-----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, IyhYffJVFOp9uuIv3/C90E+Xkc1F0DETLzEzgGaUbi8cUrHogDpcGk1d26zq+KZz w0FkX87rwymcjUKRkFM+pA== 0000898430-96-000581.txt : 19960220 0000898430-96-000581.hdr.sgml : 19960220 ACCESSION NUMBER: 0000898430-96-000581 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960216 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE HEALTH PROPERTIES INC CENTRAL INDEX KEY: 0000780053 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953997619 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09028 FILM NUMBER: 96522944 BUSINESS ADDRESS: STREET 1: 4675 MACARTHUR COURT STE 1170 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7142511211 MAIL ADDRESS: STREET 1: 4675 MACARTHUR COURT STREET 2: STE 1170 CITY: NEWSPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY INVESTMENT PROPERTIES INC DATE OF NAME CHANGE: 19890515 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________________ to _____________________ Commission file number 1-9028 NATIONWIDE HEALTH PROPERTIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 95-3997619 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4675 MACARTHUR COURT, SUITE 1170 92660 NEWPORT BEACH, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (714) 251-1211 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ----------------------- Common Stock, $.10 Par Value New York Stock Exchange 6.25% Convertible Debentures Due 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Company is approximately $815,450,000 as of January 31, 1996. 38,726,532 (NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JANUARY 31, 1996 AS ADJUSTED TO REFLECT TWO-FOR-ONE STOCK SPLIT TO BE EFFECTIVE ON MARCH 8, 1996) Part III is incorporated by reference from the registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1996. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. Nationwide Health Properties, Inc., a Maryland corporation organized in October 1985 (the "Company"), is a real estate investment trust ("REIT") which invests primarily in health care related facilities and provides financing to health care providers. As of December 31, 1995, the Company had investments in 210 facilities located in 30 states. The facilities include 173 long-term health care facilities, 35 assisted living facilities and two rehabilitation hospitals. As of December 31, 1995, the Company had direct ownership of 136 long-term health care facilities, 30 assisted living facilities and two rehabilitation hospitals (the "Properties"). All of the Company's owned facilities are leased under "net" leases (the "Leases"), which are accounted for as operating leases, to 33 health care providers (the "Lessees") including Beverly Enterprises, Inc. ("Beverly"), ARV Assisted Living, Inc., Sun Healthcare Group, Inc., Horizon/CMS Healthcare Corporation, Living Centers of America, Inc., GranCare, Inc., Integrated Health Services, Inc. and HEALTHSOUTH Corporation. Of the Lessees, only Beverly is expected to account for more than 10% of the Company's revenues in 1996. The Leases have initial terms ranging from 10 to 19 years, and the Leases generally have two or more multiple-year renewal options. The Company earns fixed monthly minimum rents and may earn periodic additional rents. The additional rent payments are generally computed as a percentage of facility net patient revenues in excess of base amounts. The base amounts, in most cases, are net patient revenues for the first year of the lease. Most Leases contain cross collateralization and cross default provisions tied to other Leases with the same Lessee, as well as grouped lease renewals and grouped purchase options. Obligations under the Leases have corporate guarantees, and leases covering 99 facilities are backed by irrevocable letters of credit or security deposits which cover from 1 to 12 months of monthly minimum rents. Under the terms of the Leases, the Lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties. As of December 31, 1995, the Company held 28 mortgage loans secured by 37 long-term health care facilities and five assisted living facilities. Such loans had an aggregate outstanding principal balance of approximately $144,232,000 and a net book value of approximately $133,226,000 at December 31, 1995. The mortgage loans have individual outstanding principal balances ranging from approximately $819,000 to $13,141,000 and have maturities ranging from 1996 to 2047. During 1995, the Company acquired 27 assisted living facilities for an aggregate purchase price of $141,278,000. Additionally, the Company provided five mortgage loans, secured by two long-term health care facilities and four assisted living facilities in an aggregate amount of $35,237,000. The Company anticipates providing lease or mortgage financing for health care facilities to qualified operators and acquiring additional health care related facilities, including long-term health care facilities, assisted living facilities and acute care hospitals. Financing for such future investments may be provided by borrowings under the Company's bank line of credit, private placements or public offerings of debt or equity, and the assumption of secured indebtedness. TAXATION OF THE COMPANY The Company believes that it has operated in such a manner as to qualify for taxation as a "real estate investment trust" under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ending December 31, 1985, and the Company intends to continue to operate in such a manner. If the Company qualifies for taxation as a real estate investment trust, it will generally not be subject to federal corporate income taxes on its net income that is currently distributed to stockholders. This treatment substantially eliminates the "double taxation" (e.g. at the corporate and stockholder levels) that generally results from investment in stock of a corporation. 1 PROPERTIES Of the 210 facilities in which the Company has investments, the Company has direct ownership of 136 long-term health care facilities, 30 assisted living facilities and two rehabilitation hospitals. The properties are leased to other parties under terms which require the lessee, in addition to paying rent, to pay all additional charges, taxes, assessments, levies and fees incurred in the operation of the leased properties. Long-Term Health Care Facilities Long-term health care facilities provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high-technology, care-intensive, high-cost setting of an acute- care or rehabilitative hospital. Treatment programs include physical, occupational, speech, respiratory and other therapeutic programs, including sub-acute clinical protocols such as wound care and intravenous drug treatment. Assisted Living Facilities Assisted living facilities provide services to aid in everyday living, such as bathing, routine or special meals, security, transportation, recreation, medication supervision and limited therapeutic programs. More intensive medical needs of the residents are often met within the Company's assisted living facilities by home health providers, close coordination with the individual's physician and skilled nursing facilities. Assisted living facilities are increasingly successful as lower cost, less institutional alternatives to the health problems of the elderly or medically frail. Rehabilitation Hospitals Rehabilitation hospitals provide inpatient and outpatient medical care to patients requiring high intensity physical, respiratory, neurological, orthopedic and other treatment protocols and for intermediate periods in their recovery. These programs are often the most effective in treating severe skeletal or neurological injuries and traumatic diseases such as stroke or acute arthritis. 2 The following table sets forth certain information regarding the Company's owned facilities as of December 31, 1995.
NUMBER NUMBER ANNUAL 1995 OF OF BEDS/ MINIMUM ADDITIONAL FACILITY LOCATION FACILITIES UNITS(1) INVESTMENT RENT(2) RENT(2) ----------------- ---------- -------- ---------- ------- ---------- (DOLLARS IN THOUSANDS) LONG-TERM HEALTH CARE FACILITIES: Arizona..................... 2 274 $ 6,076 $ 789 $ 154 Arkansas.................... 2 397 5,982 666 288 California.................. 10 1,207 34,236 3,959 949 Colorado.................... 1 117 3,116 307 5 Connecticut................. 5 674 14,727 1,486 550 Florida..................... 7 1,057 22,928 2,494 985 Georgia..................... 1 163 7,343 867 28 Idaho....................... 1 64 792 81 43 Illinois.................... 2 222 5,549 701 125 Indiana..................... 7 1,027 27,085 3,136 644 Kansas...................... 8 644 11,804 1,216 183 Maryland.................... 4 740 22,055 2,634 905 Massachusetts............... 8 859 29,841 3,238 332 Minnesota................... 9 1,122 29,629 3,621 946 Missouri.................... 1 108 2,740 337 119 Nevada...................... 1 140 4,034 480 65 New Jersey.................. 1 180 6,809 749 135 North Carolina.............. 1 150 2,360 294 153 Ohio........................ 6 811 29,537 2,740 614 Oklahoma.................... 3 253 3,939 404 108 Oregon...................... 4 356 6,760 833 221 Tennessee................... 8 883 24,003 2,420 85 Texas....................... 26 3,009 55,607 6,101 1,439 Virginia.................... 4 613 18,568 2,291 676 Washington.................. 5 506 18,522 1,903 179 Wisconsin................... 9 970 21,169 2,301 980 --- ------ -------- ------- ------- Subtotals................. 136 16,546 $415,211 $46,048 $10,911 --- ------ -------- ------- ------- ASSISTED LIVING FACILITIES: California.................. 12 1,580 73,036 7,403 8 Colorado.................... 3 377 18,954 1,877 85 Florida..................... 2 119 8,106 863 -- Idaho....................... 1 80 6,025 597 -- Michigan.................... 1 144 7,239 810 -- Ohio........................ 1 121 4,238 479 -- Oklahoma.................... 1 113 4,771 407 7 Oregon...................... 6 462 23,989 2,364 -- Tennessee................... 1 48 2,901 274 -- Texas....................... 1 100 4,526 361 7 Washington.................. 1 128 6,055 600 -- --- ------ -------- ------- ------- Subtotals................. 30 3,272 $159,840 $16,035 $ 107 --- ------ -------- ------- ------- REHABILITATION HOSPITALS: Arizona..................... 2 116 16,826 1,770 214 --- ------ -------- ------- ------- Subtotals................. 2 116 $ 16,826 $ 1,770 $ 214 --- ------ -------- ------- ------- TOTAL ALL OWNED FACILITIES 168 19,934 $591,877 $63,853 $11,232 === ====== ======== ======= =======
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(1) Assisted living facilities are measured in units, all other facilities are measured by bed count. (2) Annual Minimum Rent (as defined in the Leases) for each of the Company's owned properties. Additional rent, generally contingent upon increases in the facility net patient revenues in excess of a base amount, may also be paid. The 1995 additional rent amounts reflect additional rent accrued in 1995. 3 As of December 31, 1995, 45 of the Company's 168 owned facilities were being leased to and operated by subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has guaranteed certain obligations of its subsidiaries and of certain parties unaffiliated with Beverly in connection with 24 properties operated by such parties. The Company expects that as new facilities are acquired, an increasing percentage of its facilities will be leased to operators unaffiliated with Beverly. For additional financial information regarding Beverly, see Appendix 1 attached as part of this Annual Report on Form 10-K. COMPETITION The Company generally competes with other REITs, real estate partnerships, health care providers and other investors, including, but not limited to, banks and insurance companies, in the acquisition, leasing and financing of health care facilities. The operators of the health care facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for patients based on quality of care, reputation, physical appearance of facilities, services offered, family preferences, physicians, staff and price. REGULATION Payments for health care services provided by the operators of the Company's facilities are received principally from four sources: Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; private funds; Medicare, a federal health insurance program for the aged and certain chronically disabled individuals; and health and other insurance plans. Government revenue sources, particularly Medicaid programs, are subject to statutory and regulatory changes, administrative rulings, and government funding restrictions, all of which may materially increase or decrease the rates of payment to nursing facilities and the amount of additional rents payable to the Company under the Leases. There is no assurance that payments under such programs will remain at levels comparable to the present levels or be sufficient to cover all the operating and fixed costs allocable to Medicaid and Medicare patients. Health care facilities in which the Company invests are also generally subject to state licensure statutes and regulations and statutes which may require regulatory approval, in the form of a certificate of need ("CON"), prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements generally do not apply to assisted living facilities. CON requirements are not uniform throughout the United States and are subject to change. The Company cannot predict the impact of regulatory changes with respect to licensure and CON's on the operations of the Company's lessees and mortgagees. EXECUTIVE OFFICERS OF THE COMPANY The table below sets forth the name, position and age of each executive officer of the Company. Each executive officer of the Company is appointed by its Board of Directors, serves at the pleasure of the Board and holds office until a successor is elected, or until the earliest of death, resignation or removal. There is no "family relationship" between any of the named executive officers or any director of the Company. All information is given as of January 31, 1996.
