<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 95-3997619
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
610 NEWPORT CENTER DRIVE, SUITE 1150
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's telephone number, including area code: (714) 718-4400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, $.10 Par Value New York Stock Exchange
7.677% Series A Cumulative
Preferred None
6.25% Convertible Debentures Due
1999 New York Stock Exchange
</TABLE>
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 (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 [_]
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 to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Company is approximately $1,135,803,000 as of February 28, 1998.
43,323,679
(NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF FEBRUARY 28, 1998)
Part III is incorporated by reference from the registrant's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 17, 1998.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS.
Nationwide Health Properties, Inc., a Maryland corporation organized in
October 1985 (the "Company"), is a real estate investment trust ("REIT") which
invests primarily in health care related facilities and provides financing to
health care providers. As of December 31, 1997, the Company had investments in
291 facilities located in 30 states. The facilities include 191 long-term
health care facilities, 78 assisted living facilities, 11 continuing care
retirement communities, two rehabilitation hospitals, eight residential care
facilities for the elderly and one medical clinic
As of December 31, 1997, the Company had direct ownership of 145 long-term
health care facilities, 72 assisted living facilities, six continuing care
retirement communities, two rehabilitation hospitals, eight residential care
facilities for the elderly and one medical clinic (the "Properties"). All of
the Company's owned facilities are leased under "net" leases (the "Leases"),
which are accounted for as operating leases, to 61 health care providers (the
"Lessees") including Beverly Enterprises, Inc. ("Beverly"), ARV Assisted
Living, Inc., Alternative Living Services, Sun Healthcare Group, Inc.,
Laureate Group, Life Care Centers of America, Inc., Paragon Health Network,
Retirement Care Associates, Inc., American Health Centers, Mariner Health
Group, Liberty Healthcare, Integrated Health Services, Inc. and HEALTHSOUTH
Corporation. Of the Lessees, only Beverly and Alternative Living Services are
expected to account for more than 10% of the Company's revenues in 1998.
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. Most Leases
contain cross collateralization and cross default provisions tied to other
Leases with the same Lessee, as well as grouped lease renewals and grouped
purchase options. Obligations under the Leases have corporate guarantees, and
leases covering 155 facilities are backed by irrevocable letters of credit or
security deposits which cover from 2 to 12 months of monthly minimum rents.
Under the terms of the Leases, the Lessee is responsible for all maintenance,
repairs, taxes and insurance on the leased properties.
As of December 31, 1997, the Company held 35 mortgage loans secured by 46
long-term health care facilities, six assisted living facilities, and five
continuing care retirement communities. Such loans had an aggregate
outstanding principal balance of approximately $209,185,000 and a net book
value of approximately $199,819,000 at December 31, 1997. The mortgage loans
have individual outstanding principal balances ranging from approximately
$646,000 to $20,892,000 and have maturities ranging from 1998 to 2025.
During 1997, the Company acquired, in 38 separate transactions, 31 assisted
living facilities, nine long-term health care facilities, four continuing care
retirement communities, eight residential care facilities for the elderly and
one medical clinic for an aggregate purchase price of $248,343,000.
Additionally, the Company provided seven mortgage loans, secured by seven
long-term health care facilities, three assisted living facilities and two
continuing care retirement communities in an aggregate amount of $49,238,000.
The Company anticipates providing lease or mortgage financing for health
care facilities to qualified operators and acquiring additional health care
related facilities, including long-term health care facilities, assisted
living facilities, acute care hospitals and medical office buildings.
Financing for such future investments may be provided by borrowings under the
Company's bank line of credit, private placements or public offerings of debt
or equity, and the assumption of secured indebtedness.
TAXATION OF THE COMPANY
The Company believes that it has operated in such a manner as to qualify for
taxation as a "real estate investment trust" under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the
<PAGE>
"Code"), commencing with its taxable year ending December 31, 1985, and the
Company intends to continue to operate in such a manner. If the Company
qualifies for taxation as a real estate investment trust, it will generally
not be subject to federal corporate income taxes on its net income that is
currently distributed to stockholders. This treatment substantially eliminates
the "double taxation" (e.g. at the corporate and stockholder levels) that
generally results from investment in stock of a corporation.
PROPERTIES
Of the 291 facilities in which the Company has investments, the Company has
direct ownership of 145 long-term health care facilities, 72 assisted living
facilities, six continuing care retirement communities, two rehabilitation
hospitals, eight residential care facilities for the elderly and one medical
clinic. The properties are leased to other parties under terms which require
the lessee, in addition to paying rent, to pay all additional charges, taxes,
assessments, levies and fees incurred in the operation of the leased
properties.
LONG-TERM HEALTH CARE FACILITIES
Long-term health care facilities provide rehabilitative, restorative,
skilled nursing and medical treatment for patients and residents who do not
require the high-technology, care-intensive, high-cost setting of an acute-
care or rehabilitative hospital. Treatment programs include physical,
occupational, speech, respiratory and other therapeutic programs, including
sub-acute clinical protocols such as wound care and intravenous drug
treatment. Long-term health care facilities generally receive a significant
portion of their revenues from state based Medicaid and the federal Medicare
programs.
ASSISTED LIVING FACILITIES
Assisted living facilities provide services to aid in everyday living, such
as bathing, routine or special meals, security, transportation, recreation,
medication supervision and limited therapeutic programs. More intensive
medical needs of the residents are often met within the Company's assisted
living facilities by home health providers, close coordination with the
individual's physician and skilled nursing facilities. Assisted living
facilities are increasingly successful as lower cost, less institutional
alternatives to the health problems of the elderly or medically frail.
CONTINUING CARE RETIREMENT COMMUNITIES
Continuing care retirement communities provide a broad continuum of care. At
the most basic level, services are provided which aid in everyday living, much
like in an assisted living facility. At the other end of the spectrum, skilled
nursing, rehabilitation and medical treatment is provided to residents who
need those services. This type of facility offers residents the ability to
have the most independent lifestyle possible while providing a wide range of
social, health and nursing services tailored to meet individual needs.
RESIDENTIAL CARE FACILITIES FOR THE ELDERLY
Residential care facilities for the elderly offer similar services to an
assisted living facility, except they are provided in a residential home
setting. These facilities are generally three to four bedroom houses in
residential neighborhoods, which are slightly modified to enable adequate
access and care for the residents. There is generally one 24-hour caregiver at
each location to provide meals and assistance with activities such as bathing,
dressing, laundry and cleaning.
REHABILITATION HOSPITALS
Rehabilitation hospitals provide inpatient and outpatient medical care to
patients requiring high intensity physical, respiratory, neurological,
orthopedic and other treatment protocols and for intermediate periods in their
recovery. These programs are often the most effective in treating severe
skeletal or neurological injuries and traumatic diseases such as stroke or
acute arthritis.
