TOLEDO, Ohio--(BUSINESS WIRE)--Jan. 31, 2005--Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its fourth quarter and year ended December 31, 2004.
"We enhanced the foundation for the future growth of Health Care REIT during 2004," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "We incorporated a new contingency-based rental escalator in our lease structure, which provides for internal growth in FFO and FAD. We are pleased to have added $522 million of net new investments and six new operators. While we are disappointed that unanticipated G&A expenses and asset dispositions and transitions have caused us to miss our earnings estimate for 2004 and reduce our guidance for 2005, the company is positioned to generate strong recurring FAD per share growth in the range of 10-14% in 2005. As a result of this positive outlook, the Board of Directors approved an increase in the common stock dividend to $0.62 per quarter from $0.60 per quarter commencing with the May 2005 dividend."
As previously announced, the Board of Directors declared a dividend for the quarter ended December 31, 2004 of $0.60 per share as compared to $0.585 per share for the same period in 2003. The dividend represents the 135th consecutive dividend payment. The dividend will be payable February 22, 2005 to stockholders of record on January 31, 2005.
Summary of Fourth Quarter Results
-------------------------------------
(In thousands, except per share data)
----------------------------------------------------------------------
Three Months Three Months
Ended Ended
December 31, December 31,
2004 2003
----------------------------------------------------------------------
Revenues $68,794 $60,215
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Net Income Available to Common Stockholders $15,767 $16,935
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Funds From Operations $37,299 $33,205
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Funds From Operations - Adjusted (1) $37,299 $35,997
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Funds Available for Distribution $35,642 $25,302
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Funds Available for Distribution - Adjusted (1) $35,642 $28,094
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Net Income Per Diluted Share $ 0.30 $ 0.34
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FFO Per Diluted Share $ 0.71 $ 0.66
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FFO Per Diluted Share - Adjusted (1) $ 0.71 $ 0.72
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FAD Per Diluted Share $ 0.68 $ 0.50
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FAD Per Diluted Share - Adjusted (1) $ 0.68 $ 0.56
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Dividend Per Share $ 0.60 $ 0.585
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FFO Payout Ratio 85% 89%
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FFO Payout Ratio - Adjusted (1) 85% 81%
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FAD Payout Ratio 88% 117%
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FAD Payout Ratio - Adjusted (1) 88% 104%
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(1) Excludes impairment charges in 2003.
Summary of Year to Date Results
-------------------------------------
(In thousands, except per share data)
----------------------------------------------------------------------
Year Ended Year Ended
December 31, December 31,
2004 2003
----------------------------------------------------------------------
Revenues $251,395 $196,739
----------------------------------------------------------------------
Net Income Available to Common Stockholders $ 72,634 $ 70,732
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Funds From Operations $146,742 $119,463
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Funds From Operations - Adjusted (1) $147,056 $125,045
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Funds Available for Distribution $132,950 $104,535
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Funds Available for Distribution - Adjusted (1) $133,264 $110,117
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Net Income Per Diluted Share $ 1.39 $ 1.60
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FFO Per Diluted Share $ 2.82 $ 2.70
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FFO Per Diluted Share - Adjusted (1) $ 2.82 $ 2.83
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FAD Per Diluted Share $ 2.55 $ 2.36
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FAD Per Diluted Share - Adjusted (1) $ 2.56 $ 2.49
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Dividend Per Share $ 2.385 $ 2.34
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FFO Payout Ratio 85% 87%
----------------------------------------------------------------------
FFO Payout Ratio - Adjusted (1) 85% 83%
----------------------------------------------------------------------
FAD Payout Ratio 94% 99%
----------------------------------------------------------------------
FAD Payout Ratio - Adjusted (1) 93% 94%
----------------------------------------------------------------------
(1) Excludes preferred stock redemption charge in 2003 and impairment
charges in 2003 and 2004.
The company had a total outstanding debt balance of $1.2 billion at December 31, 2004, as compared with $1.0 billion at December 31, 2003, and stockholders' equity of $1.3 billion, which represents a debt to total book capitalization ratio of 47 percent. The debt to total market capitalization at December 31, 2004 was 34 percent. The company's coverage ratio of EBITDA to interest was 3.24 to 1.00 for the twelve months ended December 31, 2004. The company's coverage ratio of EBITDA to fixed charges was 2.77 to 1.00 for the twelve months ended December 31, 2004.