NAME POSITION AGE ---- -------- --- Milton J. Brock, Jr. ............ Chairman of the Board............ 80 President and Chief Executive R. Bruce Andrews................. Officer.......................... 55 T. Andrew Stokes................. Senior Vice President of Corporate Development........... 47 Mark L. Desmond.................. Senior Vice President and Chief Financial Officer............... 37 Vice President and General Gary E. Stark.................... Counsel.......................... 40
4 MILTON J. BROCK, JR.--Chairman of the Board of the Company since September 1989 and a director of the Company since its inception. Mr. Brock served as President and Chief Executive Officer of the Company from June 1988 to September 1989. Mr. Brock began his career with M. J. Brock & Sons, Inc., a real estate contractor and developer in 1940 and he was elected President in 1959, Chairman and Chief Executive Officer in 1973 and Chairman Emeritus upon his retirement in 1985. Mr. Brock was a director of Bank of America REIT (now BRE Properties) from its inception until his retirement in 1985, and had served for 26 years as a director of Hollywood Presbyterian Medical Center. R. BRUCE ANDREWS--President and Chief Executive Officer of the Company since September 1989 and a director of the Company since October 1989. Mr. Andrews had previously served as a director of American Medical International, Inc., a hospital management company, and served as its Chief Financial Officer from 1970 to 1985 and its Chief Operating Officer in 1985 and 1986. From 1986 through 1989, Mr. Andrews was engaged in various private investments. Mr. Andrews is also a director of Alexander Haagen Properties, Inc. and ARV Assisted Living, Inc. T. ANDREW STOKES--Senior Vice President of Corporate Development of the Company since January 1996. Mr. Stokes was Vice President of Development of the Company from August 1992 to December 1995. From 1984 to 1988, Mr. Stokes served as Vice President, Corporate Development for American Medical International, Inc., a hospital management company. From 1989 until joining the Company, Mr. Stokes was Healthcare Group Director of Houlihan, Lokey, Howard & Zukin, a national financial advisory firm. MARK L. DESMOND-- Senior Vice President and Chief Financial Officer of the Company since January 1996. Mr. Desmond was Vice President and Treasurer of the Company from May 1990 to December 1995 and Controller, Chief Accounting Officer and Assistant Treasurer of the Company from June 1988 to April 1990. From 1986 until joining the Company, Mr. Desmond held various accounting positions with Beverly, an operator of nursing facilities, pharmacies and pharmacy related outlets. GARY E. STARK--Vice President and General Counsel of the Company since January 1993. From January 1988 to December 1989, Mr. Stark held the position of General Counsel with Care Enterprises, Inc., an operator of nursing facilities, pharmacies and other ancillary health care services, and served as its Corporate Counsel from April 1985 through December 1987. From January 1990 through August 1991, Mr. Stark was engaged in the private practice of law. Mr. Stark served as Vice President of Legal Services of Life Care Centers of America, Inc., an operator and manager of nursing facilities and retirement centers from July 1992 to December 1992 and served as General Counsel from September 1991 to July 1992. EMPLOYEES As of January 31, 1996, the Company employed ten full-time employees. ITEM 2. PROPERTIES. See Item 1 for details. ITEM 3. LEGAL PROCEEDINGS. There are various legal proceedings pending to which the Company is a party or to which some of its properties are subject arising in the normal course of business. The Company does not believe that the ultimate resolution of these proceedings will have a material adverse effect on the Company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None 5 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is listed on the New York Stock Exchange. It has been the Company's policy to declare quarterly dividends to holders of the Company's common stock so as to comply with applicable sections of the Internal Revenue Code governing real estate investment trusts. Set forth below are the high and low sales prices of the Company's common stock from January 1, 1994 to December 31, 1995 as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods. The figures are restated for the two-for-one stock split effective March 8, 1996.
HIGH LOW DIVIDEND -------- --------- -------- 1995 First quarter................................ $18 3/4 $17 7/16 $.34 Second quarter............................... 19 1/2 17 13/16 .35 Third quarter................................ 20 9/16 19 .36 Fourth quarter............................... 21 1/16 19 1/4 .36 1994 First quarter................................ $21 3/8 $17 5/8 $.32 Second quarter............................... 20 7/8 19 1/8 .32 Third quarter................................ 19 1/2 17 11/16 .33 Fourth quarter............................... 19 5/16 15 13/16 .34
As of January 31, 1996 there were approximately 1,300 holders of record of the Company's common stock. ITEM 6. SELECTED FINANCIAL DATA. The following table presents selected financial data with respect to the Company, restated for the two-for-one stock split effective March 8, 1996. Certain of this financial data has been derived from the Company's audited financial statements included elsewhere in this Annual Report on Form 10-K and should be read in conjunction with those financial statements and accompanying notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations". Reference is made to Note 3 of Notes to Consolidated Financial Statements for information regarding extraordinary items and to Note 4 of Notes to Consolidated Financial Statements for information regarding the Company's acquisitions.
YEARS ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) OPERATING DATA: Total revenues.................... $ 82,028 $ 69,985 $ 60,385 $ 49,945 $ 36,378 Income before extraordinary items. 50,371 44,813 40,996 29,681 21,541 Net income........................ 50,371 44,813 38,992 29,681 18,081 Dividends paid.................... 53,182 47,751 42,883 33,349 26,245 PER SHARE DATA: Income before extraordinary items. $ 1.33 $ 1.23 $ 1.17 $ 1.00 $ .84 Net income........................ 1.33 1.23 1.11 1.00 .70 Dividends paid.................... 1.41 1.31 1.21 1.11 1.03 BALANCE SHEET DATA: Investments in real estate, net... $652,231 $501,862 $428,473 $380,539 $289,761 Total assets...................... 670,111 513,809 440,165 396,664 305,837 Bank borrowings................... 93,900 80,200 3,800 9,950 -- Senior notes due 2000-2015........ 100,000 -- -- -- -- Convertible debentures............ 65,000 67,690 73,609 44,455 50,000 Notes and bonds payable........... 23,364 20,520 23,047 32,116 33,124 Stockholders' equity.............. 371,822 336,106 332,927 301,895 218,772 OTHER DATA: Funds from operations (1)......... $ 63,267 $ 57,057 $ 51,111 $ 38,762 $ 29,126 Weighted average shares outstand- ing.............................. 37,808 36,356 35,188 29,734 25,674
- -------- (1) Industry analysts generally consider funds from operations to be an alternative measure of the performance of an equity REIT. Funds from operations is generally defined as income before extraordinary items plus certain non-cash items, primarily depreciation, less gains on sales of facilities. Funds from operations does not represent cash generated from operating activities as defined by generally accepted accounting principles (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity. 6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES During 1995, the Company acquired 27 assisted living facilities in 14 separate transactions for an aggregate purchase price of approximately $141,278,000. The acquisitions were funded by bank borrowings on the Company's bank line of credit, cash on hand and assumed indebtedness of approximately $9,304,000. The facilities were concurrently leased under terms generally similar to the Company's existing leases. Additionally, the Company provided five mortgage loans secured by two long-term health care facilities and four assisted living facilities in the aggregate amount of $35,237,000. Such mortgages were funded by bank borrowings on the Company's bank line of credit and cash on hand. In addition, the Company received a principal repayment of approximately $9,800,000 in connection with the maturity of one mortgage loan secured by two long-term health care facilities. The proceeds were used to repay short-term bank borrowings. In addition to the acquisitions, the Company provided capital improvement funding in the aggregate amount of approximately $3,061,000 in accordance with certain existing lease provisions. Such capital improvements will result in an increase in the minimum rents earned by the Company. During April 1995, the Company sold two long-term health care facilities to Beverly Enterprises, Inc., the lessee of such facilities, for an aggregate purchase price of $6,250,000. The Company received $625,000 in cash and $5,625,000 in mortgage notes which are secured by the two facilities. The related gain of approximately $3,864,000 on such sale will be recognized into income on a deferred basis in proportion to the receipt of principal payments on the mortgage loans provided by the Company. During 1995, the Company issued $100,000,000 in aggregate principal amount of medium-term notes. The notes bear fixed interest at a weighted average interest rate of 7.8% and have a weighted average maturity of 7.3 years. The proceeds were used to paydown borrowings on the Company's bank line of credit. In May 1995, the Company issued a notice of redemption and expiration of conversion privilege in connection with its 8.9% senior subordinated convertible debentures due 2001. Of the $2,277,000 in debentures outstanding at the time of notice, $2,267,000 of debentures were converted into 177,788 shares of the Company's common stock and the remaining $10,000 in debentures were redeemed at par plus accrued interest. In June 1995, the Company issued 2,000,000 shares of common stock in a public offering at a price of $18.75 per share. Proceeds from the offering, net of underwriters' fees and associated expenses, were approximately $35,484,000. The net proceeds were used to repay borrowings under the Company's bank line of credit. In July 1995, the Company amended the terms of its bank line of credit to, among other things, extend its maturity date to March 31, 1998 and to provide the Company with the option to automatically extend the bank line of credit to a three year maturity with concurrence of the bank group. Additionally, the pricing structure was amended to provide for reduced borrowing costs as the Company's debt ratings are upgraded and to reduce the current pricing from LIBOR plus 125 basis points to LIBOR plus 90 basis points. In January 1996, the maturity date of the Company's bank line of credit was extended to March 31, 1999. During September 1995, the Company sold one long-term health care facility to the lessee of such facility pursuant to a purchase option in the facility's lease. The Company received cash of approximately $8,344,000 of which approximately $4,796,000 was used to repay a mortgage secured by such facility and the balance was used to repay bank borrowings. The sale resulted in a gain of approximately $989,000. At December 31, 1995, the Company had $6,100,000 available under its $100,000,000 bank line of credit. At January 31, 1996, the Company has effective shelf registrations on file with the Securities and Exchange Commission under which the Company may issue (a) up to $200,000,000 in aggregate principal amount of medium-term notes and (b) up to $97,500,000 of securities including debt, convertible debt, common and preferred stock. The Company anticipates issuing securities under such shelf registrations to repay borrowings under the Company's bank line of credit. 7 The Company anticipates making additional investments in health care related facilities. Financing for such future investments may be provided by borrowings under the Company's bank line, private placements or public offerings of debt or equity, and the assumption of secured indebtedness. The Company believes it has sufficient liquidity and financing capability to finance future investments as well as repay borrowings at or prior to their maturity. OPERATING RESULTS Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Revenues increased $12,043,000, or 17% in 1995 as compared to 1994. The increase was primarily due to increased minimum rent and interest income resulting from the addition of 33 facilities during 1995, combined with a full year of revenues earned by facilities acquired in 1994. The increase was also attributable to increased additional rent and additional interest earned under the Company's existing leases and mortgage loans receivable and to a gain on the sale of one of the Company's facilities. Total expenses increased $6,485,000, or 26% in 1995 as compared to 1994. The increase was primarily due to increased interest expense as a result of increased borrowings on the Company's bank line of credit and the issuance of $100,000,000 in medium-term notes during 1995. The increase in total expenses was also attributable to increased depreciation due to the acquisition of additional facilities in the last 12 months. The Company expects increased rental revenues due to the addition of facilities to its property base during 1995 and due to increased additional rents under its leases. The Company also expects increased interest income resulting from additional investments in mortgage loans during 1995. Additional investments in health care facilities would also increase rental and/or interest income. As additional investments in facilities are made, depreciation and/or interest expense could also increase. Any such increases, however, are expected to be more than offset by rents or interest income associated with the investments. Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 Revenues increased $9,600,000, or 16% in 1994 as compared to 1993. The increase was primarily due to increased minimum rent as a result of the addition of 15 facilities in 1994, combined with a full year's minimum rent on facilities acquired in 1993. The increase was also attributable to increased additional rent resulting from increased facility patient revenues and increased interest income due to additional investments in mortgage loans. Total expenses increased $5,783,000, or 30% in 1994 as compared to 1993. The increase was primarily due to an increase in interest expense due to the issuance of $65,000,000 of convertible debentures in November 1993 and to increased levels of bank borrowings and higher short-term interest rates in 1994. The increase was partially offset by a decrease in interest expense in connection with the conversion of a portion of the Company's senior subordinated convertible debentures during 1994. Increased expenses were also attributable to increased depreciation as a result of acquisitions during 1994 and 1993. Year Ended December 31, 1993 Compared to Year Ended December 31, 1992 Revenues increased $10,440,000, or 21% in 1993 as compared to 1992. The increase was primarily due to increased minimum rent and interest income as a result of the addition of 19 facilities and five mortgage loans to the Company's portfolio in 1993, combined with a full year's minimum rent and interest income on facilities and mortgage loans acquired in 1992. Revenues also increased due to increased additional rent resulting from increased facility patient revenues and an increase in the number of facilities from which the Company earns additional rent. Total expenses decreased $875,000, or 4% in 1993 as compared to 1992. The decrease was primarily due to a decrease in interest expense in connection with the conversion of a substantial portion of the Company's senior subordinated convertible debentures. Of the original issuance of $50,000,000 in aggregate principal amount of debentures in October 1991, $35,846,000 and $5,545,000 of such debentures were converted into shares of the Company common stock in 1993 and 1992, respectively. This decrease was partially offset by increased interest 8 expense due to the issuance of $65,000,000 of convertible debentures in November 1993, increased depreciation as a result of acquisitions during 1993 and 1992 and increased general and administrative expenses. The Company recorded an extraordinary charge of $2,004,000 in 1993, representing the write-off of unamortized deferred financing costs and fees associated with the prepayment of a mortgage bond due in the year 2000 secured by 19 of the Company's facilities. NEW ACCOUNTING STANDARDS The Company will be required to adopt new accounting standards in the future. In 1996, the Company will be required to adopt Statement of Accounting Standards ("SFAS") No. 121 Accounting for the Impairment if Certain Long-Lived Assets and for Long-Lived Assets to be Disposed of and SFAS No. 123 Accounting for Stock Based Compensation. The Company anticipates that the adoption of SFAS No. 121 and SFAS No. 123 will not materially impact the financial statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE ---- Report of Independent Public Accountants............................. 10 Consolidated Balance Sheets.......................................... 11 Consolidated Statements of Operations................................ 12 Consolidated Statements of Stockholders' Equity...................... 13 Consolidated Statements of Cash Flows................................ 14 Notes to Consolidated Financial Statements........................... 15
