TOLEDO, Ohio--(BUSINESS WIRE)--Oct. 18, 2006--Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its third quarter ended September 30, 2006.
Third Quarter Highlights.
- Announced merger agreement with Windrose Medical Properties Trust to further diversify and expand our health care real estate portfolio with over 550 properties and approximately $4 billion in gross real estate investments
- Completed net new investments totaling $163.3 million for the quarter and $330.4 million year-to-date
- Increased 2006 FAD guidance to $3.04-$3.06 per diluted share from $2.95-$3.03 per diluted share
- Expanded and extended existing unsecured line of credit to $700 million
- Increased portfolio payment coverage to 1.95x from 1.93x in the prior quarter
Key Performance Indicators.
Quarter Quarter Year Year
Ended Ended Percentage To Date To Date Percentage
9/30/06 9/30/05 Change 9/30/06 9/30/05 Change
----------------------------------------------------------------------
Net Income
Available to
Common
Stockholders
per Diluted
Share $0.34 $0.37 -8% $1.04 $0.67 55%
----------------------------------------------------------------------
FFO per Diluted
Share $0.73 $0.77 -5% $2.18 $1.85 18%
----------------------------------------------------------------------
FFO per Diluted
Share -
Adjusted (1) $0.73 $0.77 -5% $2.18 $2.19 0%
----------------------------------------------------------------------
FAD per Diluted
Share $0.75 $0.77 -3% $2.34 $1.77 32%
----------------------------------------------------------------------
FAD per Diluted
Share -
Adjusted (1) $0.75 $0.77 -3% $2.34 $2.12 10%
----------------------------------------------------------------------
Common Dividends
per Share $0.64 $0.62 3% $1.90 $1.84 3%
----------------------------------------------------------------------
FFO Payout Ratio 88% 81% 87% 99%
----------------------------------------------------------------------
FFO Payout Ratio
- Adjusted (1) 88% 81% 87% 84%
----------------------------------------------------------------------
FAD Payout Ratio 85% 81% 81% 104%
----------------------------------------------------------------------
FAD Payout Ratio
- Adjusted (1) 85% 81% 81% 87%
----------------------------------------------------------------------
(1) Adjusted for loss on extinguishment of debt in 2Q05.
3Q06 Earnings Discussion. The third quarter 2006 reported net income available to common stockholders of $0.34 per diluted share includes $108,000 of gains on sales of real property. FAD for third quarter 2006 was higher than FFO by $1.4 million ($0.02 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
3Q06 FFO and FAD.
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
9/30/06 9/30/05 Percentage 9/30/06 9/30/05 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted Share $0.73 $0.77 -5% $0.75 $0.77 -3%
----------------------------------------------------------------------
Included items:
----------------------------------------------------------------------
Cash receipts -
prepaid/
straight-line
rent $0.05 $0.05
----------------------------------------------------------------------
Per Diluted Share
- Normalized $0.70 $0.72 -3%
----------------------------------------------------------------------
2006 Earnings Discussion. The reported net income available to common stockholders of $1.04 per diluted share for the nine months ended September 30, 2006 includes $2.6 million ($0.04 per diluted share) of gains on sales of real property. The 2005 net income available to common stockholders of $0.67 per diluted share included $18.4 million ($0.34 per diluted share) of loss on extinguishment of debt. FAD for 2006 was higher than FFO by $9.8 million ($0.16 per diluted share) due to cash rental receipts in excess of gross straight-line rental income. Please see Exhibits 13 and 14 for reconciliations of net income available to common stockholders to FAD and FFO. The following table summarizes the items impacting FFO and FAD:
Year Year Year Year
To Date To Date To Date To Date
9/30/06 9/30/05 Percentage 9/30/06 9/30/05 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted Share $2.18 $1.85 18% $2.34 $1.77 32%
----------------------------------------------------------------------
Debt
extinguishment
charges, net $0.34 $0.34
----------------------------------------------------------------------
Per Diluted Share
- Adjusted $2.18 $2.19 0% $2.34 $2.12 10%
----------------------------------------------------------------------
Included items:
----------------------------------------------------------------------
Cash receipts -
prepaid/
straight-line
rent $0.27 $0.11
----------------------------------------------------------------------
Per Diluted Share
- Normalized $2.07 $2.00 4%
----------------------------------------------------------------------
Dividends for Third Quarter 2006. As previously announced, the Board of Directors declared a dividend for the quarter ended September 30, 2006 of $0.64 per share as compared to $0.62 per share for the same period in 2005. The dividend represents the 142nd consecutive dividend payment. The dividend will be payable November 20, 2006 to stockholders of record on October 31, 2006.
