-----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, IjD0uIsN4Qn0SCVF2z8d7AN7LeX4IUMRExk8699fYoIDiMqkEGXIEk0xr3SOB87v w9U24sjjBW3OBrjJEqlDtA== 0000877860-96-000007.txt : 19961113 0000877860-96-000007.hdr.sgml : 19961113 ACCESSION NUMBER: 0000877860-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL HEALTH INVESTORS INC CENTRAL INDEX KEY: 0000877860 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 621470956 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10822 FILM NUMBER: 96658168 BUSINESS ADDRESS: STREET 1: 100 VINE ST STE 1402 CITY: MURFREESBORO STATE: TN ZIP: 37130 BUSINESS PHONE: 6158909100 MAIL ADDRESS: STREET 1: P.O. BOX 1102 CITY: MURFREESBORO STATE: TN ZIP: 37133 10-Q 1 9/30/96 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 of 15(d) of the Securities Exchange Act of 1934 For quarter ended September 30, 1996 Commission file number 33-41863 NATIONAL HEALTH INVESTORS, INC. (Exact name of registrant as specified in its Charter) Maryland 62-1470956 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 100 Vine Street Murfreesboro, TN 37130 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (615) 890-9100 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. Yes x No (2) Has been subject to such filing requirements for the past 90 days. Yes x No 22,821,684 shares of common stock were outstanding as of October 31, 1996. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. NATIONAL HEALTH INVESTORS, INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) Sept. 30 Dec. 31 1996 1995 (unaudited) ASSETS Real estate properties: Land $ 20,467 $ 8,238 Buildings and improvements 191,075 136,891 Construction in progress 553 129 212,095 145,258 Less accumulated depreciation (26,936) (22,063) Real estate properties, net 185,159 123,195 Mortgage and other notes receivable 484,198 469,628 Investment in real estate mortgage investment conduits 37,746 38,140 Interest and rent receivable 5,714 6,061 Cash and cash equivalents 1,429 2,122 Deferred costs and other assets 2,975 2,770 Total Assets $717,221 $641,916 LIABILITIES AND DEFERRED INCOME Long-term debt $136,613 $141,103 Credit facilities 49,500 31,750 Convertible subordinated debentures 113,526 82,316 Accounts payable and other accrued expenses 4,230 3,656 Accrued interest 3,120 1,468 Dividends payable 15,694 15,602 Deferred income 10,834 9,040 Commitments, contingencies and guarantees --- --- Total Liabilities and Deferred Income 333,517 284,935 STOCKHOLDERS' EQUITY Cumulative convertible preferred stock, $.01 par value; 10,000,000 shares authorized; 1,291,456 and 2,311,533 shares, respectively, issued and outstanding; stated at liquidation preference of $25 per share 32,286 57,788 Common stock, $.01 par value: 40,000,000 shares authorized; 22,420,457 and 20,535,014 shares, respectively, issued and outstanding 224 205 Capital in excess of par value of common stock 363,467 311,908 Cumulative net income 177,328 128,350 Cumulative dividends (189,601) (141,270) Total Stockholders' Equity 383,704 356,981 Total Liabilities & Stockholders' Equity $717,221 $641,916 The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements. The interim condensed balance sheet at December 31, 1995 is taken from the audited financial statements at that date. NATIONAL HEALTH INVESTORS, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 (in thousands, except share amounts) REVENUES: Mortgage interest income $ 16,057 $ 13,576 $ 46,510 $ 40,622 Rental income 9,135 8,476 25,270 23,441 Investment interest and other income 83 417 726 1,116 25,275 22,469 72,506 65,179 EXPENSES: Interest 5,190 6,267 15,033 21,145 Depreciation and amortization 2,193 1,884 5,792 5,246 General & administrative 953 799 2,703 2,487 8,336 8,950 23,528 28,878 NET INCOME $ 16,939 $ 13,519 $ 48,978 $ 36,301 DIVIDENDS TO PREFERRED STOCKHOLDERS 695 1,442 2,558 5,373 NET INCOME APPLICABLE TO COMMON STOCK $ 16,244 $ 12,077 $ 46,420 $ 30,928 NET INCOME PER COMMON SHARE: Primary $ .73 $ .70 $ 2.15 $ 2.00 Fully diluted $ .71 $ .65 $ 2.07 $ 1.88 FUNDS FROM OPERATIONS PER COMMON SHARE: Primary $ .81 $ .80 $ 2.37 $ 2.30 Fully diluted $ .78 $ .72 $ 2.25 $ 2.08 WEIGHED AVERAGE COMMON SHARES OUTSTANDING: Primary 22,218,269 17,156,968 21,596,934 15,462,229 Fully diluted 27,192,171 23,628,838 27,154,986 22,388,213 Common dividends per share declared $ .70 $ .67 $ 2.10 $ 1.91