2
<PAGE>
The following table sets forth certain information regarding the Company's
owned facilities as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER ANNUAL 1997
NUMBER OF OF BEDS/ MINIMUM ADDITIONAL
FACILITY LOCATION FACILITIES UNITS(1) INVESTMENT RENT(2) RENT(2)
- ----------------- ---------- -------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C> <C> <C> <C>
Long-Term Health Care
Facilities:
Arizona................... 2 274 $ 6,076 $ 789 $ 181
Arkansas.................. 2 397 5,982 666 301
California................ 8 963 26,481 3,228 789
Connecticut............... 3 359 7,864 783 152
Florida................... 9 1,247 29,475 3,150 889
Georgia................... 1 163 7,343 867 5
Idaho..................... 1 64 792 81 69
Illinois.................. 2 220 5,549 701 171
Indiana................... 11 1,202 35,407 4,158 828
Kansas.................... 8 641 11,804 1,216 174
Maryland.................. 4 749 22,057 2,634 1,096
Massachusetts............. 14 1,418 51,975 5,381 444
Minnesota................. 10 1,247 37,690 4,392 1,077
Missouri.................. 1 108 2,740 337 115
Nevada.................... 1 140 4,034 480 107
New Jersey................ 1 180 6,809 749 160
North Carolina............ 1 150 2,360 294 216
Ohio...................... 6 811 29,547 3,304 505
Oklahoma.................. 3 253 3,939 404 100
Oregon.................... 4 356 6,760 833 266
Tennessee................. 8 882 24,417 2,546 284
Texas..................... 26 3,009 55,607 6,102 1,498
Virginia.................. 4 605 18,568 2,291 787
Washington................ 6 621 24,309 2,349 256
Wisconsin................. 9 936 21,169 2,301 1,032
--- ------ -------- ------- -------
Subtotals............... 145 16,995 448,754 50,036 11,502
--- ------ -------- ------- -------
Assisted Living Facilities:
Alabama................... 2 166 5,952 594 7
Arizona................... 1 90 4,611 444 --
California................ 12 1,534 69,442 7,096 394
Colorado.................. 4 419 21,777 2,143 1
Florida................... 15 976 55,492 5,694 95
Idaho..................... 1 158 11,800 1,179 --
Illinois.................. 1 178 11,076 1,037 --
Kansas.................... 1 42 2,121 205 2
Michigan.................. 1 144 7,239 810 60
Nevada.................... 2 155 13,583 1,254 --
Ohio...................... 8 428 21,111 1,796 11
Oklahoma.................. 3 187 8,100 771 22
Oregon.................... 6 536 28,375 2,813 6
Tennessee................. 1 48 2,902 274 7
Texas..................... 9 393 18,415 1,764 30
Washington................ 3 271 16,987 1,650 --
Wisconsin................. 2 375 26,150 2,022 --
--- ------ -------- ------- -------
Subtotals............... 72 6,100 325,133 31,563 635
--- ------ -------- ------- -------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER ANNUAL 1997
NUMBER OF OF BEDS/ MINIMUM ADDITIONAL
FACILITY LOCATION FACILITIES UNITS(1) INVESTMENT RENT(2) RENT(2)
- ----------------- ---------- -------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C> <C> <C> <C>
Continuing Care Retirement
Communities:
California................ 1 279 $ 11,150 $ 1,083 $ 163
Colorado.................. 1 117 3,115 307 21
Kansas.................... 1 199 13,199 1,267 --
Texas..................... 1 268 23,870 1,508 --
Wisconsin................. 2 917 62,522 6,075 --
--- ------ -------- ------- -------
Subtotals............... 6 1,780 113,856 10,240 184
--- ------ -------- ------- -------
Residential Care Facilities
for the Elderly:
California................ 8 48 2,921 319 --
--- ------ -------- ------- -------
Rehabilitation Hospitals:
Arizona................... 2 116 16,826 1,770 301
--- ------ -------- ------- -------
Medical Clinic:
Alabama................... 1 -- 3,902 391 --
--- ------ -------- ------- -------
Construction in Progress.... -- -- 49,139 -- --
--- ------ -------- ------- -------
TOTAL ALL OWNED FACILITIES.. 234 25,039 $960,531 $94,319 $12,622
=== ====== ======== ======= =======
</TABLE>
- --------
(1) Assisted living facilities are measured in units, continuing care
retirement communities are measured in beds and units, and all other
facilities are measured by bed count.
(2) Annual Minimum Rent (as defined in the Leases) for each of the Company's
owned properties. Additional rent, generally contingent upon increases in
the facility net patient revenues in excess of a base amount, may also be
paid. The 1997 additional rent amounts reflect additional rent accrued in
1997.
As of December 31, 1997, 40 of the Company's 234 owned facilities were being
leased to and operated by subsidiaries of Beverly. Beverly has guaranteed
certain obligations of its subsidiaries and of certain parties unaffiliated
with Beverly in connection with 26 properties operated by such parties. The
Company expects that as new facilities are acquired, an increasing percentage
of its facilities will be leased to operators unaffiliated with Beverly. For
additional financial information regarding Beverly, see Appendix 1 attached as
part of this Annual Report on Form 10-K.
COMPETITION
The Company generally competes with other REITs, real estate partnerships,
health care providers and other investors, including, but not limited to,
banks and insurance companies, in the acquisition, leasing and financing of
health care facilities. The operators of the health care facilities compete on
a local and regional basis with operators of facilities that provide
comparable services. Operators compete for patients based on quality of care,
reputation, physical appearance of facilities, services offered, family
preferences, physicians, staff and price.
REGULATION
Payments for health care services provided by the operators of the Company's
facilities are received principally from four sources: private funds;
Medicaid, a medical assistance program for the indigent, operated by
individual states with the financial participation of the federal government;
Medicare, a federal health insurance program for the aged and certain
chronically disabled individuals; and health and other insurance plans.
Government revenue sources, particularly Medicaid programs, are subject to
statutory and regulatory changes, administrative rulings, and government
funding restrictions, all of which may materially increase or decrease the
rates of payment to nursing facilities and the amount of additional rents
payable to the Company under the Leases. There is no assurance that payments
under such programs will remain at levels comparable to the present levels or
be sufficient to cover all the operating and fixed costs allocable to Medicaid
and Medicare patients.
4
<PAGE>
Health care facilities in which the Company invests are also generally
subject to state licensure statutes and regulations and statutes which may
require regulatory approval, in the form of a certificate of need ("CON"),
prior to the addition or construction of new beds, the addition of services or
certain capital expenditures. CON requirements generally do not apply to
assisted living facilities. CON requirements are not uniform throughout the
United States and are subject to change. The Company cannot predict the impact
of regulatory changes with respect to licensure and CON's on the operations of
the Company's lessees and mortgagees.
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the name, position and age of each executive
officer of the Company. Each executive officer of the Company is appointed by
its Board of Directors, serves at the pleasure of the Board and holds office
until a successor is elected, or until the earliest of death, resignation or
removal. There is no "family relationship" between any of the named executive
officers or any director of the Company. All information is given as of
February 28, 1998.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
R. Bruce Andrews...... President and Chief Executive Officer 57
Mark L. Desmond....... Senior Vice President and Chief Financial Officer 39
T. Andrew Stokes...... Senior Vice President of Corporate Development 50
Steven J. Insoft...... Vice President of Development 34
John J. Sheehan, Jr... Vice President of Development 40
Gary E. Stark......... Vice President and General Counsel 42
</TABLE>
R. BRUCE ANDREWS--President and Chief Executive Officer of the Company since
September 1989 and a director of the Company since October 1989. Mr. Andrews
had previously served as a director of American Medical International, Inc., a
hospital management company, and served as its Chief Financial Officer from
1970 to 1985 and its Chief Operating Officer in 1985 and 1986. From 1986
through 1989, Mr. Andrews was engaged in various private investments. Mr.
