TOLEDO, Ohio--(BUSINESS WIRE)--May 6, 2004--Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its first quarter ended March 31, 2004. We continue to meet our financial and operational expectations.
"We were pleased with our operating results for the quarter," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "Our $87.3 million of new investments during the first quarter supports our net investment target of $200 million this year. We are well positioned for growth given our solid balance sheet, increased line of credit and our high quality $2 billion portfolio with improving property-level payment coverage ratios."
As previously announced, the Board of Directors declared a dividend for the quarter ended March 31, 2004 of $0.60 per share as compared to $0.585 per share for the same period in 2003. The dividend is a one and one-half cent increase from the dividend paid for the fourth quarter of 2003 and represents the 132nd consecutive dividend payment. The dividend will be payable May 20, 2004 to stockholders of record on April 30, 2004.
Summary of First Quarter Results
--------------------------------
(In thousands, except per share data)
----------------------------------------------------------------------
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
----------------------------------------------------------------------
Revenues $60,961 $44,137
----------------------------------------------------------------------
Net Income Available to Common
Stockholders $18,655 $16,451
----------------------------------------------------------------------
Funds From Operations $35,789 $28,074
----------------------------------------------------------------------
Net Income Per Diluted Share $0.36 $0.41
----------------------------------------------------------------------
FFO Per Diluted Share $0.70 $0.69
----------------------------------------------------------------------
Dividend Per Share $0.585 $0.585
----------------------------------------------------------------------
FFO Payout Ratio 84% 85%
----------------------------------------------------------------------
Net income available to common stockholders totaled $18.7 million, or $0.36 per diluted share, for the first quarter of 2004, compared with $16.5 million, or $0.41 per diluted share, for the same period in 2003. Funds from operations totaled $35.8 million, or $0.70 per diluted share, for the first quarter of 2004, compared with $28.1 million, or $0.69 per diluted share, for the same period in 2003.
We had a total outstanding debt balance of $1.0 billion at March 31, 2004, as compared with $740.8 million at March 31, 2003, and stockholders' equity of $1.2 billion, which represents a debt to total book capitalization ratio of 47 percent. The debt to total market capitalization at March 31, 2004 was 32 percent. Our coverage ratio of EBITDA to interest was 3.11 to 1.00 for the three months ended March 31, 2004.
Portfolio Update. Two assisted living facilities stabilized during the quarter. We ended the quarter with 11 assisted living facilities remaining in fill-up, representing six percent of revenues. Only two facilities, representing one percent of revenues, have occupancy of less than 50 percent. One facility opened in the third quarter of 2003 after completion of construction and the other facility was a new acquisition last quarter.
As previously announced, Doctors Community Health Care Corporation and its subsidiaries (Doctors) filed for Chapter 11 bankruptcy protection on November 20, 2002. Pursuant to procedures approved by the bankruptcy court, the assets of Doctors were the subject of an auction held on December 10 through December 16, 2003. At the conclusion of that auction, the debtors' independent director declared certain members of Doctors' management the winning bidder. Their bid contemplated a reorganization of Doctors and its subsidiaries with new equity and debt capitalization. Pursuant to the plan of reorganization, we entered into mortgage financings totaling $22.2 million with the reorganized Doctors.
Straight-line Rent. We recorded $6.7 million of straight-line rent for the quarter. Straight-line rent includes $601,000 in cash payments outside the normal monthly rental payments for the three-month period.
Supplemental Reporting Measures. We believe that net income, as defined by accounting principles generally accepted in the United States (U.S. GAAP), is the most appropriate earnings measurement. However, we consider funds from operations (FFO) to be a useful supplemental measure of our 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.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. Additionally, we exclude the non-cash provision for loan losses. We believe 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 our operations. Additionally, restrictive covenants in our long-term debt arrangements contain financial ratios based on EBITDA. We primarily utilize EBITDA to measure our interest coverage ratio which represents EBITDA divided by interest expense.
FFO 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. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes. Additionally, FFO is an internal evaluation metric utilized by the Board of Directors to evaluate management. FFO 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 and EBITDA, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Please see Exhibits 13 and 15 for reconciliations of FFO and EBITDA to net income.
Outlook for 2004. We are confirming our 2004 guidance and expect to report net income available to common stockholders in the range of $1.68 to $1.73 per diluted share, and FFO in the range of $2.99 to $3.04 per diluted share. The guidance assumes no change in our forecast for net investments of $200 million. Additionally, we plan to manage the company to maintain investment grade status with a capital structure consistent with our current profile. Please see Exhibit 14 for a reconciliation of the outlook for net income and FFO.