The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements. NATIONAL HEALTH INVESTORS, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30 1996 1995 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 48,978 $ 36,301 Depreciation of real estate 4,873 4,463 Amortization of loan and organization costs 919 783 Interest on debenture conversion 209 82 Deferred income 6,054 819 Amortization of deferred income (4,260) (767) Decrease (Increase) in interest & rent receivable 346 (816) Decrease in other assets 39 5 Increase in accounts payable and accrued liabilities 2,226 673 NET CASH PROVIDED BY OPERATING ACTIVITIES 59,384 41,543 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in mortgage and other notes receivable (99,840) (43,544) Collection of mortgage notes receivable 85,664 40,765 Acquisition of property and equipment, net (66,837) (10,917) NET CASH USED IN INVESTING ACTIVITIES (81,013) (13,696) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of short-term loans payable --- (84,792) Repayment of credit facilities (46,750) --- Proceeds from credit facilities 64,500 --- Proceeds from long-term debt 78,168 80,084 Principal payments on long-term debt (82,658) (49,356) Proceeds from sale of subordinated convertible debentures 56,190 --- Financing costs paid (1,548) (167) Dividends paid to shareholders (48,237) (32,212) Sale of stock and exercise of options 1,271 64,910 NET CASH USED IN FINANCING ACTIVITIES 20,936 (21,533) INCREASE IN CASH AND CASH EQUIVALENTS (693) 6,314 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,122 16 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,429 $ 6,330 NATIONAL HEALTH INVESTORS, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30 1996 1995 (in thousands) Supplemental Information: Cash payments for interest expense $ 10,364 $ 20,500 During the nine months ended Sept. 30, 1996 and Sept. 30, 1995, $24,980,000 and $5,256,000 respectively, of Senior Subordinated Convertible Debentures were converted into 916,811 shares and 256,943 shares, respectively, of NHI's common stock: Senior subordinated convertible debentures $(24,980) $ (5,256) Financing costs $ 384 $ 138 Accrued interest $ (209) $ (82) Common stock $ 10 $ 3 Capital in excess of par $ 24,795 $ 5,197 The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements. NATIONAL HEALTH INVESTORS, INC. INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (dollars in thousands)
Cumulative Convertible Capital in Total Preferred Stock Common Stock Excess of Cumulative Cumulative Stockholders Shares Amount Shares Amount Par Value Net Income Dividends Equity BALANCE AT 12/31/95 2,311,533 $ 57,788 20,535,014 $205 $311,908 $128,350 $(141,270) $356,981 Net income -- -- -- -- -- 48,978 -- 48,978 Shares sold -- -- 45,524 -- 1,271 -- -- 1,271 Shares issued in con- version of con- vertible debentures to common stock -- -- 916,811 10 24,795 -- -- 24,805 Shares issued in conversion of pre- ferred stock to common stock (1,020,077) (25,502) 923,108 9 25,493 -- -- -- Dividends to common shareholders ($2.10 per share) -- -- -- -- -- -- (45,773) (45,773) Dividends to preferred shareholders ($1.594 per share) -- -- -- -- -- -- (2,558) (2,558) BALANCE AT 9/30/96 1,291,456 $ 32,286 22,420,457 $224 $363,467 $177,328 $(189,601) $383,704 BALANCE AT 12/31/94 3,802,960 $ 95,074 14,047,563 $140 $140,281 $ 78,658 $ (90,274) $223,879 Net income -- -- -- -- -- 36,301 -- 36,301 Shares sold -- -- 2,502,500 25 64,885 -- -- 64,910 Shares issued in con- version of con- vertible debentures to common stock -- -- 256,943 3 5,197 -- -- 5,200 Shares issued in conversion of pre- ferred stock to common stock (1,064,425) (26,610) 963,271 10 26,600 -- -- -- Common shares sold -- -- -- -- -- -- -- -- Dividends to common shareholders ($1.86 per share) -- -- -- -- -- -- (30,020) (30,020) Dividends to preferred shareholders ($1.594 per share) -- -- -- -- -- -- (5,373) (5,373) BALANCE AT 9/30/95 2,738,535 $ 68,464 17,770,277 $178 $236,963 $114,959 $(125,667) $294,897