Andrews is also a director of Alexander Haagen Properties, Inc. and
ARV Assisted Living, Inc.
MARK L. DESMOND--Senior Vice President and Chief Financial Officer of the
Company since January 1996. Mr. Desmond was Vice President and Treasurer of
the Company from May 1990 to December 1995 and Controller, Chief Accounting
Officer and Assistant Treasurer of the Company from June 1988 to April 1990.
From 1986 until joining the Company, Mr. Desmond held various accounting
positions with Beverly, an operator of nursing facilities, pharmacies and
pharmacy related outlets.
T. ANDREW STOKES--Senior Vice President of Corporate Development of the
Company since January 1996. Mr. Stokes was Vice President of Development of
the Company from August 1992 to December 1995. From 1984 to 1988, Mr. Stokes
served as Vice President, Corporate Development for American Medical
International, Inc., a hospital management company. From 1989 until joining
the Company, Mr. Stokes was Healthcare Group Director of Houlihan, Lokey,
Howard & Zukin, a national financial advisory firm.
STEVEN J. INSOFT--Vice President of Development of the Company since
February 1998. From 1991 to 1997, Mr. Insoft served as President of CMI Senior
Housing & Healthcare, Inc., an operator of nursing facilities. From 1988 to
1991, Mr. Insoft was an Associate in the Capital Markets Group of Prudential
Insurance Company of America.
JOHN J. SHEEHAN, JR.--Vice President of Development of the Company since
February 1996. From September 1987 through April 1990, Mr. Sheehan served as
Director of Asset Management for Southmark Corporation, a real estate
syndication company. From April 1990 until joining the Company, Mr. Sheehan
was Vice President, Mortgage Finance for Life Care Centers of America, an
operator and manager of nursing facilities.
5
<PAGE>
GARY E. STARK--Vice President and General Counsel of the Company since
January 1993. From January 1988 to December 1989, Mr. Stark held the position
of General Counsel with Care Enterprises, Inc., an operator of nursing
facilities, pharmacies and other ancillary health care services, and served as
its Corporate Counsel from April 1985 through December 1987. From January 1990
through August 1991, Mr. Stark was engaged in the private practice of law. Mr.
Stark served as Vice President of Legal Services of Life Care Centers of
America, Inc., an operator and manager of nursing facilities and retirement
centers from July 1992 to December 1992 and served as General Counsel from
September 1991 to July 1992.
EMPLOYEES
As of February 28, 1998, the Company employed thirteen full-time employees.
ITEM 2. PROPERTIES.
See Item 1 for details.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal proceedings pending to which the Company is a party
or to which some of its properties are subject arising in the normal course of
business. The Company does not believe that the ultimate resolution of these
proceedings will have a material adverse effect on the Company's consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
6
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock Exchange. It has
been the Company's policy to declare quarterly dividends to holders of the
Company's common stock so as to comply with applicable sections of the
Internal Revenue Code governing real estate investment trusts. Set forth below
are the high and low sales prices of the Company's common stock from January
1, 1996 to December 31, 1997 as reported by the New York Stock Exchange and
the cash dividends per share paid with respect to such periods.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
------- ---------- --------
<S> <C> <C> <C>
1997
First quarter.................................. $23 3/8 $21 1/4 $.39
Second quarter................................. 23 1/2 19 7/8 .39
Third quarter.................................. 24 3/4 22 1/16 .39
Fourth quarter................................. 25 7/8 21 13/16 .39
1996
First quarter.................................. $22 3/8 $20 3/4 $.37
Second quarter................................. 21 7/8 19 1/2 .37
Third quarter.................................. 23 1/4 21 1/4 .37
Fourth quarter................................. 24 1/4 21 1/4 .37
</TABLE>
As of February 28, 1998 there were approximately 1,200 holders of record of
the Company's common stock.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected financial data with respect to the
Company. Certain of this financial data has been derived from the Company's
audited financial statements included elsewhere in this Annual Report on Form
10-K and should be read in conjunction with those financial statements and
accompanying notes and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations". Reference is made to Note 4 of Notes to
Consolidated Financial Statements for information regarding the Company's
acquisitions.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues............ $ 115,705 $ 95,776 $ 81,039 $ 69,985 $ 60,385
Income from operations.... 62,988 54,944 49,382 44,813 40,996
Gain on sale of
facilities............... 829 -- 989 -- --
Extraordinary charge(1)... -- -- -- -- (2,004)
Net income................ 63,817 54,944 50,371 44,813 38,992
Preferred stock dividends. (1,962) -- -- -- --
Net income available to
common stockholders...... 61,855 54,944 50,371 44,813 38,992
Dividends paid on common
stock.................... 65,734 59,581 53,182 47,751 42,883
PER SHARE DATA:
Basic/diluted income from
continuing operations
available to common
stockholders(2).......... $ 1.45 $ 1.36 $ 1.30 $ 1.23 $ 1.17
Basic/diluted net income
available to common
stockholders............. 1.47 1.36 1.33 1.23 1.11
Dividends paid on common
stock.................... 1.56 1.48 1.41 1.31 1.21
BALANCE SHEET DATA:
Investments in real
estate, net.............. $1,053,273 $722,506 $ 652,231 $501,862 $428,473
Total assets.............. 1,077,394 744,984 670,111 513,809 440,165
Senior unsecured notes due
2000-2037................ 355,000 190,000 100,000 -- --
Bank borrowings........... 19,600 32,300 93,900 80,200 3,800
Convertible debentures.... 64,512 64,920 65,000 67,690 73,609
Notes and bonds payable... 58,297 9,229 23,364 20,520 23,047
Stockholders' equity...... 553,046 428,588 371,822 336,106 332,927
OTHER DATA:
Net cash provided by
operating activities..... $ 86,010 $ 74,129 $ 66,972 $ 56,756 $ 49,725
Net cash used in investing
activities............... (267,302) (85,034) (151,476) (83,185) (56,261)
Net cash provided by
financing activities..... 179,775 14,677 88,699 26,544 1,882
Funds from operations
available to common
stockholders(3).......... 80,851 71,667 63,267 57,057 51,111
Weighted average shares
outstanding.............. 42,164 40,373 37,808 36,356 35,188
</TABLE>
- -------
(1) The Company incurred an extraordinary charge representing the write-off of
unamortized deferred financing costs and fees in connection with the
prepayment of a substantial portion of the Company's secured debt.
(2) For per share purposes, income from continuing operations is defined as
income before the effect of any gains or losses on sales of properties.
(3) Industry analysts generally consider funds from operations to be an
alternative measure of the performance of an equity REIT. The Company
therefore discloses funds from operations, although it is a measurement
that is not defined by generally accepted accounting principles. The
Company uses the NAREIT measure of funds from operations, which is
generally defined as income before extraordinary items plus certain non-
cash items, primarily real estate depreciation, less gains on sales of
facilities. The NAREIT measure may not be comparable to similarly titled
measures used by other REITs. Consequently, the Company's funds from
operations may not provide a meaningful measure of the Company's
performance as compared to that of other REITs. Funds from operations does
not represent cash generated from operating activities as defined by
generally accepted accounting principles (funds from operations does not
include changes in operating assets and liabilities) and, therefore,
should not be considered as an alternative to net income as the primary
indicator of operating performance or to cash flow as a measure of
liquidity.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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, including changes in Medicare and Medicaid payment
levels, 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.