9 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors, Nationwide Health Properties, Inc. We have audited the accompanying consolidated balance sheets of Nationwide Health Properties, Inc. (a Maryland corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Health Properties, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Orange County, California January 31, 1996 10 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, -------------------- 1995 1994 --------- --------- (IN THOUSANDS) Investments in real estate Real estate properties: Land................................................. $ 61,748 $ 39,981 Buildings and improvements........................... 530,979 418,137 --------- --------- 592,727 458,118 Less accumulated depreciation.......................... (73,722) (62,080) --------- --------- 519,005 396,038 Mortgage loans receivable, net......................... 133,226 105,824 --------- --------- 652,231 501,862 Cash and cash equivalents................................ 7,937 3,742 Receivables.............................................. 3,478 2,936 Other assets............................................. 6,465 5,269 --------- --------- $670,111 $ 513,809 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Bank borrowings.......................................... $ 93,900 $ 80,200 Senior notes due 2000-2015............................... 100,000 -- Convertible debentures................................... 65,000 67,690 Notes and bonds payable.................................. 23,364 20,520 Accounts payable and accrued liabilities................. 16,025 9,293 Commitments and contingencies Stockholders' equity: Preferred stock $1.00 par value; 5,000,000 shares authorized; none issued or outstanding................ -- -- Common stock $.10 par value; 100,000,000 shares authorized; issued and outstanding: 38,720,532 and 36,476,386 as of December 31, 1995 and 1994, respectively.......................................... 3,872 3,648 Capital in excess of par value........................... 401,438 363,135 Cumulative net income.................................... 245,135 194,764 Cumulative dividends..................................... (278,623) (225,441) --------- --------- Total stockholders' equity........................... 371,822 336,106 --------- --------- $ 670,111 $ 513,809 ========= =========
See accompanying notes. 11 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ----------------------- 1995 1994 1993 ------- ------- ------- Revenues: Minimum rent........................................ $54,504 $47,805 $40,758 Additional rent and additional interest............. 11,776 9,767 8,417 Interest and other income........................... 14,759 12,413 11,210 Gain on sale of facilities.......................... 989 -- -- ------- ------- ------- 82,028 69,985 60,385 Expenses: Depreciation and non-cash charges................... 13,885 12,244 10,115 Interest and amortization of deferred financing costs.............................................. 14,628 9,921 6,186 General and administrative.......................... 3,144 3,007 3,088 ------- ------- ------- 31,657 25,172 19,389 ------- ------- ------- Income before extraordinary items..................... 50,371 44,813 40,996 Extraordinary charge.................................. -- -- (2,004) ------- ------- ------- Net income............................................ $50,371 $44,813 $38,992 ======= ======= ======= Per share amounts: Income before extraordinary items................... $ 1.33 $ 1.23 $ 1.17 ======= ======= ======= Net income.......................................... $ 1.33 $ 1.23 $ 1.11 ======= ======= ======= Weighted average shares outstanding................... 37,808 36,356 35,188 ======= ======= =======
See accompanying notes. 12 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK CAPITAL IN TOTAL ------------- EXCESS OF CUMULATIVE CUMULATIVE STOCKHOLDERS' SHARES AMOUNT PAR VALUE NET INCOME DIVIDENDS EQUITY ------ ------ ---------- ---------- ---------- ------------- Balances at December 31, 1992................... 33,074 $3,308 $322,435 $110,959 $(134,807) $301,895 Issuance of stock..... 26 -- 178 -- -- 178 Exercise of stock options.............. 48 4 287 -- -- 291 Conversion of debentures........... 2,812 282 34,172 -- -- 34,454 Net income............ -- -- -- 38,992 -- 38,992 Dividends............. -- -- -- -- (42,883) (42,883) ------ ------ -------- -------- --------- -------- Balances at December 31, 1993................... 35,960 3,594 357,072 149,951 (177,690) 332,927 Issuance of stock..... 26 6 252 -- -- 258 Exercise of stock options.............. 26 2 148 -- -- 150 Conversion of debentures........... 464 46 5,663 -- -- 5,709 Net income............ -- -- -- 44,813 -- 44,813 Dividends............. -- -- -- -- (47,751) (47,751) ------ ------ -------- -------- --------- -------- Balances at December 31, 1994................... 36,476 3,648 363,135 194,764 (225,441) 336,106 Issuance of stock..... 2,032 203 35,714 -- -- 35,917 Exercise of stock options.............. 2 -- 10 -- -- 10 Conversion of debentures........... 210 21 2,579 -- -- 2,600 Net income............ -- -- -- 50,371 -- 50,371 Dividends............. -- -- -- -- (53,182) (53,182) ------ ------ -------- -------- --------- -------- Balances at December 31, 1995................... 38,720 $3,872 $401,438 $245,135 $(278,623) $371,822 ====== ====== ======== ======== ========= ========
See accompanying notes. 13 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ----------------------------- 1995 1994 1993 --------- -------- -------- Cash flows from operating activities: Net income.................................... $ 50,371 $ 44,813 $ 38,992 Extraordinary charge.......................... -- -- 2,004 Depreciation and non-cash charges............. 13,885 12,244 10,115 Gain on sale of facilities.................... (989) -- -- --------- -------- -------- Funds from operations......................... 63,267 57,057 51,111 Net (increase) decrease in other assets and liabilities.................................. 3,705 (301) (1,386) --------- -------- -------- Net cash provided by operating activities... 66,972 56,756 49,725 Cash flows from investing activities: Acquisition of real estate properties......... (136,783) (62,768) (57,293) Disposition of real estate properties......... 8,940 -- 2,650 Investment in mortgage loans receivable....... (35,437) (30,289) (27,450) Principal payments on mortgage loans receivable................................... 11,804 9,872 25,832 --------- -------- -------- Net cash used in investing activities....... (151,476) (83,185) (56,261) Cash flows from financing activities: Bank borrowings............................... 205,600 126,700 82,000 Repayment of bank borrowings.................. (191,900) (50,300) (88,150) Issuance of common stock...................... 35,494 117 291 Issuance of senior debt....................... 100,000 -- -- Issuance of convertible debentures............ -- -- 65,000 Principal payments on notes and bonds payable. (6,460) (2,074) (12,733) Dividends paid................................ (53,182) (47,751) (42,883) Deferred financing costs...................... (853) (148) (2,679) Refund of debt service reserve................ -- -- 1,036 --------- -------- -------- Net cash provided by financing activities... 88,699 26,544 1,882 --------- -------- -------- Increase (decrease) in cash and cash equivalents.................................... 4,195 115 (4,654) Cash and cash equivalents, beginning of period.. 3,742 3,627 8,281 --------- -------- -------- Cash and cash equivalents, end of period........ $ 7,937 $ 3,742 $ 3,627 ========= ======== ======== Supplemental schedule of cash flow information: Cash paid for interest........................ $ 12,680 $ 9,102 $ 6,025 ========= ======== ========
See accompanying notes. 14 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION Nationwide Health Properties, Inc. (the "Company") was incorporated on October 14, 1985 in the State of Maryland. The Company operates as a real estate investment trust specializing in investments in health care related properties and as of December 31, 1995 had investments in 210 health care facilities, consisting of 173 long-term health care facilities, 35 assisted living facilities and two rehabilitation hospitals. At December 31, 1995, the Company owned 136 long-term health care facilities, 30 assisted living facilities and two rehabilitation hospitals and held 28 mortgage loans secured by 37 long-term health care facilities and five assisted living facilities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its investment in its majority owned and controlled joint venture. All material intercompany accounts and transactions have been eliminated. Stock Split & Reclassifications On January 19, 1996, the Board of Directors of Nationwide Health Properties, Inc. authorized a two-for-one split of the Company's common stock to be effective on March 8, 1996. The financial statements included herein have been restated to reflect the stock split. Additionally, certain amounts in the 1994 and 1993 financial statements have been reclassified for consistent financial statement presentation. Land, Buildings and Improvements The Company records properties at cost and uses the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years. The Company provides accelerated depreciation on certain of its investments based primarily on an estimation of net realizable value of such investments at the end of the primary lease terms. Cash and Cash Equivalents Cash in excess of daily requirements is invested in money market mutual funds, commercial paper and repurchase agreements with maturities of three months or less. Such investments are deemed to be cash equivalents for purposes of presentation in the financial statements. Federal Income Taxes The Company qualifies as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company intends to continue to qualify as such and therefore to distribute at least 95% of its real estate investment trust taxable income to its stockholders. Accordingly, the Company will not be subject to Federal income taxes on its income which is distributed to stockholders. Therefore, no provisions for Federal income taxes have been made in the Company's financial statements. The net difference in the tax basis and the reported amounts of the Company's assets and liabilities as of December 31, 1995 is approximately ($4,262,000). Revenue Recognition Rental income from operating leases is accrued as earned over the life of the lease agreements. Interest income on real estate mortgages is recognized using the effective interest method based upon the expected payments over the lives of the mortgages. 15 Net Income Per Share Net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. The effect of common stock options and converted debentures is immaterial, and the effect of convertible debentures is anti-dilutive. Funds From Operations Industry analysts generally consider funds from operations to be an alternative measure of the performance of an equity REIT. Funds from operations is generally defined as net income plus certain non-cash items, primarily depreciation of real property, less gains on sales of facilities. Funds from operations does not represent cash generated from operating activities as defined by generally accepted accounting principles (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. EXTRAORDINARY ITEMS The prepayment of a portion of the Company's secured debt during 1993 resulted in an extraordinary charge of $2,004,000, representing the write-off of unamortized deferred financing costs and fees associated with such prepayment. 4. REAL ESTATE PROPERTIES All of the Company's owned facilities are leased under "net" leases which are accounted for as operating leases. The leases have initial terms ranging from 10 to 19 years, and the leases generally have two or more multiple-year renewal options. The Company earns fixed monthly minimum rents and may earn periodic additional rents. The additional rent payments are generally computed as a percentage of facility net patient revenues in excess of base amounts. The base amounts, in most cases, are net patient revenues for the first year of the lease. Certain of the leases contain provisions such that the percentage of further revenue increases due to the Company as additional rent is limited to 1% at such time as additional rent exceeds 41% of minimum rent. Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties. Minimum future rentals on non-cancelable leases as of December 31, 1995 are as follows:
MINIMUM YEAR RENTALS ---- -------------- (IN THOUSANDS) 1996...................... 63,853 1997...................... 63,524 1998...................... 61,341 1999...................... 58,303 2000...................... 44,439 2001...................... 36,507 2002...................... 30,848 2003...................... 28,246 2004...................... 24,208 2005...................... 19,568 Thereafter................ 59,139