NATIONAL HEALTH INVESTORS, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (Unaudited) Note 1. SIGNIFICANT ACCOUNTING POLICIES: The unaudited financial statements furnished herein in the opinion of the management include all adjustments which are necessary to fairly present the financial position, results of operations and cash flows of National Health Investors, Inc. ("NHI" or "Company"). NHI assumes that users of the interim financial statements herein have read or have access to the audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for the preceding fiscal years ended December 31, 1995, 1994 and 1993 and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in the Company's most recent annual report to stockholders have been omitted. The interim financial information contained herein is not necessarily indicative of the results that may be expected for a full year because of various reasons including changes in interest rates, rents and the timing of debt and equity financings. Note 2. EARNINGS PER SHARE Primary earnings per share is based on the weighted average number of common and common equivalent shares outstanding. Common equivalent shares result from the dilutive effect of stock options computed using the treasury stock method. Net income is reduced by dividends to holders of cumulative convertible preferred stock. Fully diluted earnings per share assumes, in addition to the above, the conversion of convertible subordinated debentures, the conversion of cumulative convertible preferred stock and the exercise of all stock options using the treasury stock method. Net income is increased for interest expense on the convertible subordinated debentures. The following table summarizes the earnings and the average number of common shares and common equivalent shares used in the calculation of primary and fully diluted earnings per share. NATIONAL HEALTH INVESTORS, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 PRIMARY: Weighted avg.common shares 22,189,714 17,136,770 21,568,250 15,451,984 Stock options 28,555 20,198 28,684 10,245 Average common shares outstanding 22,218,269 17,156,968 21,596,934 15,462,229 Net income $16,939,000 13,519,000 $48,978,000 $36,301,000 Dividends paid to preferred shareholders ( 695,000) (1,442,000) (2,558,000) (5,373,000) Net income available to common stockholders $16,244,000 $12,077,000 $46,420,000 $30,928,000 Net income per common share $ .73 $ .70 $ 2.15 $ 2.00 FULLY DILUTED: Weighted average common shares 22,189,714 17,136,770 21,568,250 15,451,984 Stock options 29,964 29,244 29,964 29,270 Convertible subordinated debentures 3,723,291 3,637,454 4,008,791 3,769,897 Cumulative convertible pre- ferred stock 1,249,202 2,825,370 1,547,981 3,137,062 Average common shares outstanding 27,192,171 23,628,838 27,154,986 22,388,213 Net income $16,939,000 $13,519,000 $48,978,000 $36,301,000 Interest expense on con- vertible subordinated debentures 2,239,000 1,840,000 7,122,000 5,678,000 Net income assuming con- version of subordinated convertible debentures to common stock $19,178,000 $15,359,000 $56,100,000 $41,979,000 Net income per common share $ .71 $ .65 $ 2.07 $ 1.88 NATIONAL HEALTH INVESTORS, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (Unaudited) Note 3. FUNDS FROM OPERATIONS The following table summarizes the calculation of primary and fully diluted funds from operations (FFO) per share.
