-----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, ChKnpljXbRbyRkjPsWFEbbnQBP3upNuzEyPCucWhuCbiYwORBEeo0E3Kqj6BZyHO yuJh52S22nCDaxB0jEPUiA== 0001017062-00-000699.txt : 20000320 0001017062-00-000699.hdr.sgml : 20000320 ACCESSION NUMBER: 0001017062-00-000699 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000317 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: SEC FILE NUMBER: 001-09028 FILM NUMBER: 572353 BUSINESS ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 BUSINESS PHONE: 9497184400 MAIL ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY INVESTMENT PROPERTIES INC DATE OF NAME CHANGE: 19890515 10-K 1 ANNUAL REPORT FOR PERIOD ENDED 12/31/1999 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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 For the fiscal year ended December 31, 1999 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.)
610 Newport Center Drive, Suite 1150, Newport Beach, California 92660 (Address of principal executive offices) (Zip Code) (949) 718-4400 (Registrant's telephone number, including area code) ---------------- 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 7.677% Series A Cumulative Preferred None
---------------- 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. [_] The aggregate market value of the voting stock held by non-affiliates of the Company is approximately $524,375,000 as of February 29, 2000. 46,226,484 (Number of shares of common stock outstanding as of February 29, 2000) Part III is incorporated by reference from the registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 18, 2000. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 1999, the Company had investments in 341 facilities located in 37 states and operated by 57 healthcare providers. The facilities include 197 skilled nursing facilities, 124 assisted living facilities, 14 continuing care retirement communities, 3 residential care facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic. As of December 31, 1999, the Company had direct ownership of 159 skilled nursing facilities, 116 assisted living facilities, 9 continuing care retirement communities, 3 residential care facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic (the "Properties"). Substantially all of the Company's owned facilities are leased under "net" leases (the "Leases"), which are accounted for as operating leases, to 44 healthcare providers (the "Lessees") including Alterra Healthcare Corporation ("Alterra"), American Retirement Corporation, ARV Assisted Living, Inc., Balanced Care Corporation, Beverly Enterprises, Inc. ("Beverly"), Harborside Healthcare Corporation, HEALTHSOUTH Corporation, Integrated Health Services, Mariner Post-Acute Network, and Sun Healthcare Group, Inc. Of the Lessees, only Alterra is expected to account for more than 10% of the Company's revenues in 2000. The Leases have initial terms ranging from 9 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 or as a percentage of the increase in the Consumer Price Index. Additional rents are generally calculated and payable monthly or quarterly. Most of the leases contain provisions such that the total rent cannot decrease from one year to the next. In addition, most of the 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 197 facilities are backed by irrevocable letters of credit or security deposits that cover 2 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, 1999, the Company held 37 mortgage loans secured by 38 skilled nursing facilities, 8 assisted living facilities, 5 continuing care retirement communities and 4 parcels of land. Such loans had an aggregate outstanding principal balance of approximately $210,297,000 and a net book value of approximately $203,362,000 at December 31, 1999, net of an aggregate discount of approximately $6,935,000. The mortgage loans have individual outstanding balances ranging from approximately $422,000 to $17,725,000 and have maturities ranging from 2003 to 2025. During 1999, the Company acquired 7 residential care facilities for the elderly in 1 transaction for an aggregate investment of approximately $2,304,000. The Company also completed the construction of 19 assisted living facilities in which the Company's total aggregate investment was approximately $141,201,000. Additionally, the Company funded approximately $11,024,000 in capital improvements at certain facilities in accordance with certain existing lease provisions. Such capital improvements result in an increase in the minimum rents earned by the Company on these facilities. During 1999, the Company also provided 4 mortgage loans, secured by 4 parcels of land, in the aggregate amount of $4,698,000. The Company has historically provided lease or mortgage financing for healthcare facilities to qualified operators and acquired additional healthcare related facilities, including skilled nursing facilities, assisted living facilities, acute care hospitals and medical office buildings. Financing for such investments was 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. 1 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, 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. Properties Of the 341 facilities in which the Company has investments, the Company has direct ownership of 159 skilled nursing facilities, 116 assisted living facilities, 9 continuing care retirement communities, 3 residential care facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic. Substantially all of 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. Skilled Nursing Facilities Skilled nursing 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. Continuing Care Retirement Communities Continuing care retirement communities provide a broad continuum of care. At the most basic level, services are provided which aid in everyday living, much like in an assisted living facility. At the other end of the spectrum, skilled nursing, rehabilitation and medical treatment is provided to residents who need those services. This type of facility offers residents the ability to have the most independent lifestyle possible while providing a wide range of social, health and nursing services tailored to meet individual needs. Residential Care Facilities for the Elderly Residential care facilities for the elderly offer similar services to an assisted living facility, except they are provided in a residential home setting. These facilities are generally three to four bedroom houses in residential neighborhoods, which are slightly modified to enable adequate access and care for the residents. There is generally one 24-hour caregiver at each location to provide meals and assistance with activities such as bathing, dressing, laundry and cleaning. 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 2 recovery. These programs are often the most effective in treating severe skeletal or neurological injuries and traumatic diseases such as stroke or acute arthritis. The following table sets forth certain information regarding the Company's owned facilities as of December 31, 1999.
Number of Annual 1999 Number Beds/ Minimum Additional Facility Location of Facilities Units(1) Investment Rent(2) Rent(2) ----------------- ------------- ------- ---------- ------- ---------- (Dollars in Thousands) Skilled Nursing Facilities: Arizona................. 1 130 $ 3,540 $ 481 $ 128 Arkansas................ 10 1,220 40,030 3,217 127 California.............. 8 963 26,481 3,065 986 Connecticut............. 2 239 6,192 611 175 Florida................. 11 1,481 34,307 2,583 692 Georgia................. 2 263 11,020 1,230 116 Idaho................... 1 64 792 81 116 Illinois................ 2 224 5,549 701 215 Indiana................. 11 1,269 36,416 4,521 960 Kansas.................. 10 732 13,979 1,310 241 Maryland................ 4 749 22,057 2,265 859 Massachusetts........... 17 1,820 73,838 5,819 665 Minnesota............... 10 1,242 37,877 1,182 869 Mississippi............. 1 120 4,270 388 -- Missouri................ 1 108 2,740 355 96 Nevada.................. 1 140 4,034 480 97 New Jersey.............. 1 180 6,808 591 160 North Carolina.......... 1 150 2,360 374 158 Ohio.................... 6 811 29,551 3,304 160 Oklahoma................ 3 253 3,939 404 109 Oregon.................. 1 85 1,215 -- 72 Tennessee............... 10 1,120 35,506 3,631 466 Texas................... 25 2,803 55,529 5,853 1,661 Virginia................ 4 605 18,568 3,233 860 Washington.............. 7 717 29,313 2,801 339 Wisconsin............... 9 900 21,169 2,721 989 --- ------ -------- ------- ------- Subtotals............. 159 18,388 $527,080 $51,201 $11,316 --- ------ -------- ------- ------- Assisted Living Facilities: Alabama................. 2 166 5,953 515 35 Arizona................. 2 142 7,868 743 17 Arkansas................ 1 28 1,661 144 2 California.............. 13 1,620 79,578 8,191 1,149 Colorado................ 5 514 32,708 3,076 74 Delaware................ 1 54 5,292 556 -- Florida................. 19 1,260 83,869 7,941 277 Idaho................... 1 158 11,800 1,176 91 Illinois................ 1 178 11,076 1,037 78 Indiana................. 1 50 4,656 458 6 Kansas.................. 4 231 13,470 1,196 10 Kentucky................ 1 44 2,657 273 4 Louisiana............... 1 104 7,352 809 -- Maryland................ 1 60 4,318 425 --
3
Number Annual 1999 Number of of Beds/ Minimum Additional Facility Location Facilities Units(1) Investment Rent(2) Rent(2) ----------------- ---------- -------- ---------- -------- ---------- (Dollars in Thousands) Assisted Living Facilities (continued): Massachusetts............ 2 183 $ 17,478 $ 1,545 $ 17 Michigan................. 1 144 7,305 817 124 Missouri................. 1 31 2,529 223 6 Nevada................... 2 155 13,616 1,254 4 New Jersey............... 1 52 4,085 353 3 North Carolina........... 1 42 2,916 257 6 Ohio..................... 11 659 37,198 3,607 90 Oklahoma................. 3 188 8,100 771 34 Oregon................... 6 536 28,831 2,851 86 Pennsylvania............. 2 188 12,879 1,289 -- Rhode Island............. 1 90 10,001 923 -- South Carolina........... 4 162 11,040 943 9 Tennessee................ 5 302 22,248 2,136 16 Texas.................... 16 909 75,536 6,671 78 Washington............... 4 341 22,934 2,267 58 West Virginia............ 1 62 5,180 490 -- Wisconsin................ 2 422 29,062 2,050 59 --- ------ ---------- -------- ------- Subtotals.............. 116 9,075 583,196 54,987 2,333 --- ------ ---------- -------- ------- Continuing Care Retirement Communities: California............... 1 279 12,427 1,222 242 Colorado................. 1 119 3,115 307 17 Georgia.................. 1 187 11,492 909 6 Kansas................... 1 199 13,204 1,267 45 Massachusetts............ 1 178 13,889 561 6 Texas.................... 2 550 37,149 3,161 48 Wisconsin................ 2 942 64,351 5,913 110 --- ------ ---------- -------- ------- Subtotals.............. 9 2,454 155,627 13,340 474 --- ------ ---------- -------- ------- Residential Care Facilities for the Elderly: California............... 3 18 517 -- -- --- ------ ---------- -------- ------- Rehabilitation Hospitals: Arizona.................. 2 116 16,826 1,770 674 --- ------ ---------- -------- ------- Medical Clinic: Alabama.................. 1 -- 2,433 -- 7 --- ------ ---------- -------- ------- Construction in Progress... -- -- 45,694 -- -- --- ------ ---------- -------- ------- Total All Owned Facilities................ 290 30,051 $1,331,373 $121,298 $14,804 === ====== ========== ======== =======
- -------- (1) Assisted living facilities are measured in units, continuing care retirement communities are measured in beds and units and 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 or increases in the Consumer Price Index, may also be paid. The 1999 additional rent amounts reflect additional rent earned in 1999. As of December 31, 1999, 47 of the Company's 290 owned facilities were being leased to and operated by subsidiaries of 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 4 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. As of December 31, 1999, 54 of the owned facilities are leased to and operated by subsidiaries of Alterra. 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: private funds; Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; 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. Effective for cost reporting years beginning after July 1, 1998, the payment methodology for nursing homes under the Medicare program was changed. Under the new methodology, Medicare reimburses nursing home operators for nursing care, ancillary services and capital costs at a flat per diem rate. In the past, a cost-based system of reimbursement was used. This new reimbursement methodology is being phased in over four years. Payments under the new methodology are generally lower than the payments the facilities had historically received. 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. Any changes in reimbursement levels could have an adverse impact on the revenues of the operators of the Company's facilities, which could in turn adversely impact their abilities to make their monthly lease or debt payments to the Company. 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 CONs 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 (the "Board"), 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 February 29, 2000.
Name Age Position ---- --- -------- R. Bruce Andrews........ 59 President and Chief Executive Officer Mark L. Desmond......... 41 Senior Vice President and Chief Financial Officer T. Andrew Stokes........ 52 Senior Vice President of Corporate Development Steven J. Insoft........ 36 Vice President of Development John J. Sheehan, Jr..... 42 Vice President of Development Gary E. Stark........... 44 Vice President and General Counsel
5 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 CenterTrust Retail Properties, Inc. 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. 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. Steven J. Insoft - Vice President of Development of the Company since February 1998. From 1991 to 1997, Mr. Insoft served as President of CMI Senior Housing & Healthcare, Inc., an operator of nursing facilities. From 1988 to 1991, Mr. Insoft was an Associate in the Capital Markets Group of Prudential Insurance Company of America. John J. Sheehan, Jr. - Vice President of Development of the Company since February 1996. From September 1987 through April 1990, Mr. Sheehan served as Director of Asset Management for Southmark Corporation, a real estate syndication company. From April 1990 until joining the Company, Mr. Sheehan was Vice President, Mortgage Finance for Life Care Centers of America, an operator and manager of nursing facilities. 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 February 29, 2000, the Company had fourteen 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. 6 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, 1998 to December 31, 1999 as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods.
High Low Dividend ---- ---- -------- 1999 First quarter.............................. $22 1/4 $16 3/4 $.45 Second quarter............................. 21 17 3/4 .45 Third quarter.............................. 19 3/16 14 15/16 .45 Fourth quarter............................. 17 1/16 11 3/4 .45 1998 First quarter.............................. $26 15/16 $24 1/4 $.42 Second quarter............................. 25 7/8 23 3/16 .42 Third quarter.............................. 25 3/8 19 3/8 .42 Fourth quarter............................. 23 1/4 20 .42
As of February 29, 2000 there were approximately 1,100 holders of record of the Company's common stock. 7 ITEM 6. SELECTED FINANCIAL DATA. The following table presents selected financial data with respect to the Company. 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 4 of Notes to Consolidated Financial Statements for information regarding the Company's acquisitions.