Impairments and Write-offs. During the fourth quarter of 2004, the company transitioned a portfolio of 11 properties from an underperforming operator to three new operators. As a result of the transition, the company incurred a $3.8 million write-off relating to outstanding loans with the prior operator. In addition, during the third quarter of 2004, the company incurred an impairment charge of $314,000 on one property to reduce its book value to fair market value.
Straight-line Rent. The company recorded $1.7 million and $13.8 million of straight-line rent for the three and twelve months ended December 31, 2004, respectively. Straight-line rent is net of $3.0 million and $8.1 million in cash payments outside the normal monthly rental payments for the three and twelve month periods, respectively.
2004 Earnings Shortfall. During the fourth quarter, general and administrative expenses totaled $6.2 million, representing a $2.6 million increase compared to third quarter expenses. Of this $2.6 million sequential increase, approximately $2.0 million, or $0.04 per share, was not anticipated in the company's previous 2004 guidance. Approximately half of this $2.0 million is comprised of professional services fees, with additional taxes, compensation expenses and transition costs associated with the removal of an underperforming operator comprising the remainder. The company anticipates that general and administrative expenses will total approximately $17.5 to $18.5 million for the full-year 2005.
Outlook for 2005. The company is reducing its 2005 guidance and now expects to report net income available to common stockholders in the range of $1.39 to $1.47 per diluted share and FFO in the range of $2.90 to $2.98 per diluted share. The guidance assumes net new investments of $200 million with leases that will not require rents to be straight-lined. The company expects to record straight-line rent of approximately $14 million for the full year 2005, before any payments outside the normal monthly rental payments. There are three primary factors that have contributed to the eight cent reduction in the company's forecast relative to its previous expectations.
First, the company now anticipates dispositions of two high-yielding investments during early 2005 that were not in the previous guidance. These investments total approximately $50 million and generate a blended yield of 12.5%. Accordingly, the company has adjusted its net new investment guidance to $200 million, down from the previous estimate of $250 million. Based on an assumption that proceeds would be initially used to pay down a portion of the line of credit balance then later reinvested at an initial yield of 9.0-9.5%, this factor would represent an approximately $1.6 million, or $0.03 per share, reduction to the company's 2005 forecast.
Second, as a result of ongoing professional services fees, the company's current anticipated 2005 general and administrative expense of $17.5 to $18.5 million is approximately $1.0 million, or $0.02 per share, higher than previously estimated.
Third, through a successful transition process to replace an underperforming operator during the fourth quarter of 2004, the company provided one of the three replacement operators with a rent deferral during the first six months of 2005. This will result in an incremental reduction to the company's 2005 forecast during the deferral period of approximately $1.65 million, or $0.03 per share.
Due to the increased focus on FAD, the company has now provided a reconciliation of FAD within this press release and forecasts 2005 FAD in a range of $2.65 to $2.73 per share based on estimated straight-line rent of $14 million in 2005. This $2.65 to $2.73 per share FAD guidance for 2005 represents strong 10-14% growth over 2004 recurring FAD of $2.40 per share, excluding the impact of any potential one-time cash payments the company may receive in 2005 and the actual $8.1 million in one-time cash payments received during calendar year 2004.
The company's guidance does not account for any impairments or unanticipated additions to the loan loss reserve. Additionally, the company plans to manage itself to maintain investment grade status with a capital structure consistent with its current profile. Please see Exhibit 15 for a reconciliation of the outlooks for net income, FFO and FAD.
Dividends for 2005. The Board of Directors approved a new quarterly dividend rate of $0.62 per share per quarter ($2.48 per share annually), commencing with the May 2005 dividend, up from $0.60, the rate during 2004. The company's dividend policy is reviewed annually during the Board of Director's January planning session. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Directors.
Supplemental Reporting Measures. The company believes that net income, as defined by accounting principles generally accepted in the United States (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 a useful supplemental measure 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 non-cash straight-line rental adjustments.