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 PRIMARY: Net income $16,939,000 $13,519,000 $48,978,000 $36,301,000 Depreciation of real estate 1,805,000 1,636,000 4,873,000 4,463,000 Dividends paid to preferred shareholders (695,000) (1,442,000) (2,558,000) (5,373,000) Funds from operations $18,049,000 $13,713,000 $51,293,000 $35,391,000 Average common shares outstanding 22,218,269 17,156,968 21,596,934 15,462,229 Funds from operations per common share $ .81 $ .80 $ 2.37 $ 2.30 Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 FULLY DILUTED: Net income $16,939,000 $13,519,000 $48,978,000 $36,301,000 Depreciation of real estate 1,805,000 1,636,000 4,873,000 4,463,000 Interest expense on con- vertible subordinated debentures 2,239,000 1,840,000 7,122,000 5,678,000 Funds from operations assuming conversion of subordinated convertible debentures to common stock 20,983,000 16,995,000 60,973,000 46,442,000 Average common shares outstanding 27,192,171 23,628,838 27,154,986 22,388,213 Funds from operations per common share $ .78 $ .72 $ 2.25 $ 2.08
FFO is net income plus depreciation and amortization. Net income for these purposes excludes the following items, if any: 1) gains or losses from debt restructurings, 2) gains or losses from the sale of property which has been previously depreciated, 3) items classified under generally accepted accounting principles as extraordinary or unusual, and 4) significant nonrecurring events that materially distort the comparative measurement of company performance over time. Depreciation and amortization for these purposes includes only depreciation or amortization of real estate assets and specifically excludes, if any, the depreciation of operating equipment and the amortization of deferred financing costs. For primary FFO, net income is further reduced by dividends paid to preferred shareholders. For fully diluted FFO, net income is increased for interest expense on the convertible subordinated debentures. The reconciliation of FFO to net income which is presented above includes a line-item breakdown of each of the adjustments being used in the calculation of FFO. Weighted average shares are calculated in the same way as they are for the computation of primary and fully diluted earnings per share. Beginning in 1996 and restated for prior years, FFO is being calculated by NHI without adding back to net income the amortization of loan costs, as suggested in the clarified FFO definition provided by the National Association of Real Estate Investment Trusts. Use of the clarified definition of FFO when compared to the calculation used in prior periods results in a one cent and three cent decrease, respectively in fully diluted FFO per share for the three months and nine months ended September 30, 1996 and in a one cent and four cent decrease, respectively in fully diluted FFO per share for the three months and nine months ended September 30, 1995. Note 4. COMMITMENTS AND GUARANTEES: At September 30, 1996, NHI was committed, subject to due diligence and financial performance goals, to fund approximately $66,376,000 in health care real estate projects of which approximately $47,776,000 is expected to be funded within the next 12 months. The commitments include mortgage loans or purchase leaseback agreements for sixteen long-term care centers, two retirement centers and one medical office building all at rates ranging from 10.0% to 11.5%. Also included in the $47,776,000 of commitments is a $18,600,000 commitment secured by first mortgages on 43 long-term care centers. Draws on the $18,600,000 commitment are limited to $3,700,000 annually. NHI has recorded deferred income for commitment fees related to these loans where applicable. In order to obtain the consent of appropriate lenders to NHC's transfer of assets to NHI, NHI guaranteed certain debt ($26,077,000 at September 30, 1996) of NHC. The debt is at fixed and variable interest rates with a weighted average interest rate of 8.3% at September 30, 1996. NHI receives from NHC compensation of approximately $130,000 per annum for the guarantees which is credited against NHC's base rent requirements. In management's opinion, these guarantee fees approximate the guarantee fees that NHI would currently charge to enter into similar guarantees. All of the guaranteed indebtedness discussed above is secured by first mortgages and rights which may be enforced if either party is required to pay under their respective guarantees. NHC has agreed to indemnify and hold harmless NHI against any and all loss, liability or harm incurred by NHI as a