 132 $ 528,422 49% Northeast 37 263,595 27% West 25 131,054 13% Midwest 30 118,988 11% ---------------------------------------------------------------------- Total 224 $1,042,059 100% CONCENTRATION BY STATE # Properties Investment % Investment ---------------------------------------------------------------------- Texas 46 $ 176,229 17% Florida 27 120,460 12% Massachusetts 15 93,911 9% North Carolina 16 70,743 7% New York 7 70,344 7% Remaining States 113 510,372 48% ---------------------------------------------------------------------- Total 224 $1,042,059 100% REVENUE BY STATE # Properties Revenue (1) % Revenue ---------------------------------------------------------------------- Texas 46 $ 17,624 18% Massachusetts 15 9,268 9% Florida 27 8,798 9% New York 7 7,336 7% Pennsylvania 11 6,646 7% Remaining States 118 48,320 50% ---------------------------------------------------------------------- Total 224 $ 97,992 100% NOTES: (1) YEAR ENDED DECEMBER 31, 1998.
EX-99.6 8 EXHIBIT 99.6 1 Exhibit 99.6 F O R I M M E D I A T E R E L E A S E March 16, 1999 For more information contact: Erin Ibele - (419) 247-2800 Ed Lange - (419) 247-2800 HEALTH CARE REIT, INC. ANNOUNCES SALE OF $50 MILLION OF SENIOR UNSECURED NOTES Toledo, Ohio, March 16, 1999..... HEALTH CARE REIT, INC. (NYSE/HCN) announced today the sale of $50 million of 8.17% senior unsecured notes due March 15, 2006. The notes are rated "Ba1" by Moody's Investors Service, "BBB-" by Standard & Poor's Corporation and "BBB-" by Duff & Phelps Credit Rating Co. The net proceeds from the sale of the notes will be used to repay borrowings under the company's revolving lines of credit arrangements and invest in additional health care property investments. Legg Mason Wood Walker, Incorporated acted as the sole underwriter for the offering. Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust which invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At December 31, 1998, the company had investments in 224 health care facilities in 34 states and had total assets of approximately $1.1 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. ##### -----END PRIVACY-ENHANCED MESSAGE-----