In August 2003, the company adopted the SEC clarification of Emerging Issues Task Force (EITF) Topic D-42. To implement the clarified accounting pronouncement, the company's 2003 results reflect a reduction in net income available to common stockholders resulting from a non-cash, non-recurring charge of $2,790,000, or $0.06 per diluted share, due to the redemption of the company's 8.875% Series B Cumulative Redeemable Preferred Stock in July 2003. NAREIT has issued its recommendation that preferred stock redemption charges should not be added back to net income in the calculation of FFO. Although the company has adopted this recommendation, it has also disclosed FFO and FAD adjusted for the preferred stock redemption charge for enhanced clarity. Additionally, the company believes that the nature of the charge is non-recurring because there was not a similar charge during the two preceding years and the company does not anticipate a similar charge in the succeeding two years.
In October 2003, NAREIT informed its member companies that the SEC had changed its position on certain aspects of the NAREIT FFO definition, including impairment charges. Previously, the SEC accepted NAREIT's view that impairment charges were effectively an early recognition of an expected loss on an impending sale of property and thus should be excluded from FFO similar to other gains and losses on sales. However, the SEC's clarified interpretation is that recurring impairments taken on real property may not be added back to net income in the calculation of FFO. Although the company has adopted this recommendation, it has also disclosed FFO and FAD adjusted for the impairment charges for enhanced clarity.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. Additionally, the company excludes the non-cash provision for loan losses. 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 interest expense.
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, in making operating decisions and for budget planning purposes. Additionally, FFO and FAD are internal evaluation metrics 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 13, 14, 15 and 16 for reconciliations of FAD, FFO and EBITDA to net income.
Conference Call Information. The company has scheduled a conference call on February 1, 2005, at 9:00 a.m. Eastern time to discuss its fourth quarter and year end results, industry trends, portfolio performance and outlook for 2005. To participate on the webcast, log on to www.hcreit.com or www.fulldisclosure.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.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily skilled nursing and assisted living facilities. At December 31, 2004, the company had investments in 394 health care facilities in 35 states with 50 operators and had total assets of approximately $2.5 billion. The portfolio included 234 assisted living facilities, 152 skilled nursing facilities and eight specialty care hospitals. 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 the possible expansion of the company's portfolio; the performance of its operators and properties; its ability to enter into agreements with new viable tenants for properties which it 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," 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; serious 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; changes in federal, state and local legislation; 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; and changes in rules or practices governing the company's financial reporting. 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
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HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
December 31
-----------------------
2004 2003
-----------------------
Assets
Real estate investments:
Real property owned
Land $ 208,173 $ 166,408
Buildings & improvements 2,176,327 1,712,868
Construction in progress 25,463 14,701
----------- -----------
2,409,963 1,893,977
Less accumulated depreciation (219,536) (152,440)
----------- -----------
Total real property owned 2,190,427 1,741,537
Loans receivable
Real property loans 213,067 213,480
Subdebt investments 43,739 45,254
----------- -----------
256,806 258,734
Less allowance for losses on loans receivable (5,261) (7,825)
----------- -----------
251,545 250,909
----------- -----------
Net real estate investments 2,441,972 1,992,446
Other assets:
Equity investments 3,298 3,299
Deferred loan expenses 6,958 10,331
Cash and cash equivalents 19,763 124,496
Receivables and other assets 77,652 52,159
----------- -----------
107,671 190,285
----------- -----------
Total assets $2,549,643 $2,182,731
=========== ===========
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 151,000 $ 0
Senior unsecured notes 875,000 865,000
Secured debt 160,225 148,184
Accrued expenses and other liabilities 28,139 19,868
----------- -----------
Total liabilities 1,214,364 1,033,052
Stockholders' equity:
Preferred stock 283,751 120,761
Common stock 52,860 50,298
Capital in excess of par value 1,139,723 1,069,887
Treasury stock (1,286) (523)
Cumulative net income 745,817 660,446
Cumulative dividends (884,890) (749,166)
Accumulated other
comprehensive income 1 1
Other equity (697) (2,025)
----------- -----------
Total stockholders' equity 1,335,279 1,149,679
----------- -----------
Total liabilities and stockholders' equity $2,549,643 $2,182,731
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
----------------- -------------------
2004 2003 2004 2003
------------------ -------------------
Revenues:
Rental income $62,564 $53,723 $226,095 $172,212
Interest income 5,622 4,841 22,818 20,768
Transaction fees and other
income 558 1,651 2,432 3,759
Prepayment fees 50 0 50 0
-------- -------- --------- ---------
Gross revenues 68,794 60,215 251,395 196,739
Expenses:
Interest expense 18,721 16,731 71,994 52,811
Provision for depreciation 20,236 15,642 73,036 49,349
General and administrative 6,247 3,032 16,585 11,483
Loan expense 825 889 3,393 2,921
Impairment of assets 0 2,792 314 2,792
Provision for loan losses 300 2,120 1,200 2,870
-------- -------- --------- ---------
Total expenses 46,329 41,206 166,522 122,226
-------- -------- --------- ---------
Income from continuing
operations 22,465 19,009 84,873 74,513
Discontinued operations:
Gain (loss) on sales of
properties (1,272) (173) (143) 4,139
Income (loss) from
discontinued
operations, net 16 243 641 4,088
-------- -------- --------- ---------
(1,256) 70 498 8,227
-------- -------- --------- ---------
Net income 21,209 19,079 85,371 82,740
Preferred dividends 5,442 2,144 12,737 9,218
Preferred stock redemption
charge 0 0 0 2,790
-------- -------- --------- ---------
Net income available to
common stockholders $15,767 $16,935 $ 72,634 $ 70,732
======== ======== ========= =========
Average number of common shares
outstanding:
Basic 52,326 49,440 51,544 43,572
Diluted 52,784 50,119 52,082 44,201
Net income available to
common stockholders per share:
Basic $ 0.30 $ 0.34 $ 1.41 $ 1.62
Diluted 0.30 0.34 1.39 1.60
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
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Portfolio Composition ($000's) Exhibit 1
----------------------------------------------------------------------
Balance Sheet Data # Properties # Beds/Units Balance % Balance
-------------------------------------------------
Real Property 373 35,219 $2,190,427 90%
Loans Receivable (1) 21 2,643 213,067 9%
Subdebt Investments 0 0 43,739 1%
-------------------------------------------------
Total Investments 394 37,862 $2,447,233 100%
%
Investment Data # Properties # Beds/Units Investment(2) Investment
---------------------------------------------------
Assisted Living
Facilities 234 15,776 $1,335,717 54%
Skilled Nursing
Facilities 152 20,975 965,328 39%
Specialty Care
Facilities 8 1,111 151,833 7%
---------------------------------------------------
Real Estate
Investments 394 37,862 $2,452,878 100%
Notes: (1) Includes $35,918,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$2,447,233,000 and $5,645,000, respectively.
----------------------------------------------------------------------
Revenue Composition ($000's) Exhibit 2
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31, 2004 December 31, 2004
------------------ -------------------
Revenue by Investment Type (1)
Real Property $ 63,134 92% $230,278 91%
Loans Receivable 4,588 7% 18,482 7%
Subdebt Investments 1,183 1% 4,817 2%
--------------------------------------------------------------------
Total $ 68,905 100% $253,577 100%
Revenue by Facility Type (1)
Assisted Living Facilities $ 36,625 53% $139,440 55%
Skilled Nursing Facilities 28,401 41% 98,677 39%
Specialty Care Facilities 3,879 6% 15,460 6%
--------------------------------------------------------------------
Total $ 68,905 100% $253,577 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
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Operator Concentration ($000's) Exhibit 3
----------------------------------------------------------------------
Concentration by Investment # Properties Investment % Investment
---------------------------------------
Emeritus Corporation 48 $ 361,367 15%
Southern Assisted Living, Inc. 43 200,750 8%
Commonwealth Communities L.L.C. 13 196,560 8%
Delta Health Group, Inc. 25 178,221 7%
Home Quality Management, Inc. 32 176,081 7%
Remaining Operators (45) 233 1,339,899 55%
-------------- ------------------------
Total 394 $2,452,878 100%
----------------------------------------------------------------------
Geographic Concentration ($000's) Exhibit 4
----------------------------------------------------------------------
Concentration by Region # Properties Investment % Investment
---------------- --------------- --------------
South 244 $1,285,128 52%
Northeast 56 499,171 20%
West 49 322,758 13%
Midwest 45 345,821 15%
---------------- --------------- --------------
Total 394 $2,452,878 100%
Concentration by State # Properties Investment % Investment
---------------- --------------- --------------
Florida 59 $ 376,115 15%
Massachusetts 33 341,935 14%
North Carolina 42 197,036 8%
Ohio 17 158,283 6%
Texas 36 145,529 6%
Remaining States (30) 207 1,233,980 51%
---------------- --------------- --------------
Total 394 $2,452,878 100%
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Committed Investment Balances Exhibit 5
($000's except Investment per Bed/Unit)
----------------------------------------------------------------------
Committed Investment
# Properties # Beds/Units Balance(1) per Bed/Unit
-----------------------------------------------------
Assisted Living
Facilities 234 15,776 $1,339,550 $ 84,911
Skilled Nursing
Facilities 152 20,975 965,328 46,023
Specialty Care
Facilities 8 1,111 151,833 136,663
-----------------------------------------------------
Total 394 37,862 $2,456,711 -na-
Notes: (1) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
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Selected Facility Data Exhibit 6
----------------------------------------------------------------------
Coverage Data
--------------
% Payor Mix Before After
----------------- Mgt. Mgt.