Development Initiative. The company currently expects to fund $175 million for development during 2006 comprised of $150 million on existing projects and an additional $25 million from projects which have yet to commence. The $150 million of expected funding from existing projects is comprised of $107 million funded during the nine months ended September 30, 2006 and $43 million expected to be funded during the fourth quarter of 2006. The information contained in Exhibit 8 relates only to development projects for which initial funding has commenced as of September 30, 2006, and does not include any additional development projects which may commence later in 2006.
Outlook for 2006. The company is revising its gross investment guidance to a range of $525 to $575 million from $525 to $600 million for 2006. Gross investments are comprised of $350 to $400 million of acquisitions and advances on existing assets and $175 million of funded new development. The company expects $150 million of dispositions, resulting in net investments of $375 to $425 million. The company is refining its 2006 guidance for net income available to common stockholders to a range of $1.38 to $1.40 per diluted share from a range of $1.34 to $1.42 per diluted share. The company is refining its 2006 FFO guidance to a range of $2.91 to $2.93 per diluted share from a range of $2.88 to $2.96 per diluted share. The company is increasing its 2006 FAD guidance to a range of $3.04 to $3.06 per diluted share from a range of $2.95 to $3.03 per diluted share primarily due to the cash receipts of $3.3 million during the third quarter of 2006.
The company's guidance excludes any impairments, unanticipated additions to the loan loss reserve or other additional one-time items, including any additional cash payments outside the normal monthly rental payments. Please see Exhibit 15 for a reconciliation of the outlook for net income available to common stockholders to FFO and FAD.
Windrose Merger Update. The company and Windrose Medical Properties Trust are working towards successfully closing the transaction and integrating the two companies. Management continues to anticipate that the merger will close on or around year-end 2006.
Conference Call Information. The company has scheduled a conference call on October 19, 2006 at 9:00 a.m. Eastern time to discuss its third quarter and year-to-date results, industry trends, portfolio performance and outlook for 2006. Telephone access will be available by dialing 800-811-0667 or 913-981-4901 (international). For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the call through November 2, 2006. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 2816324. To participate in the webcast, log on to www.hcreit.com or www.earnings.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through the same Web sites. This earnings release is posted on the company's Web site under the heading Press Releases.
Supplemental Reporting Measures. The company believes that net income, as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FAD represents FFO excluding the net straight-line rental adjustments.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. The company believes that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of its operations. Additionally, restrictive covenants in the company's long-term debt arrangements contain financial ratios based on EBITDA. The company primarily utilizes EBITDA to measure its interest coverage ratio, which represents EBITDA divided by total interest, and its fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred stock dividends.
In April 2002, the Financial Accounting Standards Board issued Statement No. 145 that requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement No. 4. The company adopted the standard effective January 1, 2003 and has properly reflected the prior year loss on extinguishment of debt which may not be added back to net income in the calculation of FFO, FAD or EBITDA. Although the company has adopted this treatment, it has also disclosed FFO, FAD and EBITDA adjusted for the loss on extinguishment of debt for enhanced clarity.