result of having to perform under its guarantee of any or all of the guaranteed debt. Also additionally, NHI has also guaranteed bank loans in the amount of $1,524,000 to key employees and directors which amount was utilized for the exercise of NHI stock options. Shares of NHI stock are held as security by NHI and the loans are limited to $100,000 per individual per year. Note 5. REVOLVING LINE OF CREDIT In June, 1996, NHI renegotiated its $100,000,000 revolving line of credit with seven banks. The agreement was previously comprised of a $40,000,000 tranch which matured after one year and a $60,000,000 tranch which matured after three years. Under the revised terms, all of the $100,000,000 revolving line of credit has a three year term which matures in June, 1999. Additionally, the revised line of credit is at a lower spread over LIBOR ("London Interbank Offered Rate") compared to what was available under the previous agreement. The full amount available to be drawn on the line of credit was $50,500,000 at September 30, 1996. Note 6. TERM LOANS In August, 1996, the Company consolidated its three $25,000,000 term loans into one term loan. The new term loan facility has $75,000,000 outstanding and a total of $100,000,000 committed. The term loan bears interest at a premium over LIBOR and matures August 1, 2001. The $25,000,000 available under the term loan will remain available until December 31, 1996 at which time the additional $25,000,000 commitment will be eliminated unless previously borrowed. In September, 1996, NHI received an investment grade rating on its senior unsecured debt. Duff & Phelps Credit Rating Co. assigned a BBB- debt rating citing NHI's stable cash flow provided by a diversified portfolio of investments in health care properties, moderate financial leverage, and a track record of growth and profitability. As a result of receiving this investment grade rating, NHI's borrowing cost has been reduced by 1/8% on its term loan and revolving line of credit facilities. Note 7. CONVERTIBLE SUBORDINATED DEBENTURES: On December 12, 1995 and on January 15, 1996, NHI sold $45,000,000 and $55,000,000, respectively (for a total of $100,000,000) of 7.75% convertible subordinated debentures (the "1995 debentures") due on January 1, 2001. The 1995 debentures are convertible at the option of the holder into the common stock of NHI at a conversion price of $31.625, subject to adjustment. At September 30, 1996, $3,930,000 of the 1995 debentures have been converted into 124,266 shares of common stock. NHI has reserved 3,162,055 shares of common stock for 1995 debenture conversions. On February 9, 1996 and April 12, 1996, NHI issued $1,050,000 and $140,000, respectively of 7% subordinated convertible debentures due on January 1, 2006 (the "1995 debt service debentures"). The debentures may be issued to current and future mortgagees and lessees of NHI to satisfy existing debt service reserve escrow requirements under applicable mortgages or leases. At September 30, 1996, debentures in the amount of $4,861,000 have been issued to mortgagees or lessees to satisfy debt service escrow requirements. The debentures are convertible at the option of the holder into common stock of the Company at a conversion price of 110% of the market price on the date of issuance of the debentures, subject to adjustment. At September 30, 1996, none of the debentures have been converted. At September 30, 1996, $12,295,000 of 7.375% convertible subordinated debentures (the "1993 debentures") remain outstanding. The 1993 debentures are convertible at the option of the holder into the common stock of the Company at a conversion price of $27.25 per share, subject to adjustment. During the nine months ended September 30, 1996, $19,540,000 of the 1993 debentures were converted into 717,045 shares of common stock. The Company has reserved 454,789 shares of common stock for conversion of the 1993 debentures. In addition to the 1993 debentures, $300,000 of the 10% senior convertible subordinated debentures (the "senior debentures") remain outstanding at September 30, 1996. The senior debentures are convertible into the common stock of the Company at $20 per share. During the nine months ended September 30, 1996, $1,510,000 of the senior debentures were converted into 75,500 shares of common stock. The Company has reserved 82,750 shares of common stock for conversion of the senior debentures. Note 8. CUMULATIVE CONVERTIBLE PREFERRED STOCK In February and March, 1994, NHI issued $109,558,000 of 8.5% Cumulative Convertible Preferred Stock ("Preferred Stock") with