Census Private Medicare Fees Fees
-----------------------------------------
Assisted Living Facilities 87% 86% 0% 1.45x 1.23x
Skilled Nursing Facilities 87% 16% 15% 2.11x 1.62x
Specialty Care Facilities 66% 23% 40% 2.69x 2.08x
---------------
Weighted Averages 1.78x 1.44x
Notes: Data as of September 30, 2004.
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Credit Support ($000's) Exhibit 7
----------------------------------------------------------------------
Balance % Investment
-------------------------
Cross Defaulted $2,344,328 96% of gross real estate investments
Cross Collateralized 165,589 78% of real property loans receivable
Master Leases 1,852,702 85% of real property owned
Current Capitalization Leverage & Performance
($000's except share price) Ratios
--------------------------- --------------------------
Balance % Balance
---------------------
Borrowings Under Bank
Lines $ 151,000 6% Debt/Total Book Cap 47%
Long-Term Debt
Obligations 1,035,225 41%
Stockholders' Equity 1,335,279 53% Debt/Total Market Cap 34%
---------------------
Total Book
Capitalization $2,521,504 100%
Interest
Coverage 3.25x 4th Qtr.
3.24x YTD
Common Shares
Outstanding (000's) 52,925
Year-end Share Price $ 38.15
-----------
Common Stock Market
Value $2,019,089 58% Fixed Charge
Preferred Stock 283,751 8% Coverage 2.53x 4th Qtr.
Borrowings Under Bank 2.77x YTD
Lines 151,000 4%
Long-Term Debt
Obligations 1,035,225 30%
---------------------
Total Market
Capitalization $3,489,065 100%
----------------------------------------------------------------------
Revenue Maturities ($000's) Exhibit 8
----------------------------------------------------------------------
Operating Lease Expirations & Loan Maturities
Current Current Lease and
Lease Interest Interest
Year Revenue (1) Revenue (1) Revenue % of Total
----------------------------------------------------------------------
2005 $ 0 $ 718 $ 718 0%
2006 0 2,880 2,880 1%
2007 0 4,825 4,825 2%
2008 0 4,219 4,219 2%
2009 0 3,046 3,046 1%
Thereafter 251,480 5,846 257,326 94%
-----------------------------------------------------------
Total $251,480 $21,534 $273,014 100%
Notes: (1) Revenue impact by year, annualized.
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Debt Maturities and Principal Payments ($000's) Exhibit 9
----------------------------------------------------------------------
Lines of Senior Secured
Year Credit (1) Notes Debt Total
----------------------------------------------------------------------
2005 $ 30,000 $ 0 $ 6,276 $ 36,276
2006 310,000 50,000 2,977 362,977
2007 0 175,000 15,004 190,004
2008 0 100,000 10,194 110,194
2009 0 0 13,278 13,278
2010 0 0 9,313 9,313
2011 0 0 21,149 21,149
Thereafter 0 550,000 82,034 632,034
-----------------------------------------------------------
Total $340,000 $875,000 $160,225 $1,375,225
Notes: (1) Reflected at 100% capacity.