Conference Call Information. We have scheduled a conference call on May 7, 2004, at 11:00 a.m. Eastern to discuss our first quarter results, industry trends, portfolio performance and outlook for 2004. 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 our 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 March 31, 2004, we had investments in 340 health care facilities in 33 states with 48 operators and had total assets of approximately $2.2 billion. For more information on Health Care REIT, Inc., via facsimile at no cost, dial 1-800-PRO-INFO and enter the company code - HCN. 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 our portfolio; the performance of our operators and properties; our ability to enter into agreements with new viable tenants for properties which we take back from financially troubled tenants, if any; our ability to make distributions; our policies and plans regarding investments, financings and other matters; our tax status as a real estate investment trust; our ability to appropriately balance the use of debt and equity; and our ability to access capital markets or other sources of funds. When we use words such as "believe," "expect," "anticipate," or similar expressions, we are making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our expected results may not be achieved, and actual results may differ materially from our 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; compliance with and changes to regulations and payment policies within the health care industry; changes in financing terms; competition within the health care and senior housing industries; and changes in federal, state and local legislation. Finally, we assume 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)
March 31
--------------------------
2004 2003
------------ ------------
Assets
Real estate investments:
Real property owned
Land $ 174,888 $ 120,640
Buildings & improvements 1,786,296 1,312,218
Construction in progress 17,924 26,162
------------ ------------
1,979,108 1,459,020
Less accumulated depreciation (169,574) (125,173)
------------ ------------
Total real property owned 1,809,534 1,333,847
Loans receivable
Real property loans 218,434 205,634
Subdebt investments 45,173 17,613
------------ ------------
263,607 223,247
Less allowance for losses on loans
receivable (8,125) (5,205)
------------ ------------
255,482 218,042
------------ ------------
Net real estate investments 2,065,016 1,551,889
Other assets:
Equity investments 3,298 7,101
Deferred loan expenses 9,554 5,518
Cash and cash equivalents 47,063 33,878
Receivables and other assets 61,390 43,454
------------ ------------
121,305 89,951
------------ ------------
Total assets $ 2,186,321 $ 1,641,840
============ ============
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of
credit obligations $ 0 $ 74,100
Senior unsecured notes 865,000 615,000
Secured debt 147,616 51,730
Accrued expenses and other liabilities 13,342 7,637
------------ ------------
Total liabilities 1,025,958 748,467
Stockholders' equity:
Preferred stock 119,631 127,500
Common stock 51,051 40,207
Capital in excess of par value 1,091,896 793,541
Treasury stock (850) 0
Cumulative net income 681,371 599,793
Cumulative dividends (781,046) (664,446)
Accumulated other
comprehensive income 1 (344)
Other equity (1,691) (2,878)
------------ ------------
Total stockholders' equity 1,160,363 893,373
------------ ------------
Total liabilities and stockholders'
equity $ 2,186,321 $ 1,641,840
============ ============
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended
March 31
------------------------
2004 2003
---------- ----------
Revenues:
Rental income $ 54,535 $ 38,605
Interest income 5,713 4,940
Transaction fees and other income 713 592
Prepayment fees 0 0
---------- ----------
Gross revenues 60,961 44,137
Expenses:
Interest expense 18,552 11,383
Provision for depreciation 17,134 10,920
General and administrative 3,159 2,611
Loan expense 891 635
Provision for loan losses 300 250
---------- ----------
Total expenses 40,036 25,799
---------- ----------
Income from continuing operations 20,925 18,338
Discontinued operations:
Gain (loss) on sales of properties 0 34
Income (loss) from discontinued
operations, net 0 925
---------- ----------
0 959
---------- ----------
Net income 20,925 19,297
Preferred dividends 2,270 2,846
---------- ----------
Net income available to
common stockholders $ 18,655 $ 16,451
========== ==========
Average number of common shares
outstanding:
Basic 50,580 39,971
Diluted 51,358 40,473
Net income available to
common stockholders per share:
Basic $ 0.37 $ 0.41
Diluted 0.36 0.41
Funds from operations $ 35,789 $ 28,074
Funds from operations per share:
Basic $ 0.71 $ 0.70
Diluted 0.70 0.69
Dividends per share $ 0.585 $ 0.585
HEALTH CARE REIT, INC.
Financial Supplement - March 31, 2004
Portfolio Composition ($000's) Exhibit 1
------------------------------
Balance Sheet # #
Data Properties Beds/Units Balance % Balance
----------------------------------------------------
Real Property 316 28,426 $1,809,534 87%
Loans
Receivable 24 2,733 218,434 11%
Subdebt
Investments 0 0 45,173 2%
----------------------------------------------------
Total
Investments 340 31,159 $2,073,141 100%
# #
Investment Data Properties Beds/Units Investment(1) % Investment
----------------------------------------------------
Assisted Living
Facilities 221 14,370 $1,210,880 58%
Skilled Nursing
Facilities 111 15,585 706,937 34%
Specialty Care
Facilities 8 1,204 158,519 8%
----------------------------------------------------
Real Estate
Investments 340 31,159 $2,076,336 100%
Notes: (1) Real Estate Investments include gross real
estate investments and credit enhancements which amounted
to $2,073,141,000 and $3,195,000, respectively.