LIQUIDITY AND CAPITAL RESOURCES
During 1997, the Company acquired 31 assisted living facilities, nine long-
term health care facilities, four continuing care retirement communities,
eight residential care facilities for the elderly and one medical clinic in 38
separate and independent transactions for an aggregate purchase price of
approximately $248,343,000. The acquisitions were funded by bank borrowings on
the Company's bank line of credit, approximately $49,542,000 of debt
assumption, 1,315,686 shares of the Company's common stock and cash on hand.
The facilities were concurrently leased under terms generally similar to the
Company's existing leases. Additionally, the Company provided seven mortgage
loans secured by seven long-term health care facilities, three assisted living
facilities and two continuing care retirement communities in the aggregate
amount of $49,238,000. Such mortgages were funded by bank borrowings on the
Company's bank line of credit and cash on hand. In addition, the Company
received principal repayments of approximately $10,544,000 in connection with
the maturity of two mortgage loans secured by three long-term health care
facilities and one assisted living facility. The proceeds were used to repay
bank borrowings.
In addition to the acquisitions, the Company provided new construction
financing of approximately $51,830,000 for three long-term health care
facilities, 17 assisted living facilities and five medical clinics. During
1997, three properties completed the construction phase of the Company's
investment process. The facilities were completed in three separate
transactions for a total investment of $13,301,000 and included the
construction of one long-term health care facility and two assisted living
facilities. The facilities were leased under terms generally similar to the
Company's existing leases. The Company also funded approximately $15,531,000
in capital improvements in accordance with certain existing lease provisions.
Such capital improvements will result in an increase in the minimum rents
earned by the Company. The construction advances and capital improvement
advances are funded by bank borrowings on the Company's bank line of credit
and by cash on hand.
During June 1997, the Company sold two long-term health care facilities for
an aggregate price of approximately $6,863,000. The Company received a
mortgage note in the amount of the purchase price, which is secured by the two
facilities. The related gain of approximately $1,676,000 on such sale will be
recognized into income on a deferred basis in proportion to the receipt of
principal payments on the mortgage loans provided by the Company.
During August 1997, the Company sold one long-term health care facility to
the lessee of such facility pursuant to a purchase option provision in the
respective lease for a purchase price of approximately $4,829,000 resulting in
a gain of approximately $829,000. The proceeds of the sale were used to repay
bank borrowings on the Company's bank line of credit.
During 1997, the Company issued $165,000,000 in aggregate principal amount
of medium-term notes. The notes bear fixed interest at a weighted average
interest rate of 7.1% and have a weighted average maturity of 19.2 years. The
proceeds were used to repay borrowings on the Company's bank line of credit.
9
<PAGE>
In September 1997, the Company sold 1,000,000 shares of 7.677% Series A
Cumulative Preferred Step-Up REIT securities ("Preferred Stock") with a
liquidation preference of $100 per share. Dividends on the Preferred Stock are
cumulative from the date of original issue and are payable quarterly in
arrears, commencing December 31, 1997 at the rate of 7.677% per annum of the
liquidation preference per share (equivalent to $7.677 per annum per share)
through September 30, 2012 and at a rate of 9.677% of the liquidation
preference per annum per share (equivalent to $9.677 per annum per share)
thereafter. The Preferred Stock is not redeemable prior to September 30, 2007.
On or after September 30, 2007, the Preferred Stock may be redeemed for cash
at the option of the Company, in whole or in part, at a redemption price of
$100 per share, plus accrued and unpaid dividends, if any, thereon. Proceeds
from the sale of the Preferred Stock were used to repay $71,150,000 of bank
borrowings on the Company's bank line of credit and fund additional
investments.
At December 31, 1997, the Company had $80,400,000 available under its
$100,000,000 bank line of credit. The Company also had effective shelf
registrations on file with the Securities and Exchange Commission under which
the Company may issue (a) up to $245,000,000 in aggregate principal amount of
medium-term notes and (b) up to $233,122,000 of securities including debt,
convertible debt, common and preferred stock. The Company anticipates issuing
securities under such shelf registrations to repay borrowings under the
Company's bank line of credit, for the financing of additional investments or
for general corporate purposes.
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.
OPERATING RESULTS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues increased $19,929,000 or 21% in 1997 as compared to 1996. The
increase was primarily due to increased minimum rent and interest income
resulting from investments in 60 net additional facilities in 1997, combined
with a full year of revenues earned by investments in additional facilities in
1996. The increase was also attributable to increased additional rent and
additional interest as provided in the Company's existing leases and mortgage
loans receivable based on increases in the facility revenues or the Consumer
Price Index.
Total expenses increased $11,885,000 or 29% in 1997 as compared to 1996. The
increase was primarily due to an increase in interest expense due to the
issuance of $165,000,000 in medium term notes during 1997 and the issuance of
$90,000,000 in medium term notes in 1996. The increase in total expenses was
also attributable to increased depreciation due to the acquisition of
additional facilities in 1997 and 1996.
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 increase with increases in facility revenues 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 or interest income. As additional investments in facilities
are made, depreciation 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.
The Company does not expect any material costs or any material negative
impact on its operations related to Year 2000 computer systems compliance
issues.
10
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues increased $14,737,000, or 18% in 1996 as compared to 1995. The
increase was primarily due to increased minimum rent and interest income
resulting from investments in 21 additional facilities during 1996, combined
with a full year of revenues earned by investments in additional facilities in
1995. The increase was also attributable to increased additional rent and
additional interest as provided in the Company's existing leases and mortgage
loans receivable based on increases in the facility revenues or the Consumer
Price Index.
Total expenses increased $9,175,000, or 29% in 1996 as compared to 1995. The
increase was primarily due to increased interest expense as a result of the
issuance of $90,000,000 in medium term notes during 1996 and the issuance of
$100,000,000 in medium term notes during 1995. The increase in total expenses
was also attributable to increased depreciation due to the acquisition of
additional facilities in 1996 and 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<S> <C>
Report of Independent Public Accountants............................... 12
Consolidated Balance Sheets............................................ 13
Consolidated Statements of Operations.................................. 14
Consolidated Statements of Stockholders' Equity........................ 15
Consolidated Statements of Cash Flows.................................. 16
Notes to Consolidated Financial Statements............................. 17
</TABLE>
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Directors of
Nationwide Health Properties, Inc.