Years ended December 31, ------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- -------- --------- (In thousands, except per share data) Operating Data: Total revenues........ $ 163,865 $ 142,584 $ 115,705 $ 95,776 $ 81,039 Income from operations........... 71,148 67,427 62,988 54,944 49,382 Gain (loss) on sale of facilities........... (335) 2,321 829 -- 989 Net income............ 70,813 69,748 63,817 54,944 50,371 Preferred stock dividends............ (7,677) (7,677) (1,962) -- -- Net income available to common stockholders......... 63,136 62,071 61,855 54,944 50,371 Dividends paid on common stock......... 83,480 75,128 65,734 59,581 53,182 Per Share Data: Basic/diluted income from continuing operations available to common stockholders (1)..... $ 1.37 $ 1.34 $ 1.45 $ 1.36 $ 1.30 Basic/diluted net income available to common stockholders.. 1.37 1.39 1.47 1.36 1.33 Dividends paid on common stock......... 1.80 1.68 1.56 1.48 1.41 Balance Sheet Data: Investments in real estate, net.......... $1,372,064 $1,316,685 $1,053,273 $722,506 $ 652,231 Total assets.......... 1,430,056 1,357,303 1,077,394 744,984 670,111 Senior unsecured notes due 2000-2038........ 657,900 545,150 355,000 190,000 100,000 Bank borrowings....... 75,300 42,000 19,600 32,300 93,900 Convertible debentures........... -- 57,431 64,512 64,920 65,000 Notes and bonds payable.............. 64,048 64,623 58,297 9,229 23,364 Stockholders' equity.. 585,590 605,558 553,046 428,588 371,822 Other Data: Net cash provided by operating activities........... $ 94,659 $ 106,067 $ 86,010 $ 74,129 $ 66,972 Net cash used in investing activities........... (89,753) (282,968) (267,302) (85,034) (151,476) Net cash provided by (used in) financing activities........... (4,949) 182,891 179,775 14,677 88,699 Funds from operations available to common stockholders (2)..... 99,602 92,726 80,851 71,667 63,267 Weighted average shares outstanding... 46,216 44,637 42,164 40,373 37,808
- ------- (1) For per share purposes, income from continuing operations is defined as income before the effect of any gains or losses on sales of properties. (2) Industry analysts generally consider funds from operations to be an alternative measure of the performance of an equity REIT. The Company therefore discloses funds from operations, although it is a measurement that is not defined by generally accepted accounting principles. The Company uses the NAREIT measure of funds from operations, which is generally defined as income before extraordinary items adjusted for certain non-cash items, primarily real estate depreciation, less gains/losses on sales of facilities. The NAREIT measure may not be comparable to similarly titled measures used by other REITs. Consequently, the Company's funds from operations may not provide a meaningful measure of the Company's performance as compared to that of other REITs. 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. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Statement Regarding Forward Looking Disclosure Certain information contained in this report includes forward looking statements, which can be identified by the use of forward looking terminology such as "may", "will", "expect", "should" or comparable terms or the negative thereof. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include (without limitation) the following: the effect of economic and market conditions and changes in interest rates, government regulations, including changes in Medicare and Medicaid payment levels, changes in the healthcare industry, the amount of any additional investments, access to capital markets and changes in the ratings of the Company's debt securities. Operating Results Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Minimum rent increased $19,721,000 or 19% in 1999 as compared to 1998. The increase was primarily due to minimum rent resulting from the 19 developments completed during 1999, combined with a full year of revenues earned by investments in additional facilities in 1998. Interest and other income increased by $518,000 or 2% in 1999 as compared to 1998. The increase was primarily due to approximately $7,617,000 of working capital loans provided during 1999. Additional rent and additional interest increased by $1,042,000 or 7% in 1999 as compared to 1998. The increase was attributable to increased additional rent and additional interest as provided in the Company's existing leases and mortgage loans receivable based on increases in the facility revenues or the Consumer Price Index. Interest and amortization of deferred financing costs increased $14,090,000 or 38% in 1999 as compared to 1998. The increase was primarily due to the issuance of $112,750,000 in medium-term notes during 1999, a full year of interest expense related to the issuance of $190,150,000 of medium-term notes in 1998 and a rise in interest rates during 1999. Depreciation and non-cash charges increased $8,155,000 or 29% in 1999 as compared to 1998. The increase was attributable to increased depreciation due to the developments completed in 1999 and a full year of depreciation related to facilities acquired in 1998. General and administrative costs increased $315,000 or 7% in 1999 as compared to 1998 due to general cost increases and additional costs associated with the Company's larger asset base. The Company expects increased rental revenues and interest income due to the addition of facilities to its property base and mortgage loans receivable over the last twelve months. The Company also expects increased additional rent and additional interest at individual facilities because the Company's leases and mortgages generally contain provisions under which additional rents or interest income increase with increases in facility revenues and/or increases in the Consumer Price Index. Historically, revenues at the Company's facilities and the Consumer Price Index generally have increased, although there are no assurances that they will continue to increase in the future. Sales of facilities or repayments of mortgages would serve to offset the aforementioned revenue increases. In addition, the Company is currently negotiating a new lease with Beverly Enterprises, Inc. ("Beverly") which will incorporate 38 of their 47 current facilities' leases, the majority of which are up for renewal in 2000. The other 9 facilities are on a separate lease that does not expire until 2010. The new lease will have new base rent amounts for each facility that will generally incorporate the former additional rents. This will result in a shift in revenues from additional rent to base rent. The new lease will probably result in a decrease in total rent from Beverly as it is likely that Beverly will purchase 5 facilities from the Company and certain rent concessions will probably be made with regard to a few specific facilities. 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 at least partially offset by rents or interest income associated with the investments. 9 Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Minimum rent increased $24,618,000 or 31% in 1998 as compared to 1997. The increase was primarily due to minimum rent resulting from investments in 57 net additional leased facilities in 1998, combined with a full year of revenues earned by investments in additional facilities in 1997. Interest and other income increased by $405,000 or 2% in 1998 as compared to 1997. The increase was primarily due to the increase in mortgage loans during 1998. Additional rent and additional interest increased by $1,856,000 or 14% in 1998 as compared to 1997. The increase was attributable to increased additional rent and additional interest as provided in the Company's existing leases and mortgage loans receivable based on increases in the facility revenues or the Consumer Price Index. Interest and amortization of deferred financing costs increased $8,632,000 or 30% in 1998 as compared to 1997. The increase was primarily due to the issuance of $190,150,000 in medium-term notes during 1998 and a full year of interest expense related to the issuance of $165,000,000 of medium-term notes in 1997. Depreciation and non-cash charges increased $8,151,000 or 41% in 1998 as compared to 1997. The increase was attributable to increased depreciation due to the acquisition of additional facilities in 1998 and a full year of depreciation related to facilities acquired in 1997. General and administrative costs increased $657,000 or 16% in 1998 as compared to 1997. The increase was due in part to adding two additional employees, increased wages and increases in other general expenses. The impairment of long-lived assets was due to recording a provision of $5,000,000 as a reduction in the carrying amount of the Company's investment in three medical clinics that were constructed for and leased to a company that has declared bankruptcy. Information Regarding Certain Operators Three of the companies that operate facilities owned by the Company have filed for bankruptcy protection. The table below summarizes the filing dates of the bankruptcies, the number of the Company's facilities operated by each operator, the Company's investment in facilities subject to the bankruptcies, the percentage of the Company's revenue for 1999 relating to the facilities operated by each operator and cash deposits and letters of credit held by the Company as security for each operator.
Number of Investment Percentage Bankruptcy Facilities in of 1999 Security Operator Filing Date Operated Facilities Revenue Deposits -------- ---------------- ---------- ------------ ---------- ---------- Sun Healthcare Group, Inc.................... October 14, 1999 23 $ 85,650,000 6% $3,064,000 Mariner Post-Acute Network................ January 18, 2000 21 67,851,000 6% 3,055,000 Integrated Health Services, Inc.......... February 2, 2000 11 45,904,000 4% 1,277,000 --- ------------ --- ---------- Totals................ 55 $199,405,000 16% $7,396,000 === ============ === ==========
The number of facilities and investment in facilities amounts above include investments in mortgage loans. The Company has one mortgage directly with Mariner Post-Acute Network in the amount of $7,497,000 secured by 1 facility. The remaining mortgage loans, aggregating $19,294,000, are secured by 2 facilities operated by Sun Healthcare Group, Inc. and 4 facilities operated by Integrated Health Services. The operators are not the borrowers under the non- direct mortgage loans, and the borrowers are responsible for making the interest payments to the Company. The Company's interest continues to be paid each month on a timely basis. Under bankruptcy statutes, the court must either affirm the Company's lease or reject it and return the property to the Company. The court cannot change the rental amount or other lease provisions that could financially impact the Company. The likelihood that the Company's leases would be affirmed rests primarily on whether the properties that are operated by the tenant are providing positive cash flows. Only a few of the fifty-five facilities leased to and operated by these three companies are not providing adequate cash flows on their own to cover the rent under the leases. The Company's rent continues to be paid each month on a timely basis. While there is a possibility that these properties may be returned by the courts, the Company has already identified parties interested in leasing these facilities, however such leases would be at a slightly lower rental rate. 10 Liquidity and Capital Resources During 1999, the Company acquired 7 residential care facilities for the elderly in 1 transaction for an aggregate investment of approximately $2,304,000. During 1999, the Company provided new construction financing of approximately $96,408,000. Construction of 19 assisted living facilities was completed in 1999, in which the Company's total aggregate investment was approximately $141,201,000; $60,485,000 of this amount was a current year investment included in the new construction financing amount above. Upon acquisition or completion of construction, as applicable, the facilities were concurrently leased under terms generally similar to the Company's existing Leases. During 1999, the Company also funded approximately $11,024,000 in capital improvements at certain facilities in accordance with certain existing lease provisions. Such capital improvements result in an increase in the minimum rents earned by the Company on these facilities. The acquisitions, construction advances and capital improvements were funded by bank borrowings on the Company's bank line of credit and cash on hand. During 1999, the Company provided 4 mortgage loans secured by 4 parcels of land in the aggregate amount of $4,698,000. In addition, the Company funded an additional $313,000 on existing mortgage loans. Such additional amounts funded result in an increase in interest income earned by the Company on these loans. The mortgage loans and the additional amounts funded were financed by borrowings on the Company's bank line of credit and by cash on hand. During 1999, the Company disposed of 5 skilled nursing facilities, 2 assisted living facilities, 21 residential care facilities for the elderly and 2 medical clinics in 27 separate transactions for aggregate proceeds of approximately $20,272,000. The Company recognized an aggregate loss of $335,000 related to the disposal of these facilities. The proceeds of the disposals were used to repay borrowings on the Company's bank line of credit. During 1999, the Company issued $112,750,000 in aggregate principal amount of medium-term notes. The notes bear fixed interest at a weighted average interest rate of 8.62% and have a weighted average maturity of 7 years. The proceeds were used to repay borrowings on the Company's bank line of credit. On January 1, 1999, $57,431,000 of the Company's convertible debentures matured. Of the total maturing, debentures totaling $57,423,000 were repaid and the remaining debentures, totaling $8,000, were converted into 356 shares of common stock. The repayment was funded by bank borrowings on the Company's bank line of credit and cash on hand. At December 31, 1999, the Company had $24,700,000 available under its $100,000,000 bank line of credit that expires on March 31, 2002. The Company also had effective shelf registrations on file with the Securities and Exchange Commission under which the Company may issue (a) up to $442,100,000 in aggregate principal amount of medium-term notes and (b) up to $178,247,000 of securities including debt, convertible debt, common and preferred stock. The Company anticipates making additional investments in health care related facilities, although the level of new investments is decreasing and the Company does not anticipate making additional investments beyond its current commitments until such time as access to long-term capital is under more favorable terms. 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. The Company believes it has sufficient liquidity and financing capability to finance anticipated future investments as well as repay borrowings at or prior to their maturity. Year 2000 Readiness Disclosure Update All statements contained in the following section are "Year 2000 Readiness Disclosures" within the meaning of the Year 2000 Information and Disclosure Act. 11 The Year 2000 issue (the "Year 2000 Issue") in computers arose from the common industry practice of using two digits to represent a date in computer software code and databases to enhance both processing time and save storage space. Therefore, when dates in the year 2000 and beyond are indicated and computer programs read the date "00," the computers may default to the year "1900" rather than the correct "2000." This could result in incorrect calculations, faulty data and computer shutdowns, which could cause disruptions of operations. During 1999, the Company reviewed the risks of the Year 2000 Issue with regard to the Company's own internal operations, information systems and software applications and the impact on the Company of its outside vendors', lessees' and borrowers' ability to operate. During the second quarter of 1999, unrelated to the Year 2000 Issue, the Company replaced its entire computer system, which consists of a local area network of twelve personal computers and three servers. The system was replaced to enable the Company to upgrade its accounting software package, which was completed during the third quarter of 1999. The Company believed its own internal operations, information systems and software applications were compliant based upon reasonable assurance by vendors and the Company's information systems consultants. The cost to remediate the Year 2000 Issues with regard to the Company's internal operations, information systems and software applications was not material. Subsequent to January 1, 2000, the Company has not experienced any hardware or software problems related to the Year 2000 Issue with regard to its own internal operations and systems. The Company's vendors that provide banking, communications and payroll services and the Company's lessees and borrowers were also likely to be affected by the Year 2000 Issue. If the Company's vendors, lessees and borrowers were not Year 2000 compliant, or if they faced disruptions in their operations or cash flows due to Year 2000 Issues, the Company could have faced significant temporary disruptions in rent and mortgage payments and, therefore, cash flows after that date. At this time, the Company is not aware of any significant issues that may have impacted these vendors, lessees and borrowers, and there have been no disruptions in rent or mortgage payments. The Company also had risks associated with Year 2000 Issues in non- information technology areas as it related to owned properties. There was a risk that embedded chips in elevators, security systems, electrical systems and similar technology-driven devices may have stopped functioning due to Year 2000 Issues. Substantially all of the Company's owned properties are leased under triple-net leases and as such, the cost to remediate any of these items was paid by the lessees. At the current time, the Company is unaware of any significant disruptions of these sorts at any of its owned properties. At this time there have been no indications that the Company's vendors, lessees, borrowers and third parties upon which they are dependent have experienced any Year 2000 Issues which would have a material impact on the future operations and/or financial results of the Company, and the Company does not expect any future disruptions related to its vendors, lessees and borrowers. Readers are cautioned that many of the statements contained in the "Year 2000 Readiness Disclosure Update" paragraphs are forward looking and should be read in conjunction with the Company's disclosures under the heading "Statement Regarding Forward Looking Disclosure" set forth above. Impact of New Accounting Pronouncements The adoption of Statement of Financial Accounting Standards ("SFAS") No. 133 Accounting for Derivative Instruments and Hedging Activities does not have an impact on the Company's financial statements as the Company does not utilize derivatives or engage in any hedging activities. Market Risk Exposure The Company is exposed to market risks related to fluctuations in interest rates on its mortgage loans receivable and debt. The Company does not utilize interest rate swaps, forward or option contracts on foreign 12 currencies or commodities, or other types of derivative financial instruments. The purpose of the following analyses is to provide a framework to understand the Company's sensitivity to hypothetical changes in interest rates as of December 31, 1999. Readers are cautioned that many of the statements contained in the "Market Risk Exposure" paragraphs are forward looking and should be read in conjunction with the Company's disclosures under the heading "Statement Regarding Forward Looking Disclosure" set forth above. The Company provides mortgage loans to operators of healthcare facilities as part of its normal operations. The majority of the loans have fixed rates. Four of the mortgage loans have adjustable rates; however, the rates adjust only once or twice over the loan lives and the minimum adjusted rate is equal to the current rate. Therefore, all mortgage loans receivable are treated as fixed rate notes in the table and analysis below. The Company utilizes debt financing primarily for the purpose of making additional investments in healthcare facilities. Historically, the Company has made short-term borrowings on its bank line of credit to fund its acquisitions until market conditions were appropriate, based on management's judgment, to issue stock or fixed rate debt to provide long-term financing. The Company holds variable rate debt in the form of housing revenue bonds, which were assumed in connection with certain healthcare facility acquisitions because of the favorable interest rates, which in turn provided favorable lease rates to the sellers/lessees. Pursuant to the associated lease arrangements, increases or decreases in the interest rates on the housing revenue bonds would be substantially offset by increases or decreases in the associated rent received by the Company on the properties securing this debt. Therefore, there is substantially no market risk associated with the Company's variable rate debt. For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. The Company generally cannot prepay fixed rate debt prior to maturity, therefore, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until the Company would be required to refinance such debt. Holding the variable rate debt balance constant, and including the bank borrowings as variable rate debt due to its nature, each one percentage point increase in interest rates would result in an increase in interest expense for the coming year of approximately $878,000. The table below details the principal amount and the average interest rates for the mortgage loans receivable and debt for each category based on the final maturity dates. Certain of the mortgage loans receivable and certain items in the various categories of debt require periodic principal payments prior to the final maturity date. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing current rates offered to the Company for debt of the same type and remaining maturity.