During 1995, the Company acquired 27 assisted living facilities in 14 separate transactions for an aggregate purchase price of $141,278,000. The facilities were concurrently leased under terms generally similar to the Company's existing leases. The acquisitions were funded by bank borrowings on the Company's bank line of credit, cash on hand and assumed indebtedness of approximately $9,304,000. 16 In addition to the acquisitions, the Company provided capital improvement funding in the aggregate amount of approximately $3,061,000 in accordance with certain existing lease provisions. Such capital improvements will result in an increase in the minimum rents earned by the Company. During 1995, the Company sold one long-term health care facility to the lessee of such facility pursuant to a purchase option in the facility's lease. The Company received cash of approximately $8,344,000 of which approximately $4,796,000 was used to repay a mortgage secured by such facility and the balance was used to repay bank borrowings. The sale resulted in a gain of approximately $989,000. The following table lists the Company's real estate properties as of December 31, 1995:
FACILITY NUMBER OF BUILDINGS AND TOTAL ACCUMULATED NOTES AND LOCATION FACILITIES LAND IMPROVEMENTS INVESTMENT(1) DEPRECIATION BONDS PAYABLE -------- ---------- ------- ------------- ------------- ------------ ------------- (DOLLAR AMOUNTS IN THOUSANDS) LONG-TERM CARE FACILI- TIES: Arizona............... 2 $ 833 $ 5,243 $ 6,076 $ 1,028 $ 1,147 Arkansas.............. 2 209 5,773 5,982 1,553 -- California............ 10 7,753 26,483 34,236 2,778 -- Colorado.............. 1 400 2,716 3,116 158 -- Connecticut........... 5 1,465 13,262 14,727 2,466 -- Florida............... 7 2,186 20,743 22,928 4,153 -- Georgia............... 1 801 6,542 7,343 490 -- Idaho................. 1 15 777 792 175 -- Illinois.............. 2 157 5,392 5,549 794 3,554 Indiana............... 7 751 26,334 27,085 4,190 8,744 Kansas................ 8 517 11,287 11,804 1,344 615 Maryland.............. 4 845 21,210 22,055 5,716 -- Massachusetts......... 8 3,893 25,948 29,841 3,786 -- Minnesota............. 9 1,545 28,084 29,629 9,384 -- Missouri.............. 1 51 2,689 2,740 769 -- Nevada................ 1 740 3,294 4,034 350 -- New Jersey............ 1 360 6,449 6,809 2,224 -- North Carolina........ 1 116 2,244 2,360 641 -- Ohio.................. 6 1,316 28,221 29,537 4,979 -- Oklahoma.............. 3 98 3,841 3,939 859 -- Oregon................ 4 435 6,325 6,760 1,808 -- Tennessee............. 8 1,040 22,963 24,003 1,552 -- Texas................. 26 4,805 50,802 55,607 7,324 -- Virginia.............. 4 1,036 17,532 18,568 5,012 -- Washington............ 5 2,350 16,172 18,522 1,325 -- Wisconsin............. 9 1,621 19,547 21,169 5,266 -- --- ------- -------- -------- ------- ------- Subtotals........... 136 $35,338 $379,873 $415,211 $70,124 $14,060 --- ------- -------- -------- ------- ------- ASSISTED LIVING FACILITIES: California............ 12 15,305 57,731 73,036 873 -- Colorado.............. 3 1,936 17,018 18,954 -- -- Florida............... 2 2,261 5,845 8,106 68 -- Idaho................. 1 466 5,559 6,025 -- -- Michigan.............. 1 300 6,939 7,239 165 -- Ohio.................. 1 225 4,013 4,238 95 -- Oklahoma.............. 1 392 4,379 4,771 218 -- Oregon................ 6 2,078 21,911 23,989 -- 9,304 Tennessee............. 1 600 2,301 2,901 33 -- Texas................. 1 308 4,218 4,526 197 -- Washington............ 1 172 5,883 6,055 -- -- --- ------- -------- -------- ------- ------- Subtotals........... 30 $24,043 $135,797 $159,840 $ 1,649 $ 9,304 --- ------- -------- -------- ------- ------- REHABILITATION HOSPITALS: Arizona............... 2 1,517 15,309 16,826 1,949 -- --- ------- -------- -------- ------- ------- Subtotal............ 2 $ 1,517 $ 15,309 $ 16,826 $ 1,949 $ -- --- ------- -------- -------- ------- ------- TOTAL OWNED FACILITIES.. 168 $60,898 $530,979 $591,877 $73,722 $23,364 === ======= ======== ======== ======= =======
- -------- (1) Also represents the approximate aggregate cost for Federal income tax purposes. 17 The following table summarizes the changes in real estate properties and accumulated depreciation during 1995, 1994 and 1993:
REAL ESTATE ACCUMULATED PROPERTIES DEPRECIATION ----------- ------------ (IN THOUSANDS) Balance at December 31, 1992............. $344,062 $41,446 Additions.............................. 58,353 9,904 Sales.................................. (7,065) (1,170) -------- ------- Balance at December 31, 1993............. $395,350 $50,180 -------- ------- Additions.............................. 62,768 11,900 Sales.................................. -- -- -------- ------- Balance at December 31, 1994............. $458,118 $62,080 -------- ------- Additions.............................. 146,087 13,408 Sales.................................. (11,478) (1,766) -------- ------- Balance at December 31, 1995............. $592,727 $73,722 ======== =======
The average age of the Company's facilities is 24 years. The Company acquired 27 of its facilities on December 30, 1985, 31 facilities during 1986, 10 facilities during 1987, 5 facilities during 1988, 12 facilities during 1990, 17 facilities during 1991, 5 facilities during 1992, 19 facilities during 1993, 15 facilities during 1994 and 27 facilities during 1995. 5. MORTGAGE LOANS RECEIVABLE During 1995, the Company provided five mortgage loans, secured by two long- term health care facilities and four assisted living facilities in an aggregate amount of $35,237,000. At December 31, 1995, the Company had 28 mortgage loans receivable secured by 37 long-term health care facilities and five assisted living facilities. The loans have an aggregate principal balance of approximately $144,232,000 and are reflected in the Company's financial statements net of an aggregate discount of approximately $11,006,000. The principal balances of mortgage loans receivable as of December 31, 1995 mature approximately as follows: $5,732,000 in 1996, $3,461,000 in 1997, $7,626,000 in 1998, $2,397,000 in 1999, $2,566,000 in 2000 and $122,450,000 thereafter. 18 The following table lists the Company's mortgage loans receivable at December 31, 1995:
FINAL ESTIMATED ORIGINAL FACE CARRYING NUMBER OF INTEREST MATURITY BALLOON AMOUNT OF AMOUNT OF LOCATION OF FACILITIES FACILITIES RATE DATE PAYMENT(1) MORTGAGES MORTGAGES(2) ---------------------- ---------- -------- -------- ---------- ------------- ------------ (DOLLARS IN THOUSANDS) LONG-TERM HEALTH CARE FACILITIES: Arkansas.............. 3 10.00% 12/06 $ 4,946 $ 5,500 $ 4,998 California............ 1 10.00% 05/25 1,549 8,200 8,200 California............ 1 7.86% 05/98 3,207 3,600 2,890 California............ 1 7.86% 05/98 2,182 2,425 1,962 California............ 3 9.50% 03/09 7,600 12,000 11,002 Florida............... 1 10.15% 07/03 -- 4,400 1,600 Illinois.............. 1 9.00% 01/24 -- 9,500 7,570 Indiana............... 1 10.15% 07/03 -- 785 898 Kansas................ 1 9.89% 05/97 1,311 1,550 1,244 Louisiana............. 1 10.89% 04/15 2,407 3,850 3,850 Maryland.............. 1 10.90% 06/03 5,278 6,900 6,659 Massachusetts......... 1 8.75% 02/24 -- 9,000 6,918 Michigan.............. 3 11.40% 12/06 6,846 7,817 7,165 Michigan.............. 2 10.82% 06/03 2,503 3,000 2,821 Michigan.............. 1 10.00% 01/05 1,501 1,800 1,759 New Mexico............ 1 7.86% 02/96 2,722 2,880 2,711 South Dakota.......... 1 9.75% 05/05 -- 1,350 819 Texas................. 1 9.88% 01/04 624 1,460 964 Texas................. 2 10.85% 01/02 1,963 2,519 2,267 Texas................. 3 10.75% 06/03 4,120 4,700 4,147 Texas................. 1 9.50% 12/96 853 2,825 924 Virginia.............. 1 10.50% 04/13 10,192 13,250 13,141 Washington............ 4 11.00% 10/19 112 6,000 5,944 Wisconsin............. 1 9.75% 05/05 -- 4,275 1,258 --- ------- -------- -------- Subtotals........... 37 $59,916 $119,586 $101,711 --- ------- -------- -------- ASSISTED LIVING FACILITIES: Florida............... 2 10.31% 09/20 -- 7,230 7,230 Massachusetts......... 1 9.52% 06/23 -- 9,400 9,400 Oklahoma.............. 1 9.55% 03/24 -- 8,250 8,328 Washington............ 1 9.95% 12/47 -- 6,557 6,557 --- ------- -------- -------- Subtotals........... 5 $ -- $ 31,437 $ 31,515 --- ------- -------- -------- Total................... 42 $59,916 $151,023 $133,226 === ======= ======== ========
- -------- (1) Most loans require monthly principal and interest payments at level amounts over life to maturity. Some loans are adjustable rate mortgages with varying principal and interest payments over life to maturity, in which case the balloon payments reflected are an estimate. Five of the loans have decreasing principal and interest payments over the life of the loans. Most loans require a prepayment penalty based on a percentage of principal outstanding or a penalty based upon a calculation maintaining the yield the Company would have earned if prepayment had not occurred. Three loans have a provision that no prepayments are acceptable. (2) The aggregate cost for federal income tax purposes is approximately $143,240,000. 19 The following table summarizes the changes in mortgage loans receivable during 1995 and 1994:
1995 1994 -------- -------- (IN THOUSANDS) Balance at January 1.................................. $105,824 $ 83,303 New mortgage loans.................................. 37,544 30,289 Accretion of discount on loans...................... 1,662 2,104 Collection of principal............................... (11,804) (9,872) -------- -------- Balance at December 31................................ $133,226 $105,824 ======== ========
6. BANK BORROWINGS The Company has a $100,000,000 unsecured credit agreement with certain banks. The terms of the bank line of credit were amended in July 1995 to, among other things, extend its maturity date to March 31, 1998 and to provide the Company with the option to automatically extend the bank line of credit to a three year maturity with concurrence of the bank group. Additionally, the pricing structure was amended to provide for reduced borrowing costs as the Company's debt ratings are upgraded and to reduce the current pricing from LIBOR plus 125 basis points to LIBOR plus 90 basis points. The Company pays a facility fee of one-fourth of 1% per annum on the total commitment under the agreement. In January 1996, the maturity date of the line of credit was extended to March 31, 1999. Under covenants contained in the credit agreement, the Company is required to maintain: (i) a minimum net worth of $300,000,000; (ii) a ratio of cash flow before interest expense and non-cash expenses to regularly scheduled debt service payments on all debt of at least 2.0 to 1.0; and (iii) a ratio of total liabilities to net worth of not more than 1.1 to 1.0. The weighted average borrowings outstanding under the Company's credit agreements during 1995, 1994 and 1993 were approximately $51,811,000, $40,938,000 and $11,630,000, respectively. Maximum amounts outstanding at the end of the months during 1995, 1994 and 1993 were $93,900,000, $80,200,000 and $19,100,000, respectively. The weighted average interest rates during 1995, 1994 and 1993 were approximately 7.3%, 6.3% and 4.9%, respectively. The weighted average interest rates at December 31, 1995, 1994 and 1993 were approximately 6.8%, 7.5% and 6.0%, respectively. 7. NOTES AND BONDS PAYABLE Notes and bonds payable are due through the year 2024, at interest rates ranging from 8.6% to 10.9% and are secured by real estate properties with an aggregate net book value as of December 31, 1995 of approximately $30,953,000. The principal balances of the notes and bonds payable as of December 31, 1995 mature approximately as follows: $13,525,000 in 1996, $82,000 in 1997, $90,000 in 1998, $99,000 in 1999, $109,000 in 2000, and $9,459,000 thereafter. 8. SENIOR NOTES DUE 2000-2015 During 1995, the Company issued $100,000,000 in aggregate principal amount of medium-term notes. The weighted average interest rate on the Senior Notes was 7.8% and the weighted average maturity was 7.3 years. The principal balances of the Senior Notes as of December 31, 1995 mature approximately as follows: $30,000,000 in the year 2000 and $70,000,000 thereafter. 9. CONVERTIBLE DEBENTURES During November 1993, the Company issued $65,000,000 of 6.25% convertible debentures due January 1, 1999. The debentures are convertible at any time prior to maturity into shares of the Company's common stock at a conversion price of $22.41 per share. As of December 31, 1995, no debentures have been converted. 20 During 1991, the Company issued $50,000,000 of 8.9% senior subordinated convertible debentures due July 1, 2001. The debentures were convertible into common stock of the Company at a conversion price of $12.75 per share of common stock. The debentures were redeemable by the Company in whole or in part at par plus accrued interest on any date subsequent to October 29, 1992. In May 1995, the Company issued a notice of redemption and expiration of conversion privilege. At the time of notice, all shares were converted into shares of the Company's common stock with the exception of $10,000 in debentures which were redeemed at par plus accrued interest. During 1995, 1994 and 1993, $2,267,000, $5,919,000 and $35,846,000, respectively, of such debentures converted into 210,180, 464,212 and 2,811,412 shares of common stock, respectively. 10. STOCK INCENTIVE PLAN Under the terms of a stock incentive plan (the "Plan"), the Company has reserved for issuance 800,000 shares of common stock. Directors, officers and employees of the Company are eligible to participate in the Plan. The following is a summary of stock options granted, exercised and canceled, and restricted stock awarded:
RESTRICTED STOCK STOCK OPTIONS AWARDS ---------------------- ----------- NUMBER NUMBER EXERCISE OF OF SHARES PRICE SHARES --------- ------------ ------- Outstanding at December 31, 1992.... 98,368 $5.625-$8.75 27,400 Granted 1993.............................. -- -- 27,500 1994.............................. -- -- 28,400 1995.............................. -- -- 32,200 Canceled 1993.............................. 18,000 8.75 1,600 1994.............................. -- -- -- 1995.............................. -- -- -- Exercised/Restrictions Lapsed 1993.............................. 48,368 5.625 400 1994.............................. 26,800 5.625 -- 1995.............................. 1,800 5.625 9,600 Outstanding at December 31, 1995.... 3,400 $5.625 103,900
Stock options granted under the Plan become exercisable each year following the date of grant in annual increments of one-third for non-management directors of the Company and one-fifth for all other grant recipients. Stock options covering 3,400 shares were exercisable at December 31, 1995. The restricted stock awards are granted at no cost. Restricted stock awards vest at the third anniversary of the award date with respect to non-employee directors and at the fifth anniversary with respect to officers and employees. The restricted stock awards are amortized over their respective vesting periods. Expense is determined based upon the market value at the date of award of the restricted stock and is recognized over the vesting period. Expense recorded in 1995, 1994 and 1993 related to restricted stock awards was approximately $433,000, $292,000 and $178,000, respectively. 11. PENSION PLAN During 1991, the Company adopted an unfunded benefit pension plan covering the current non-employee members of its board of directors upon completion of five years of service on the board. The benefits, limited to the number of years of service on the board, are based upon the then current annual retainer in effect. 21 The following tables set forth the amounts recognized in the Company's financial statements:
DECEMBER 31, DECEMBER 31, 1995 1994 ------------ ------------ Actuarial present value of benefit obligations: Vested benefit obligation.................... $679,000 $493,000 ======== ======== Accumulated benefit obligation............... $706,000 $504,000 ======== ======== Projected benefit obligation................. $756,000 $561,000 Unrecognized prior service cost.............. 156,000 183,000 Unrecognized net (gain) or loss.............. 55,000 (20,000) -------- -------- Accrued pension cost......................... $545,000 $398,000 ======== ========
Net pension cost for the year included the following components:
1995 1994 1993 -------- -------- -------- Current service cost.......................... $ 73,000 $ 62,000 $ 56,000 Interest cost................................. 48,000 38,000 33,000 Amortization of prior service cost............ 27,000 27,000 27,000 -------- -------- -------- Net periodic pension cost..................... $148,000 $127,000 $116,000 ======== ======== ========
Discount rates of 7.0% and 8.5% in 1995 and 1994, respectively and a 5.0% increase in the annual retainer every other year were used in determining the actuarial present value of the projected benefit obligation. 12. TRANSACTIONS WITH BEVERLY ENTERPRISES, INC. As of December 31, 1995, 45 of the owned facilities are leased to and operated by subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has guaranteed certain obligations of its subsidiaries and of certain parties unaffiliated with Beverly in connection with 24 properties operated by such parties. During 1995, the Company sold two long-term health care facilities to Beverly, the lessee of such facilities, for an aggregate purchase price of $6,250,000. The Company received $625,000 in cash and $5,625,000 in mortgage notes which are secured by the two facilities. The related gain of approximately $3,864,000 on such sale will be recognized into income on a deferred basis in proportion to the receipt of principal payments on the mortgage loans provided by the Company. Revenues from Beverly were approximately $21,921,000, $22,776,000 and $24,323,000, for the years ended December 31, 1995, 1994 and 1993, respectively. One of the directors of the Company is also an officer and director of Beverly. 13. DIVIDENDS Dividend payments by the Company to the stockholders were characterized in the following manner for tax purposes:
1995 1994 1993 ----- ----- ----- Ordinary income......................................... $1.24 $1.26 $1.12 Capital gain............................................ .17 .05 .09 Return of capital....................................... -- -- -- ----- ----- ----- Total dividends paid.................................. $1.41 $1.31 $1.21 ===== ===== =====
22 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED ----------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1995: Revenues...................... $18,852 $19,965 $21,854 $21,357 Net income.................... 11,457 12,197 13,890 12,827 Net income per share.......... .31 .33 .36 .33 Dividends per share........... .34 .35 .36 .36 1994: Revenues...................... $16,500 $17,380 $17,875 $18,230 Net income.................... 10,944 11,208 11,371 11,290 Net income per share.......... .30 .31 .31 .31 Dividends per share........... .32 .32 .33 .34
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The following methods and assumptions were used to estimate the fair value of each class of financial instruments. Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Mortgage Loans Receivable Fair values are based upon the estimates of management and on rates on currently prevailing for comparable loans. Long-Term Debt The fair value of long-term debt is estimated based on the quoted market prices for publicly traded debt and on the current rates offered to the Company for debt of the same remaining maturity. The estimated fair values of the Company's financial instruments are as follows:
1995 1994 ----------------- ----------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- (IN THOUSANDS) Cash and cash equivalents............ $ 7,937 $ 7,937 $ 3,742 $ 3,742 Mortgage loans receivable............ 133,226 157,306 105,824 109,516 Long-term debt....................... 282,264 284,045 168,410 164,062
23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1996, filed or to be filed pursuant to Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1996, filed or to be filed pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1996, filed or to be filed pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1996, filed or to be filed pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Financial Statements. Report of Independent Public Accountants Consolidated Balance Sheets at December 31, 1995 and 1994 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements Note: Schedules have been omitted because the required information is presented in the financial statements and the related notes or because the schedules are not applicable. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three-month period ended December 31, 1995 (c) Exhibits 24
EXHIBIT NO. DESCRIPTION ----------- ----------- 3. Articles of Incorporation and Bylaws 3.1(a) Restated Articles of Incorporation, filed as Exhibit 3.1 to the Company's Registration Statement on Form S-11 (No. 33-1128), effective December 19, 1985, and incorporated herein by this reference. 3.1(b) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended March 31, 1989, and incorporated herein by this reference. 3.1(c) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(c) to the Company's Registration Statement on Form S-11 (No. 33-32251), effective January 23, 1990, and incorporated herein by this reference. 3.1(d) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(d) to the Company's Form 10-K for the year ended December 31, 1994, and incorporated herein by this reference. 3.2 Bylaws of the Company as amended January 19, 1996. 4. Instruments Defining Rights of Security Holders, Including Indentures 4.1 Indenture dated as of November 16, 1992, between Nationwide Health Properties, Inc., Issuer to The Chase Manhattan Bank (National Association), Trustee, filed as Exhibit 4.1 to the Company's Form S-3 (No. 33-54870) dated November 24, 1992, and incorporated herein by this reference. 4.2 Indenture dated as of June 30, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3 (No. 33-64798), effective July 12, 1993, and incorporated herein by this reference. 4.3 First Supplemental Indenture dated November 15, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.1 to the Company's Form 8-K dated November 15, 1993, and incorporated by reference herein. 4.4 Indenture dated as of January 12, 1996, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company's Registration Statement on Form S-3 (No 33-65423) dated December 27, 1995, and incorporated herein by this reference. 10. Material Contracts 10.1 Master Lease Document--General Terms and Conditions dated December 30, 1985, for Leases between various subsidiaries of Beverly as Lessees and the Company as Lessor, filed as Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 1985, and incorporated herein by this reference. 10.2 Guaranty by and between the Company and Beverly filed as Exhibit 10.7 to the Company's Registration Statement on Form S-11 (No. 33- 1128), effective December 19, 1985, and incorporated herein by this reference. 10.3 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases and Contract of Acquisition, dated as of August 1, 1986, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.3 to the Company's Registration Statement on Form S-11 (No. 33- 32251), effective January 23, 1990, and incorporated herein by this reference. 10.4 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases and Contract of Acquisition, dated as of November 1, 1986, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.4 to the Company's Registration Statement on Form S-11 (No. 33- 32251), effective January 23, 1990, and incorporated herein by this reference.
25
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.5 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases, dated as of July 31, 1987, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.5 to the Company's Registration Statement on Form S-11 (No. 33-32251), effective January 23, 1990, and incorporated herein by this reference. 10.6 1989 Stock Option Plan of the Company as Amended and Restated January 24, 1992 filed as Exhibit 10.8(a) to the Company's Form 10-K, and incorporated herein by this reference. 10.7 The Company's Retirement Plan for Directors effective July 26, 1991 filed as Exhibit 10.13 to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference. 10.8 Deferred Compensation Plan of the Company effective September 1, 1991 filed as Exhibit 10.14 to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference. 10.9 Commercial and Multi-family Mortgage Loan Sale Agreement dated as of June 5, 1992 by and between Resolution Trust Corporation, as Receiver, and Nationwide Health Properties, Inc. filed as Exhibit A to the Company's Form 8-K dated May 29, 1992, and incorporated herein by this reference. 10.10 Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank National Association, National Westminster Bank USA, The Daiwa Bank Limited and Sanwa Bank of California filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by this reference. 10.10(a) Amendment Number One to Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited, and Sanwa Bank California filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1994, and incorporated herein by this reference. 10.10(b) Amendment Number Two to Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa Bank California, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1995, and incorporated herein by this reference. 10.10(c) Amendment Number Three to Credit Agreement dated as of January 22, 1996 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa Bank California. 10.11 Form of Indemnity Agreement between officers and directors of the Company including David R. Banks, Milton J. Brock, Jr., Sam A. Brooks, Jr., Charles D. Miller, Jack D. Samuelson, R. Bruce Andrews, Mark L. Desmond, Don M. Pearson, Gary E. Stark, and T. Andrew Stokes. 10.12 Executive Employment Security Policy 21. Subsidiaries of the Company 23. Consents of Experts and Counsel 23.1 Consent of Arthur Andersen LLP 27. Financial Data Schedule
26 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. NATIONWIDE HEALTH PROPERTIES, INC. By: /s/ R. Bruce Andrews ----------------------------------- R. Bruce Andrews President and Chief Executive Officer Dated: February 16, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Milton J. Brock, Jr. Chairman and Director February 16, 1996 ____________________________________ Milton J. Brock, Jr. /s/ R. Bruce Andrews President, Chief Executive February 16, 1996 ____________________________________ Officer and Director R. Bruce Andrews (Principal Executive Officer) /s/ Mark L. Desmond Senior Vice President and February 16, 1996 ____________________________________ Chief Financial Officer Mark L. Desmond (Principal Financial and Accounting Officer) /s/ David R. Banks Director February 16, 1996 ____________________________________ David R. Banks /s/ Sam A. Brooks Director February 16, 1996 ____________________________________ Sam A. Brooks /s/ Charles D. Miller Director February 16, 1996 ____________________________________ Charles D. Miller /s/ Jack D. Samuelson Director February 16, 1996 ____________________________________ Jack D. Samuelson
27 APPENDIX 1 BEVERLY ENTERPRISES, INC. SET FORTH BELOW IS CERTAIN CONDENSED FINANCIAL DATA OF BEVERLY ENTERPRISES, INC. ("BEVERLY") WHICH IS TAKEN FROM BEVERLY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE BEVERLY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AS FILED WITH THE COMMISSION. The information and financial data contained herein concerning Beverly was obtained and has been condensed from Beverly's public filings under the Exchange Act. The Beverly financial data presented includes only the most recent interim and fiscal year end reporting periods. The Company can make no representation as to the accuracy and completeness of Beverly's public filings but has no reason not to believe the accuracy and completeness of such filings. It should be noted that Beverly has no duty, contractual or otherwise, to advise the Company of any events subsequent to such dates which might affect the significance or accuracy of such information. Beverly is subject to the information filing requirements of the Exchange Act, and in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Such reports, proxy statements and other information may be inspected at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available at the following Regional Offices of the Commission: 7 World Trade Center, New York, N.Y. 10048, and 500 West Madison Street, Suite 1400, Chicago, IL 60661. Such reports and other information concerning Beverly can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, Room 1102, New York, New York 10005. I-1 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ Total current assets................................. $ 691,361 $ 652,337 Property and equipment, net.......................... 1,229,196 1,200,623 Total other assets................................... 624,407 469,618 ---------- ---------- Total assets......................................... $2,544,964 $2,322,578 ========== ========== Total current liabilities............................ $ 446,148 $ 409,625 Long-term obligations................................ 897,103 918,018 Other liabilities and deferred items................. 171,032 167,691 Total stockholders' equity........................... 1,030,681 827,244 ---------- ---------- Total liabilities and stockholders' equity........... $2,544,964 $2,322,578 ========== ==========
I-2 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, ---------------------- 1995 1994 1993 ----------------- ---------- ---------- Revenues............................. $2,431,166 $2,983,817 $2,899,720 Costs and expenses: Operating and Administrative....... 2,199,581 2,715,496 2,662,946 Interest........................... 63,872 64,792 66,196 Depreciation and amortization...... 77,982 88,734 82,938 ---------- ---------- ---------- 2,341,435 2,869,022 2,812,080 ========== ========== ========== Income before provision for income taxes and extraordinary charge............ 89,731 114,795 87,640 Provision for income taxes........... 34,098 37,882 29,684 Extraordinary charge, net of income taxes............................... -- (2,412) (2,345) ---------- ---------- ---------- Net income........................... $ 55,633 $ 74,501 $ 55,611 ========== ========== ========== Net income applicable to common shares.............................. $ 49,455 $ 66,251 $ 31,173 ========== ========== ========== Income per share of common stock: Primary: Before redemption premium on Series A preferred stock and extraordinary charge.............. $ .54 $ .79 $ .66 Redemption premium on Series A preferred stock -- -- (.25) Extraordinary charge............... -- (.03) (.03) ---------- ---------- ---------- Net income per share............... $ .54 $ .76 $ .38 ========== ========== ========== Shares used to compute per share amounts............................. 91,736 87,087 81,207 ========== ========== ==========