We have audited the accompanying consolidated balance sheets of Nationwide
Health Properties, Inc. (a Maryland corporation) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Health
Properties, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
January 16, 1998
12
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments in real estate
Real estate properties:
Land................................................ $ 120,236 $ 75,252
Buildings and improvements.......................... 809,217 574,544
Construction in progress............................ 31,078 2,213
---------- ---------
960,531 652,009
Less accumulated depreciation....................... (107,077) (89,967)
---------- ---------
853,454 562,042
Mortgage loans receivable, net........................ 199,819 160,464
---------- ---------
1,053,273 722,506
Cash and cash equivalents............................... 10,192 11,709
Receivables............................................. 4,362 4,321
Other assets............................................ 9,567 6,448
---------- ---------
$1,077,394 $ 744,984
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings......................................... $ 19,600 $ 32,300
Senior notes due 2000-2037.............................. 355,000 190,000
Convertible debentures.................................. 64,512 64,920
Notes and bonds payable................................. 58,297 9,229
Accounts payable and accrued liabilities................ 26,939 19,947
Commitments and contingencies
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized; issued and outstanding: 1997--1,000,000;
1996--none; stated at liquidation preference of $100
per share............................................ 100,000 --
Common stock $.10 par value; 100,000,000 shares
authorized; issued and outstanding: 43,128,889 and
41,785,001 as of December 31, 1997 and 1996,
respectively......................................... 4,313 4,179
Capital in excess of par value........................ 490,737 462,534
Cumulative net income................................. 363,896 300,079
Cumulative dividends.................................. (405,900) (338,204)
---------- ---------
Total stockholders' equity........................ 553,046 428,588
---------- ---------
$1,077,394 $ 744,984
========== =========
</TABLE>
See accompanying notes.
13
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Minimum rent....................................... $ 79,587 $66,536 $54,504
Interest and other income.......................... 22,454 17,104 14,759
Additional rent and additional interest............ 13,664 12,136 11,776
-------- ------- -------
115,705 95,776 81,039
-------- ------- -------
Expenses:
Interest and amortization of deferred financing
costs............................................. 28,899 20,797 14,628
Depreciation and non-cash charges.................. 19,825 16,723 13,885
General and administrative......................... 3,993 3,312 3,144
-------- ------- -------
52,717 40,832 31,657
-------- ------- -------
Income before gain on sale of facilities............. 62,988 54,944 49,382
Gain on sale of facilities........................... 829 -- 989
-------- ------- -------
Net income........................................... 63,817 54,944 50,371
Preferred stock dividends............................ (1,962) -- --
-------- ------- -------
Net income available to common stockholders.......... $ 61,855 $54,944 $50,371
======== ======= =======
Per share amounts:
Basic/diluted income from continuing operations
available to common stockholders.................. $ 1.45 $ 1.36 $ 1.30
======== ======= =======
Basic/diluted net income available to common
stockholders...................................... $ 1.47 $ 1.36 $ 1.33
======== ======= =======
Weighted average shares outstanding.................. 42,164 40,373 37,808
======== ======= =======
</TABLE>
See accompanying notes.
14
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------- ---------------
CAPITAL IN TOTAL
EXCESS OF CUMULATIVE CUMULATIVE STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT PAR VALUE NET INCOME DIVIDENDS EQUITY
------ ------ ------ -------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1994................... 36,476 $3,648 -- $ -- $363,135 $194,764 $(225,441) $336,106
Issuance of common
stock................. 2,032 203 -- -- 35,714 -- -- 35,917
Exercise of common
stock
options............... 2 -- -- -- 10 -- -- 10
Conversion of
debentures............ 210 21 -- -- 2,579 -- -- 2,600
Net income............. -- -- -- -- -- 50,371 -- 50,371
Common dividends....... -- -- -- -- -- -- (53,182) (53,182)
------ ------ ----- -------- -------- -------- --------- --------
Balances at December 31,
1995................... 38,720 3,872 -- -- 401,438 245,135 (278,623) 371,822
Issuance of common
stock................. 3,058 307 -- -- 60,998 -- -- 61,305
Exercise of common
stock
options............... 3 -- -- -- 19 -- -- 19
Conversion of
debentures............ 4 -- -- -- 79 -- -- 79
Net income............. -- -- -- -- -- 54,944 -- 54,944
Common dividends....... -- -- -- -- -- -- (59,581) (59,581)
------ ------ ----- -------- -------- -------- --------- --------
Balances at December 31,
1996................... 41,785 4,179 -- -- 462,534 300,079 (338,204) 428,588
Issuance of common
stock................. 1,326 132 -- -- 30,551 -- -- 30,683
Issuance of preferred
stock................. -- -- 1,000 100,000 (2,750) -- -- 97,250
Conversion of
debentures............ 18 2 -- -- 402 -- -- 404
Net income............. -- -- -- -- -- 63,817 -- 63,817
Preferred dividends.... -- -- -- -- -- -- (1,962) (1,962)
Common dividends....... -- -- -- -- -- -- (65,734) (65,734)
------ ------ ----- -------- -------- -------- --------- --------
Balances at December 31,
1997................... 43,129 $4,313 1,000 $100,000 $490,737 $363,896 $(405,900) $553,046
====== ====== ===== ======== ======== ======== ========= ========
</TABLE>
See accompanying notes.
15
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 63,817 $ 54,944 $ 50,371
Depreciation and non-cash charges........... 19,825 16,723 13,885
Gain on sale of properties.................. (829) -- (989)
Amortization of deferred financing costs.... 801 772 490
Net change in other assets and liabilities.. 2,396 1,690 3,215
--------- --------- ---------
Net cash provided by operating activities. 86,010 74,129 66,972
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate properties........ (239,775) (59,282) (136,783)
Disposition of real estate properties....... 4,812 -- 8,940
Investment in mortgage loans receivable..... (44,947) (31,430) (35,437)
Principal payments on mortgage loans
receivable................................. 12,608 5,678 11,804
--------- --------- ---------
Net cash used in investing activities..... (267,302) (85,034) (151,476)
--------- --------- ---------
Cash flows from financing activities:
Bank borrowings............................. 263,700 132,450 205,600
Repayment of bank borrowings................ (276,400) (194,050) (191,900)
Issuance of common stock, net............... -- 60,903 35,494
Issuance of preferred stock, net............ 97,250 -- --
Issuance of senior unsecured debt........... 165,000 90,000 100,000
Principal payments on notes and bonds
payable.................................... (474) (14,135) (6,460)
Dividends paid.............................. (67,696) (59,581) (53,182)
Deferred financing costs.................... (1,605) (910) (853)
--------- --------- ---------
Net cash provided by financing activities. 179,775 14,677 88,699
--------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................. (1,517) 3,772 4,195
Cash and cash equivalents, beginning of
period....................................... 11,709 7,937 3,742
--------- --------- ---------
Cash and cash equivalents, end of period...... $ 10,192 $ 11,709 $ 7,937
========= ========= =========
Supplemental schedule of cash flow
information:
Cash interest paid.......................... $ 22,467 $ 12,721 $ 12,680
========= ========= =========
</TABLE>
See accompanying notes.
16
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. ORGANIZATION
Nationwide Health Properties, Inc. (the "Company") was incorporated on
October 14, 1985 in the State of Maryland. The Company operates as a real
estate investment trust specializing in investments in health care related
properties and as of December 31, 1997 had investments in 291 health care
facilities, including 191 long-term health care facilities, 78 assisted living
facilities, 11 continuing care retirement communities, two rehabilitation
hospitals, eight residential care facilities for the elderly and one medical
clinic. At December 31, 1997, the Company owned 145 long-term health care
facilities, 72 assisted living facilities, six continuing care retirement
communities, two rehabilitation hospitals, eight residential care facilities
for the elderly and one medical clinic and held 35 mortgage loans secured by
46 long-term health care facilities, six assisted living facilities and five
continuing care retirement communities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and its investment in its majority owned and
controlled joint ventures. All material intercompany accounts and transactions
have been eliminated.