Maturity Date -------------------------------------------------------------------------- Fair 2000 2001 2002 2003 2004 Thereafter Total Value ------- ------- ------- ------- ------- ---------- -------- -------- (Dollars in thousands) Assets Mortgage loans receivable............ -- -- -- $ 2,418 $ 4,698 $196,246 $203,362 $189,820 Average interest rate................ -- -- -- 10.05% 9.00% 10.27% 10.24% Liabilities Debt Fixed rate............ $30,000 $78,150 $50,000 $66,000 $67,750 $417,596 $709,496 $618,236 Average interest rate................ 7.43% 6.89% 7.35% 7.49% 9.08% 7.39% 7.50% Variable rate......... -- -- -- -- -- $ 12,452 $ 12,452 $ 12,452 Average interest rate................ -- -- -- -- -- 4.21% 4.21% Bank borrowings....... -- -- $75,300 -- -- -- $ 75,300 $ 75,185 Average interest rate................ -- -- 7.32% -- -- -- 7.32%
13 Increases in interest rates during 1999 resulted in an increase in interest expense for the Company primarily related to the bank line of credit and medium-term notes issued during the year at rates somewhat higher than in prior years. These interest rate increases have made it more expensive for the Company to borrow on its bank line of credit and to access debt capital through its medium-term note program. Any future interest rate increases will further increase the cost of any borrowings to finance future acquisitions or replace current long-term debt as it matures. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report of Independent Public Accountants.................................. 15 Consolidated Balance Sheets............................................... 16 Consolidated Statements of Operations..................................... 17 Consolidated Statements of Stockholders' Equity........................... 18 Consolidated Statements of Cash Flows..................................... 19 Notes to Consolidated Financial Statements................................ 20
14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors of 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, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. Arthur Andersen LLP Orange County, California January 20, 2000 15 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS
December 31, ---------------------- 1999 1998 ---------- ---------- (In thousands) ASSETS ------ Investments in real estate Real estate properties: Land............................................... $ 146,712 $ 148,388 Buildings and improvements......................... 1,146,921 1,024,637 Construction in progress........................... 37,740 70,363 ---------- ---------- 1,331,373 1,243,388 Less accumulated depreciation...................... (162,671) (133,316) ---------- ---------- 1,168,702 1,110,072 Mortgage loans receivable, net....................... 203,362 206,613 ---------- ---------- 1,372,064 1,316,685 Cash and cash equivalents.............................. 16,139 16,182 Receivables............................................ 7,614 6,712 Other assets........................................... 34,239 17,724 ---------- ---------- $1,430,056 $1,357,303 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Bank borrowings........................................ $ 75,300 $ 42,000 Senior notes due 2000-2038............................. 657,900 545,150 Notes and bonds payable................................ 64,048 64,623 Convertible debentures................................. -- 57,431 Accounts payable and accrued liabilities............... 47,218 42,541 Commitments and contingencies.......................... Stockholders' equity: Preferred stock $1.00 par value; 5,000,000 shares authorized; issued and outstanding: 1,000,000 as of December 31, 1999 and 1998; stated at liquidation preference of $100 per share........................ 100,000 100,000 Common stock $.10 par value; 100,000,000 shares authorized; issued and outstanding: 46,216,484 and 46,206,128 as of December 31, 1999 and 1998, respectively........................................ 4,622 4,621 Capital in excess of par value....................... 556,373 555,998 Cumulative net income................................ 504,457 433,644 Cumulative dividends................................. (579,862) (488,705) ---------- ---------- Total stockholders' equity......................... 585,590 605,558 ---------- ---------- $1,430,056 $1,357,303 ========== ==========
See accompanying notes. 16 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
Years ended December 31, ---------------------------- 1999 1998 1997 -------- -------- -------- Revenues: Minimum rent................................... $123,926 $104,205 $ 79,587 Interest and other income...................... 23,377 22,859 22,454 Additional rent and additional interest........ 16,562 15,520 13,664 -------- -------- -------- 163,865 142,584 115,705 -------- -------- -------- Expenses: Interest and amortization of deferred financing costs......................................... 51,621 37,531 28,899 Depreciation and non-cash charges.............. 36,131 27,976 19,825 General and administrative..................... 4,965 4,650 3,993 Impairment of long-lived assets................ -- 5,000 -- -------- -------- -------- 92,717 75,157 52,717 -------- -------- -------- Income before gain (loss) on sale of facilities.. 71,148 67,427 62,988 Gain (loss) on sale of facilities................ (335) 2,321 829 -------- -------- -------- Net income....................................... 70,813 69,748 63,817 Preferred stock dividends........................ (7,677) (7,677) (1,962) -------- -------- -------- Net income available to common stockholders...... $ 63,136 $ 62,071 $ 61,855 ======== ======== ======== Per share amounts: Basic/diluted income from continuing operations available to common stockholders.............. $ 1.37 $ 1.34 $ 1.45 ======== ======== ======== Basic/diluted net income available to common stockholders.................................. $ 1.37 $ 1.39 $ 1.47 ======== ======== ======== Weighted average shares outstanding.............. 46,216 44,637 42,164 ======== ======== ========
See accompanying notes. 17 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Capital in Common stock Preferred Stock excess Total ------------- --------------- of par Cumulative Cumulative stockholders' Shares Amount Shares Amount value net income dividends equity ------ ------ ------ -------- -------- ---------- ---------- ------------- Balances at December 31, 1996................... 41,785 $4,179 -- $ -- $462,534 $300,079 ($338,204) $428,588 Issuance of common stock................. 1,326 132 -- -- 30,551 -- -- 30,683 Issuance of preferred stock................. -- -- 1,000 100,000 (2,750) -- -- 97,250 Conversion of debentures............ 18 2 -- -- 402 -- -- 404 Net income............. -- -- -- -- -- 63,817 -- 63,817 Preferred dividends.... -- -- -- -- -- -- (1,962) (1,962) Common dividends....... -- -- -- -- -- -- (65,734) (65,734) ------ ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1997................... 43,129 4,313 1,000 100,000 490,737 363,896 (405,900) 553,046 Issuance of common stock................. 2,761 276 -- -- 58,248 -- -- 58,524 Conversion of debentures............ 316 32 -- -- 7,013 -- -- 7,045 Net income............. -- -- -- -- -- 69,748 -- 69,748 Preferred dividends.... -- -- -- -- -- -- (7,677) (7,677) Common dividends....... -- -- -- -- -- -- (75,128) (75,128) ------ ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1998................... 46,206 4,621 1,000 100,000 555,998 433,644 (488,705) 605,558 Issuance of common stock................. 10 1 -- -- 327 -- -- 328 Conversion of debentures............ -- -- -- -- 8 -- -- 8 Stock options.......... -- -- -- -- 40 -- -- 40 Net income............. -- -- -- -- -- 70,813 -- 70,813 Preferred dividends.... -- -- -- -- -- -- (7,677) (7,677) Common dividends....... -- -- -- -- -- -- (83,480) (83,480) ------ ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1999................... 46,216 $4,622 1,000 $100,000 $556,373 $504,457 ($579,862) $585,590 ====== ====== ===== ======== ======== ======== ========= ========
See accompanying notes. 18 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years ended December 31, ------------------------------- 1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Net income.................................. $ 70,813 $ 69,748 $ 63,817 Depreciation and non-cash charges........... 36,131 27,976 19,825 (Gain) loss on sale of properties........... 335 (2,321) (829) Impairment of long-lived assets............. -- 5,000 -- Amortization of deferred financing costs.... 940 980 801 Net change in other assets and liabilities.. (13,560) 4,684 2,396 --------- --------- --------- Net cash provided by operating activities............................... 94,659 106,067 86,010 --------- --------- --------- Cash flows from investing activities: Investment in real estate properties........ (110,590) (279,384) (239,775) Disposition of real estate properties....... 23,669 5,496 4,812 Investment in mortgage loans receivable..... (5,011) (18,711) (44,947) Principal payments on mortgage loans receivable................................. 2,179 9,631 12,608 --------- --------- --------- Net cash used in investing activities..... (89,753) (282,968) (267,302) --------- --------- --------- Cash flows from financing activities: Bank borrowings............................. 262,600 308,800 263,700 Repayment of bank borrowings................ (229,300) (286,400) (276,400) Issuance of common stock, net............... -- 53,062 -- Issuance of preferred stock, net............ -- -- 97,250 Issuance of senior unsecured debt........... 112,750 190,150 165,000 Issuance of notes and bonds................. -- 4,507 -- Principal payments on convertible debentures, notes and bonds................ (58,470) (2,729) (474) Dividends paid.............................. (91,157) (82,805) (67,696) Deferred financing costs.................... (1,372) (1,694) (1,605) --------- --------- --------- Net cash provided by (used in) financing activities............................... (4,949) 182,891 179,775 --------- --------- --------- Increase (decrease) in cash and cash equivalents.................................. (43) 5,990 (1,517) Cash and cash equivalents, beginning of period....................................... 16,182 10,192 11,709 --------- --------- --------- Cash and cash equivalents, end of period...... $ 16,139 $ 16,182 $ 10,192 ========= ========= ========= Supplemental schedule of cash flow information: Cash interest paid.......................... $ 49,402 $ 38,402 $ 22,467 ========= ========= =========
See accompanying notes. 19 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1999, 1998 and 1997 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, 1999 had investments in 341 health care facilities, including 197 skilled nursing facilities, 124 assisted living facilities, 14 continuing care retirement communities, 3 residential care facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic. At December 31, 1999, the Company owned 159 skilled nursing facilities, 116 assisted living facilities, 9 continuing care retirement communities, 3 residential care facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic. The Company also held 37 mortgage loans secured by 38 skilled nursing facilities, 8 assisted living facilities, 5 continuing care retirement communities and 4 parcels of land. In addition, at December 31, 1999, the Company had 7 assisted living facilities under construction. The Company has no foreign facilities or operations. 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 ventures. All material intercompany accounts and transactions have been eliminated. 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 original 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 that 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, 1999 is approximately $9,731,000. Revenue Recognition Rental income from operating leases is accrued as earned over the life of the lease agreements in accordance with generally accepted accounting principles. There are no step rent provisions in any of the lease agreements. Additional rent is generally computed as a percentage of facility net patient revenues in excess of base amounts 20 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) or as a percentage of the increase in the Consumer Price Index. Additional rent is generally calculated and payable monthly or quarterly. Interest income on real estate mortgages is recognized using the effective interest method based upon the expected payments over the lives of the mortgages. 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. Accounting for Stock-Based Compensation During 1999, the Company adopted the accounting provisions of SFAS No. 123 Accounting for Stock-Based Compensation. This Statement establishes a fair value based method of accounting for stock-based compensation. Accounting for stock-based compensation under this Statement causes the fair value of stock options granted to be amortized into expense over the vesting period of the stock and causes any dividend equivalents earned to be treated as dividends for financial reporting purposes. Previously, the Company provided footnote disclosure of the pro forma effect of options granted as calculated under the provisions of SFAS No. 123. The impact of the adoption of this pronouncement was immaterial to the Company's financial position and results of operations. Capitalization of Interest The Company capitalizes interest on facilities under construction. The capitalization rates used are based on rates for the Company's senior unsecured notes and bank line of credit, as applicable. Capitalized interest in 1999, 1998 and 1997 was $4,190,000, $4,693,000 and $1,651,000, respectively. Impact of New Accounting Pronouncements The adoption of Statement of Financial Accounting Standards ("SFAS") No. 133 Accounting for Derivative Instruments and Hedging Activities does not have an impact on the Company's financial statements as the Company does not utilize derivatives or engage in any hedging activities. 3. Earnings Per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Income available to common stockholders is calculated by deducting dividends declared on preferred stock from income from continuing operations and net income. Diluted earnings per share includes the effect of the potential shares outstanding; dilutive stock options and dilutive convertible debentures. The table below details the components of the basic and diluted earnings per share from continuing operations calculations:
Years Ended December 31, ----------------------------------------------- 1999 1998 1997 --------------- --------------- --------------- Income Shares Income Shares Income Shares ------- ------ ------- ------ ------- ------ (Amounts in thousands) Income before gain on sale of facility..................... $71,148 $67,427 $62,988 Less: preferred stock dividends.................... (7,677) (7,677) (1,962) ------- ------- ------- Basic EPS..................... 63,471 46,216 59,750 44,637 61,026 42,164 Effect of dilutive securities: Stock options................. -- -- -- 8 -- 9 ------- ------ ------- ------ ------- ------ Diluted EPS................... $63,471 46,216 $59,750 44,645 $61,026 42,173 ======= ====== ======= ====== ======= ======
21 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. Real Estate Properties Substantially 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 9 to 19 years, and generally the leases 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 or as a percentage of the increase in the Consumer Price Index. Additional rents are generally calculated and payable monthly or quarterly. Most leases contain provisions such that the total rent cannot decrease from one year to the next. In addition, 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 197 facilities are backed by irrevocable letters of credit or security deposits that cover 2 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. Minimum future rentals on non-cancelable leases as of December 31, 1999 are as follows:
Minimum Year Rentals ---- -------------- (In thousands) 2000........................................................ $120,702 2001........................................................ 116,794 2002........................................................ 112,720 2003........................................................ 109,999 2004........................................................ 106,424 2005........................................................ 93,493 2006........................................................ 86,289 2007........................................................ 73,223 2008........................................................ 63,427 2009........................................................ 51,507 Thereafter.................................................. $106,943
During 1999, the Company acquired 7 residential care facilities for the elderly in 1 transaction for an aggregate investment of approximately $2,304,000. During 1999, the Company provided new construction financing of approximately $96,408,000. Construction of 19 assisted living facilities was completed in 1999, in which the Company's total aggregate investment was $141,201,000; $60,485,000 of this amount was a current year investment included in the new construction financing amount above. Upon acquisition or completion of construction, as applicable, the facilities were concurrently leased under terms generally similar to the Company's existing leases. The Company also funded approximately $11,024,000 in capital improvements at certain facilities in accordance with certain existing lease provisions. Such capital improvements will result in an increase in the minimum rents earned by the Company on these facilities. During 1999, the Company disposed of 5 skilled nursing facilities, 2 assisted living facilities, 21 residential care facilities for the elderly and 2 medical clinics in 27 separate transactions for aggregate proceeds of approximately $20,272,000. The Company recognized an aggregate loss of $335,000 related to the disposal of these facilities. The Company has deferred recognition of additional payments received totaling approximately $4,109,000 related to four facilities pending resolution of renewal negotiations of the master lease relating to such facilities. 22 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table lists the Company's real estate properties as of December 31, 1999:
Notes Buildings and Number of and Total Accumulated Bonds Facility Location Facilities Land Improvements Investment(1) Depreciation Payable ----------------- ---------- ------- ------------ ------------- ------------ ------- (Dollar amounts in thousands) Skilled Nursing Facilities: Arizona............... 1 $ 650 $ 2,890 $ 3,540 $ 810 $ -- Arkansas.............. 10 2,900 37,130 40,030 3,579 2,220 California............ 8 7,053 19,428 26,481 4,801 -- Connecticut........... 2 810 5,382 6,192 1,325 -- Florida............... 11 4,712 29,595 34,307 7,036 -- Georgia............... 2 1,363 9,657 11,020 1,227 -- Idaho................. 1 15 777 792 253 -- Illinois.............. 2 157 5,392 5,549 1,513 -- Indiana............... 11 2,044 34,372 36,416 8,191 -- Kansas................ 10 767 13,212 13,979 2,861 -- Maryland.............. 4 845 21,212 22,057 8,069 -- Massachusetts......... 17 7,488 66,350 73,838 9,139 -- Minnesota............. 10 2,559 35,318 37,877 14,467 -- Mississippi........... 1 750 3,520 4,270 126 -- Missouri.............. 1 51 2,689 2,740 1,076 -- Nevada................ 1 740 3,294 4,034 679 -- New Jersey............ 1 360 6,448 6,808 3,740 -- North Carolina........ 1 116 2,244 2,360 898 -- Ohio.................. 6 1,316 28,235 29,551 8,412 -- Oklahoma.............. 3 98 3,841 3,939 1,243 -- Oregon................ 1 100 1,115 1,215 496 -- Tennessee............. 10 2,354 33,152 35,506 4,946 -- Texas................. 25 4,757 50,772 55,529 12,550 -- Virginia.............. 4 1,036 17,532 18,568 7,015 -- Washington............ 7 2,973 26,340 29,313 3,636 -- Wisconsin............. 9 1,621 19,548 21,169 7,500 -- --- ------- -------- -------- -------- ------- Subtotals........... 159 47,635 479,445 527,080 115,588 2,220 --- ------- -------- -------- -------- ------- Continuing Care Retirement Communities: California............ 1 1,600 10,827 12,427 1,415 -- Colorado.............. 1 400 2,715 3,115 520 -- Georgia............... 1 723 10,769 11,492 295 -- Kansas................ 1 687 12,517 13,204 842 2,600 Massachusetts......... 1 1,351 12,538 13,889 521 -- Texas................. 2 2,681 34,468 37,149 1,822 -- Wisconsin............. 2 11,057 53,294 64,351 3,533 24,518 --- ------- -------- -------- -------- ------- Subtotals........... 9 18,499 137,128 155,627 8,948 27,118 --- ------- -------- -------- -------- -------
23 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Buildings Notes and Number of and Total Accumulated Bonds Facility Location Facilities Land Improvements Investment(1) Depreciation Payable ----------------- ---------- -------- ------------ ------------- ------------ --------- (Dollar amounts in thousands) Assisted Living Facilities: Alabama.................. 2 $ 1,681 $ 4,272 $ 5,953 $ 373 $ -- Arizona.................. 2 1,024 6,844 7,868 562 -- Arkansas................. 1 182 1,479 1,661 67 -- California............... 13 15,105 64,473 79,578 7,901 -- Colorado................. 5 2,861 29,847 32,708 2,404 -- Delaware................. 1 345 4,947 5,292 90 -- Florida.................. 19 10,839 73,030 83,869 3,765 -- Idaho.................... 1 544 11,256 11,800 973 -- Illinois................. 1 603 10,473 11,076 786 -- Indiana.................. 1 805 3,851 4,656 160 -- Kansas................... 4 1,885 11,585 13,470 593 -- Kentucky................. 1 110 2,547 2,657 134 -- Louisiana................ 1 831 6,521 7,352 24 -- Maryland................. 1 533 3,785 4,318 47 -- Massachusetts............ 2 3,463 14,015 17,478 519 -- Michigan................. 1 300 7,005 7,305 960 -- Missouri................. 1 414 2,115 2,529 116 -- Nevada................... 2 1,219 12,397 13,616 656 6,764 New Jersey............... 1 655 3,430 4,085 107 -- North Carolina........... 1 385 2,531 2,916 111 -- Ohio..................... 11 3,623 33,575 37,198 1,729 -- Oklahoma................. 3 745 7,355 8,100 1,029 -- Oregon................... 6 2,078 26,753 28,831 2,911 8,957 Pennsylvania............. 2 1,066 11,813 12,879 251 -- Rhode Island............. 1 1,200 8,801 10,001 55 -- South Carolina........... 4 779 10,261 11,040 359 -- Tennessee................ 5 2,664 19,584 22,248 658 -- Texas.................... 16 7,283 68,253 75,536 2,961 -- Washington............... 4 1,841 21,093 22,934 1,439 -- West Virginia............ 1 705 4,475 5,180 26 -- Wisconsin................ 2 4,843 24,219 29,062 1,410 18,989 --- -------- ---------- ---------- -------- ------- Subtotals.............. 116 70,611 512,585 583,196 33,176 34,710 --- -------- ---------- ---------- -------- ------- Residential Care Facilities for the Elderly: California............... 3 101 416 517 80 -- --- -------- ---------- ---------- -------- ------- Rehabilitation Hospitals: Arizona.................. 2 1,517 15,309 16,826 3,480 -- --- -------- ---------- ---------- -------- ------- Medical Clinic:............ Alabama.................. 1 248 2,185 2,433 1,399 -- --- -------- ---------- ---------- -------- ------- Construction In Progress... -- 8,101 37,593 45,694 -- -- --- -------- ---------- ---------- -------- ------- Total Owned Facilities..... 290 $146,712 $1,184,661 $1,331,373 $162,671 $64,048 === ======== ========== ========== ======== =======
- -------- (1) Also represents the approximate aggregate cost for Federal income tax purposes. 24 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. Mortgage Loans Receivable During 1999, the Company provided 4 mortgage loans secured by 4 parcels of land in the aggregate amount of $4,698,000. In addition, the Company funded an additional $313,000 on existing mortgage loans. Such additional amounts funded will result in an increase in interest income earned by the Company. At December 31, 1999, the Company had 37 mortgage loans receivable secured by 38 skilled nursing facilities, 8 assisted living facilities, 5 continuing care retirement communities and 4 parcels of land. The loans have an aggregate principal balance of approximately $210,297,000 and are reflected in the Company's financial statements net of an aggregate discount of approximately $6,935,000. The principal balances of mortgage loans receivable as of December 31, 1999 mature approximately as follows: $2,802,000 in 2000, $2,588,000 in 2001, $2,787,000 in 2002, $6,161,000 in 2003, $7,294,000 in 2004 and $188,665,000 thereafter. The following table lists the Company's mortgage loans receivable at December 31, 1999:
Final Estimated Original Face Carrying Number Interest Maturity Balloon Amount of Amount of Location of Facilities of Facilities Rate Date Payment(1) Mortgages Mortgages(2) ---------------------- ------------- -------- -------- ---------- ------------- ------------ (Dollar amounts in thousands) Skilled Nursing Facilities: Arkansas.............. 3 10.00% 12/06 $4,946 $ 5,500 $ 5,101 California............ 1 10.00% 05/25 1,489 8,200 8,120 California............ 2 9.50% 03/09 5,336 7,841 7,277 Connecticut........... 2 10.00% 06/22 -- 8,862 5,801 Florida............... -- 10.95% 07/03 -- 4,400 766 Florida............... 1 11.25% 07/06 4,400 4,400 4,400 Illinois.............. 1 9.00% 01/24 -- 9,500 8,263 Indiana............... 1 10.95% 07/03 -- 785 422 Kansas................ 1 9.25% 09/03 1,169 1,550 1,229 Louisiana............. 1 10.89% 04/15 2,407 3,850 3,796 Maryland.............. 1 10.90% 06/21 -- 7,800 7,497 Massachusetts......... 1 8.75% 02/24 -- 9,000 7,489 Michigan.............. 3 12.61% 12/06 6,904 7,817 6,988 Michigan.............. 2 12.66% 01/05 2,506 3,000 2,599 Michigan.............. 1 11.70% 01/05 1,501 1,800 1,605 Missouri.............. 7 11.14% 08/11 17,725 17,725 17,725 South Dakota.......... 1 10.55% 05/05 -- 4,275 734 Tennessee............. 1 10.22% 01/07 8,550 8,550 8,550 Texas................. 1 12.00% 03/08 -- 1,460 915 Texas................. 1 9.50% 09/13 5,760 5,760 5,760 Virginia.............. 1 10.50% 04/13 10,192 16,250 15,847 Washington............ 4 11.00% 10/19 112 6,000 5,687 Wisconsin............. 1 10.55% 05/05 -- 1,350 473 ------ ------- ------- Subtotals........... 38 72,997 145,675 127,044 ------ ------- -------