I-3 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, -------------------- 1995 1994 1993 ----------------- --------- --------- Cash flows from operating activities: Net income........................... $ 55,633 $ 74,501 $ 55,611 Adjustments to reconcile net income to net cash provided by operating activities............... 74,786 19,719 73,378 --------- --------- --------- Net cash provided by operating activi- ties.................................. 130,419 94,220 128,989 Net cash used for investing activities. (138,503) (317,553) (147,126) Net cash provided by (used for) financ- ing activities........................ (4,202) 214,239 44,161 --------- --------- --------- Net increase (decrease) in cash and cash equivalents...................... (12,286) (9,094) 26,024 Cash and cash equivalents at beginning of period............................. 67,964 77,058 51,034 --------- --------- --------- Cash and cash equivalents at end of pe- riod.................................. $ 55,678 $ 67,964 $ 77,058 ========= ========= =========
I-4 EX-3.2 2 BYLAWS EXHIBIT 3.2 BYLAWS OF NATIONWIDE HEALTH PROPERTIES, INC. AS AMENDED AND RESTATED JANUARY 19, 1996 ARTICLE I OFFICES Section 1. Registered Office. The registered office of the ----------------- corporation shall be established and maintained at the office of THE CORPORATION TRUST INCORPORATED, 32 South Street, Baltimore, Maryland 21202, and said THE CORPORATION TRUST INCORPORATED be the registered agent of this corporation in charge thereof. Section 2. Other Offices. The corporation may establish such other ------------- offices, within or without the State of Maryland, at such place or places as the Board of Directors from time to time may designate, or which the business of the corporation may require. ARTICLE II STOCKHOLDERS Section 1. Annual Meetings. Annual meetings of stockholders for the --------------- election of Directors and for such other business as may be stated in the notice of the meeting, shall be held on a date and at a time designated by the Board of Directors at such place, within or without the State of Maryland, as the Board of Directors by resolution shall determine, and as set forth in the notice of the meeting. If the date of the annual meeting shall fall on a legal holiday of the state in which the meeting is to be held, the meeting shall be held on the next succeeding business day. Section 2. Special Meetings. Special meetings of the stockholders, ---------------- for any purpose or purposes, may be called by the Chairman, the Chief Executive Officer, the President, by a majority of the Board of Directors or by a majority of the Independent Directors and shall be called by an officer upon written request of stockholders holding in the aggregate not less than 10% of the outstanding shares entitled to vote on the business proposed to be transacted thereat. Such meetings may be held at such time and place, within or without the State of Maryland, as shall be stated in the notice of the meeting. The call of a special meeting shall state the nature of the business to be transacted and no other business shall be considered at the meeting. A special meeting may be called for the purpose of removing a Director. Section 3. Notice of Meetings. Written or printed notice, stating ------------------ the place, date and time of the meeting, and, in 1 the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, by United States mail, postage prepaid, not less than twenty (20) nor more than sixty (60) days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all stockholders entitled to vote thereat. Section 4. Voting. At each annual meeting the stockholders entitled ------ to vote shall elect a Board of Directors, and they may transact such other corporate business as shall be stated in the notice of the meeting. The vote for Directors, and, upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. All elections of Directors shall be by a plurality of the votes cast, and all questions shall be decided by a majority vote, except as otherwise provided by the Articles of Incorporation or by the laws of the State of Maryland. The Directors may fix a day not more than sixty (60) days prior to the holding of any such meeting as the date as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice of or to vote at any such meeting. Each stockholder entitled to vote, in accordance with the terms of the Articles of Incorporation and the provisions of these Bylaws, shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after eleven (11) months from its date unless such proxy provides for a longer period. In no case shall any proxy be given for a period in excess of ten (10) years from the date of its execution. Section 5. Quorum. Except as provided in the next section hereof, ------ any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If, at any meeting, less than a quorum shall be present or represented, those present, either in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock shall be present, at which time any business may be transacted which might have been transacted at the meeting as originally noticed. Section 6. Action Without Meeting. Except for the election of ---------------------- Directors, any action to be taken by the stockholders may be taken without a meeting, if, prior to such action, all stockholders entitled to vote thereon shall consent in writing to such action being taken, and such consent shall be treated for all 2 purposes as a vote at a meeting. ARTICLE III DIRECTORS Section 1. Number and Term. The number of Directors shall not be --------------- less than five (5) nor more than nine (9) until changed by amendment of these Bylaws. The exact number of Directors shall be six (6) until changed, within the limit specified, by a Bylaw amending this section duly adopted by the Board of Directors or stockholders. The Directors shall be elected at the annual meeting of stockholders, and each Director shall be elected to serve until his successor shall be elected and shall have qualified. In no case shall the number of Directors be less than five (5), unless changed by an amendment to the Articles of Incorporation. The Board of Directors of this corporation shall be classified into three groups. Each group of Directors shall be elected for successive terms ending at the annual meeting of stockholders the third year after election. Directors need not be stockholders. Section 2. Independent Directors. At least a majority of the entire --------------------- Board of Directors shall be Independent Directors. An Independent Director shall mean a Director who is not, directly or indirectly, an Affiliate of the Advisor of the corporation. An Affiliate of the Advisor shall mean a person who: (a) is an officer or director or employee of the Advisor; (b) beneficially owns 5% or more of any class of equity securities of the Advisor because of the power to vote, sell, or exercise a right to acquire such securities; (c) is an officer, director or employee of, or beneficially owns 5% or more of any class of equity securities of, an entity that controls, is controlled by or is under common control with the Advisor; or (d) has a member of his or her immediate family who has one of the foregoing relationships with the Advisor. Section 3. Quorum. A majority of the Directors shall constitute a ------ quorum for the transaction of business. If, at any meeting of the Board, there shall be less than a quorum present, a majority of those present may adjourn the meeting, from time to time, until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. Section 4. First Meeting. The newly elected Directors may hold their ------------- first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after the annual meeting of stockholders or the time and place of 3 EX-10.10C 3 AMENDMENT #3 TO CREDIT AGRMT EXHIBIT 10.10(c) AMENDMENT NUMBER THREE TO CREDIT AGREEMENT ------------------------------------------ This AMENDMENT NUMBER THREE TO CREDIT AGREEMENT, dated as of January 22, 1996 (this "Amendment"), is entered into among NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (the "Borrower"), the financial institutions which are signatories to the Credit Agreement (each a "Bank" and, collectively, the "Banks"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent for the Banks thereunder (in such capacity, the "Agent"). WHEREAS, the Borrower has requested that (i) pursuant to Section ------- 4.1(b)(ii) of the Credit Agreement, the Termination Date of the Credit Agreement - ---------- be extended for an additional one-year period and (ii) the Banks amend certain provisions of the Credit Agreement to provide for, among other things, the revision of covenants in connection with the incurrence of indebtedness by the Borrower. WHEREAS, subject to the terms and conditions contained herein, the Banks are willing to amend such provisions of the Credit Agreement. NOW, THEREFORE, in consideration of the mutual covenants, conditions, and provisions hereinafter set forth, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS FOR THIS AMENDMENT; ------------------------------ AMENDMENT OF ARTICLE I OF THE CREDIT AGREEMENT ---------------------------------------------- 1.1 Definitions for this Amendment. Any and all initially ------------------------------ capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement unless specifically defined herein. For purposes of this Amendment, the following initially capitalized terms shall have the following meanings: "Agent" shall have the meaning set forth in the introduction to this ----- Amendment. "Amendment" means this Amendment Number Three to Credit Agreement --------- among the Borrower, the Banks, and the Agent. "Bank" and "Banks" shall have the respective meanings set forth in the ---- ----- introduction to this Amendment. "Borrower" shall have the meaning set forth in the introduction to -------- this Amendment. "Credit Agreement" means that certain Credit Agreement, dated as of ---------------- May 20, 1993, among the Borrower, the Banks, and the Agent, as amended by that certain Amendment Number One to Credit Agreement dated as of April 28, 1994, and that certain Amendment Number Two to Credit Agreement dated as of July 11, 1995. -1- 1.2 Amendment of Section 1.1 of the Credit Agreement. Section 1.1 of ------------------------------------------------ the Credit Agreement is hereby amended by (a) deleting the defined term "Termination Date" in its entirety; and (b) inserting the following defined terms: "1996 Indenture" means that certain Indenture, dated as of January 12, -------------- 1996, from the Borrower to The Bank of New York, as Trustee, providing for the issuance from time to time of unsecured and unsubordinated debentures, notes or other evidences of indebtedness of the Borrower. "1996 Indenture Indebtedness" means Indebtedness of the Borrower --------------------------- incurred under or pursuant to the 1996 Indenture. "Termination Date" means, unless extended pursuant to Section 4.1(b), ---------------- -------------- March 31, 1999. ARTICLE 2 AMENDMENT OF CERTAIN PROVISIONS ------------------------------- OF THE CREDIT AGREEMENT ----------------------- 2.1 Amendment of Section 4.3(b) of the Credit Agreement. Section --------------------------------------------------- 4.3(b) of the Credit Agreement is amended by deleting clause (i) therefrom in its entirety and substituting therefor the following clause: (i) If the Borrower shall create or incur Indenture Indebtedness or 1996 Indenture Indebtedness or, with the prior written consent of the Majority Banks, shall create, incur or assume Indebtedness pursuant to Sections -------- 9.4(a)(v) or 9.4(a)(vii), the Borrower shall pay to the Agent as a ------------------------ prepayment in whole or ratably in part of the outstanding amount of the Loans, an amount equal to the Net Cash Proceeds received by the Borrower from such Indebtedness as created, incurred or assumed (to the extent of the amount of the Loans then outstanding). 2.2 Amendment of Section 9.1(b) of the Credit Agreement. Section --------------------------------------------------- 9.1(b) of the Credit Agreement is amended by deleting clause (xi) therefrom in its entirety and substituting therefor the following clause: (xi) as soon as reasonably practical and, in any event, not less than two days prior to the consummation thereof, written notice of (A) the proposed incurrence or issuance of Indenture Indebtedness or 1996 Indenture Indebtedness or (B) any proposed supplement or amendment to the Indenture or the 1996 Indenture; and 2.3 Amendment of Section 9.4(a) of the Credit Agreement. Section --------------------------------------------------- 9.4(a) of the Credit Agreement is amended by deleting the "." at the end of clause (x) thereof and inserting in place thereof "; and" and by inserting immediately thereafter the following new clause (xi): -2- (xi) 1996 Indenture Indebtedness; provided, however, that: (a) -------- ------- the maximum aggregate principal amount of 1996 Indenture Indebtedness at any time outstanding shall not exceed $200,000,000; (b) without the prior written consent of the Majority Banks, no regularly scheduled principal payment on any 1996 Indenture Indebtedness shall be required prior to the fifth (5th) anniversary of the issuance of the debenture, note or other evidence of indebtedness evidencing such 1996 Indenture Indebtedness (without regard to the effect of the acceleration provisions set forth in Section 502 of the 1996 Indenture); (c) all 1996 Indenture Indebtedness shall be unsecured; (d) in connection with the incurrence or issuance of any 1996 Indenture Indebtedness, no covenant (financial or otherwise) shall be imposed upon, or agreed to by, the Borrower that is more restrictive (in the judgment of the Majority Banks) than the covenants set forth in this Agreement; and (e) prior to the effectiveness thereof, the Majority Banks shall have approved, in their sole discretion, each supplement or amendment to the 1996 Indenture. ARTICLE 3 MISCELLANEOUS ------------- 3.1 Loan Documents. This Amendment shall be one of the Loan -------------- Documents. 3.2 Execution. This Amendment may be executed in any number of --------- counterparts, each of which when so executed and delivered shall be deemed an original. All of such counterparts shall constitute but one and the same instrument. Delivery of an executed counterpart of the signature pages of this Amendment by telecopier shall be equally effective as delivery of a manually executed counterpart. Any party delivering an executed counterpart of the signature pages of this Amendment by telecopier shall thereafter also promptly deliver a manually executed counterpart, but the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment. 3.3 Effectiveness. This Amendment shall be effective as of the date ------------- first written above, when (a) one or more counterparts hereof shall have been executed by the Borrower, the Banks, and the Agent and shall have been delivered to the Agent and (b) the Borrower shall have delivered to the Banks and the Agent an executed copy of the 1996 Indenture. 3.4 No Other Amendment. Except as expressly amended hereby, the ------------------ Credit Agreement shall remain unchanged and in full force and effect. To the extent any terms or provisions of this Amendment conflict with those of the Credit Agreement, the terms and provisions of this Amendment shall control. This Amendment shall be deemed a part of and is hereby incorporated in the Credit Agreement. 