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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended DECEMBER 31, 1996 Commission File No. 1-8923
HEALTH CARE REIT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1096634
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One SeaGate, Suite 1500, Toledo, Ohio 43604
(Address of principal executive office) (Zip Code)
(419) 247-2800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Shares of Common Stock New York Stock Exchange
$1.00 par value
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months; and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K.
[X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant on February 6, 1997 was $441,534,000 based on the reported closing
sales price of such shares on the New York Stock Exchange for that date.
As of February 7, 1996, there were 18,662,919 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the annual
shareholders meeting to be held April 22, 1997, are incorporated by reference
into Part III.
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FORM 10-K/A
AMENDMENT NO. 1 TO ANNUAL REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
HEALTH CARE REIT, INC.
The undersigned registrant hereby amends the following items, financial
statements, or other portions of its Annual Report on Form 10-K for the year
ended December 31, 1996.
FRONT COVER AND INSIDE FRONT COVER
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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HEALTH CARE REIT, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
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Page
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Item 1. Business................................................................................................3
Item 2. Properties.............................................................................................11
Item 3. Legal Proceedings......................................................................................12
Item 4. Submission of Matters to a Vote of Security Holders....................................................12
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters...........................................................................12
Item 6. Selected Financial Data................................................................................13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................................14
Item 8. Financial Statements and Supplementary Data............................................................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................................................. 33
PART III
Item 10. Directors and Executive Officers of the Registrant.....................................................33
Item 11. Executive Compensation.................................................................................33
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................................................................33
Item 13. Certain Relationships and Related Transactions.........................................................33
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.................................................................................33
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company's net real estate investments totaled
approximately $512,894,000, which included 56 nursing facilities, 63 assisted
living facilities, 11 retirement centers, five specialty care facilities and two
behavioral care facilities. The Company funds its investments through a
combination of long-term and short-term financing, utilizing both debt and
equity.
During 1996, the Company provided permanent mortgage financings of $69,970,000,
invested $31,900,000 in operating leases and made construction advances of
$93,993,000. During 1996, the Company received principal payments on real estate
mortgages of $3,080,000, net repayments on working capital loans of $2,053,000
and proceeds of $52,047,000 from the prepayment of mortgage loans.
Also during 1996, 16 of the above-mentioned construction loans completed the
construction phase of the Company's investment process and were converted to
investments in operating leases, with an aggregate investment of $26,418,000,
and 4 construction loans converted to permanent mortgage loans with an aggregate
investment balance of $24,298,000.
As of December 31, 1996, the Company had shareholders' equity of $325,536,000
and a total outstanding debt balance of approximately $184,395,000, which
represents a debt to equity ratio of 0.57 to 1.0.
In April 1996, the Company issued Senior Notes in the aggregate principal amount
of $30,000,000 which mature in 2001 and 2003, and have a weighted average
interest rate of 7.18%. The notes are secured by approximately $40,000,000 of
assets.
In May 1996, the Company issued 2,322,200 shares of Common Stock, $1.00 par
value per share, at the price of $22.00 per share, which generated net proceeds
of $48,103,000 to the Company.
In September 1996, the Company issued 1,587,800 shares of Common Stock, $1.00
par value per share, at the price of $22.00 per share, which generated net
proceeds to the Company of $34,111,000.
In December 1996, the Company issued 2,200,000 shares of Common Stock, $1.00 par
value per share, at the price of $23.875 per share, which generated net proceeds
to the Company of $49,898,000.
As of December 31, 1996, the Company had a secured revolving line of credit
expiring March 31, 1997 in the amount of $150,000,000 bearing interest at the
lender's prime rate or LIBOR plus 1.50%. In addition, the Company had unsecured
revolving lines of credit in the amounts of $25,000,000 and $10,000,000 bearing
interest at the lenders' prime rate expiring May 31, 1997 and April 30, 1997,
respectively. At December 31, 1996, under the Company's line of credit
arrangements, available funding totaled $92,875,000.
As of February 4, 1997, the Company has effective shelf registrations on file
with the Securities and Exchange Commission under which the Company may issue up
to $353,576,250 of securities including debt, convertible debt, common and
preferred stock. The Company anticipates issuing securities under such shelf
registrations to invest in additional health care facilities and to repay
borrowings under the Company's line of credit arrangements.
As of December 31, 1996, the Company had approximately $236,277,000 in unfunded
commitments. The Company believes its liquidity and various sources of available
capital are sufficient to fund operations, finance future investments, and meet
debt service and dividend requirements.
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RESULTS OF OPERATIONS DECEMBER 31, 1996 VS. DECEMBER 31, 1995
Revenues for the year ended December 31, 1996, were $54,402,000 compared to
$44,596,000 for the year ended December 31, 1995, an increase of $9,806,000 or
22%. Revenue growth resulted primarily from increased interest income of
$5,457,000, operating lease income of $3,496,000 and loan and commitment fees of
$941,000 resulting primarily from additional real estate investments made during
the past twelve to fifteen months.
Expenses for the year ended December 31, 1996, totaled $23,726,000, a decrease
of $7,235,000 from expenses of $30,961,000 for the year ended December 31, 1995.
Expenses for the year ended December 31, 1995, were negatively influenced by
nonrecurring charges, primarily related to a $4,800,000 provision for losses and
a $5,794,000 charge for the settlement of the management contract, an expense
associated with the merger of the Company's advisor into the Company.