Stock Split & Reclassifications
On January 19, 1996, the Board of Directors of Nationwide Health Properties,
Inc. authorized a two-for-one split of the Company's common stock effective on
March 8, 1996. The financial statements included herein have been restated to
reflect the stock split. Additionally, certain amounts in the 1996 and 1995
financial statements have been reclassified for consistent financial statement
presentation.
Land, Buildings and Improvements
The Company records properties at cost and uses the straight-line method of
depreciation for buildings and improvements over their estimated remaining
useful lives of up to 40 years. The Company provides accelerated depreciation
on certain of its investments based primarily on an estimation of net
realizable value of such investments at the end of the primary lease terms.
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in money market mutual
funds, commercial paper and repurchase agreements with original maturities of
three months or less. Such investments are deemed to be cash equivalents for
purposes of presentation in the financial statements.
Federal Income Taxes
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% of its real estate investment trust taxable income to its stockholders.
Accordingly, the Company will not be subject to Federal income taxes on its
income which is distributed to stockholders. Therefore, no provisions for
Federal income taxes have been made in the Company's financial statements. The
net difference in the tax basis and the reported amounts of the Company's
assets and liabilities as of December 31, 1997 is approximately ($4,309,000).
17
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Rental income from operating leases is accrued as earned over the life of
the lease agreements in accordance with generally accepted accounting
principles. There are no step rent provisions in any of the lease agreements.
Interest income on real estate mortgages is recognized using the effective
interest method based upon the expected payments over the lives of the
mortgages.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Impact of New Accounting Pronouncements
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 128 Earnings per Share and SFAS No. 129 Disclosure of Information About
Capital Structure in 1997. The adoption of SFAS No. 128 and SFAS No. 129 has
not materially impacted the Company's financial statements.
SFAS No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information were issued in June of
1997 and are effective for fiscal years beginning after December 15, 1997. The
adoption of these pronouncements in the first quarter of 1998 is not expected
to have a material impact on the Company's financial statements.
3. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding.
Income available to common stockholders is calculated by deducting dividends
declared on preferred stock from income from continuing operations and net
income. Diluted earnings per share includes the effect of the potential shares
outstanding; dilutive stock options and dilutive convertible debentures. The
table below details the components of the basic and diluted earnings per share
from continuing operations calculations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
--------------- -------------- --------------
INCOME SHARES INCOME SHARES INCOME SHARES
------- ------ ------- ------ ------- ------
(AMOUNTS IN THOUSANDS)
----------------------
<S> <C> <C> <C> <C> <C> <C>
Income before gain on sale of
facility........................ $62,988 $54,944 $49,382
Less: preferred stock dividends.. (1,962) -- --
------- ------- -------
Basic EPS........................ 61,026 42,164 54,944 40,373 49,382 37,808
Effect of dilutive securities:
Stock options.................. -- 9 -- 4 -- 3
8.9% convertible debentures.... -- -- -- -- 18 77
------- ------ ------- ------ ------- ------
Diluted EPS...................... $61,026 42,173 $54,944 40,377 $49,400 37,888
======= ====== ======= ====== ======= ======
</TABLE>
18
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. REAL ESTATE PROPERTIES
All of the Company's owned facilities are leased under "net" leases which
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. Certain of the leases contain provisions such that the
percentage of further revenue increases due to the Company as additional rent
is limited to 1% at such time as additional rent exceeds 41% of minimum rent.
Under the terms of the leases, the lessee is responsible for all maintenance,
repairs, taxes and insurance on the leased properties.
Minimum future rentals on non-cancelable leases as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
MINIMUM
YEAR RENTALS
---- --------------
(IN THOUSANDS)
<S> <C>
1998........................... $ 93,267
1999........................... 90,232
2000........................... 77,001
2001........................... 69,613
2002........................... 64,017
2003........................... 61,571
2004........................... 58,085
2005........................... 53,793
2006........................... 48,260
2007........................... 39,363
Thereafter..................... 132,674
</TABLE>
During 1997, the Company acquired 31 assisted living facilities, nine long-
term health care facilities, four continuing care retirement communities,
eight residential care facilities for the elderly and one medical clinic in 38
separate and independent transactions for an aggregate purchase price of
approximately $248,343,000. The facilities were concurrently leased under
terms generally similar to the Company's existing leases. The acquisitions
were funded by bank borrowings on the Company's bank line of credit,
approximately $49,542,000 of debt assumption, 1,315,686 shares of the
Company's common stock and cash on hand.
In addition to the acquisitions, the Company provided new construction
financing of approximately $51,830,000, including capitalized interest of
approximately $1,651,000, for three long-term health care facilities, 17
assisted living facilities and five medical clinics. The Company also provided
capital improvement funding in the aggregate amount of approximately
$15,531,000 in accordance with certain existing lease provisions. Such capital
improvements will result in an increase in the minimum rents earned by the
Company.
During June 1997, the Company sold two long-term health care facilities for
an aggregate purchase price of approximately $6,863,000. The Company received
a mortgage note in the amount of the purchase price, which is secured by the
two facilities. The related gain of approximately $1,676,000 on such sale will
be recognized into income on a deferred basis in proportion to the receipt of
principal payments on the mortgage loans provided by the Company.
During August 1997, the Company sold one long-term health care facility to
the lessee of such facility pursuant to a purchase option provision in the
respective lease for a purchase price of approximately $4,829,000 resulting in
a gain of approximately $829,000. The proceeds of the sale were used to repay
bank borrowings on the Company's bank line of credit.
