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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________________to____________________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-3997619
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NUMBER)
4675 MACARTHUR COURT, SUITE 1170
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 251-1211
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No
----- -----
Shares of registrant's common stock, $.10 par value, outstanding at October
31, 1996 -- 41,781,432.
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NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets....................... 2
Condensed Consolidated Statements of Operations............. 3
Condensed Consolidated Statements of Cash Flows............. 4
Notes to Condensed Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 9
</TABLE>
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Investments in real estate
Real estate properties:
Land............................................................. $ 69,207 $ 61,748
Buildings and improvements....................................... 561,602 530,979
--------- ---------
630,809 592,727
Less accumulated depreciation........................................ (85,826) (73,722)
--------- ---------
544,983 519,005
Mortgage loans receivable, net....................................... 155,507 133,226
--------- ---------
700,490 652,231
Cash and cash equivalents............................................... 10,074 7,937
Receivables............................................................. 4,280 3,478
Other assets............................................................ 8,817 6,465
--------- ---------
$ 723,661 $ 670,111
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings......................................................... $ 48,200 $ 93,900
Senior unsecured notes due 2000-2015.................................... 150,000 100,000
Convertible debentures.................................................. 65,000 65,000
Notes and bonds payable................................................. 9,249 23,364
Accounts payable and accrued liabilities................................ 22,249 16,025
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized; none
issued or outstanding
Common stock $.10 par value; 100,000,000 shares authorized;
issued and outstanding: 1996 - 41,781,432, 1995 - 38,720,532........ 4,178 3,872
Capital in excess of par value........................................ 462,351 401,438
Cumulative net income................................................. 285,178 245,135
Cumulative dividends.................................................. (322,744) (278,623)
--------- ---------
Total stockholders' equity....................................... 428,963 371,822
--------- ---------
$ 723,661 $ 670,111
========= =========
</TABLE>
See accompanying notes.
2
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NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Minimum rent.......................................................... $16,792 $13,946 $49,431 $39,947
Interest and other income............................................. 4,314 3,669 12,242 10,826
Additional rent and additional interest............................... 3,198 3,250 8,862 8,909
------- ------- ------- -------
24,304 20,865 70,535 59,682
Expenses:
Depreciation and non-cash charges..................................... 4,198 3,563 12,454 10,246
Interest and amortization of deferred financing costs................. 4,808 3,637 15,539 10,525
General and administrative............................................ 843 764 2,499 2,356
------- ------- ------- -------
9,849 7,964 30,492 23,127
------- ------- ------- -------
Income from operations.................................................. 14,455 12,901 40,043 36,555
Gain on sale of facilities.............................................. - 989 - 989
------- ------- ------- -------
Net Income.............................................................. $14,455 $13,890 $40,043 $37,544
======= ======= ======= =======
Net income per share.................................................... $ 0.35 $ .36 $ 1.00 $ 1.00
======= ======= ======= =======
Dividends paid per share................................................ $ 0.37 $ .36 $ 1.11 $ 1.05
======= ======= ======= =======
Weighted average shares outstanding..................................... 41,781 38,720 39,899 37,500
======= ======= ======= =======
</TABLE>
See accompanying notes.
3
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NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income.................................................................... $ 40,043 $ 37,544
Depreciation and non-cash charges............................................. 12,453 10,246
Gain on sale of facilities.................................................... - (989)
Amortization of deferred financing costs...................................... 573 476
Net decrease in other assets and liabilities.................................. 1,891 3,789
--------- ---------
Net cash provided by operating activities................................ 54,960 51,066
Cash flow from investing activities:
Acquisition of real estate properties......................................... (38,082) (54,345)
Disposition of real estate properties......................................... - 8,940
Investment in mortgage loans receivable....................................... (26,350) (28,680)
Principal payments on mortgage loans receivable............................... 5,180 11,265
--------- ---------
Net cash used in investing activities.................................... (59,252) (62,820)
Cash flow from financing activities:
Issuance of common stock...................................................... 60,905 35,494
Bank borrowings............................................................... 96,050 112,400
Repayment of bank borrowings.................................................. (141,750) (143,900)
Issuance of senior debt....................................................... 50,000 56,000
Dividends paid................................................................ (44,121) (39,145)
Principal payments on notes and bonds......................................... (14,115) (6,330)
Other, net.................................................................... (540) (468)
--------- ---------
Net cash provided by financing activities................................ 6,429 14,051
--------- ---------
Increase in cash and cash equivalents............................................. 2,137 2,297
Cash and cash equivalents, beginning of period.................................... 7,937 3,742
--------- ---------
Cash and cash equivalents, end of period.......................................... $ 10,074 $ 6,039
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month and nine-month periods ended September
30, 1996 and 1995 pursuant to the rules and regulations of the Securities and
Exchange Commission. All of such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures in such financial statements are
adequate to make the information presented not misleading, these condensed
consolidated financial statements should be read in conjunction with the
Company's financial statements and the notes thereto included in the Company's
1995 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the three-month and nine-month periods
ended September 30, 1996 and 1995 are not necessarily indicative of the results
for a full year.