FFO, FAD and EBITDA are financial measures that are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The company's management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, FFO and FAD are utilized by the Board of Directors to evaluate management. FFO, FAD and EBITDA do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, FFO, FAD and EBITDA, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Please see Exhibits 12, 13 and 14 for reconciliations of EBITDA, FAD and FFO to net income.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care and senior housing properties. At September 30, 2006, the company had investments in 477 facilities in 37 states with 58 operators and had total assets of approximately $3.2 billion. The portfolio included 39 independent living/continuing care retirement communities, 204 assisted living facilities, 220 skilled nursing facilities and 14 specialty care facilities. More information is available on the Internet at www.hcreit.com.
This document may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company's portfolio; the sale of properties; the performance of its operators and properties; its ability to enter into agreements with new viable tenants for properties that the company takes back from financially troubled tenants, if any; its ability to make distributions; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; and its ability to meet its earnings guidance. When the company uses words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company's expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including prevailing interest rates; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies and operators' difficulty in obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and senior housing industries; negative developments in the operating results or financial condition of operators, including, but not limited to, their ability to pay rent and repay loans; the company's ability to transition or sell facilities with a profitable result; the failure of closings to occur as and when anticipated; acts of God affecting the company's properties; the company's ability to reinvest sale proceeds at similar rates to assets sold; operator bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates; liability claims and insurance costs for operators; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company's properties; delays in reinvestment of sale proceeds; changes in rules or practices governing the company's financial reporting; and structure related factors, including real estate investment trust qualification, anti-takeover provisions and key management personnel. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements.
FINANCIAL SCHEDULES FOLLOW
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
September 30
------------------------
2006 2005
------------------------
Assets
Real estate investments:
Real property owned
Land $ 276,480 $ 225,604
Buildings & improvements 2,815,206 2,373,762
Real property held for sale, net of
accumulated depreciation 27,678 52,167
Construction in progress 98,675 1,135
------------ -----------
3,218,039 2,652,668
Less accumulated depreciation (332,925) (265,478)
------------ -----------
Total real property owned 2,885,114 2,387,190
Loans receivable 216,870 235,259
Less allowance for losses on loans receivable (7,156) (6,161)
------------ -----------
209,714 229,098
------------ -----------
Net real estate investments 3,094,828 2,616,288
Other assets:
Equity investments 5,070 3,298
Deferred loan expenses 12,309 8,781
Cash and cash equivalents 15,490 27,119
Receivables and other assets 73,132 81,412
------------ -----------
106,001 120,610
------------ -----------
Total assets $ 3,200,829 $2,736,898
============ ===========
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 276,000 $ 304,000
Senior unsecured notes 1,196,897 894,830
Secured debt 130,405 174,324
Accrued expenses and other liabilities 50,558 44,048
------------ -----------
Total liabilities 1,653,860 1,417,202
Stockholders' equity:
Preferred stock 276,875 276,989
Common stock 63,005 54,534
Capital in excess of par value 1,469,491 1,191,240
Treasury stock (2,714) (1,766)
Cumulative net income 909,894 798,183
Cumulative dividends (1,171,302) (999,737)
Accumulated other
comprehensive income 0 1
Other equity 1,720 252
------------ -----------
Total stockholders' equity 1,546,969 1,319,696
------------ -----------
Total liabilities and stockholders' equity $ 3,200,829 $2,736,898
============ ===========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2006 2005 2006 2005
------------------ -------------------
Revenues:
Rental income $ 75,290 $64,516 $220,002 $180,960
Interest income 4,436 4,997 13,178 15,249
Transaction fees and other
income 1,019 773 3,049 2,742
--------- -------- --------- ---------
Gross revenues 80,745 70,286 236,229 198,951
Expenses:
Interest expense 24,007 20,477 70,587 57,707
Provision for depreciation 24,094 19,915 70,256 56,879
General and administrative 5,223 4,640 16,517 12,993
Loan expense 782 673 2,199 2,209
Loss on extinguishment of debt 0 0 0 18,448
Provision for loan losses 250 300 750 900
--------- -------- --------- ---------
Total expenses 54,356 46,005 160,309 149,136
--------- -------- --------- ---------
Income from continuing
operations 26,389 24,281 75,920 49,815
Discontinued operations:
Gain (loss) on sales of
properties 108 0 2,590 (134)
Income from discontinued
operations, net 316 1,016 1,281 2,685
--------- -------- --------- ---------
424 1,016 3,871 2,551
--------- -------- --------- ---------
Net income 26,813 25,297 79,791 52,366
Preferred dividends 5,333 5,389 15,998 16,261
--------- -------- --------- ---------
Net income (loss) available to
common stockholders $ 21,480 $19,908 $ 63,793 $ 36,105
========= ======== ========= =========
Average number of common shares
outstanding:
Basic 62,524 54,038 60,766 53,498
Diluted 62,866 54,359 61,102 53,867
Net income (loss) available to
common stockholders per share:
Basic $ 0.34 $ 0.37 $ 1.05 $ 0.67
Diluted 0.34 0.37 1.04 0.67
Common dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
HEALTH CARE REIT, INC.