19
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table lists the Company's real estate properties as of December
31, 1997:
<TABLE>
<CAPTION>
BUILDINGS NOTES AND
NUMBER OF AND TOTAL ACCUMULATED BONDS
FACILITY LOCATION FACILITIES LAND IMPROVEMENTS INVESTMENT(1) DEPRECIATION PAYABLE
----------------- ---------- ------- ------------ ------------- ------------ ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM HEALTH CARE
FACILITIES:
Arizona............... 2 $ 833 $ 5,243 $ 6,076 $ 1,329 $ --
Arkansas.............. 2 209 5,773 5,982 1,883 --
California............ 8 7,053 19,428 26,481 3,612 --
Connecticut........... 3 1,044 6,820 7,864 1,404 --
Florida............... 9 4,187 25,288 29,475 5,498 --
Georgia............... 1 801 6,542 7,343 828 --
Idaho................. 1 15 777 792 214 --
Illinois.............. 2 157 5,392 5,549 1,153 --
Indiana............... 11 2,044 33,363 35,407 6,069 --
Kansas................ 8 517 11,287 11,804 2,068 --
Maryland.............. 4 845 21,212 22,057 6,893 --
Massachusetts......... 14 6,753 45,222 51,975 5,836 --
Minnesota............. 10 2,559 35,131 37,690 10,822 --
Missouri.............. 1 51 2,689 2,740 922 --
Nevada................ 1 740 3,294 4,034 515 --
New Jersey............ 1 360 6,449 6,809 2,866 --
North Carolina........ 1 116 2,244 2,360 770 --
Ohio.................. 6 1,316 28,231 29,547 6,695 --
Oklahoma.............. 3 98 3,841 3,939 1,051 --
Oregon................ 4 435 6,325 6,760 2,170 --
Tennessee............. 8 1,041 23,376 24,417 3,061 --
Texas................. 26 4,805 50,802 55,607 10,183 --
Virginia.............. 4 1,036 17,532 18,568 6,013 --
Washington............ 6 2,647 21,662 24,309 2,253 --
Wisconsin............. 9 1,621 19,548 21,169 6,383 --
--- ------- -------- -------- ------- ------
Subtotals........... 145 41,283 407,471 448,754 90,491 --
--- ------- -------- -------- ------- ------
ASSISTED LIVING
FACILITIES:
Alabama............... 2 1,681 4,271 5,952 147 --
Arizona............... 1 519 4,092 4,611 188 --
California............ 12 14,255 55,187 69,442 4,012 --
Colorado.............. 4 2,146 19,631 21,777 1,067 --
Florida............... 16 8,480 49,914 58,394 1,233 --
Idaho................. 1 544 11,256 11,800 401 --
Illinois.............. 1 603 10,473 11,076 262 --
Kansas................ 1 200 1,921 2,121 36 --
Michigan.............. 1 300 6,939 7,239 562 --
Nevada................ 2 1,219 12,364 13,583 -- 7,003
Ohio.................. 7 1,795 16,414 18,209 420 --
Oklahoma.............. 3 745 7,355 8,100 586 --
Oregon................ 6 2,078 26,297 28,375 1,317 9,147
Tennessee............. 1 600 2,302 2,902 149 --
Texas................. 9 1,748 16,667 18,415 771 --
Washington............ 3 1,075 15,912 16,987 407 --
Wisconsin............. 2 4,843 21,307 26,150 145 16,526
--- ------- -------- -------- ------- ------
Subtotals........... 72 42,831 282,302 325,133 11,703 32,676
--- ------- -------- -------- ------- ------
</TABLE>
20
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
BUILDINGS NOTES AND
NUMBER OF AND TOTAL ACCUMULATED BONDS
FACILITY LOCATION FACILITIES LAND IMPROVEMENTS INVESTMENT(1) DEPRECIATION PAYABLE
----------------- ---------- -------- ------------ ------------- ------------ ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONTINUING CARE
RETIREMENT COMMUNITIES:
California............ 1 $ 1,600 $ 9,550 $ 11,150 $ 872 $ --
Colorado.............. 1 400 2,715 3,115 339 --
Kansas................ 1 687 12,512 13,199 151 2,800
Texas................. 1 1,848 22,022 23,870 373 --
Wisconsin............. 2 11,057 51,465 62,522 385 22,821
--- -------- -------- -------- -------- -------
Subtotals........... 6 15,592 98,264 113,856 2,120 25,621
--- -------- -------- -------- -------- -------
RESIDENTIAL CARE
FACILITIES FOR THE
ELDERLY:
California............ 8 704 2,217 2,921 10 --
--- -------- -------- -------- -------- -------
REHABILITATION
HOSPITALS:
Arizona............... 2 1,517 15,309 16,826 2,715 --
--- -------- -------- -------- -------- -------
MEDICAL CLINIC:
Alabama............... 1 248 3,654 3,902 38 --
--- -------- -------- -------- -------- -------
CONSTRUCTION IN
PROGRESS............... -- 18,061 31,078 49,139 -- --
--- -------- -------- -------- -------- -------
TOTAL OWNED FACILITIES.. 234 $120,236 $840,295 $960,531 $107,077 $58,297
=== ======== ======== ======== ======== =======
</TABLE>
- --------
(1) Also represents the approximate aggregate cost for Federal income tax
purposes.
21
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. MORTGAGE LOANS RECEIVABLE
During 1997, the Company provided seven mortgage loans, secured by seven
long-term health care facilities, three assisted living facilities and two
continuing care retirement communities in an aggregate amount of $49,238,000,
inclusive of the note received related to the sale of two properties in June
1997 less the related deferred gain. Additionally, proceeds of approximately
$10,544,000 were received in connection with the repayment of two mortgage
loans secured by three long-term health care facilities and one assisted
living facility. At December 31, 1997, the Company had 35 mortgage loans
receivable secured by 46 long-term health care facilities, six assisted living
facilities and five continuing care retirement communities. The loans have an
aggregate principal balance of approximately $209,185,000 and are reflected in
the Company's financial statements net of an aggregate discount of
approximately $9,366,000. The principal balances of mortgage loans receivable
as of December 31, 1997 mature approximately as follows: $9,235,000 in 1998,
$2,239,000 in 1999, $2,393,000 in 2000, $2,663,000 in 2001, $4,768,000 in 2002
and $187,887,000 thereafter.
The following table lists the Company's mortgage loans receivable at
December 31, 1997:
<TABLE>
<CAPTION>
NUMBER FINAL ESTIMATED ORIGINAL FACE CARRYING
OF INTEREST MATURITY BALLOON AMOUNT OF AMOUNT OF
LOCATION OF FACILITIES FACILITIES RATE DATE PAYMENT(1) MORTGAGES MORTGAGES(2)
---------------------- ---------- -------- -------- ---------- ------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM HEALTH CARE
FACILITIES:
Arkansas.............. 3 10.00% 12/06 $ 4,945 $ 5,500 $ 5,044
California............ 1 10.00% 05/25 1,489 8,200 8,200
California............ 1 7.69% 05/98 3,203 3,600 3,152
California............ 1 7.69% 05/98 2,179 2,425 2,144
California............ 2 9.50% 03/09 5,336 7,841 7,517
Connecticut........... 2 10.00% 06/22 -- 8,862 5,302
Florida............... 1 10.55% 07/03 -- 4,400 1,183
Florida............... 1 11.25% 07/06 4,400 4,400 4,400
Florida............... 2 10.78% 06/09 3,642 3,642 3,642
Georgia............... 1 10.78% 06/09 2,804 2,804 2,804
Illinois.............. 1 9.00% 01/24 -- 9,500 7,869
Indiana............... 1 10.55% 07/03 -- 785 660
Kansas................ 1 9.73% 09/98 1,253 1,550 1,282
Louisiana............. 1 10.89% 04/15 2,392 3,850 3,850
Maryland.............. 1 10.90% 06/21 -- 7,800 7,497
Massachusetts......... 1 8.75% 02/24 -- 9,000 7,165
Michigan.............. 3 12.61% 12/06 6,904 7,817 7,078
Michigan.............. 2 11.70% 01/05 2,506 3,000 2,698
Michigan.............. 1 10.82% 01/05 1,501 1,800 1,676
Missouri.............. 7 10.60% 08/11 17,725 17,725 17,725
South Dakota.......... 1 10.15% 05/05 -- 4,275 996
Tennessee............. 1 12.00% 06/07 3,000 3,000 3,000
Tennessee............. 1 9.77% 01/07 8,550 8,550 8,550
Texas................. 1 10.43% 01/04 633 1,460 913
Texas................. 2 10.85% 01/02 1,963 2,519 2,188
Virginia.............. 1 10.50% 04/13 10,192 16,250 16,012
Washington............ 4 11.00% 10/19 112 6,000 5,830
Wisconsin............. 1 10.15% 05/05 -- 1,350 646
--- ------- -------- --------
Subtotals........... 46 84,729 157,905 139,023
--- ------- -------- --------
</TABLE>
22
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
NUMBER FINAL ESTIMATED ORIGINAL FACE CARRYING
OF INTEREST MATURITY BALLOON AMOUNT OF AMOUNT OF
LOCATION OF FACILITIES FACILITIES RATE DATE PAYMENT(1) MORTGAGES MORTGAGES(2)
---------------------- ---------- -------- -------- ---------- ------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING
FACILITIES:
Florida............... 1 10.39% 11/06 $ 5,500 $ 5,500 $ 5,500
Florida............... 2 10.31% 09/20 -- 7,230 7,230
North Carolina........ 2 10.24% 05/07 2,475 2,700 2,475
Washington............ 1 9.95% 12/15 6,403 6,557 6,557
--- -------- -------- --------
Subtotals........... 6 14,378 21,987 21,762
--- -------- -------- --------
CONTINUING CARE RETIREMENT
COMMUNITIES:
California............ 1 9.50% 03/09 2,831 4,159 3,987
Florida............... 1 10.78% 06/09 14,446 14,550 14,446
Massachusetts......... 1 9.52% 06/23 -- 9,400 9,400
Oklahoma.............. 1 9.55% 03/24 -- 8,950 8,201
Tennessee............. 1 10.00% 02/07 3,000 3,000 3,000
--- -------- -------- --------
Subtotals........... 5 20,277 40,059 39,034
--- -------- -------- --------
Total............. 57 $119,384 $219,951 $199,819
=== ======== ======== ========
</TABLE>
- --------
(1) Most loans require monthly principal and interest payments at level
amounts over life to maturity. Some loans are adjustable rate mortgages
with varying principal and interest payments over life to maturity, in
which case the balloon payments reflected are an estimate. Five of the
loans have decreasing principal and interest payments over the life of the
loans. Most loans require a prepayment penalty based on a percentage of
principal outstanding or a penalty based upon a calculation maintaining
the yield the Company would have earned if prepayment had not occurred.