a liquidation preference of $25 per share. Dividends at an annual rate of $2.125 are cumulative from the date of issuance and are paid quarterly. The Preferred Stock is convertible into NHI common stock at the option of the holder at any time at a conversion price of $27.625 per share of common stock, which is equivalent to a conversion rate of 0.905 per share of common stock for each share of Preferred Stock (subject to adjustment in certain circumstances). The Preferred Stock is not redeemable by NHI prior to February 15, 1999 and is not redeemable for cash. On or after February 15, 1999, the Preferred Stock will be redeemable for common stock. NHI may redeem the Preferred Stock only if the trading price of the Common Stock on the New York Stock Exchange (NYSE) exceeds $27.625 per share for 20 trading days within a period of 30 trading days prior to the exercise. The Preferred Stock is listed on the NYSE under the symbol "NHIPr." Note 9. LIMITS ON COMMON STOCK OWNERSHIP On October 16, 1996, the NHI Board of Directors, pursuant to powers granted by NHI's charter, changed the limit on the percentage of ownership which any person may have in the outstanding common stock of NHI from a limit of 7.0% (as passed on October 17, 1995) to a limit of 9.9%. The limit on ownership of any other class of stock (including issues convertible into common stock) remains at 9.9% of the outstanding stock. This limit is a provision of NHI's charter and is necessary in order to reduce the possibility of NHI's failing to meet the stock ownership requirements for REIT qualification under the Internal Revenue Code. The changing of the limit to 9.9% of the outstanding common stock is made possible by the increase in the number of authorized and issued common shares of NHI since its inception in October, 1991. Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations Overview National Health Investors, Inc. ("NHI" or the "Company") is a real estate investment trust which invests primarily in income producing health care properties with emphasis on the long-term care sector. As of September 30, 1996, NHI had interests in net real estate owned by it and mortgage investments totaling $707.1 million. NHI's strategy is to invest in health care real estate which generates current income which will be distributed to stockholders. NHI intends to implement this strategy by making mortgage loans and acquiring properties to lease nationwide. As of September 30, 1996, the Company has investments in 233 health care facilities located in 26 states consisting of 187 long-term care facilities, three acute care hospitals, eight medical office buildings, eight assisted living facilities, eight retirement centers, and 19 residential projects for the developmentally disabled. These investments consist of approximately $484.2 million aggregate principal amount of loans to 46 borrowers, $185.2 million of purchase leaseback transactions with nine lessees and $37.7 million invested in REMIC pass through certificates backed by first mortgage loans to seven operators. Of these 233 facilities, 43 are leased to NHC and nine additional facilities are managed by NHC. (NHC is the Company's investment advisor.) Consistent with its strategy of diversification, the Company has reduced the portion of its portfolio operated by NHC from 100.0% of total real estate assets on October 17, 1991 to approximately 20.1% of total real estate assets on September 30, 1996. Capital Resources and Liquidity NHI has generated net cash from operating activities for the first nine months of 1996 in the amount of $59.4 million. The funds were used along with $56.2 million (net of financing costs paid) proceeds from the sale of subordinated convertible debentures, $85.7 million from the collection of mortgage notes receivable, $17.8 million of net proceeds from credit facilities and $1.3 million from the sale of common stock to make additional investments in income producing assets and real estate properties totaling approximately $166.7 million, to repay long-term debt in a net amount of $4.5 million and to pay dividends to stockholders of $48.2 million. In September, 1996, NHI received an investment grade rating on its senior unsecured debt. Duff & Phelps Credit Rating Co. assigned a BBB- debt rating citing NHI's stable cash flow provided by a diversified portfolio of investments in health care properties, moderate financial leverage, and a track record of growth and profitability. In June 1996, NHI renegotiated its $100 million revolving line of credit for a lower spread over LIBOR compared