3.5 Governing Law. This Amendment shall be governed by, and ------------- construed and enforced in accordance with, the laws of the State of California. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered as of the date first set forth above. THE BORROWER ------------ NATIONWIDE HEALTH PROPERTIES, INC. By_________________________________ Title: Vice President and Treasurer THE AGENT --------- WELLS FARGO BANK, NATIONAL ASSOCIATION By___________________________________ Title: Vice President THE BANKS --------- WELLS FARGO BANK, NATIONAL ASSOCIATION By____________________________________ Title: Vice President NATWEST BANK N.A. By____________________________________ Title:______________________________ -4- THE DAIWA BANK, LIMITED By____________________________________ Title:______________________________ By____________________________________ Title:______________________________ SANWA BANK CALIFORNIA By____________________________________ Title:______________________________ -5- EX-10.11 4 INDEMNITY AGREEMENT EXHIBIT 10.11 INDEMNITY AGREEMENT ------------------- This Agreement is made as of the _____ day of July, 1995, by and between Nationwide Health Properties, Inc., a Maryland corporation ("NHP"), and _____________________ (the "Director"), with reference to the following facts: The Director has been elected as a Director of NHP and NHP wishes the Director to continue in such capacity. The Director is willing, under certain circumstances, to continue serving as a Director of NHP. In order to induce the Director to continue to serve as a Director of NHP and in consideration of his continued service, NHP hereby agrees to indemnify the Director as follows: 1. NHP will pay on behalf of the Director and his executors or administrators, any amount which the Director is or becomes legally obligated to pay because of any claim or claims made against him as a result of any act or omission or neglect or breach of duty, including any actual or alleged error or misstatement or misleading statement, which he commits or suffers, or committed or suffered prior to the date hereof, while acting in his capacity as a Director of NHP. The payments which NHP will be obligated to make hereunder shall include judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the Director in connection with the proceeding, including attorney fees, claims or proceedings and appeals therefrom, and costs of attachment or similar bonds; provided, however, that NHP shall not be obligated to make any payment 1 hereunder which it is prohibited from paying as indemnity, or for any other reason, under federal or state securities laws or any other applicable law. 2. If a claim under this Agreement is not paid by NHP, or on its behalf, within thirty days after a written claim has been received by NHP, the Director may at any time thereafter bring suit against NHP to recover the unpaid amount of the claim and if successful in whole or in part, the Director shall be entitled to be paid also the expense of prosecuting such claim. It is specifically understood and agreed that expenses incurred by the Director in defending any claim shall be paid or reimbursed by NHP in advance of the final disposition thereof upon receipt by NHP of (i) a written affirmation by the Director of the Director's good faith belief that the standard of conduct necessary under Paragraph 4 hereof for indemnification was met, and (ii) a written undertaking by or on behalf of the Directors to repay advanced amounts if it shall ultimately be determined by judgment or other final adjudication adverse to the Director that the standard under Paragraph 4 hereof has not been met. 3. In the event of payment under this Agreement, NHP shall be subrogated to the extent of such payment to all of the rights of recovery of the Director, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable NHP effectively to bring suit to enforce such rights. 2 4. NHP shall not be liable under this Agreement to make any payment in connection with any claim made against the Director: (a) if the proceeding was one by or in the right of NHP and the Director shall have been adjudged to be liable to NHP. (b) for which payment is actually made to the Director under a valid and collectible insurance policy, except in respect of any excess beyond the amount of payment under such insurance, and any applicable deductible; (c) for which the Director is entitled to indemnity and/or payment by reason of having given notice of any circumstance which might give rise to claim under any policy of insurance, the terms of which have expired prior to the effective date of this Agreement; (d) in any proceeding in which the Director is adjudged to be liable on the basis that a personal benefit in money, property or services was improperly received by the Director; (e) for an accounting of profits made from the purchase or sale by the Director of securities of NHP within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any state statutory law or common law; 3 (f) where the act or omission of the Director was material to the cause of action in connection with which indemnification is sought and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; or (g) where, in the case of any criminal proceeding, the Director had reasonable cause to believe that the act or omission giving rise to the claim for which indemnification is sought was unlawful. 5. The termination of any proceeding by judgment, order, or settlement does not create a presumption that the Director did not meet the requisite standard of conduct. The termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Director did not meet that standard of conduct. 6. The Director, as a condition precedent to his right to be indemnified under this Agreement, shall give to NHP notice in writing as soon as practicable of any claim made against him for which indemnity will or could be sought under this Agreement. Notice to NHP shall be given at its principal office (or such other address as NHP shall designate in writing to the Director), and shall be directed to the President; notice shall be sent by certified mail return receipt with postage prepaid, or by facsimile or by courier and shall be deemed received on receipt of facsimile or courier confirmation or as 4 evidenced by a certified mail return receipt. In addition, the Director shall give NHP such information and cooperation as it may reasonably require and as shall be within the Director's power. 7. This Agreement supersedes and replaces any prior agreement. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one instrument. 8. This Agreement shall be governed by and construed in accordance with Maryland law. 9. Nothing herein shall be deemed to diminish or otherwise restrict the Director's right to indemnification under any provision of NHP's Charter or Bylaws and amendments thereto, or under the Maryland General Corporation Law. It is the intent of this Agreement that the Director herein shall be indemnified to the fullest extent possible under the Maryland General Corporation Law, and NHP's Charter and Bylaws, as the same may be amended from time to time. This Agreement shall in no way limit indemnification to the maximum extent permitted by the Maryland General Corporation Law. However, to the extent that this Agreement, or NHP's Charter or Bylaws provides for indemnification or other rights in addition to those of Section 2- 418 of the Maryland General Corporation Law, such indemnification and/or other rights shall be valid under Section 2-418(g) of the Maryland General 5 Corporation Law, unless expressly limited by the Maryland General Corporation Law or other applicable law. 10. In case one or more of the provisions contained in this Agreement (or any portion of any such provision) shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement (or any portion of any such provision), but this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion thereof) had never been contained herein. 11. This Indemnity Agreement shall be applicable during Director's time of service as a Director and for any applicable limitations period thereafter. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the day and year first above written. _________________________________ _______________________, Director NATIONWIDE HEALTH PROPERTIES, INC. By________________________________ R. Bruce Andrews President and Chief Executive Officer 6 EX-10.12 5 EXEC EMPLOY SECURITY POLICY EXHIBIT 10.12 NATIONWIDE HEALTH PROPERTIES, INC. ---------------------------------- EXECUTIVE EMPLOYMENT SECURITY POLICY ------------------------------------ The following policy shall be applicable to such officers of the Company as shall be selected by the Compensation Committee of the Company's Board and notified thereof as hereinafter provided. This Policy shall not apply to any officer of the Company who is a party to a separate employment agreement with the Company or a subsidiary thereof, unless such employment agreement expressly provides that this Policy shall be applicable to said Officer, and said Agreement has been approved by the Compensation Committee, and he is provided with notice hereunder. This Policy shall be operative only for a period of three (3) years after a Change of Control. This Policy shall not be applicable, and no payments shall be made pursuant to it, unless a Change of Control occurs. 1. DEFINITIONS. ----------- For purposes of this Policy the following terms shall have the meanings set forth in this Paragraph 1: A. "Board" shall mean the Board of Directors of the Company. ----- B. "Cause" shall mean (i) willful refusal by Participant to follow a ----- lawful written order of the Board, (ii) willful misconduct, dishonesty or reckless disregard of his duties by Participant, or (iii) the conviction of Participant of any felony involving moral turpitude. 1 C. "Change of Control" shall mean a change in control of the Company of a ----------------- nature that would be required to be reported in response to Item 6(e) of Schedule 14A, Regulation 240.14a-101, promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Policy or, if Item 6(e) is no longer in effect, any regulation issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serves similar purposes; provided that, without limitation, a Change of Control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who are members of the Board immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following such election. D. "Company" shall mean Nationwide Health Properties, Inc. ------- E. "Compensation Committee" shall mean the Compensation Committee of the ---------------------- Board. F. "Conflict of Interest" is defined in Paragraph 9 hereof. -------------------- G. "Participant" shall mean an officer of the ----------- Company who has been selected by the Compensation Committee to 2 participate under this Policy, who has been so notified by the Compensation Committee and who acknowledged such notification pursuant to Paragraph 13 hereof. Participants shall mean all officers of the Company so selected and notified, and who have so acknowledged notification. H. "Period of Employment" shall mean the number of months of employment of -------------------- a Participant by the Company. "Period of Employment" is used to ascertain the number of months for which Termination Indemnity payments will be paid pursuant to the terms hereof. Prior service may be included within the Period of Employment at the discretion of the Compensation Committee if a termination allowance was not paid at the time the prior service ended. Period of Employment shall include disability and military leaves of absence but exclude other leaves of absence unless such leaves of absence are for the convenience of the Company and are approved by the Compensation Committee. Earned but accrued vacation credits shall not be included within "Period of Employment." I. "Termination Indemnity Payments" shall mean those Termination Indemnity ------------------------------ Payments provided by the terms of this Agreement. J. "Total Compensation" shall mean the amount per annum equal to the ------------------ highest annual compensation (salary plus bonus) paid to Participant by Company during any of Company's three (3) fiscal years immediately preceding termination of employment. "Monthly Total Compensation" shall mean one twelfth (1/12) of Total 3 Compensation. 2. TERMINATION OF EMPLOYMENT BY THE COMPANY. ---------------------------------------- Within three years after a Change of Control of Company, in the event of termination by the Company of the active employment of any Participant (except where the basis for such termination is Cause, death, disability or normal retirement age sixty-five (65)), such Participant shall be entitled to receive and the Company shall be obligated to pay as Termination Indemnity Payments an amount equal to the Participant's Monthly Total Compensation for the number of months following such termination indicated in Paragraph 6 below, less one half (1/2) of all salary, bonus, other remuneration and the fair market value to Participant of fringe benefits that the Participant may receive from new employment during the period he is entitled to Termination Indemnity Payments. 3. TERMINATION OF EMPLOYMENT BY THE PARTICIPANT. -------------------------------------------- During the three (3) years after a Change of Control of Company, if the Board fails to reelect a Participant to his then existing or reasonably comparable office, or if a change not acceptable to a Participant is made that affects a substantial reduction in his compensation or benefits (except for (i) a general reduction of compensation or benefits affecting all Participants and resulting from a severe economic downturn in the financial position of the Company, or (ii) for normal retirement at age sixty-five (65) of such Participant) such Participant shall have the right by written notice to the Company to terminate his active 4 employment as of the last day of the month in which such written notice is delivered to the Company, and such Participant shall be entitled to receive and the Company shall be obligated to pay as Termination Indemnity Payments an amount equal to the Participant's Monthly Total Compensation for the number of months following such termination indicated in Paragraph 6 below, less one-half (1/2) of all salary, bonus, other remuneration and the fair market value to Participant of fringe benefits that the Participant may receive from new employment during the period he is entitled to Termination Indemnity Payments. Except as provided above in this paragraph, no Termination Indemnity Payments will be paid pursuant to the terms of this Policy to any Participant whose employment at Company is terminated by voluntary resignation (unless otherwise determined by the Compensation Committee). 4. DEATH/DISABILITY/RETIREMENT: CONTINUATION OF BENEFITS IN CASE OF DEATH. ---------------------------------------------------------------------- Participant shall not receive payments under this Policy on account of termination of employment because of death or disability or upon normal retirement at age sixty-five-(65) or thereafter. Should a Participant covered by this Policy die after commencement of payments to him of the Termination Indemnity Payments but before such Termination Indemnity Payments are paid in full, the balance the Participant would have received had he lived shall be paid in installments as designated in writing by such Participant; or if there is not effective written designation then to his spouse; or if there is neither an effective written 5 designation nor a surviving spouse, then to his estate. Designation of a beneficiary or beneficiaries to receive the balance of any Termination Indemnity Payments hereunder shall be made by written notice to the Company and the Participant may revoke or change any such designation of beneficiary at any time by a later written notice to the Company. 