Financial Supplement - September 30, 2006
Portfolio Composition Exhibit 1
-----------------------------
($000's except Investment per Bed/Unit)
Balance Sheet Data # #
Properties Beds/Units Balance % Balance
-------------------------------------------------
Real Property 456 47,040 $2,885,114 93%
Loans Receivable (1) 21 2,127 216,870 7%
-------------------------------------------------
Totals 477 49,167 $3,101,984 100%
# # %
Investment Balances Properties Beds/Units Investment (2) Investment
-------------------------------------------------
Independent/CCRCs 39 5,224 $ 488,863 16%
Assisted Living
Facilities 204 12,615 996,318 32%
Skilled Nursing
Facilities 220 30,063 1,413,508 46%
Specialty Care
Facilities 14 1,265 205,745 6%
-------------------------------------------------
Totals 477 49,167 $3,104,434 100%
Investment
# # Committed per
Committed Investments Properties Beds/Units Balance (3) Bed/Unit
-------------------------------------------------
Independent/CCRCs 39 5,224 $ 588,940 $112,737
Assisted Living
Facilities 204 12,615 1,116,176 88,480
Skilled Nursing
Facilities 220 30,063 1,432,850 47,662
Specialty Care
Facilities 14 1,265 231,580 183,067
-------------------------------------------------
Totals 477 49,167 $3,369,546 -na-
Notes: (1) Includes $10,979,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$3,101,984,000 and $2,450,000, respectively.
(3) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
Selected Facility Data Exhibit 2
------------------------
Coverage Data
--------------------
% Payor Mix
------------------------- Before After Mgt.
Census Private Medicare Medicaid Mgt. Fees Fees
-------------------------------- --------------------
Independent/CCRCs 90% 98% 1% 1% 1.47x 1.25x
Assisted Living
Facilities 88% 82% 0% 18% 1.51x 1.30x
Skilled Nursing
Facilities 86% 18% 16% 66% 2.16x 1.55x
Specialty Care
Facilities 70% 20% 58% 22% 3.18x 2.65x
--------------------
Weighted Averages 1.95x 1.53x
Notes: Data as of June 30, 2006.