Revenue Composition ($000's) Exhibit 2
----------------------------
Three Months Ended
March 31, 2004
------------------------
Revenue by Investment Type(1)
Real Property $55,142 90%
Loans Receivable 4,706 8%
Subdebt Investments 1,113 2%
------------------------
Total $60,961 100%
Revenue by Facility Type (1)
Assisted Living Facilities $35,607 58%
Skilled Nursing Facilities 21,322 35%
Specialty Care Facilities 4,032 7%
------------------------
Total $60,961 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
Operator Concentration ($000's) Exhibit 3
-------------------------------
Concentration by Investment # Properties Investment % Investment
------------------------------------------
Emeritus Corporation 30 $ 230,717 11%
Southern Assisted Living,
Inc. 46 210,882 10%
Commonwealth Communities
L.L.C. 14 202,066 10%
Home Quality Management,
Inc. 32 182,230 9%
Life Care Centers of America,
Inc. 17 123,071 6%
Remaining Operators (43) 201 1,127,370 54%
------------------------------------------
Total 340 $2,076,336 100%
Concentration by Revenue # Properties Revenue(1) % Revenue
------------------------------------------
Emeritus Corporation 30 $ 7,029 12%
Commonwealth Communities
L.L.C. 14 6,926 11%
Southern Assisted Living,
Inc. 46 6,264 10%
Home Quality Management,
Inc. 32 4,674 8%
Life Care Centers of America,
Inc. 17 3,713 6%
Remaining Operators (43) 201 32,355 53%
------------------------------------------
Total 340 $ 60,961 100%
Notes: (1) Three months ended March 31, 2004.
Geographic Concentration ($000's) Exhibit 4
---------------------------------
Concentration by Region # Properties Investment % Investment
--------------- ------------ -------------
South 207 $1,038,814 50%
Northeast 50 444,824 21%
West 44 307,588 15%
Midwest 39 285,110 14%
--------------- ------------ -------------
Total 340 $2,076,336 100%
Concentration by State # Properties Investment % Investment
--------------- ------------ -------------
Massachusetts 28 $ 298,772 14%
North Carolina 44 204,767 10%
Florida 33 182,673 9%
Tennessee 27 148,577 7%
Ohio 14 128,662 6%
Remaining States (28) 194 1,112,885 54%
--------------- ------------ -------------
Total 340 $2,076,336 100%
Revenue by State # Properties Revenue(1) % Revenue
--------------- ------------ -------------
Massachusetts 28 $ 9,028 15%
North Carolina 44 6,147 10%
Florida 33 5,553 9%
Ohio 14 4,107 7%
Tennessee 27 3,809 6%
Remaining States (28) 194 32,317 53%
--------------- ------------ -------------
Total 340 $ 60,961 100%
Notes: (1) Three months ended March 31, 2004.
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 221 14,370 $1,223,170 $ 85,120
Skilled Nursing
Facilities 111 15,585 706,937 45,360
Specialty Care
Facilities 8 1,204 158,519 131,660
----------------------------------------------------
Total 340 31,159 $2,088,626 -na-
Notes: (1) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
Lease Up Statistics on Assisted Living Facilities ($000's) Exhibit 6
----------------------------------------------------------
Average Months
Occupancy # Properties in Operation Revenue(1) % Revenue
--------------------------------------------------------
0% - 50% 2 5 $ 603 1%
50% - 70% 1 41 454 1%
70% + 8 35 2,477 4%
----------------------------------------------------
11 -na- $3,534 6%
Notes: (1) Interest and rental income for the three months ended
March 31, 2004.
Selected Facility Data Exhibit 7
--------------------------
Coverage Data
% Payor Mix ---------------------
---------------------- Before After
Census Private Medicare Mgt. Fees Mgt. Fees
------------------------------------------------------
Assisted Living
Facilities 85% 85% 0% 1.35x 1.14x
Skilled Nursing
Facilities 85% 17% 15% 1.84x 1.41x
Specialty Care
Facilities 69% 14% 35% 1.95x 1.49x
---------------------
Weighted Averages 1.58x 1.26x
Notes: Data as of December 31, 2003.