(ii) Net income per share is calculated by dividing net income by the
weighted average common shares outstanding during the period. The effect of
common stock options is immaterial, and the effect of convertible debentures is
anti-dilutive.
(iii) In January 1996, the Board of Directors of the Company authorized a
two-for-one stock split of the Company's common stock effective March 8, 1996.
The financial statements included herein have been restated to reflect the stock
split. Additionally, certain amounts in the 1995 financial statements have been
reclassified for consistent financial statement presentation.
(iv) The Company qualifies as a real estate investment trust under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The
Company intends to continue to qualify as such and therefore to distribute at
least 95 percent of its taxable income to its stockholders. Accordingly, no
provision has been made for federal income taxes.
(v) The Company invests in health care related real estate and, as of
September 30, 1996, had investments in 224 facilities, including 182 long-term
health care facilities, 40 assisted living facilities and 2 rehabilitation
hospitals.
The Company's facilities which are owned and leased under "net"
leases are accounted for as operating leases. The leases have initial terms
ranging from 10 to 19 years, and the leases generally have two or more multiple-
year renewal options. The Company earns fixed monthly minimum rents and may earn
periodic additional rents. The additional rent payments are generally computed
as a percentage of facility net patient revenues in excess of base amounts. The
base amounts, in most cases, are net patient revenues for the first year of the
lease. Under the terms of the leases, the lessee is responsible for all
maintenance, repairs, taxes and insurance on the leased properties. Forty-five
of the facilities were leased to and operated by subsidiaries of Beverly
Enterprises, Inc.
(vi) During the nine-month period ended September 30, 1996, the Company
acquired five assisted living facilities and three long-term care facilities in
seven separate transactions for an aggregate purchase price of approximately
$28,347,000. The acquisitions were funded by bank borrowings on the Company's
bank line of credit and cash on hand. The facilities were concurrently leased
under terms generally similar to the Company's existing leases.
5
<PAGE>
In addition to the acquisitions, the Company provided new
construction financing of approximately $3,200,000 for 4 assisted living
facilities and capital improvement funding in the aggregate amount of
approximately $6,000,000 in accordance with certain existing lease agreements.
During the nine-month period ended September 30, 1996, the Company
provided two mortgage loans secured by eight long-term health care facilities in
the aggregate amount of $21,650,000 and a $3,000,000 note was funded which is
cross-collateralized by properties under existing mortgage loans with the
Company. Additionally, proceeds of approximately $3,608,000 were received in
connection with the repayment of two mortgage loans secured by two long-term
health care facilities.
During the nine months ended September 30, 1996, the Company issued
$50,000,000 in medium-term notes. The notes bear fixed interest at a weighted
average of 7.19% and have a weighted average maturity of 6 years. The proceeds
were used to reduce borrowings on the Company's bank line of credit.
In June 1996, the Company issued 3,047,500 shares of common stock in
a public offering at a price of $21.125 per share. Proceeds from the offering,
net of underwriters' fees and associated expenses, were approximately
$60,988,000. The net proceeds were used to repay borrowings under the Company's
bank line of credit.
6
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
OPERATING RESULTS
Nine Months 1996 Compared to Nine Months 1995
Revenues for the nine-months ended September 30, 1996 increased $10,853,000
or 18% over the same period in 1995. The increase is due to increased minimum
rent and interest income resulting from additional investments in real estate
properties and mortgage loans receivable during the last twelve months.
Total expenses for the nine-month period increased $7,365,000 or 32% over
the same period in 1995. The increase is primarily due to increased interest
expense as a result of the issuance of fixed rate medium term notes during 1995
and 1996, the proceeds of which were used to repay lower cost variable rate bank
debt. The increase in total expenses was also attributable to increased
depreciation due to the acquisition of additional facilities in the last twelve
months.
Third Quarter 1996 Compared to Third Quarter 1995
Revenues for the three months ended September 30, 1996 increased $3,439,000
or 16% over the same period in 1995. The increase is primarily due to increased
minimum rent and interest income resulting from additional investments in real
estate properties and mortgage loans receivable during the last twelve months.
Total expenses for the three months ended September 30, 1996 increased
$1,885,000 or 24% over the same period in 1995. The increase is attributed to
an increase in interest expense due to the issuance of fixed rate medium term
notes during 1995 and 1996, the proceeds of which were used to repay lower cost
variable rate bank debt. This increase was partially offset by a decrease in
interest expense on the Company's bank line of credit due to lower levels of
borrowing resulting from paying down bank borrowings with proceeds from the
Company's June common stock offering. The increase in total expenses was also
attributable to increased depreciation due to the acquisition of additional
facilities in the last twelve months.