Investment Concentrations ($000's) Exhibit 3
---------------------------------------
Concentration by Operator # Properties Investment % Investment
------------- ------------- ------------
Emeritus Corporation 50 $ 356,023 11%
Brookdale Senior Living Inc. 87 286,392 9%
Home Quality Management,
Inc. 37 246,979 8%
Life Care Centers of
America, Inc. 26 230,698 7%
Merrill Gardens L.L.C. 13 200,231 6%
Remaining operators (53) 264 1,784,111 59%
------------- ------------- ------------
Totals 477 $3,104,434 100%
Concentration by Region # Properties Investment % Investment
------------- ------------- ------------
South 285 $1,572,043 51%
Northeast 61 482,485 16%
West 65 517,293 17%
Midwest 66 532,613 16%
------------- ------------- ------------
Totals 477 $3,104,434 100%
Concentration by State # Properties Investment % Investment
------------- ------------- ------------
Florida 67 $ 478,422 15%
Massachusetts 35 328,127 11%
Ohio 31 254,753 8%
Texas 56 240,962 8%
North Carolina 43 199,186 6%
Remaining States (32) 245 1,602,984 52%
------------- ------------- ------------
Totals 477 $3,104,434 100%
Revenue Composition ($000's) Exhibit 4
---------------------------------
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------ ------------------
Revenue by Investment Type (1)
Real Property $ 77,058 94% $226,609 94%
Loans Receivable 4,702 6% 13,574 6%
------------------ ------------------
Totals $ 81,760 100% $240,183 100%
Revenue by Facility Type (1)
Independent/CCRCs $ 10,273 13% $ 29,756 12%
Assisted Living Facilities 28,470 35% 85,271 36%
Skilled Nursing Facilities 38,194 47% 111,262 46%
Specialty Care Facilities 4,823 5% 13,894 6%
------------------ ------------------
Totals $ 81,760 100% $240,183 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
Revenue Maturities ($000's) Exhibit 5
-----------------------------
Operating Lease Expirations & Loan Maturities
Current Current Lease and
Lease Interest Interest
Year Revenue (1) Revenue (1) Revenue % of Total
----------------------------------------------------------------------
2006 $ 3,603 $ 211 $ 3,814 1%
2007 0 1,324 1,324 0%
2008 0 2,737 2,737 1%
2009 906 2,347 3,253 1%
2010 1,089 2,704 3,793 1%
Thereafter 301,648 9,302 310,950 96%
----------------------------------------------------
Totals $307,246 $18,625 $325,871 100%
Notes: (1) Revenue impact by year, annualized.
Debt Maturities and Principal Payments ($000's) Exhibit 6
--------------------------------------------------------
Lines of Senior Secured
Year Credit (1) Notes (2) Debt Total
----------------------------------------------------------------------
2006 $ 0 $ 0 $ 787 $ 787
2007 40,000 52,500 15,074 107,574
2008 0 42,330 10,289 52,619
2009 700,000 0 33,807 733,807
2010 0 0 8,733 8,733
2011 0 0 20,472 20,472
2012 0 250,000 14,851 264,851
Thereafter 0 850,000 26,392 876,392
----------------------------------------------------
Totals $740,000 $1,194,830 $130,405 $2,065,235
Notes: (1) Reflected at 100% capacity.
(2) Amounts above represent principal amounts due and do not
reflect unamortized premiums/discounts or the fair value
of interest-rate swap agreements as reflected on the
balance sheet.