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Investment Activity ($000's) Exhibit 10
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31, 2004 December 31, 2004
------------------------------------------
Funding by Investment Type
Real Property $125,179 99% $554,102 95%
Loans Receivable 643 1% 9,438 2%
Subdebt Investments 53 0% 21,391 3%
--------------------- ------------------
Total $125,875 100% $584,931 100%
Funding by Facility Type
Assisted Living Facilities $ 22,135 18% $228,365 39%
Skilled Nursing Facilities 103,207 82% 350,262 60%
Specialty Care Facilities 533 0% 6,304 1%
--------------------- ------------------
Total $125,875 100% $584,931 100%
----------------------------------------------------------------------
Disposition Activity ($000's) Exhibit 11
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31, 2004 December 31, 2004
--------------------------------------
Dispositions by Investment Type
Real Property $ 3,902 14% $37,710 60%
Loans Receivable 9,881 36% 10,992 18%
Subdebt Investments 13,882 50% 13,882 22%
-------- ---- -------- ----
Total $27,665 100% $62,584 100%
Dispositions by Facility Type
Assisted Living Facilities $18,772 68% $39,889 64%
Skilled Nursing Facilities 8,893 32% 12,340 20%
Specialty Care Facilities 10,355 16%
-------- ---- -------- ----
Total $27,665 100% $62,584 100%
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Discontinued Operations ($000's) Exhibit 12
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31 December 31
------------------------------------
2004 2003 2004 2003
------ ------- ------- --------
Revenues
Rental income $111 $1,033 $2,182 $10,175
Expenses
Interest expense 21 335 562 2,566
Provision for depreciation 74 455 979 3,521
------ ------- ------- --------
Income (loss) from discontinued
operations, net $ 16 $ 243 $ 641 $ 4,088
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Funds Available For Distribution Reconciliation Exhibit 13
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Year Ended
December 31 December 31
----------------- -------------------
2004 2003 2004 2003
-------- ------- --------- ---------
Net income available to common
stockholders $15,767 $16,935 $ 72,634 $ 70,732
Provision for depreciation (1) 20,310 16,097 74,015 52,870
Loss (gain) on sales of
properties 1,272 173 143 (4,139)
Prepayments fees (50) 0 (50) 0
Rental income in excess of
cash received (1,657) (7,903) (13,792) (14,928)
-------- -------- --------- ---------
Funds available for
distribution 35,642 25,302 132,950 104,535
Impairment of assets 0 2,792 314 2,792
Preferred stock redemption
charge 0 0 0 2,790
-------- -------- --------- ---------
Funds available for
distribution - adjusted 35,642 28,094 133,264 110,117
Non-recurring rental
cash payments (3,036) (197) (8,144) (6,271)
-------- -------- --------- ---------
Funds available for
distribution - recurring $32,606 $27,897 $125,120 $103,846
Average common shares
outstanding:
Basic 52,326 49,440 51,544 43,572
Diluted 52,784 50,119 52,082 44,201
Per share data:
Net income available to common
stockholders
Basic $ 0.30 $ 0.34 $ 1.41 $ 1.62
Diluted 0.30 0.34 1.39 1.60
Funds available for
distribution
Basic $ 0.68 $ 0.51 $ 2.58 $ 2.40
Diluted 0.68 0.50 2.55 2.36
Funds available for
distribution - adjusted
Basic $ 0.68 $ 0.57 $ 2.59 $ 2.53
Diluted 0.68 0.56 2.56 2.49
Funds available for
distribution - recurring
Basic $ 0.62 $ 0.56 $ 2.43 $ 2.38
Diluted 0.62 0.56 2.40 2.35
FAD Payout Ratio
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
FAD per diluted share 0.68 0.50 2.55 2.36
-------- -------- --------- ---------
FAD payout ratio 88% 117% 94% 99%
FAD Payout Ratio - Adjusted
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
FAD per diluted
share - adjusted $ 0.68 $ 0.56 $ 2.56 $ 2.49
-------- -------- --------- ---------
FAD payout ratio - adjusted 88% 104% 93% 94%
FAD Payout Ratio - Recurring
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
FAD per diluted
share - recurring $ 0.62 $ 0.56 $ 2.40 $ 2.35
-------- -------- --------- ---------
FAD payout ratio - recurring 97% 104% 99% 100%