25 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Final Estimated Original Face Carrying Number Interest Maturity Balloon Amount of Amount of Location of Facilities of Facilities Rate Date Payment(1) Mortgages Mortgages(2) ---------------------- ------------- -------- -------- ---------- ------------- ------------ (Dollar amounts in thousands) Assisted Living Facilities: Alabama............... -- 9.00% 06/04 $ 710 $ 710 $ 710 Florida............... 1 10.79% 11/06 5,500 5,500 5,500 Florida............... 2 10.31% 09/20 -- 7,230 7,230 Florida............... -- 9.00% 04/04 1,013 1,013 1,013 Michigan.............. -- 9.00% 07/04 1,675 1,675 1,675 North Carolina........ 2 10.44% 05/07 2,841 2,841 2,950 Pennsylvania.......... -- 9.00% 06/04 1,300 1,300 1,300 Pennsylvania.......... 1 8.94% 09/08 2,900 2,900 2,900 South Carolina........ 1 8.94% 09/08 2,955 2,955 2,955 Washington............ 1 9.95% 12/15 6,403 6,557 6,557 -------- -------- -------- Subtotals........... 8 25,297 32,681 32,790 -------- -------- -------- Continuing Care Retirement Communities: California............ 1 9.50% 03/09 2,831 4,159 3,861 Florida............... 1 10.00% 06/09 14,200 14,200 14,200 Massachusetts......... 1 9.52% 06/23 -- 12,350 12,170 Oklahoma.............. 1 9.55% 03/24 2,250 11,200 10,297 Tennessee............. 1 10.40% 02/07 3,000 3,000 3,000 -------- -------- -------- Subtotals........... 5 22,281 44,909 43,528 -------- -------- -------- Total................... 51 $120,575 $223,265 $203,362 ======== ======== ========
- -------- (1) Most loans require monthly principal and interest payments at level amounts over life to maturity. Some loans have interest rates which periodically adjust, but cannot decrease, which results in 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. Seven loans have a provision that no prepayments are acceptable. (2) Also represents the approximate aggregate cost for Federal income tax purposes. The following table summarizes the changes in mortgage loans receivable during 1999, 1998 and 1997:
1999 1998 1997 -------- -------- -------- (In thousands) Balance at January 1,.......................... $206,613 $199,819 $160,464 New mortgage loans........................... 5,011 18,711 50,134 Accretion of discount on loans............... 1,217 1,214 1,829 Reclassification of loans to leases.......... (7,300) (3,500) -- Collection of principal...................... (2,179) (9,631) (12,608) -------- -------- -------- Balance at December 31,........................ $203,362 $206,613 $199,819 ======== ======== ========
26 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Bank Borrowings The Company has a $100,000,000 unsecured credit agreement with certain banks which matures on March 31, 2002. The terms of the bank line of credit include an option to automatically extend the bank line of credit by one year with concurrence of the bank group. At the option of the Company, borrowings under the agreement bear interest at prime (8.5% at December 31, 1999) or LIBOR plus 70 basis points (6.575% at December 31, 1999). The Company pays a facility fee of .3% per annum on the total commitment under the agreement. Under covenants contained in the credit agreement, the Company is required to maintain, among other things: (i) a minimum net worth of $550,000,000; (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 2.5 to 1.0; and (iii) a ratio of total liabilities to net worth of not more than 1.5 to 1.0. 7. Notes and Bonds Payable Notes and bonds payable are due through the year 2035, at interest rates ranging from 3.5% to 10.9% and are secured by real estate properties with an aggregate net book value as of December 31, 1999 of approximately $111,374,000. The principal balances of the notes and bonds payable as of December 31, 1999 mature approximately as follows: $1,078,000 in 2000, $1,141,000 in 2001, $1,217,000 in 2002, $1,292,000 in 2003, $1,389,000 in 2004, and $57,931,000 thereafter. 8. Senior Unsecured Notes Due 2000-2038 During 1999, the Company issued $112,750,000 in aggregate principal amount of medium term notes. The aggregate principal amount of Senior Notes outstanding at December 31, 1999 was $657,900,000. The weighted average interest rate on the Senior Notes was 7.5% and the weighted average maturity was 13.8 years. The principal balances of the Senior Notes as of December 31, 1999 mature approximately as follows: $30,000,000 in 2000, $78,150,000 in 2001, $50,000,000 in 2002, $66,000,000 in 2003, $67,750,000 in 2004 and $366,000,000 thereafter. There are $55,000,000 of medium term notes due in 2037 which may be put back to the Company at their face amount at the option of the holder on October 1st of any of the following years: 2004, 2007, 2009, 2012, 2017, or 2027. There are $41,500,000 of medium term notes due in 2028 which may be put back to the Company at their face amount at the option of the holder on November 20th of any of the following years: 2003, 2008, 2013, 2018, or 2023. There are $40,000,000 of medium term notes due in 2038 which may be put back to the Company at their face amount at the option of the holder on July 7th of any of the following years: 2003, 2008, 2013, 2018, 2023, or 2028. 9. Convertible Debentures During 1993, the Company issued $65,000,000 of 6.25% unsecured convertible debentures due January 1, 1999. The debentures were convertible at any time prior to maturity into shares of the Company's common stock at a conversion price of $22.4125 per share. During 1999, $8,000 of such debentures converted into 356 shares of common stock and the remaining debentures, totaling $57,423,000, were repaid. During 1998, $7,081,000 of such debentures converted into 315,921 shares of common stock. 10. Preferred Stock During 1997, the Company sold 1,000,000 shares of 7.677% Series A Cumulative Preferred Step-Up REIT securities ("Preferred Stock") with a liquidation preference of $100 per share. Dividends on the Preferred Stock 27 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) are cumulative from the date of original issue and are payable quarterly in arrears, commencing December 31, 1997 at the rate of 7.677% per annum of the liquidation preference per share (equivalent to $7.677 per annum per share) through September 30, 2012 and at a rate of 9.677% of the liquidation preference per annum per share (equivalent to $9.677 per annum per share) thereafter. The Preferred Stock is not redeemable prior to September 30, 2007. On or after September 30, 2007, the Preferred Stock may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price of $100 per share, plus accrued and unpaid dividends, if any, thereon. 11. Stock Incentive Plan Under the terms of a stock incentive plan (the "Plan"), the Company has reserved for issuance 1,600,000 shares of common stock. Under the Plan, as amended, the Company may issue stock options, restricted stock, dividend equivalents and stock appreciation rights. The Company began accounting for the Plan under SFAS No. 123 Accounting for Stock-Based Compensation during 1999 for options granted in 1999. Prior to 1999, the Company accounted for the Plan under Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. Had compensation cost for the Plan been determined consistent with SFAS No. 123 Accounting for Stock-Based Compensation for the years prior to 1999, the Company's net income and net income per share in 1999, 1998 and 1997 would have been the following pro forma amounts:
1999 1998 1997 ----------- ----------- ----------- Net income available to common stockholders: As reported......................... $63,136,000 $62,071,000 $61,855,000 Pro forma........................... 62,977,000 61,840,000 61,712,000 Basic/diluted net income per share: As reported......................... $ 1.37 $ 1.39 $ 1.47 Pro forma........................... 1.36 1.39 1.46
28 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Because the pro forma calculation reflects only amounts attributable to options granted since January 1, 1995, and the Company adopted SFAS No. 123 during 1999, future pro forma affects will decrease as the prior period options fully amortize. A summary of the status of the Plan at December 31, 1999, 1998 and 1997 and changes during the years then ended are as follows:
1999 1998 1997 ---------------- ---------------- ---------------- Wtd Avg Wtd Avg Wtd Avg Ex Ex Ex Shares Price Shares Price Shares Price ------- ------- ------- ------- ------- ------- Options: Outstanding at beginning of year.... 279,000 $ 23.42 179,000 $ 21.89 89,000 $ 20.78 Granted............... 125,000 20.56 100,000 26.14 90,000 23.00 Exercised............. -- -- -- -- -- -- Forfeited............. -- -- -- -- -- -- Expired............... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Outstanding at end of year................. 404,000 22.53 279,000 23.42 179,000 21.89 ======= ======= ======= ======= ======= ======= Exercisable at end of year................. 182,327 $ 22.50 89,328 $ 21.52 29,667 $ 20.78 Weighted average fair value of options granted.............. $ 1.04 $ 2.69 $ 2.14 Restricted Stock: Outstanding at beginning of year.... 73,400 94,900 109,100 Awarded............... 10,000 12,000 10,000 Vested................ (30,400) (33,500) (24,200) Forfeited............. -- -- -- ------- ------- ------- Outstanding at end of year................. 53,000 73,400 94,900 ======= ======= ======= Weighted average fair value of restricted stock awarded........ $20.56 $26.12 $23.19
Stock options granted under the Plan become exercisable each year following the date of grant in annual increments of one-third and are exercisable at the market price of the Company's common stock on the date of grant. Options at December 31, 1999 have a weighted average contractual life of 8 years. The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions:
1999 1998 1997 ----- ----- ----- Risk free rate of return.............................. 5.18% 6.30% 6.30% Dividend yield........................................ 8.75% 6.43% 6.78% Option term........................................... 10 10 10 Volatility............................................ 18.96% 16.45% 16.45%
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. Subsequent to 1995, only non-employee directors receive restricted stock awards. 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 1999, 1998 and 1997 related to restricted stock awards was approximately $325,000, $440,000 and $368,000, respectively. 29 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Awards of dividend equivalents accompany the 1999, 1998 and 1997 stock option grants on a one-for-one basis. Such dividend equivalents are payable in cash until such time as the corresponding stock option is exercised, based upon a formula approved by the Compensation Committee of the Board of Directors. That formula depends on the Company's performance measured for a minimum of a three-year period and up to a five-year period by total return to stockholders (increase in stock price and dividends paid) compared to peer companies and other select financial measures compared to peer companies, in each case as selected by the Compensation Committee. Dividend equivalents may be earned in all or part depending upon the actual total return to shareholders as compared to peer groups of other real estate investment trusts. SFAS No. 123 provides that payments related to the dividend equivalents are treated as dividends. No stock appreciation rights have been issued under the Plan. 12. 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. The following tables set forth the amounts recognized in the Company's financial statements:
12/31/99 12/31/98 -------- -------- Actuarial present value of benefit obligations: Vested benefit obligation............................... $684,000 $723,000 ======== ======== Accumulated benefit obligation.......................... $695,000 $730,000 ======== ======== Projected benefit obligation............................ $764,000 $814,000 Unrecognized prior service cost......................... (47,000) (74,000) Unrecognized net gain................................... 264,000 163,000 -------- -------- Accrued pension cost................................... $981,000 $903,000 ======== ========
Net pension cost for the year included the following components: 1999 1998 1997 -------- -------- -------- Current service cost.......................... $ 54,000 $ 43,000 $ 47,000 Interest cost................................. 53,000 61,000 58,000 Amortization of prior service cost............ 19,000 27,000 27,000 -------- -------- -------- Net periodic pension cost.................... $126,000 $131,000 $132,000 ======== ======== ========