Investment Activity ($000's) Exhibit 7
--------------------------------
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------- ------------------
Funding by Investment Type
Real Property $115,015 65% $319,270 81%
Loans Receivable 60,765 35% 76,544 19%
------------------- ------------------
Total $175,780 100% $395,814 100%
Funding by Facility Type
Independent/CCRCs $ 37,657 21% $ 73,435 19%
Assisted Living Facilities 20,046 11% 90,872 23%
Skilled Nursing Facilities 101,036 57% 210,746 53%
Specialty Care Facilities 17,041 11% 20,761 5%
------------------- ------------------
Total $175,780 100% $395,814 100%
Development Activity ($000's) Exhibit 8
---------------------------------
Balance
at Balance at
Dec. 31, 2006 YTD 2006 YTD Sept. 30, Committed
Facility Type 2005 Fundings Conversions 2006 Balances
-------------- -------- --------- ----------- ----------- ------------
Independent/
CCRCs $ 1,202 $ 32,550 $ (1,751) $ 32,001 $132,078
Assisted
Living
Facilities 1,793 53,478 (3,972) 51,299 171,157
Skilled
Nursing
Facilities 911 15,519 (6,370) 10,060 29,402
Specialty
Care
Facilities 0 5,315 0 5,315 31,150
-------- --------- ----------- ----------- ------------
Totals $ 3,906 $106,862 $(12,093) $ 98,675 $363,787
Development Funding Projections ($000's)
---------------------------------------------
Projected Future
Fundings
-----------------------
# Beds/ 2006 Fundings Unfunded
Facility Type Projects Units Fundings Thereafter Commitments
-------------- -------- --------- ----------- ----------- ------------
Independent/
CCRCs 7 588 $ 16,950 $ 83,127 $100,077
Assisted
Living
Facilities 16 1,177 17,729 102,129 119,858
Skilled
Nursing
Facilities 4 365 3,351 15,991 19,342
Specialty
Care
Facilities 2 110 5,350 20,485 25,835
-------- --------- ----------- ----------- ------------
Totals 29 2,240 $ 43,380 $221,732 $265,112
Project Conversion Projections ($000's)
---------------------------------------------
2006 Quarterly Projections Annual Projections
------------------------------- ------------------------------------
Projected
Average Projected
Initial Average
Yields Initial
Quarter Amount (1) Year Amount Yields (1)
------------ -------- --------- ----------- ----------- ------------
1Q06 2006
actual $ 0 n/a projected $ 14,961 9.12%
2Q06 2007
actual 0 n/a projected 146,363 9.11%
3Q06 2008
actual 12,093 9.14% projected 137,339 9.59%
4Q06
projected 2,868 9.00% Thereafter 77,217 8.89%
-------- --------- ----------- ------------
Totals $14,961 9.12% Totals $375,880 9.24%
Notes: All amounts include both cash advances and non-cash
additions such as capitalized interest.
(1) Actual initial yields may be higher if the underlying
market rates increase.
Disposition Activity ($000's) Exhibit 9
---------------------------------
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------ ------------------
Dispositions by Investment Type
Real Property $ 3,702 30% $35,366 54%
Loans Receivable 8,806 70% 30,046 46%
-------- ---- -------- ----
Totals $12,508 100% $65,412 100%
Dispositions by Facility Type
Assisted Living Facilities 0% $25,487 39%
Skilled Nursing Facilities $ 8,702 70% 29,162 45%
Specialty Care Facilities 3,806 30% 10,763 16%
-------- ---- -------- ----
Totals $12,508 100% $65,412 100%
Discontinued Operations ($000's) Exhibit 10
---------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ------------------
2006 2005 2006 2005
--------- --------- --------- --------
Revenues
Rental income $1,015 $4,314 $3,954 $12,827
Expenses
Interest expense 267 1,147 1,012 3,548
Provision for depreciation 432 2,151 1,661 6,594
--------- --------- --------- --------
Income (loss) from discontinued
operations, net $ 316 $1,016 $1,281 $ 2,685
Exhibit 11
Current Capitalization ($000's except Leverage & Performance
share price) Ratios
------------------------------------------ ---------------------------
Balance % Balance
---------------------
Borrowings Under Bank Debt/Total Book
Lines $ 276,000 9% Cap 51%
Long-Term Debt Debt/Undepreciated
Obligations 1,327,302 42% Book Cap 46%
Debt/Total Market
Stockholders' Equity 1,546,969 49% Cap 36%
---------------------
Total Book
Capitalization $3,150,271 100%
Interest
Coverage 2.98x 3rd Qtr.
Common Shares
Outstanding (000's) 63,067 3.04x YTD
Period-End Share Interest
Price $ 40.01 Coverage 3.00x 3rd Qtr.
-----------
Common Stock Market - adjusted 3.10x YTD
Value $2,523,311 57%
Fixed Charge
Preferred Stock 276,875 7% Coverage 2.41x 3rd Qtr.
Borrowings Under Bank
Lines 276,000 6% 2.44x YTD
Long-Term Debt Fixed Charge
Obligations 1,327,302 30% Coverage 2.42x 3rd Qtr.