to what was previously available and also to extend the maturity date for the entire $100 million credit agreement to June, 1999. The amount available to be drawn on the line of credit was $50.5 million at September 30, 1996. In January of 1996, NHI collected $54.7 million in proceeds from the sale of 7.75% convertible subordinated debentures. The Company's balance sheet was further strengthened by the conversion of $25.5 million of NHI's outstanding convertible preferred stock and $25.0 million of convertible debentures to common equity during the first nine months of 1996. NHI's nonconvertible debt as a percentage of total capitalization has been lowered from 45% at the end of 1994 to 28% at December 31, 1995 and to 27% at September 30, 1996. The Company continues to be well positioned to take advantage of new investment opportunities. At September 30, 1996, the Company was committed, subject to due diligence and financial performance goals, to fund approximately $66.4 million in health care real estate projects, of which approximately $47.8 million is expected to be funded within the next 12 months. The commitments include mortgage loans or purchase leaseback agreements for 16 long-term health care centers, two retirement centers and one medical office building, generally at rates ranging from 10.0% to 11.5%. Included in the $66.4 million of commitments is a $18.6 million commitment which amount is secured by first mortgages on 43 long- term care centers. Draws on the $18.6 million commitment are limited to $3.7 million annually. Furthermore, the Company anticipates that it will in the future continue to make additional investments in health care properties. Financing for NHI's current commitments and future commitments to others may be provided by borrowings under NHI's bank credit facilities, new lines of credit, private placements or public offerings of debt or equity, and the assumption of secured or unsecured indebtedness or by the sale of all or a portion of certain currently held investments. Results of Operations Three Months Ended September 30, 1996 Compared to Three Months Ended September 30, 1995 Net income for the three months ended September 30, 1996 is $16.9 million versus $13.5 million for the same period of 1995, an increase of 25.3%. Fully diluted earnings per common share increased six cents or 9.2% to 71 cents in the 1996 period from 65 cents in the 1995 period. Fully diluted funds from operations applicable to common stock for the 1996 three months period were $21.0 million or 78 cents per share versus $17.0 million or 72 cents per share for the 1995 period, a per share increase of 8.3%. Total revenues for the three months ended September 30, 1996 increased $2.8 million or 12.5% to $25.3 million from $22.5 million for the three months ended September 30, 1995. Revenues from mortgage interest income increased $2.5 million or 18.3% in the 1996 period as compared to the 1995 period. Revenues from rental income increased $0.7 million or 7.8% when compared to the same period in 1995. These increases resulted primarily from investments in additional facilities during the last 12 months and increased "revenue participations" and "additional rent" earned under the Company's existing mortgages and leases. Total expenses for the 1996 three month period decreased $0.6 million or 6.9% to $8.3 million from $9.0 million for the 1995 three month period. Interest expenses decreased $1.1 million or 17.2% in the 1996 three month period as compared to the 1995 three month period. Depreciation and amortization increased $0.3 million or 16.4% when compared to the same period in 1995. General and administrative expenses in 1996 increased $0.1 million or 19.3% when compared to the 1995 period. The decrease in interest expense was due to decreased debt levels resulting from the paydown of credit facility debt (average outstanding balance, $89.2 million in the three months ended September 30, 1995, $38.0 million in 1996) and from the conversion of 7.375% and 10% convertible debentures to common stock (average outstanding balance $100.6 million in 1995, $21.1 million during the three months ended September 30, 1996). The decrease in interest expense was offset in part by interest on 7.75% convertible debt which was not outstanding in the 1995 three month period but which was outstanding in an average amount of %97.3 million for the 1996 three month period. Depreciation increased as a result of the Company's placing of newly constructed assets in service in 1995 and 1996. General and administrative expenses increased due to