Discount rates of 6.75%, 7.0% and 7.5% in 1999, 1998 and 1997, 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. 13. Transactions with Alterra Healthcare Corporation and Beverly Enterprises, Inc. As of December 31, 1999, 53 of the owned facilities are leased to and operated by subsidiaries of Alterra Healthcare Corporation ("Alterra"). Additionally, Alterra is the borrower on one of the Company's mortgage loans. Revenues from Alterra were approximately $19,117,000, $17,114,000 and $10,274,000 for the years ended December 31, 1999, 1998 and 1997, respectively. As of December 31, 1999, 47 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 30 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) unaffiliated with Beverly in connection with 24 properties operated by such parties. Additionally, Beverly is the borrower on four of the Company's mortgage loans. Revenues from Beverly were approximately $21,211,000, $21,161,000 and $19,712,000 for the years ended December 31, 1999, 1998 and 1997, respectively. One of the directors of the Company is also an officer and director of Beverly. 14. Impairment of Long-lived Assets During 1998, the Company recorded a provision of $5,000,000 as a reduction in the value of the Company's investment in three medical clinics constructed for and leased to a company that declared bankruptcy. The fair value of the medical clinics was determined based on discounted estimated future cash flows. During 1999, the Company disposed of two of the medical clinics and continues to look for another party to whom it may lease or sell the remaining facility. 15. Dividends Dividend payments by the Company to the common stockholders were characterized in the following manner for tax purposes:
1999 1998 1997 ----- ----- ------ Ordinary income........................................... $1.30 $1.63 $1.505 Capital gain.............................................. .10 .05 .055 Return of capital......................................... .40 -- -- ----- ----- ------ Total dividends paid.................................... $1.80 $1.68 $1.560 ===== ===== ======
16. Quarterly Financial Data (unaudited)
Three months ended, -------------------------------------------- March 31, June 30, September 30, December 31, --------- -------- ------------- ------------ (In thousands except per share amounts) 1999: Revenues.................... $39,309 $40,871 $41,525 $42,160 New income available to common stockholders........ 15,811 15,305 15,775 16,246 Basic/diluted net income per share...................... .34 .33 .34 .35 Dividends per share......... .45 .45 .45 .45 1998: Revenues.................... $33,158 $34,491 $36,625 $38,310 Net income available to common stockholders........ 17,971 16,227 16,407 11,467 Basic/diluted net income per share...................... .42 .37 .37 .25 Dividends per share......... .42 .42 .42 .42
17. 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. 31 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Mortgage Loans Receivable Fair values are based upon the estimates of management and on rates currently prevailing for comparable loans. Long-Term Debt The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to the Company for debt of the same type and remaining maturity. The estimated fair values of the Company's financial instruments are as follows:
1999 1998 -------------- -------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- (In millions) Cash and cash equivalents...................... $ 16 $ 16 $ 16 $ 16 Mortgage loans receivable...................... 203 190 207 212 Long-term debt................................. 797 706 709 694
32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors of Nationwide Health Properties, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Nationwide Health Properties, Inc.'s annual report to shareholders included in this Form 10-K, and have issued our report thereon dated January 20, 2000. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index of consolidated financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Orange County, California January 20, 2000 33 SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION NATIONWIDE HEALTH PROPERTIES, INC. DECEMBER 31, 1999
Gross Amount at which Carried at Costs Close of Period(1) Initial Cost Capitalized -------------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ -------- (Dollar amounts in thousands) Skilled Nursing Facilities: Benton............... AR $ 4,532 $ 4 $ 685 $ 4,536 $ 5,221 $ 205 1992 1998 Bryant............... AR 4,693 4 320 4,697 5,017 212 1989 1998 Hot Springs.......... AR 2,320 0 54 2,320 2,374 890 1972 1986 Jacksonville......... AR 3,453 0 155 3,453 3,608 1,323 1962 1986 Lake Village......... AR 3,872 15 261 3,887 4,148 154 1997 1998 Monticello........... AR 3,244 8 300 3,252 3,552 129 1993 1998 Morrilton............ AR 5,092 2 308 5,094 5,402 202 1996 1998 Morrilton............ AR 3,635 2 250 3,637 3,887 164 1988 1998 Wilmot............... AR 2,217 20 240 2,237 2,477 118 1964 1998 Wynne (3)............ AR 4,015 2 327 4,017 4,344 182 1990 1998 Scottsdale........... AZ 2,790 100 650 2,890 3,540 810 1963 1991 Chowcilla............ CA 1,119 0 109 1,119 1,228 343 1964 1987 Gilroy............... CA 1,892 0 714 1,892 2,606 520 1968 1991 Hayward.............. CA 1,222 221 795 1,443 2,238 381 1968 1991 Orange............... CA 5,059 0 1,141 5,059 6,200 938 1987 1992 Pomona............... CA 1,247 0 365 1,247 1,612 499 1963 1985 San Diego............ CA 4,925 0 842 4,925 5,767 1,163 1965 1992 San Jose............. CA 1,136 571 1,595 1,707 3,302 429 1968 1991 Santa Cruz........... CA 1,596 440 1,492 2,036 3,528 528 1964 1991 Bloomfield........... CT 2,827 0 670 2,827 3,497 494 1967 1994 Torrington........... CT 2,555 0 140 2,555 2,695 831 1969 1987 Dania................ FL 1,962 102 178 2,064 2,242 38 1970 1997 Ft. Pierce........... FL 2,758 0 125 2,758 2,883 1,104 1965 1985 Jacksonville......... FL 2,787 0 498 2,787 3,285 317 1965 1996 Jacksonville......... FL 1,853 0 161 1,853 2,014 571 1965 1987 Jacksonville......... FL 1,759 0 1,503 1,759 3,262 114 1997 1997 Lakeland............. FL 5,029 0 1,000 5,029 6,029 880 1982 1994 Live Oak............. FL 3,217 0 50 3,217 3,267 1,233 1983 1986 Maitland............. FL 3,327 0 209 3,327 3,536 1,275 1983 1986 Pensacola............ FL 1,833 0 77 1,833 1,910 573 1969 1987 Tampa................ FL 2,726 0 563 2,726 3,289 892 1971 1986 Tampa................ FL 2,053 189 348 2,242 2,590 39 1970 1997 Flowery Branch....... GA 3,115 0 562 3,115 3,677 61 1970 1997 Lawrenceville........ GA 3,993 2,549 801 6,542 7,343 1,166 1988 1991 Buhl................. ID 777 0 15 777 792 253 1913 1986 LaSalle.............. IL 2,703 0 127 2,703 2,830 758 1975 1991 Litchfield........... IL 2,689 0 30 2,689 2,719 755 1972 1991 Brookville........... IN 4,120 0 80 4,120 4,200 738 1987 1992 Evansville........... IN 5,324 0 280 5,324 5,604 1,494 1968 1991 Gas City............. IN 3,082 0 147 3,082 3,229 308 1976 1996
34
Gross Amount at which Carried at Close of Costs Period(1) Initial Cost Capitalized --------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- ------- ------------ ------ ------ ------------ -------- (Dollar amounts in thousands) Ligonier................ IN $1,669 $ 0 $ 54 $1,669 $1,723 $ 167 1976 1997 Muncie.................. IN 1,141 1,009 983 2,150 3,133 119 1989 1997 Muncie.................. IN 888 0 109 888 997 89 1975 1997 New Castle.............. IN 5,173 0 43 5,173 5,216 1,451 1972 1991 Petersburg.............. IN 2,352 0 33 2,352 2,385 901 1968 1986 Richmond................ IN 2,519 0 114 2,519 2,633 966 1974 1986 Rochester............... IN 4,055 250 161 4,305 4,466 1,175 1969 1991 Wabash.................. IN 2,790 0 40 2,790 2,830 783 1974 1991 Belleville.............. KS 1,887 0 213 1,887 2,100 425 1977 1993 Colby................... KS 599 0 50 599 649 197 1974 1986 Derby................... KS 2,482 0 133 2,482 2,615 641 1978 1992 Hiwatha................. KS 788 0 150 788 938 28 1974 1998 Hutchinson.............. KS 1,855 161 75 2,016 2,091 391 1964 1994 Kensington.............. KS 639 0 6 639 645 245 1965 1986 Oakley.................. KS 414 0 7 414 421 136 1964 1986 Onaga................... KS 652 0 6 652 658 250 1959 1986 Salina.................. KS 2,463 135 27 2,598 2,625 507 1981 1994 Topeka.................. KS 1,137 0 100 1,137 1,237 41 1973 1998 Amesbury................ MA 4,241 607 229 4,848 5,077 373 1971 1997 Beverly................. MA 3,748 0 392 3,748 4,140 94 1998 1998 Brighton................ MA 2,212 0 300 2,212 2,512 387 1969 1994 Brockton................ MA 3,591 16 525 3,607 4,132 741 1971 1993 Buzzards Bay............ MA 4,815 0 415 4,815 5,230 1,926 1911 1985 Danvers................. MA 4,248 0 392 4,248 4,640 106 1998 1998 Danvers................. MA 3,211 1,144 327 4,355 4,682 312 1962 1997 Danvers................. MA 2,891 487 305 3,378 3,683 263 1969 1997 Haverhill............... MA 5,707 1,756 660 7,463 8,123 1,176 1973 1993 Haverhill............... MA 1,414 3 775 1,417 2,192 291 1962 1993 Melrose................. MA 4,029 186 432 4,215 4,647 224 1965 1998 N. Bellerica............ MA 3,137 300 800 3,437 4,237 636 1969 1994 New Bedford............. MA 2,357 0 93 2,357 2,450 943 1889 1985 Northborough............ MA 2,509 387 300 2,896 3,196 112 1969 1998 Saugus.................. MA 5,262 514 374 5,776 6,150 450 1967 1997 Sharon.................. MA 1,097 4,046 844 5,143 5,987 131 1975 1996 Wellesley............... MA 2,435 0 325 2,435 2,760 974 1962 1985 Clinton................. MD 5,017 0 400 5,017 5,417 1,589 1965 1987 Cumberland.............. MD 5,260 0 150 5,260 5,410 2,105 1968 1985 Hagerstown.............. MD 4,140 0 215 4,140 4,355 1,656 1972 1985 Westminster............. MD 6,795 0 80 6,795 6,875 2,719 1974 1985 Duluth.................. MN 7,047 0 1,014 7,047 8,061 529 1971 1997 Fairbault............... MN 2,785 0 90 2,785 2,875 1,391 1967 1985 Minneapolis............. MN 5,752 0 333 5,752 6,085 2,578 1973 1985 Minneapolis............. MN 4,184 0 436 4,184 4,620 1,834 1961 1985 Minneapolis............. MN 3,833 0 322 3,833 4,155 1,972 1962 1985 Minneapolis............. MN 2,934 187 141 3,121 3,262 2,892 1914 1985 Osseo................... MN 2,927 0 123 2,927 3,050 1,171 1957 1985 Ostrander............... MN 947 0 8 947 955 310 1968 1986
35
Gross Amount at which Carried at Close of Costs Period(1) Initial Cost Capitalized --------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- ------- ------------ ------ ------ ------------ -------- (Dollar amounts in thousands) Owatonna................ MN $2,140 $ 0 $ 59 $2,140 $2,199 $ 695 1965 1986 Willmar................. MN 2,582 0 33 2,582 2,615 1,095 1905 1985 Maryville............... MO 2,689 0 51 2,689 2,740 1,076 1979 1985 Columbus................ MS 3,520 0 750 3,520 4,270 126 1976 1998 Hendersonville.......... NC 2,244 0 116 2,244 2,360 898 1978 1985 Lakewood................ NJ 6,448 0 360 6,448 6,808 3,740 1966 1987 Sparks.................. NV 3,294 0 740 3,294 4,034 679 1988 1991 Alliance................ OH 1,862 0 83 1,862 1,945 522 1962 1991 Boardman................ OH 7,046 0 60 7,046 7,106 1,976 1962 1991 Columbus................ OH 4,333 0 343 4,333 4,676 1,449 1984 1988 Galion.................. OH 3,419 0 24 3,419 3,443 959 1967 1991 Warren.................. OH 7,489 0 450 7,489 7,939 2,100 1967 1991 Wash Ct. House.......... OH 4,086 0 356 4,086 4,442 1,406 1984 1988 Maud.................... OK 803 0 12 803 815 262 1960 1986 Sapulpa................. OK 2,243 0 68 2,243 2,311 729 1970 1986 Tonkawa................. OK 795 0 18 795 813 252 1962 1987 Portland................ OR 1,115 0 100 1,115 1,215 496 1954 1985 Brownsville............. TN 2,957 0 100 2,957 3,057 608 1970 1993 Celina.................. TN 853 0 150 853 1,003 175 1972 1993 Clarksville............. TN 3,479 0 350 3,479 3,829 715 1970 1993 Columbia................ TN 2,240 0 225 2,240 2,465 395 1984 1993 Decatur................. TN 3,330 0 193 3,330 3,523 143 1981 1998 Hohenwald............... TN 3,732 0 90 3,732 3,822 767 1975 1993 Jonesborough............ TN 2,551 3 65 2,554 2,619 525 1981 1983 Madison................. TN 6,415 0 1,120 6,415 7,535 229 1967 1998 Martin.................. TN 4,121 0 33 4,121 4,154 847 1977 1993 Selmer.................. TN 2,263 1,208 28 3,471 3,499 542 1985 1993 Baytown................. TX 2,388 0 90 2,388 2,478 552 1975 1990 Baytown................. TX 1,902 0 61 1,902 1,963 440 1966 1990 Bogota.................. TX 1,820 0 14 1,820 1,834 698 1963 1986 Center.................. TX 1,424 0 22 1,424 1,446 329 1970 1990 Eagle Lake.............. TX 1,833 0 25 1,833 1,858 424 1972 1990 El Paso................. TX 1,888 0 166 1,888 2,054 620 1980 1988 Garland................. TX 1,619 0 238 1,619 1,857 375 1970 1990 Gilmer.................. TX 3,033 0 248 3,033 3,281 116 1990 1998 Gilmer.................. TX 2,065 0 750 2,065 2,815 826 1970 1985 Gladewater.............. TX 2,018 0 125 2,018 2,143 443 1971 1993 Houston................. TX 4,155 0 408 4,155 4,563 923 1986 1993 Humble.................. TX 1,821 0 140 1,821 1,961 421 1973 1990 Huntsville.............. TX 1,930 0 135 1,930 2,065 446 1968 1990 Linden.................. TX 2,520 0 25 2,520 2,545 553 1968 1993 Marshall................ TX 865 0 19 865 884 385 1964 1986 McKinney................ TX 1,456 0 1,318 1,456 2,774 464 1967 1987 Mount Pleasant.......... TX 2,505 0 40 2,505 2,545 550 1970 1993 Nacogdoches............. TX 1,104 0 135 1,104 1,239 255 1973 1990 New Boston.............. TX 2,366 0 44 2,366 2,410 519 1966 1993