---------------------
Total Market - adjusted 2.49x YTD
Capitalization $4,403,488 100%
EBITDA Reconciliation ($000's) Exhibit 12
--------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income $26,813 $25,297 $ 79,791 $ 52,366
Interest expense (1) 24,274 21,624 71,599 61,255
Tax expense 70 1 82 220
Provision for depreciation (1) 24,526 22,066 71,917 63,473
Amortization 781 594 2,199 3,318
--------- -------- --------- ---------
EBITDA 76,464 69,582 225,588 180,632
Stock-based compensation
expense 192 317 3,543 949
Provision for loan losses 250 300 750 900
Loss on extinguishment of debt,
net 0 0 0 18,448
--------- -------- --------- ---------
EBITDA - adjusted $76,906 $70,199 $229,881 $200,929
Interest Coverage Ratio
Interest expense (1) $24,274 $21,624 $ 71,599 $ 61,255
Capitalized interest 1,384 12 2,494 626
--------- -------- --------- ---------
Total interest 25,658 21,636 74,093 61,881
EBITDA $76,464 $69,582 $225,588 $180,632
--------- -------- --------- ---------
Interest coverage ratio 2.98x 3.22x 3.04x 2.92x
EBITDA - adjusted $76,906 $70,199 $229,881 $200,929
--------- -------- --------- ---------
Interest coverage ratio - 3.00x 3.24x 3.10x 3.25x
adjusted
Fixed Charge Coverage Ratio
Total interest (1) $25,658 $21,636 $ 74,093 $ 61,881
Secured debt principal
amortization 773 699 2,184 2,042
Preferred dividends 5,333 5,389 15,998 16,261
--------- -------- --------- ---------
Total fixed charges 31,764 27,724 92,275 80,184
EBITDA $76,464 $69,582 $225,588 $180,632
--------- -------- --------- ---------
Fixed charge coverage ratio 2.41x 2.51x 2.44x 2.25x
EBITDA - adjusted $76,906 $70,199 $229,881 $200,929
--------- -------- --------- ---------
Fixed charge coverage ratio - 2.42x 2.53x 2.49x 2.51x
adjusted
Notes: (1) Provision for depreciation and interest expense include
provision for depreciation and interest expense from
discontinued operations.
Funds Available For Distribution Reconciliation Exhibit 13
--------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income (loss) available to
common stockholders $21,480 $19,908 $ 63,793 $ 36,105
Provision for depreciation (1) 24,526 22,066 71,917 63,473
Loss (gain) on sales of
properties (108) 0 (2,590) 134
Gross straight-line rental
income (1,904) (2,950) (6,520) (10,193)
Prepaid/straight-line rent
receipts 3,256 2,832 16,276 6,044
--------- -------- --------- ---------
Funds available for
distribution 47,250 41,856 142,876 95,563
Loss on extinguishment of debt,
net 0 0 0 18,448
--------- -------- --------- ---------
Funds available for
distribution - adjusted 47,250 41,856 142,876 114,011
Prepaid/straight-line rent
receipts (3,256) (2,832) (16,276) (6,044)
--------- -------- --------- ---------
Funds available for
distribution - normalized $43,994 $39,024 $126,600 $107,967
Average common shares
outstanding:
Basic 62,524 54,038 60,766 53,498
Diluted 62,866 54,359 61,102 53,867
Per share data:
Net income (loss) available to
common stockholders
Basic $ 0.34 $ 0.37 $ 1.05 $ 0.67
Diluted 0.34 0.37 1.04 0.67
Funds available for
distribution
Basic $ 0.76 $ 0.77 $ 2.35 $ 1.79
Diluted 0.75 0.77 2.34 1.77
Funds available for
distribution - adjusted
Basic $ 0.76 $ 0.77 $ 2.35 $ 2.13
Diluted 0.75 0.77 2.34 2.12
Funds available for
distribution - normalized
Basic $ 0.70 $ 0.72 $ 2.08 $ 2.02
Diluted 0.70 0.72 2.07 2.00
FAD Payout Ratio
Dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
FAD per diluted share $ 0.75 $ 0.77 $ 2.34 $ 1.77
--------- -------- --------- ---------
FAD payout ratio 85% 81% 81% 104%
FAD Payout Ratio - Adjusted
Dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
FAD per diluted share -
adjusted $ 0.75 $ 0.77 $ 2.34 $ 2.12
--------- -------- --------- ---------
FAD payout ratio - adjusted 85% 81% 81% 87%
FAD Payout Ratio - Normalized
Dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
FAD per diluted share -
normalized $ 0.70 $ 0.72 $ 2.07 $ 2.00
--------- -------- --------- ---------
FAD payout ratio - normalized 91% 86% 92% 92%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
Funds From Operations Reconciliation Exhibit 14
-----------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income (loss) available to
common stockholders $21,480 $19,908 $ 63,793 $ 36,105
Provision for depreciation (1) 24,526 22,066 71,917 63,473
Loss (gain) on sales of
properties (108) 0 (2,590) 134
--------- -------- --------- ---------
Funds from operations 45,898 41,974 133,120 99,712
Loss on extinguishment of debt,
net 0 0 0 18,448
--------- -------- --------- ---------
Funds from operations -
adjusted $45,898 $41,974 $133,120 $118,160
Average common shares
outstanding:
Basic 62,524 54,038 60,766 53,498
Diluted 62,866 54,359 61,102 53,867
Per share data:
Net income (loss) available to
common stockholders
Basic $ 0.34 $ 0.37 $ 1.05 $ 0.67
Diluted 0.34 0.37 1.04 0.67
Funds from operations
Basic $ 0.73 $ 0.78 $ 2.19 $ 1.86
Diluted 0.73 0.77 2.18 1.85
Funds from operations -
adjusted
Basic $ 0.73 $ 0.78 $ 2.19 $ 2.21
Diluted 0.73 0.77 2.18 2.19
FFO Payout Ratio
Dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
FFO per diluted share $ 0.73 $ 0.77 $ 2.18 $ 1.85
--------- -------- --------- ---------
FFO payout ratio 88% 81% 87% 99%
FFO Payout Ratio - Adjusted
Dividends per share $ 0.64 $ 0.62 $ 1.90 $ 1.84
FFO per diluted share -
adjusted $ 0.73 $ 0.77 $ 2.18 $ 2.19
--------- -------- --------- ---------
FFO payout ratio - adjusted 88% 81% 87% 84%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
Outlook Reconciliation Exhibit 15
-------------------------------
(Amounts in 000's except per share data)
Current Outlook Prior Outlook
Year Ended Year Ended
December 31, 2006 December 31, 2006
------------------- -------------------
Low High Low High
--------- --------- --------- ---------
Net income available to common
stockholders $ 85,740 $ 86,990 $ 83,292 $ 88,192
Loss (gain) on sales of
properties (2,590) (2,590) (2,482) (2,482)
Provision for depreciation (1) 97,500 97,500 97,500 97,500
--------- --------- --------- ---------
Funds from operations 180,650 181,900 178,310 183,210
Rental income less than (in
excess of ) cash received 7,700 7,700 4,500 4,500
--------- --------- --------- ---------
Funds available for
distribution $188,350 $189,600 $182,810 $187,710
Average common shares
outstanding (diluted) 62,000 62,000 62,000 62,000
Per share data (diluted):
Net income available to common
stockholders $ 1.38 $ 1.40 $ 1.34 $ 1.42
Funds from operations 2.91 2.93 2.88 2.96
Funds available for
distribution 3.04 3.06 2.95 3.03
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
CONTACT: Health Care REIT, Inc.
Scott Estes or Mike Crabtree, 419-247-2800
SOURCE: Health Care REIT, Inc.