Credit Support ($000's) Exhibit 8
-----------------------
Balance % Investment
-------------------------
Cross Defaulted $1,939,569 94% of gross real estate investments
Cross Collateralized 174,335 80% of real property loans receivable
Master Leases 1,471,210 81% of real property owned
Current Capitalization ($000's) Leverage & Performance
------------------------------ Ratios
Balance % Balance ---------------------------
--------------------
Borrowings Under
Bank Lines $ 0 0% Debt/Total Book Cap 47%
Long-Term Debt
Obligations 1,012,616 47% Debt/Total Market Cap 32%
Stockholders' Interest
Equity 1,160,363 53% Coverage 3.11x 1st Qtr.
------------------
Total Book
Capitalization $2,172,979 100%
FFO Payout
Ratio 84% 1st Qtr.
Revenue Maturities ($000's) Exhibit 9
-------------------------
Operating Lease Expirations & Loan Maturities
Current Lease Current Interest Lease and
Year Revenue (1) Revenue (1) Interest Revenue % of Total
---------------------------------------------------------------------
2004 $ 0 $ 1,101 $ 1,101 0%
2005 0 1,758 1,758 1%
2006 0 5,106 5,106 2%
2007 0 4,695 4,695 2%
2008 0 2,633 2,633 1%
Thereafter 218,306 7,561 225,867 94%
-----------------------------------------------------------
Total $218,306 $ 22,854 $241,160 100%
Notes: (1) Revenue impact by year, annualized.
Debt Maturities and Principal Payments ($000's) Exhibit 10
----------------------------------------------
Lines of
Year Credit(1) Senior Notes Secured Debt Total
---------------------------------------------------------------------
2004 $ 30,000 $ 40,000(2) $ 1,800 $ 71,800
2005 0 0 6,021 6,021
2006 310,000 50,000 2,702 362,702
2007 0 175,000 14,709 189,709
2008 0 100,000 9,879 109,879
2009 0 0 12,938 12,938
2010 0 0 8,948 8,948
Thereafter 0 500,000 90,619 590,619
-----------------------------------------------------------
Total $340,000 $865,000 $147,616 $1,352,616
Notes: (1) Reflected at 100% capacity.
(2) Paid off on April 15, 2004.
Investment Activity ($000's) Exhibit 11
----------------------------
Three Months Ended
March 31, 2004
----------------------
Funding by Investment Type
Real Property $85,390 98%
Loans Receivable 1,610 2%
Subdebt Investments 290 0%
----------------------
Total $87,290 100%
Funding by Facility Type
Assisted Living Facilities $23,927 27%
Skilled Nursing Facilities 62,510 72%
Specialty Care Facilities 853 1%
----------------------
Total $87,290 100%
Discontinued Operations ($000's) Exhibit 12
---------------------------------
Three Months Ended
March 31
----------------------
2004 2003
----------------------
Revenues
Rental income $ 0 $ 2,155
Expenses
Interest expense 0 493
Provision for depreciation 0 737
-------- --------
Income (loss) from discontinued
operations, net $ 0 $ 925
Funds From Operations Reconciliation Exhibit 13
----------------------------------------
(Amounts in 000's except per share data)
Three Months Ended
March 31
------------------
2004 2003
-------- --------
Net income available to common stockholders $18,655 $16,451
Provision for depreciation (1) 17,134 11,657
Loss (gain) on sales of properties 0 (34)
-------- --------
Funds from operations $35,789 $28,074
Average common shares outstanding:
Basic 50,580 39,971
Diluted 51,358 40,473
Per share data:
Net income available to common stockholders
Basic $ 0.37 $ 0.41
Diluted 0.36 0.41
Funds from operations
Basic $ 0.71 $ 0.70
Diluted 0.70 0.69
FFO Payout Ratio
Dividends per share $ 0.585 $ 0.585
FFO per diluted share $ 0.70 $ 0.69
-------- --------
FFO payout ratio 84% 85%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
FFO Outlook Reconciliation Exhibit 14
---------------------------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2004
-------------------
Low High
--------- ---------
Net income available to common
stockholders $ 86,700 $ 89,300
Provision for depreciation (1) 68,000 68,000
--------- ---------
Funds from operations $154,700 $157,300
Average common shares outstanding
(diluted) 51,750 51,750
Per share data (diluted):
Net income available to common
stockholders $ 1.68 $ 1.73
Funds from operations 2.99 3.04
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
EBITDA Reconciliation ($000's) Exhibit 15
------------------------------------
Three Months Ended
March 31
------------------
2004 2003
-------- --------
Net income $20,925 $19,297
Provision for depreciation (1) 17,134 11,657
Interest expense (1) 18,552 11,876
Capitalized interest 137 258
Amortization (2) 1,118 1,188
Provision for loan losses 300 250
-------- --------
EBITDA $58,166 $44,526
Interest Coverage Ratio
Interest expense (1) $18,552 $11,876
Capitalized interest 137 258
-------- --------
Total interest 18,689 12,134
EBITDA 58,166 44,526
-------- --------
Interest coverage ratio 3.11x 3.67x
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.