36
Gross Amount at which Carried Costs at Close of Period(1) Initial Cost Capitalized ----------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- ------- ------------ -------- ------ ------------ -------- (Dollar amounts in thousands) Omaha................... TX $ 1,579 $ 0 $ 28 $ 1,579 $ 1,607 $ 347 1970 1993 San Antonio............. TX 2,033 0 32 2,033 2,065 470 1963 1990 San Antonio............. TX 1,636 0 221 1,636 1,857 378 1965 1990 Sherman................. TX 2,075 0 67 2,075 2,142 455 1971 1993 Texarkana............... TX 1,244 0 87 1,244 1,331 477 1983 1986 Waxahachie.............. TX 3,493 0 319 3,493 3,812 1,084 1976 1987 Annadale................ VA 7,752 0 487 7,752 8,239 3,102 1961 1985 Charlottsville.......... VA 4,620 0 362 4,620 4,982 1,849 1966 1985 Petersburg.............. VA 2,945 0 94 2,945 3,039 1,178 1977 1985 Petersburg.............. VA 2,215 0 93 2,215 2,308 886 1973 1985 Battleground............ WA 2,226 0 84 2,226 2,310 723 1963 1986 Kennewick............... WA 4,459 0 297 4,459 4,756 347 1959 1997 Moses Lake.............. WA 4,307 1,326 304 5,633 5,937 744 1972 1994 Moses Lake.............. WA 2,385 0 164 2,385 2,549 424 1988 1994 Seattle................. WA 5,752 0 1,223 5,752 6,975 791 1993 1994 Shelton................. WA 4,382 0 326 4,382 4,708 119 1998 1997 Tacoma.................. WA 1,503 0 575 1,503 2,078 488 1939 1987 Chilton................. WI 2,275 0 55 2,275 2,330 872 1963 1986 Florence................ WI 1,529 0 15 1,529 1,544 586 1970 1986 Green Bay............... WI 2,255 0 300 2,255 2,555 864 1968 1986 Oconto.................. WI 2,071 0 50 2,071 2,121 794 1972 1986 Sheboyan................ WI 1,697 0 219 1,697 1,916 647 1968 1986 Shorewood............... WI 5,744 0 706 5,744 6,450 2,188 1971 1986 St. Francis............. WI 535 0 80 535 615 204 1964 1986 Tomah................... WI 1,745 0 115 1,745 1,860 698 1974 1985 Wisconsin Dells......... WI 1,697 0 81 1,697 1,778 647 1972 1986 -------- ------- ------- -------- -------- -------- 461,491 17,954 47,635 479,445 527,080 115,588 -------- ------- ------- -------- -------- -------- Assisted Living Facilities: Decatur................. AL 1,825 0 1,484 1,825 3,309 169 1987 1996 Hanceville.............. AL 2,447 0 197 2,447 2,644 204 1996 1996 Benton.................. AR 1,479 0 182 1,479 1,661 67 1988 1998 Chandler................ AZ 2,753 0 505 2,753 3,258 97 1998 1998 Mesa.................... AZ 1,391 2,700 519 4,091 4,610 465 1985 1996 Capistrano.............. CA 6,344 235 700 6,579 7,279 746 1985 1995 Capistrano.............. CA 3,834 172 1,225 4,006 5,231 522 1985 1995 Carmichael.............. CA 7,929 755 1,500 8,684 10,184 1,300 1983 1995 Chula Vista............. CA 6,281 72 950 6,353 7,303 750 1989 1995 Encinitas............... CA 5,017 126 1,000 5,143 6,143 718 1984 1995 Mission Viejo........... CA 3,544 89 900 3,633 4,533 474 1985 1995 Novato.................. CA 3,658 403 2,500 4,061 6,561 549 1978 1995 Placentia............... CA 3,801 184 1,320 3,985 5,305 588 1983 1995 Rancho Cucamonga........ CA 4,156 269 610 4,425 5,035 565 1987 1995 San Dimas............... CA 3,577 225 1,700 3,802 5,502 505 1975 1995 San Jose................ CA 7,252 0 850 7,252 8,102 317 1998 1998 Santa Maria............. CA 2,649 118 1,500 2,767 4,267 381 1977 1995
37
Gross Amount at which Carried at Close of Costs Period(1) Initial Cost Capitalized ---------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- ------- ------------ ------- ------ ------------ -------- (Dollar amounts in thousands) Vista................... CA $ 3,701 $ 82 $ 350 $ 3,783 $ 4,133 $ 486 1980 1996 Aurora.................. CO 10,217 0 715 10,217 10,932 190 1999 1999 Aurora.................. CO 7,923 0 919 7,923 8,842 1,056 1983 1995 Boulder................. CO 4,811 0 833 4,811 5,644 481 1985 1995 Boulder................. CO 4,738 0 184 4,738 4,922 542 1992 1995 Brighton................ CO 2,158 0 210 2,158 2,368 135 1997 1997 Hockessin............... DE 4,947 0 345 4,947 5,292 90 1999 1999 Gainesville............. FL 2,699 0 356 2,699 3,055 163 1997 1997 Gainesville............. FL 3,313 0 310 3,313 3,623 83 1998 1998 Hudson.................. FL 8,139 550 1,665 8,689 10,354 927 1987 1996 Jacksonville............ FL 2,770 0 226 2,770 2,996 156 1997 1997 Jacksonville............ FL 2,376 0 366 2,376 2,742 163 1997 1997 LeHigh Acres............ FL 2,600 0 307 2,600 2,907 141 1997 1997 Naples.................. FL 10,844 0 1,140 10,844 11,984 222 1999 1999 Naples.................. FL 4,084 0 1,182 4,084 5,266 247 1997 1997 Palm Coast.............. FL 2,580 0 406 2,580 2,986 129 1997 1997 Panama City............. FL 2,659 0 353 2,659 3,012 94 1998 1998 Pensacola............... FL 4,486 0 408 4,486 4,894 64 1999 1999 Pensacola............... FL 1,580 400 170 1,980 2,150 219 1979 1996 Port Charlotte.......... FL 2,655 0 245 2,655 2,900 155 1997 1997 Punta Gorda............. FL 2,691 0 210 2,691 2,901 163 1997 1997 Rotunda................. FL 2,628 0 267 2,628 2,895 131 1997 1997 St. Petersburg.......... FL 2,396 985 2,000 3,381 5,381 328 1993 1995 Tallahassee............. FL 7,594 0 696 7,594 8,290 79 1999 1999 Travares................ FL 2,466 0 156 2.466 2,622 164 1997 1997 Venice.................. FL 2,535 0 376 2,535 2,911 137 1997 1997 Boise................... ID 5,586 5,670 544 11,256 11,800 973 1978 1995 Oak Park................ IL 10,473 0 603 10,473 11,076 786 1993 1997 Carmel.................. IN 3,851 0 805 3,851 4,656 160 1998 1998 Lawrence................ KS 3,822 0 932 3,822 4,754 159 1995 1998 Salina.................. KS 2,887 0 329 2,887 3,216 138 1989 1998 Salina.................. KS 1,921 0 200 1,921 2,121 132 1996 1997 Topeka.................. KS 2,955 0 424 2,955 3,379 164 1986 1998 Murray.................. KY 2,547 0 110 2,547 2,657 134 1998 1998 Mandeville.............. LA 6,521 0 831 6,521 7,352 24 1999 1999 Centerville............. MA 4,766 0 1,705 4,766 6,471 179 1998 1998 Pittsfield.............. MA 9,052 197 1,758 9,249 11,007 340 1998 1998 Hagerstown.............. MD 3,785 0 533 3,785 4,318 47 1999 1999 Riverview............... MI 6,939 66 300 7,005 7,305 960 1987 1995 Jackson................. MO 2,115 0 414 2,115 2,529 116 1990 1998 Hickory................. NC 2,531 0 385 2,531 2,916 111 1997 1998 Deptford................ NJ 3,430 0 655 3,430 4,085 107 1998 1998 Sparks (4).............. NV 7,278 0 714 7,278 7,992 364 1993 1997 Sparks (5).............. NV 5,119 0 505 5,119 5624 292 1991 1997 Dayton.................. OH 1,916 0 270 1,916 2,186 100 1997 1997 Dublin.................. OH 5,793 0 356 5,793 6,149 205 1998 1998 Fairfield............... OH 1,917 0 270 1,917 2,187 116 1997 1997 Greenville.............. OH 2,311 0 215 2,311 2,526 140 1997 1997 Hilliard................ OH 7,056 0 652 7,056 7,708 115 1999 1999
38
Gross Amount at which Carried at Costs Close of Period(1) Initial Cost Capitalized -------------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ -------- (Dollar amounts in thousands) Lancaster............... OH $ 2,084 $ 0 $ 350 $ 2,084 $ 2,434 $ 69 1998 1998 Newark.................. OH 2,047 0 225 2,047 2,272 128 1997 1997 Sharonville............. OH 4,013 37 225 4,050 4,275 555 1987 1995 Springdale.............. OH 2,092 0 440 2,092 2,532 118 1997 1997 Urbana.................. OH 2,118 0 150 2,118 2,268 115 1997 1997 Youngstown.............. OH 2,191 0 470 2,191 2,661 68 1998 1998 Broken Arrow............ OK 1,445 0 178 1,445 1,623 109 1996 1997 Oklahoma City........... OK 3,897 482 392 4,379 4,771 805 1982 1994 Oklahoma City........... OK 1,531 0 175 1,531 1,706 115 1996 1997 Albany.................. OR 3,657 4,531 511 8,188 8,699 861 1968 1995 Albany (6).............. OR 2,465 0 92 2,465 2,557 329 1984 1995 Forest Grove (7)........ OR 3,152 0 401 3,152 3,553 360 1994 1995 Gresham................. OR 4,647 0 0 4,647 4,647 531 1988 1995 McMinnville (8)......... OR 3,976 0 760 3,976 4,736 398 1989 1995 Medford................. OR 4,325 0 314 4,325 4,639 432 1990 1995 Bridgeville............. PA 8,023 0 653 8,023 8,676 151 1999 1999 York.................... PA 3,790 0 413 3,790 4,203 100 1999 1999 Portsmouth.............. RI 8,801 0 1,200 8,801 10,001 55 1999 1999 Clinton................. SC 2,560 0 87 2,560 2,647 80 1997 1998 Columbia................ SC 2,664 0 210 2,664 2,874 116 1997 1998 Greenwood............... SC 2,648 0 107 2,648 2,755 83 1998 1998 Greer................... SC 2,389 0 375 2,389 2,764 80 1998 1998 Brentwood............... TN 2,302 0 600 2,302 2,902 264 1995 1995 Bristol................. TN 4,130 0 406 4,130 4536 95 1999 1999 Germantown.............. TN 4,623 0 755 4,623 5,378 154 1998 1998 Johnson City............ TN 4,289 0 404 4,289 4,693 60 1999 1999 Murfreesboro............ TN 4,240 0 499 4,240 4,739 85 1999 1999 Corsicana............... TX 1,494 0 117 1,494 1,611 115 1996 1996 Dallas.................. TX 3,500 718 308 4,218 4,526 764 1982 1994 Denton.................. TX 1,425 0 185 1,425 1,610 110 1996 1996 Ennis................... TX 1,409 0 119 1,409 1,528 109 1996 1996 Houston................. TX 8,992 0 985 8,992 9,977 168 1999 1999 Houston................. TX 7,232 0 1,089 7,232 8,321 120 1999 1999 Houston................. TX 7,194 0 1,235 7,194 8,429 270 1998 1998 Houston................. TX 7,101 0 1,089 7,101 8,190 132 1999 1999 Lakeway................. TX 10,941 0 579 10,941 11,520 241 1999 1999 Lewisville.............. TX 1,892 0 260 1,892 2,152 122 1997 1997 Mansfield............... TX 1,575 0 225 1,575 1,800 118 1996 1997 Paris................... TX 1,465 0 166 1,465 1,631 113 1996 1996 Pearland................ TX 7,892 0 493 7,892 8,385 296 1998 1998 Richland Hills.......... TX 2,211 0 65 2,211 2,276 56 1998 1998 Richland Hills.......... TX 1,616 0 223 1,616 1,839 121 1996 1997 Weatherford............. TX 1,596 0 145 1,596 1,741 106 1996 1997 Bellevue................ WA 4,467 0 766 4,467 5,233 158 1998 1998 Richland................ WA 6,052 118 172 6,170 6,342 699 1990 1995 Tacoma.................. WA 5,208 0 403 5,208 5,611 326 1997 1997 Yakima.................. WA 5,248 0 500 5,248 5,748 256 1998 1998
39
Gross Amount at which Carried at Costs Close of Period(1) Initial Cost Capitalized -------------------------------- to Building Subsequent Buildings Original and to and Accum. Construction Date Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired - -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ -------- (Dollar amounts in thousands) Menomonee Falls (9).......... WI $ 13,190 $ 0 $ 4,161 $ 13,190 $ 17,351 $ 848 1990 1997 West Allis (10)...... WI 8,117 2,912 682 11,029 11,711 562 1996 1997 Scott Depot.......... WV 4,475 0 705 4,475 5,180 26 1999 1999 ---------- ------- -------- ---------- ---------- -------- ---- ---- 490,489 22,096 70,611 512,585 583,196 33,176 ---------- ------- -------- ---------- ---------- -------- CCRCs Palm Desert.......... CA 9,097 1,730 1,600 10,827 12,427 1,415 1989 1994 Sterling............. CO 2,715 0 400 2,715 3,115 520 1979 1994 Lawrenceville........ GA 10,769 0 723 10,769 11,492 295 1988 1998 Andover (11)......... KS 12,517 0 687 12,517 13,204 842 1987 1997 Norton............... MA 8,272 4,266 1,351 12,538 13,889 521 1968 1996 College Station...... TX 6,008 10 833 6,018 6,851 213 1994 1998 Corpus Christi....... TX 14,929 13,521 1,848 28,450 30,298 1,609 1985 1997 Glendale (12)........ WI 22,905 0 3,824 22,905 26,729 1,420 1988 1997 Waukesha (13)........ WI 28,562 1,827 7,233 30,389 37,622 2,113 1973 1997 ---------- ------- -------- ---------- ---------- -------- 115,774 21,354 18,499 137,128 155,627 8,948 ---------- ------- -------- ---------- ---------- -------- RCFE's Murrietta............ CA 154 0 38 154 192 68 1990 1998 Murrietta............ CA 144 0 35 144 179 8 1990 1998 Murrietta............ CA 118 0 28 118 146 4 1988 1998 ---------- ------- -------- ---------- ---------- -------- 416 0 101 416 517 80 ---------- ------- -------- ---------- ---------- -------- Rehab Scottsdale........... AZ 5,874 0 242 5,874 6,116 1,701 1986 1988 Tucson............... AZ 9,435 0 1,275 9,435 10,710 1,779 1992 1992 ---------- ------- -------- ---------- ---------- -------- 15,309 0 1,517 15,309 16,826 3,480 ---------- ------- -------- ---------- ---------- -------- Clinic Heflin............... AL 2,100 85 248 2,185 2,433 1,399 1997 1997 ---------- ------- -------- ---------- ---------- -------- Construction in Progress 37,593 0 8,101 37,593 45,694 0 ---------- ------- -------- ---------- ---------- -------- GRAND TOTAL $1,123,172 $61,489 $146,712 $1,184,661 $1,331,373 $162,671 ========== ======= ======== ========== ========== ========
- ------- (1) Also represents the approximate cost for Federal income tax purposes. (2) Gross amount at which land is carried at close of period also represents initial cost to the Company. (3)Real estate is security for notes payable in the aggregate of $2,220,000 at 12/31/99. (4) Real estate is security for notes payable in the aggregate of $3,147,000 at 12/31/99. (5) Real estate is security for notes payable in the aggregate of $3,617,000 at 12/31/99. (6) Real estate is security for notes payable in the aggregate of $2,070,000 at 12/31/99. (7) Real estate is security for notes payable in the aggregate of $3,341,000 at 12/31/99. (8) Real estate is security for notes payable in the aggregate of $3,546,000 at 12/31/99. (9) Real estate is security for notes payable in the aggregate of $10,765,000 at 12/31/99. (10)Real estate is security for notes payable in the aggregate of $8,224,000 at 12/31/99. (11)Real estate is security for notes payable in the aggregate of $2,600,000 at 12/31/99. (12)Real estate is security for notes payable in the aggregate of $13,015,000 at 12/31/99. (13)Real estate is security for notes payable in the aggregate of $11,503,000 at 12/31/99. 40