The provision for depreciation for the year ended December 31, 1996, totaled
$2,427,000, an increase of $848,000 over the year ended 1995 as a result of
additional operating lease investments.
Interest expense for the year ended December 31, 1996, was $14,635,000 compared
to $12,752,000 for the year ended December 31, 1995. The increase in interest
expense during 1996 was primarily due to the issuance of $30,000,000 Senior
Notes in April 1996 and higher average borrowings under the Company's line of
credit arrangements, which were offset by lower interest rates.
General and administrative expense for the year ended December 31, 1996 totaled
$4,448,000 as compared to $5,284,000 for the year ended December 31, 1995. The
expenses for the year ended December 31, 1996 were 8.18% of revenues as compared
to 11.85% for the year ended December 31, 1995.
It is the Company's intention to systematically eliminate its investments in
behavioral care facilities. As a result, at September 30, 1996, the Company
declared a disposition of investment associated with its behavioral care
portfolio. As a result, any gains realized through the repayment or sale of
investments associated with the Company's behavioral care facilities will be
added to the Company's general allowance for losses and applied against any
losses incurred through the repayment or sale of behavioral care related
investments. During the year ended December 31, 1996, the Company recorded an
$808,000 disposition of investment expense as an offset to an $808,000
prepayment fee received from the repayment of two behavioral care related
mortgage loans. Additionally, the Company's general allowance for losses was
reduced by $481,000, resulting from the repayment of these loans.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1996, was $30,676,000 as compared to $13,635,000 for the year
ended December 31, 1995. Net income per share for the year ended December 31,
1996, was $2.18 versus $1.16 for the year ended December 31, 1995. The per share
increase resulted from an increase in net income offset by an increase in
average shares outstanding during 1996.
RESULTS OF OPERATIONS DECEMBER 31, 1995 VS. DECEMBER 31, 1994
Revenues for the year ended December 31, 1995, were $44,596,000 compared to
$42,732,000 for the year ended December 31, 1994, an increase of $1,864,000 or
4.4%. Revenue growth resulted primarily from increased interest income of
$6,731,000 and increased operating lease income of $872,000 resulting primarily
from additional real estate investments made during the previous twelve months.
The growth in interest income and rental income was offset by a high incidence
of prepayment fees and gains on the exercise of purchase options earned during
1994, which totaled $6,982,000 as compared to $4,082,000 for 1995.
Expenses for the year ended December 31, 1995, totaled $30,961,000, an increase
of $13,182,000 from expenses of $17,779,000 for the year ended December 31,
1994. Expenses for the year ended December 31, 1995, were negatively influenced
by nonrecurring charges, primarily related to a $4,800,000 provision for losses
and a $5,794,000 charge for the settlement of the management contract, an
expense associated with the merger of the Company's advisor into the Company.
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The provision for depreciation for the year ended December 31, 1995, totaled
$1,580,000, an increase of $194,000 over the year ended December 31, 1994 as a
result of additional operating lease investments.
Interest expense for the year ended December 31, 1995, was $12,752,000 compared
to $9,684,000 for the year ended December 31, 1994. The increase in interest
expense during 1995 was primarily due to higher average borrowings under the
Company's line of credit arrangements, and higher costs of borrowing.
General and administrative expense for the year ended December 31, 1995 totaled
$5,284,000 as compared to $5,072,000 for the year ended December 31, 1994. The
expenses for the year ended December 31, 1995 were 11.85% of revenues as
compared to 11.87% for the year ended December 31, 1994.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1995, was $13,635,000 as compared to $24,953,000 for the year
ended December 31, 1994. Net income per share for the year ended December 31,
1995, was $1.16 versus $2.17 for the year ended December 31, 1994. The per share
decrease resulted from a decrease in net income.
IMPACT OF INFLATION
During the past three years, inflation has not significantly affected the
earnings of the Company because of the moderate inflation rate. Additionally,
earnings of the Company are primarily long-term investments with fixed interest
rates. These investments are mainly financed with a combination of equity,
senior notes and borrowings under the revolving lines of credit, of which a
portion is hedged with interest rate swaps. During inflationary periods, which
generally are accompanied by rising interest rates, the Company's ability to
grow may be adversely affected because the yield on new investments may increase
at a slower rate than new borrowing costs. Presuming the current inflation rate
remains moderate and long-term interest rates do not increase significantly, the
Company believes that equity and debt financing will be available.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HEALTH CARE REIT, INC.
(Registrant)
By: GEORGE L. CHAPMAN
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 5, 1997 by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ William C. Ballard, Jr.* /s/ Richard A. Unverferth*
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William C. Ballard, Jr., Director Richard A. Unverferth, Director
/s/ Pier C. Borra*
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Pier C. Borra, Director Frederic D. Wolfe, Director
/s/ Bruce Douglas* /s/ George L. Chapman
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Bruce Douglas, Director George L. Chapman, Chairman,
Chief Executive Officer, President
and Director (Principal Executive
Officer)
/s/ Richard C. Glowacki* /s/ Edward F. Lange, Jr.*
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Richard C. Glowacki, Director Edward F. Lange, Jr., Chief
Financial Officer (Principal
Financial Officer)
/s/ Sharon M. Oster* /s/ Michael A. Crabtree*
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Sharon M. Oster, Director Michael A. Crabtree, Controller
(Principal Accounting Officer)
/s/ Bruce G. Thompson* *By: /s/ George L. Chapman
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Bruce G. Thompson, Director George L. Chapman,
Attorney-in-Fact
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