The Company expects increased rental revenues due to the addition of
facilities to its property base in the last twelve months. The Company also
expects increased interest income resulting from additional investments in
mortgage loans over the last twelve months. The Company also expects increased
additional rent and additional interest because the Company's leases and
mortgages generally contain provisions under which additional rents or interest
income with increases in facility revenues and/or increases in the Consumer
Price Index. Historically, revenues at the Company's facilities and the
Consumer Price Index generally have increased; although, there are no assurances
that they will continue to increase in the future. Sales of facilities or
repayments of mortgages would serve to offset the aforementioned revenue
increases. Additional investments in health care facilities would also increase
rental and/or interest income. As additional investments in facilities are
made, depreciation and/or interest expense could also increase. Any such
increases, however, are expected to be more than offset by rents or interest
income associated with the investments.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the nine-month period ended September 30, 1996, the Company acquired
five assisted living facilities and three long-term care facilities in seven
separate transactions for an aggregate purchase price of approximately
$28,347,000. The acquisitions were funded by bank borrowings under the
Company's bank line of credit and cash on hand. The facilities were
concurrently leased under terms generally similar to the Company's existing
leases.
In addition to the acquisitions, the Company provided new construction
financing of approximately $3,200,000 for 4 assisted living facilities and
capital improvement funding in the aggregate amount of approximately $6,000,000
in accordance with certain existing lease agreements. New construction and
capital improvements were funded by cash on hand and bank borrowings on the
Company's bank line of credit.
During the nine-month period ended September 30, 1996, the Company provided
two mortgage loans secured by eight long-term health care facilities in the
aggregate amount of $21,650,000 and a $3,000,000 note was funded which is cross-
collateralized by properties under existing mortgage loans with the Company.
Additionally, proceeds of approximately $3,608,000 were received in connection
with the repayment of two mortgage loans secured by two long-term health care
facilities. The loans were funded by bank borrowings under the Company's bank
line of credit and cash on hand.
During the nine months ended September 30, 1996, the Company issued
$50,000,000 in medium-term notes. The notes bear fixed interest at a weighted
average of 7.19% and have a weighted average maturity of 6 years. The proceeds
were used to reduce borrowings on the Company's bank line of credit.
In June 1996, the Company issued 3,047,500 shares of common stock in a
public offering at a price of $21.125 per share. Proceeds from the offering,
net of underwriters' fees and associated expenses, were approximately
$60,988,000. The net proceeds were used to repay borrowings under the Company's
bank line of credit.
At September 30, 1996, the Company had $51,800,000 available under its
$100,000,000 bank line of credit. The Company has effective shelf registrations
on file with the Securities and Exchange Commission under which the Company may
issue (a) up to $150,000,000 in aggregate principal amount of medium term notes
and (b) up to $33,121,562 of securities including debt, convertible debt, common
and preferred stock.
The Company anticipates making additional investments in health care
related facilities. Financing for such future investments may be provided by
borrowings under the Company's bank line, private placements or public offerings
of debt or equity, and the assumption of secured indebtedness. The Company
believes it has sufficient liquidity and financing capability to finance future
investments as well as repay borrowings at or prior to their maturity.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Certain information contained in this report includes forward looking
statements, which can be identified by the use of forward looking terminology
such as "may", "will", "expect", "should" or comparable terms or the negative
thereof. These statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the statements.
These risks and uncertainties include (without limitation) the following; the
effect of economic and market conditions and changes in interest rates,
government regulations, changes in the health industry, the amount of any
additional investments, access to capital markets and changes in the ratings of
the Company's debt securities.
8
<PAGE>
OTHER INFORMATION
PART II
ITEM 4. NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three-
month period ended September 30, 1996.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 7, 1996
NATIONWIDE HEALTH PROPERTIES, INC.
By /s/ MARK L. DESMOND
--------------------------------
Mark L. Desmond
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,074
<SECURITIES> 0
<RECEIVABLES> 4,280
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,817
<PP&E> 630,809
<DEPRECIATION> 85,826
<TOTAL-ASSETS> 723,661
<CURRENT-LIABILITIES> 22,249
<BONDS> 272,449
0
0
<COMMON> 4,178
<OTHER-SE> 424,785
<TOTAL-LIABILITY-AND-EQUITY> 723,661
<SALES> 0
<TOTAL-REVENUES> 70,535
<CGS> 0
<TOTAL-COSTS> 30,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,539
<INCOME-PRETAX> 40,043
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,043
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,043
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