Real Estate Accumulated Properties Depreciation ---------- ------------ (in thousands) Balances at December 31, 1996....................... $ 652,009 $ 89,967 ---------- -------- Acquisitions...................................... 304,213 18,665 Improvements...................................... 15,608 574 Sales............................................. (11,299) (2,129) ---------- -------- Balances at December 31, 1997....................... 960,531 107,077 ---------- -------- Acquisitions...................................... 261,702 26,193 Improvements...................................... 26,800 1,016 Reclassifications................................. 3,500 -- Impairment of long-lived assets................... (5,000) -- Sales............................................. (4,145) (970) ---------- -------- Balances at December 31, 1998....................... 1,243,388 133,316 ---------- -------- Acquisitions...................................... 99,572 33,876 Improvements...................................... 11,100 1,381 Reclassifications................................. 7,300 -- Sales............................................. (29,987) (5,902) ---------- -------- Balances at December 31, 1999....................... $1,331,373 $162,671 ---------- --------
41 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. See Item 1 for details regarding executive officers. Details regarding directors are incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 18, 2000, 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 18, 2000, 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 18, 2000, 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 18, 2000, filed or to be filed pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) Financial Statements Report of Independent Public Accountants Consolidated Balance Sheets at December 31, 1999 and 1998 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements (2) Financial Statement Schedules Report of Independent Public Accountants Schedule III Real Estate and Accumulated Depreciation (b) Reports on Form 8-K None. 42 (c) Exhibits
Exhibit Number Description ------- ----------- 2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Agreement to Merge, dated August 19, 1997, among the Company, Laureate Investments, Inc. and Laureate Properties, Inc., filed as Exhibit 2.1 to the Company's Form 8-K dated October 7, 1997, and incorporated herein by this reference. 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. 3.1(e) Articles Supplementary to the Registrant's Amended and Restated Articles of Incorporation, dated September 24, 1997, filed as Exhibit 3.1 to the Company's Form 8-K dated September 24, 1997, and incorporated herein by this reference. 3.2 Bylaws of the Company as amended January 19, 1996, filed as Exhibit 3.2 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 3.3 Amended and Restated Bylaws of the Company, filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended September 30, 1998, and incorporated herein by this reference. 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.
43
Exhibit Number Description ------- ----------- 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. 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 19, 1996, filed as Exhibit 10.6 to the Company's 10-K for the year ended December 31, 1996, and incorporated herein by this reference. 10.6(a) Amended Stock Option Plan filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended September 30, 1999, 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 Amended and Restated Credit Agreement dated as of July 27, 1999 between the Company and Wells Fargo Bank National Association, Bank of America, N.A., The Bank of New York and KBC Bank N.V. filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by this reference. 10.11 Form of Indemnity Agreement between officers and directors of the Company including John C. Argue, David R. Banks, Sam A. Brooks, Jr., William K. Doyle, Charles D. Miller and Jack D. Samuelson, R. Bruce Andrews, Mark L. Desmond, Stephen J. Insoft, Don M. Pearson, Gary E. Stark, and T. Andrew Stokes, and John J. Sheehan, Jr., filed as Exhibit 10.11 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 10.12 Executive Employment Security Policy, filed as Exhibit 10.12 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 10.13 Employment agreement entered into by and between Nationwide Health Properties, Inc. and R. Bruce Andrews dated as of February 25, 1998, filed as Exhibit 10.13 to the Company's Form 10-K for the year ended December 31, 1998, and incorporated herein by this reference. 10.14 Employment agreement entered into by and between Nationwide Health Properties, Inc. and T. Andrew Stokes dated as of February 25, 1998, filed as Exhibit 10.14 to the Company's Form 10-K for the year ended December 31, 1998, and incorporated herein by this reference. 10.15 Employment agreement entered into by and between Nationwide Health Properties, Inc. and Mark L. Desmond dated as of February 25, 1998, filed as Exhibit 10.15 to the Company's Form 10-K for the year ended December 31, 1998, and incorporated herein by this reference. 21. Subsidiaries of the Company 23. Consents of Experts and Counsel 23.1 Consent of Arthur Andersen LLP 27. Financial Data Schedule
44 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. /s/ R. Bruce Andrews By: _________________________________ R. Bruce Andrews President and Chief Executive Officer Dated: March 17, 2000 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/ Charles D. Miller Chairman and Director March 17, 2000 _______________________________ Charles D. Miller /s/ R. Bruce Andrews President, Chief Executive March 17, 2000 _______________________________ Officer and Director R. Bruce Andrews (Principal Executive Officer) /s/ Mark L. Desmond Senior Vice President and March 17, 2000 _______________________________ Chief Financial Officer Mark L. Desmond (Principal Financial and Accounting Officer) /s/ John C. Argue Director March 17, 2000 _______________________________ John C. Argue /s/ David R. Banks Director March 17, 2000 _______________________________ David R. Banks /s/ William K. Doyle Director March 17, 2000 _______________________________ William K. Doyle /s/ Jack D. Samuelson Director March 17, 2000 _______________________________ Jack D. Samuelson
45 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, 1998 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, 1999 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. A-1-1 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, December 31, 1999 1998 ------------- ------------ Total current assets................................. $ 492,219 $ 695,970 Property and equipment, net.......................... 1,108,188 1,120,315 Total other assets................................... 369,665 344,226 ---------- ---------- Total assets......................................... $1,970,072 $2,160,511 ========== ========== Total current liabilities............................ $ 345,194 $ 357,156 Long-term obligations................................ 776,276 878,270 Other liabilities and deferred items................. 174,696 148,879 Total stockholders' equity........................... 673,906 776,206 ---------- ---------- Total liabilities and stockholders' equity........... $1,970,072 $2,160,511 ========== ==========
A-1-2 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts)
Nine months ended Years ended September 30, December 31, ------------- ---------------------- 1999 1998 1997 ------------- ---------- ---------- Revenues.................................. $1,907,038 $2,822,940 $3,230,300 Costs and expenses: Operating and administrative............ 1,727,368 2,633,135 2,888,021 Interest................................ 54,029 65,938 82,713 Depreciation and amortization........... 74,511 93,722 107,060 Workforce reductions, asset impairments, transaction costs and other unusual items.................................. 199,043 69,443 44,000 Year 2000 remediation................... 10,672 9,719 -- Investigation costs..................... 3,404 1,865 -- ---------- ---------- ---------- 2,069,027 2,873,822 3,121,794 Income (loss) before provision for income taxes and extraordinary charge........... (161,989) (50,882) 108,506 Provision for (benefit from) income taxes.................................... (59,936) (25,936) 49,913 ---------- ---------- ---------- Income (loss) before extraordinary charge and cumulative effect of change in accounting............................... (102,053) (24,946) 58,593 ---------- ---------- ---------- Extraordinary charge, net of income taxes.................................... -- (1,660) -- Cumulative effect of change in accounting, net of income taxes...................... -- (4,415) -- ---------- ---------- ---------- Net income (loss)..................... $ (102,053) $ (31,021) $ 58,593 ========== ========== ========== Income (loss) per share of common stock: Basic: Before extraordinary charge and cumulative effect of change in accounting............................ $ (1.00) $ (.24) $ .57 Extraordinary charge................... -- (.02) -- Cumulative effect of change in accounting............................ -- (.04) -- ---------- ---------- ---------- Net income per share.................. $ (1.00) $ (.30) $ .57 ========== ========== ========== Shares used to compute per share amounts.............................. 102,490 103,762 102,060 ========== ========== ========== Diluted: Before extraordinary charge and cumulative effect of change in accounting............................ $ (1.00) $ (.24) $ .57 Extraordinary change................... -- (.02) -- Cumulative effect of change in accounting............................ -- (.04) -- ---------- ---------- ---------- Net income per share.................. $ (1.00) $ (.30) $ .57 ========== ========== ========== Shares used to compute per share amounts.............................. 102,490 103,762 103,422 ========== ========== ==========
A-1-3 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine months Years ended Ended December 31, September 30, --------------------- 1999 1998 1997 ------------- --------- ---------- Cash flows from operating activities: Net income (loss)....................... $(102,053) $ (31,021) $ 58,593 --------- --------- ---------- Adjustments to reconcile net income to net cash provided by operating activities............................. 220,740 37,810 85,611 --------- --------- ---------- Net cash provided by operating activities............................... 118,687 6,789 144,204 --------- --------- ---------- Net cash provided by (used for) investing activities............................... (45,187) (230,586) 230,853 --------- --------- ---------- Net cash provided by (used for) financing activities............................... (73,316) 135,845 (339,588) --------- --------- ---------- Net increase (decrease) in cash and cash equivalents.............................. 184 (87,952) 35,469 Cash and cash equivalents at beginning of period................................... 17,278 105,230 69,761 --------- --------- ---------- Cash and cash equivalents at end of period................................... $ 17,462 $ 17,278 $ 105,230 ========= ========= ==========
A-1-4 EX-21 2 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1999
STATE OF INCORPORATION OR NAME ORGANIZATION ---- ---------------- Nationwide Health Properties Finance Corporation............. Delaware MLD Financial Capital Corporation............................ Delaware MLD Wisconsin SNF, Inc. ..................................... Wisconsin MLD Delaware Trust........................................... Delaware MLD Properties, Inc. ........................................ Delaware MLD Properties LLC........................................... Delaware NH Texas Properties Limited Partnership...................... Texas MLD Properties Limited Partnership........................... Delaware
EX-23.1 3 CONSENT OF ARTHUR ANDERSON LLP. EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-35276, Registration Statement File No. 33-64798, Registration Statement File No. 333-32135, Registration Statement File No. 333-17061, Registration Statement File No. 333-20589, and Registration Statement File No. 333-70707. /s/ ARTHUR ANDERSEN LLP Orange County, California March 17, 2000 1 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 16,139 0 7,614 0 0 57,992 1,331,373 162,671 1,430,056 47,218 797,248 0 100,000 4,622 480,968 1,430,056 0 163,865 0 41,096 0 0 51,621 71,148 0 71,148 0 (335) 0 70,813 1.37 1.37
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