5. CAUSE. ----- In the event Participant's employment is terminated for Cause, Participant shall not receive any payments under this Policy. 6. TERMINATION INDEMNITY PAYMENTS. ------------------------------ Termination Indemnity Payments shall be computed and paid to all full-time officers of the Company in accordance with the following schedule, except for R. Bruce Andrews, President and Chief Executive Officer of the Company, who shall be entitled to the maximum period of Termination Indemnity Payments regardless of his period of employment: Period of Employment Termination of Indemnity Payments -------------------- --------------------------------- (Amount equal to 100% Monthly Total Compensation for the number of months set forth below) Less than one year 12 months One year or more 24 months Three years or more 36 months The maximum period of Termination Indemnity Payments shall be thirty- six (36) months or age sixty-five (65), whichever occurs first. 6 Payments of the Monthly Termination Indemnity Payments hereunder shall be made at the regular pay period of the Company or in such other manner as may be agreed upon by the Participant entitled to receive such payments and the Compensation Committee. Payments made to a Participant hereunder as Termination Indemnity Payments shall be deemed to be compensation for services rendered for all purposes and shall be subject to applicable Federal, State and local tax withholding and deduction requirements. If during the period a Participant is receiving Termination Indemnity Payments under this Policy such Participant makes any false statement or conducts himself in a fraudulent or dishonest manner which materially and adversely affects the Company, the Board may terminate all payments hereunder. 7. OTHER COMPANY EMPLOYMENT BENEFITS. --------------------------------- Participants entitled to receive Termination Indemnity Payments under this Policy shall be entitled to participate in certain employee insurance plans (as described below) during the period the Termination Indemnity Payments provided for herein are being paid. During the period of a Participant is receiving payments hereunder, he shall be treated as a continuing employee for purposes of participation in and accrual of rights and benefits under all of the Company's life, accident, medical and dental insurance plans of Participant and his spouse; however, he shall not be entitled to medical or dental coverages for himself or his spouse if such medical or dental coverages are provided under any other group plan or by another employer. In the 7 event that such participation in one or more of such Plans is not possible, Company shall arrange to provide Participant with benefits substantially similar to those which Participant would have been entitled to receive under such plans if he had continued as an employee at the Total Compensation level; however, he shall not be entitled to medical or dental coverages for himself or his spouse if such medical or dental coverages are provided under any other group plan or by another employer. Benefits of continued participation in the Company Retirement Plan and any retirement plans hereafter adopted in which Participant was entitled to participate prior to date of termination (hereinafter referred to as the "Plans") shall continue, provided, however, that if Participant's continued participation is not possible under the general terms and provisions of the Plans, Company shall arrange to provide Participant with benefits substantially similar to those which Participant would have been entitled to receive under the Plans if he had continued as an employee for the full term provided in Paragraph 6 above at the Participant's Total Compensation level. This paragraph is not intended to limit Participant's vested rights under any of Company's retirement plans to a period of three (3) years or until age sixty- five (65); rather, such rights shall continue pursuant to the terms of said Plans. Participants receiving Termination Indemnity Payments hereunder shall not be entitled to continued participation in or accrual of benefits under any Company stock option or restricted stock plan. No stock option shall be granted to such Participant under any Company stock option 8 plan after the termination of active employment; however, such Participant shall have the benefits of all rights vested as of the date of termination of active employment pursuant to the terms of said plans. A Participant receiving Termination Indemnity Payments under this Policy shall be entitled to purchase at depreciated book value the automobile (if any) which Company was providing for the use of such Participant. Also, such Participant shall have the option to have assigned to him any assignable insurance policy owned by Company which relates specifically to such Participant. Company shall have no obligation to pay off any loans against such insurance policies and such former Participant shall reimburse the Company for the cash value of such insurance policies (if any). 8. OTHER EMPLOYMENT. ---------------- After ceasing active employment with the Company or a subsidiary of the Company, and during the period the Participant is eligible to receive any Termination Indemnity Payments hereunder, such Participant has an obligation to use his best efforts to seek other employment, and shall have the right to accept other employment or engage in other business activities subject to the restrictions set forth in Paragraph 9 below (relating to Conflict of Interests). One-half (1/2) of all salary, bonus, other remuneration and the fair market value to Participant of fringe benefits from any such new employment shall be deducted from or set off against Termination Indemnity Payments and other benefits provided in this Policy. 9 9. CONFLICT OF INTEREST. -------------------- During the period a Participant is entitled to receive Termination Indemnity Payments hereunder, such Participant shall not, without the prior written consent of the Company, engage directly or indirectly (including, by way of example only, as a principal, partner, venturer, employee or agent), nor have any direct or indirect interest, in any business which competes with the Company or any of its subsidiaries in any area of the world in which the Company or such subsidiary engages in business at the time of termination of the Participant's active employment with the Company. Included within the meaning of an indirect interest for purposes of this Policy would be, by way of example only, an interest in any such business held through a nominee, agent, option or other device. The foregoing clause does not apply to an investment by any Participant in the stock of a publicly held corporation if the market value of such investment at the time the Participant acknowledges this Policy and the provisions hereof (if then owned) or when acquired by such Participant (if acquired after the date of such acknowledgment) does not exceed One Hundred Thousand Dollars ($100,000) or to any investment by such Participant in a mutual fund. If Participant directly or indirectly discloses to any third person any confidential records or information, trade secrets or customer list relating to Company's business, Participant's right to Termination Indemnity Payments hereunder shall terminate immediately (in addition to any other remedies that 10 Company may have). 10. CONSULTATION FOR COMPANY. ------------------------ During the period Participant is entitled to receive Termination Indemnity Payments hereunder, he shall be available at reasonable times and upon reasonable notice to consult with and advise officers and executives of the Company regarding the business and affairs of the Company; provided, however, that such consultation and advice shall be scheduled and arranged so that it does not interfere unreasonably with any other employment or business activities of Participant. 11. AMENDMENT OR TERMINATION OF POLICY. ---------------------------------- The Company reserves the right to alter, amend or revoke this Policy prospectively at any time prior to a Change of Control, by notice to the Participants, but no such alteration, amendment or revocation shall be made after a Change of Control except with the express prior written consent and agreement of such Participant. Nothing herein shall entitle any Participant to continued employment with the Company or to continued tenure in any specific office or position. 12. TERMINATION OF TERMINATION INDEMNITY PAYMENTS. --------------------------------------------- The Termination Indemnity Payments and all other benefits to which any Participant is entitled hereunder shall terminate immediately if following termination of active employment such person (1) breaches the Conflict of Interest provisions in Paragraph 9 hereof, or (2) fails or refuses to consult with and advise officers and other executives of the Company in accordance 11 with Paragraph 10 hereof, of (3) makes false statements or conducts himself in a manner that in the reasonable discretion of the Board materially and adversely affects the Company, or (4) reaches his sixty-fifth (65th) birthday. 13. ACKNOWLEDGMENT BY COMPANY OFFICERS. ---------------------------------- Each officer of the Company to whom this Policy is to be applicable shall be informed thereof by letter substantially in the form attached as Exhibit "A" hereto and, as a condition to entitlement, shall acknowledge in a writing substantially similar to the form of letter attached as Exhibit "B" hereto that the Participant understands and agrees to be bound by the provisions of this Policy. A list of the Participants shall be maintained by the Secretary of the Company. 14. OTHER PROVISIONS. ---------------- This Policy shall become effective as of February 8, 1990. The Termination Indemnity Payments provided hereby supersede and replace any and all other termination compensation to which any Participant is or might become entitled under any other policies or practices of the Company, except termination compensation covered by an agreement in effect on the effective date hereof which has separately been approved by the Compensation Committee. The rights and obligations of the Company under this Policy shall inure to the benefit of and shall be binding upon the Company's successors and assigns. References in this Policy to the male gender shall include the female gender. In any action at law or in equity to enforce any of the provisions or rights under this Policy, the 12 unsuccessful party to such litigation as determined by the court in a final judgment or decree shall pay the successful party or parties all costs, expenses and reasonable attorneys fees incurred therein by such party or parties (including without limitation such costs, expenses and fees on any appeals) and if such successful party shall recover judgment in any such action or proceedings, such costs, expenses and attorneys fees shall be included as a part of such judgment. Paragraphs or other headings contained in this Policy are for reference purposes only and shall not affect in any way the meaning or interpretation of this Policy. To the full extent controllable by stipulation of the parties, this Policy shall be interpreted and enforced under California law. NOTE: This Policy is intended to remain outside the provisions of Section 67 of the Tax Reform Act of 1984, as originally enacted (adding Sections 28OG and 4999 and amending Sections 275(a) and 3121(v) of the Internal Revenue Code) (the "1984 Act"). Notwithstanding any other term or provision contained in this Policy, no Termination Indemnity Payment shall be made to any Participant in an amount which would subject any portion of such Termination Indemnity Payment, or any such Termination Indemnity Payment theretofore received by the Participant, to the excise tax provided in Section 67 of the 1984 Act. 13 PERSONAL AND CONFIDENTIAL - ------------------------- (Date) (Address) Re: Nationwide Health Properties, Inc. Executive Employment Security Policy ------------------------------------ Dear __________________: You have been designated as one of the officers of Nationwide Health Properties, Inc. (the "Company") covered by the above-referenced Executive Employment Security Policy ("Policy"), a copy of which is enclosed. This letter constitutes the notice to you required by Paragraph 13 of the Policy. Under Paragraph 13 of the Policy, your entitlement to any benefits which you may eventually qualify to receive under the Policy is subject to the written acknowledgment of your understanding of and agreement to the terms and conditions of the Policy. Enclosed for this purpose are two copies of a form letter for use. Please complete, date and sign both copies of that letter and return one signed copy to the Secretary of the Company while retaining the other copy for your personal records. Very truly yours, Encl. Exhibit "A" PERSONAL AND CONFIDENTIAL - ------------------------- (Date) Nationwide Health Properties, Inc. 35 North Lake Avenue Pasadena, California 91101 Re: Nationwide Health Properties, Inc. Executive Employment Security Policy ------------------------------------ Gentlemen: This will acknowledge receipt of the Nationwide Health Properties, Inc. Executive Employment Security Policy which was enclosed in your letter of _____________________________. I have read this Policy and understand and agree to all of its terms and conditions. I hereby designate _____________________________________ as my beneficiary(ies) to receive the balance of any Termination Indemnity Payments to which I am entitled under the Policy but which remain unpaid at the date of my death. I understand that I may revoke or change this designation of beneficiary(ies) at any time by a later written notice to the Company. Very truly yours, Exhibit "B" The undersigned, Secretary of Nationwide Health Properties, Inc., certifies that the "Nationwide Health Properties, Inc. Executive Employment Security Policy" as set forth in the foregoing document was adopted by Nationwide Health Properties, Inc. as its policy pursuant to Board action on February 8, 1990. Dated: November 1, 1995 _____________________________ Don M. Pearson, Secretary EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF JANUARY 31, 1996
STATE OF NAME INCORPORATION ---- ------------- Nationwide Health Properties Finance Corporation.................. Delaware MLD Texas Trust................................................... Delaware
EX-23.1 7 CONSENT OF IND. PUBLIC ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement No. 33-35276, Registration Statement No. 33-39156, Registration Statement No. 33-64798 and Registration Statement No. 33-65423. ARTHUR ANDERSEN LLP Orange County, California February 15, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 7,937 0 3,478 0 0 6,465 592,727 73,722 670,111 16,025 282,264 3,872 0 0 367,950 670,111 0 82,028 0 31,657 3,144 0 14,628 50,371 0 0 0 0 0 50,371 1.33 0
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