increased administrative expenses and advisory fees to NHC. Nine Months ended September 30, 1996 Compared to Nine Months Ended September 30, 1995. Net income for the nine months ended September 30, 1996 is $49.0 million versus $36.3 million for the same period of 1995, an increase of 34.9%. Fully diluted earnings per common share increased 19 cents or 10.1% to $2.07 in the 1996 period from $1.88 in the 1995 period. Fully diluted funds from operations applicable to common stock for the 1996 nine month period were $60.9 million or $2.25 per share versus $46.4 million or $2.08 per share for the 1995 period, a per share increase of 8.2%. FFO is calculated using the National Association of Real Estate Investment Trusts clarified definition of funds from operations which NHI has adopted in 1996. Use of the clarified definition when compared to the calculation used in prior periods results in a one cent and three cent decrease, respectively in fully diluted FFO per share for the three months and nine months ended September 30, 1996 and in a one cent and four cent decrease, respectively in fully diluted FFO for the three months and nine months ended September 30, 1995. Total revenues for the nine months ended September 30, 1996 increased $7.3 million or 11.2% to $72.5 million from $65.2 million for the nine months ended September 30, 1995. Revenues from mortgage interest income increased $5.9 million or 14.5% in the 1996 period as compared to the 1995 period. Revenues from rental income increased $1.8 million or 7.8% when compared to the same period in 1995. These increases resulted primarily from investments in additional facilities during the last 12 months and increased "revenue participations" and "additional rent" earned under the Company's existing mortgages and leases. Total expenses for the 1996 nine month period decreased $5.4 million or 18.5% to $23.5 million from $28.9 million for the 1996 nine month period. Interest expenses decreased $6.1 million or 28.9% in the 1996 nine month period as compared to the 1995 nine month period. Depreciation and amortization increased $0.5 million or 10.4% when compared to the same period in 1995. Other operating expenses in 1996 increased $0.2 million or 8.7% when compared to the 1995 period. The decrease in interest expense was due to decreased debt levels resulting from the paydown of credit facility debt (average outstanding balance, $121.9 million in the nine months ended September 30, 1995, $12.7 million in the nine months ended September 30, 1996) and from the conversion of 7.375% and 10% convertible debentures to common stock (average outstanding balance $100.6 million in 1995, $21.1 million in 1996). The decrease in interest expense was offset in part by the increased interest on 7.75% convertible debt, $45.0 million of which was issued in December, 1995 and $55.0 million of which was issued in January, 1996. Depreciation increased as a result of the Company's placing of newly constructed assets in service in 1995 and 1996. General and administrative expenses increased due to increased administrative expenses and advisory fees to NHC. Future Growth The Company expects increases in both mortgage interest income and rental income from additional investments in mortgage loans and owned facilities during 1996. The Company expects to continue to make additional investments in health care facilities that would increase interest and rental revenues as well as interest and depreciation expense. Increases in revenues are expected to more than offset increases in associated expenses. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities. Not applicable Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) List of exhibits - Exhibit 27 - Financial Data Schedule (for SEC purposes only) (b) Reports on Form 8-K - none required SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL HEALTH INVESTORS, INC. (Registrant) Date November 11, 1996 s/Richard F. LaRoche, Jr. Richard F. LaRoche, Jr. Secretary Date November 11, 1996 s/Donald K. Daniel Donald K. Daniel Principal Accounting Officer EX-27 2
5 This schedule contains summary financial information extracted from the Interim Condensed Consolidated Balance Sheets and the Interim Condensed Consolidated Statements of Income and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1996 JAN-1-1996 SEP-30-1996 1,429,000 0 521,944,000 0 0 0 212,095,000 (26,936,000) 717,221,000 0 299,639,000 0 32,286,000 224,000 351,194,000 717,221,000 0 72,506,000 0 0 2,703,000 0 15,033,000 0 0 0 0 0 0 48,978,000 2.15 2.07
-----END PRIVACY-ENHANCED MESSAGE-----