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 Year Ended
December 31 December 31
------------------ -------------------
2004 2003 2004 2003
-------- -------- --------- --------
Net income available to common
stockholders $15,767 $16,935 $ 72,634 $ 70,732
Provision for depreciation (1) 20,310 16,097 74,015 52,870
Loss (gain) on sales of
properties 1,272 173 143 (4,139)
Prepayments fees (50) 0 (50) 0
-------- -------- --------- ---------
Funds from operations 37,299 33,205 146,742 119,463
Impairment of assets 0 2,792 314 2,792
Preferred stock redemption
charge 0 0 0 2,790
-------- -------- --------- ---------
Funds from operations -
adjusted $37,299 $35,997 $147,056 $125,045
Average common shares
outstanding:
Basic 52,326 49,440 51,544 43,572
Diluted 52,784 50,119 52,082 44,201
Per share data:
Net income available to common
stockholders
Basic $ 0.30 $ 0.34 $ 1.41 $ 1.62
Diluted 0.30 0.34 1.39 1.60
Funds from operations
Basic $ 0.71 $ 0.67 $ 2.85 $ 2.74
Diluted 0.71 0.66 2.82 2.70
Funds from operations -
adjusted
Basic $ 0.71 $ 0.73 $ 2.85 $ 2.87
Diluted 0.71 0.72 2.82 2.83
FFO Payout Ratio
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
FFO per diluted share $ 0.71 $ 0.66 $ 2.82 $ 2.70
-------- -------- --------- ---------
FFO payout ratio 85% 89% 85% 87%
FFO Payout Ratio - Adjusted
Dividends per share $ 0.60 $ 0.585 $ 2.385 $ 2.34
FFO per diluted share -
adjusted $ 0.71 $ 0.72 $ 2.82 $ 2.83
-------- -------- --------- ---------
FFO payout ratio - adjusted 85% 81% 85% 83%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
----------------------------------------------------------------------
FFO Outlook Reconciliation Exhibit 15
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2005
-----------------------
Low High
--------- ---------
Net income available to common
stockholders $ 76,500 $ 80,900
Provision for depreciation (1) 83,000 83,000
------------------------
Funds from operations 159,500 163,900
Rental income in excess of cash
received (14,000) (14,000)
------------------------
Funds available for distribution $145,500 $149,900
Average common shares outstanding
(diluted) 55,000 55,000
Per share data (diluted):
Net income available to common
stockholders $ 1.39 $ 1.47
Funds from operations 2.90 2.98
Funds available for distribution 2.65 2.73
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
----------------------------------------------------------------------
EBITDA Reconciliation ($000's) Exhibit 16
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31 December 31
------------------ -------------------
2004 2003 2004 2003
-------- -------- -------- ---------
Net income $21,209 $19,079 $ 85,371 $ 82,740
Provision for depreciation (1) 20,310 16,097 74,015 52,870
Interest expense (1) 18,742 17,066 72,556 55,377
Capitalized interest 285 407 875 1,535
Amortization (2) 1,016 1,102 4,247 3,957
Provision for loan losses 300 2,120 1,200 2,870
-------- -------- --------- ---------
EBITDA $61,862 $55,871 $238,264 $199,349
Interest Coverage Ratio
Interest expense (1) $18,742 $17,066 $ 72,556 $ 55,377
Capitalized interest 285 407 875 1,535
-------- -------- --------- ---------
Total interest 19,027 17,473 73,431 56,912
EBITDA $61,862 $55,871 $238,264 $199,349
-------- -------- --------- ---------
Interest coverage ratio 3.25x 3.20x 3.24x 3.50x
Fixed Charge Coverage Ratio
Total interest (1) $19,027 $17,473 $ 73,431 $ 56,912
Preferred dividends 5,442 2,144 12,737 9,218
-------- -------- --------- ---------
Total fixed charges 24,469 19,617 86,168 66,130
EBITDA $61,862 $55,871 $238,264 $199,349
-------- -------- --------- ---------
Fixed charge coverage ratio 2.53x 2.85x 2.77x 3.01x
Notes: (1) Provision for depreciation and interest expense include
provision for depreciation and interest expense from
discontinued operations.
(2) Amortization includes amortization of deferred loan
expenses, restricted stock and stock options.
CONTACT: Health Care REIT, Inc.
Ray Braun, 419-247-2800
Mike Crabtree, 419-247-2800
Scott Estes, 419-247-2800
SOURCE: Health Care REIT, Inc.