Seven loans have a provision that no prepayments are acceptable.
(2) The aggregate cost for federal income tax purposes is approximately
$209,272,000.
The following table summarizes the changes in mortgage loans receivable
during 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1,.......................... $160,464 $133,226 $105,824
New mortgage loans........................... 50,134 31,430 37,544
Accretion of discount on loans............... 1,829 1,486 1,662
Collection of principal...................... (12,608) (5,678) (11,804)
-------- -------- --------
Balance at December 31,........................ $199,819 $160,464 $133,226
======== ======== ========
</TABLE>
6. BANK BORROWINGS
The Company has a $100,000,000 unsecured credit agreement with certain banks
which matures on March 31, 2000. The terms of the bank line of credit include
an option to automatically extend the bank line of credit by one year with
concurrence of the bank group. At the option of the Company, borrowings under
the agreement bear interest at prime or LIBOR plus 75 basis points. The
Company pays a facility fee of .28% per annum on the total commitment under
the agreement.
23
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under covenants contained in the credit agreement, the Company is required
to maintain: (i) a minimum net worth of $300,000,000; (ii) a ratio of cash
flow before interest expense and non-cash expenses to regularly scheduled debt
service payments on all debt of at least 2.0 to 1.0; and (iii) a ratio of
total liabilities to net worth of not more than 1.3 to 1.0.
7. NOTES AND BONDS PAYABLE
Notes and bonds payable are due through the year 2035, at interest rates
ranging from 3.5% to 10.9% and are secured by real estate properties with an
aggregate net book value as of December 31, 1997 of approximately $49,111,000.
The principal balances of the notes and bonds payable as of December 31, 1997
mature approximately as follows: $914,000 in 1998, $982,000 in 1999,
$1,043,000 in 2000, $1,121,000 in 2001, $1,042,000 in 2002, and $53,195,000
thereafter.
8. SENIOR UNSECURED NOTES DUE 2000-2037
During 1997, the Company issued $165,000,000 in aggregate principal amount
of medium term notes. The aggregate principal amount of Senior Notes
outstanding at December 31, 1997 was $355,000,000. The weighted average
interest rate on the Senior Notes was 7.3% and the weighted average maturity
was 13.0 years. The principal balances of the Senior Notes as of December 31,
1997 mature approximately as follows: $30,000,000 in the year 2000,
$38,000,000 in 2001, $50,000,000 in 2002, and $237,000,000 thereafter.
There are $55,000,000 of medium term notes due in 2037 which may be put back
to the Company at their face amount at the option of the holder on October 1st
of any of the following years: 2004, 2007, 2009, 2012, 2017, or 2027.
9. CONVERTIBLE DEBENTURES
During 1993, the Company issued $65,000,000 of 6.25% unsecured convertible
debentures due January 1, 1999. The debentures are convertible at any time
prior to maturity into shares of the Company's common stock at a conversion
price of $22.4125 per share. During 1997, $408,000 of such debentures
converted into 18,202 shares of common stock. During 1996, $80,000 of such
debentures converted into 3,569 shares of common stock.
10. PREFERRED STOCK
During 1997, the Company sold 1,000,000 shares of 7.677% Series A Cumulative
Preferred Step-Up REIT securities ("Preferred Stock") with a liquidation
preference of $100 per share. Dividends on the Preferred Stock are cumulative
from the date of original issue and are payable quarterly in arrears,
commencing December 31, 1997 at the rate of 7.677% per annum of the
liquidation preference per share (equivalent to $7.677 per annum per share)
through September 30, 2012 and at a rate of 9.677% of the liquidation
preference per annum per share (equivalent to $9.677 per annum per share)
thereafter. The Preferred Stock is not redeemable prior to September 30, 2007.
On or after September 30, 2007, the Preferred Stock may be redeemed for cash
at the option of the Company, in whole or in part, at a redemption price of
$100 per share, plus accrued and unpaid dividends, if any, thereon.
11. STOCK INCENTIVE PLAN
Under the terms of a stock incentive plan (the "Plan"), the Company has
reserved for issuance 1,600,000 shares of common stock. Under the Plan, as
amended, the Company may issue stock options, restricted stock, dividend
equivalents and stock appreciation rights. The Company accounts for the Plan
under
24
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
APB Opinion No. 25. Had compensation cost for the Plan been determined
consistent with FASB Statement No. 123, the Company's net income and net
income per share in 1997 and 1996 would have been the following pro forma
amounts:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net income available to common stockholders:
As reported....................................... $61,855,000 $54,944,000
Pro forma......................................... 61,712,000 54,867,000
Basic/diluted net income per share:
As reported....................................... $ 1.47 $ 1.36
Pro forma......................................... 1.46 1.36
</TABLE>
Because the pro forma calculation reflects only amounts attributable to
options granted since January 1, 1995, future pro forma affects may not be
comparable to those above. A summary of the status of the Plan at December 31,
1997, 1996 and 1995 and changes during the years then ended is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at
beginning of year..... 89,000 $20.78 3,400 $5.625 5,200 $5.625
Granted................ 90,000 23.00 89,000 20.78 -- --
Exercised.............. -- -- 3,400 5.625 1,800 5.625
Forfeited.............. -- -- -- -- --
Expired................ -- -- -- -- --
------- ------- -------
Outstanding at end of
year.................... 179,000 21.89 89,000 20.78 3,400 5.625
======= ======= =======
Exercisable at end of
year.................... 29,667 20.78 -- 3,400 5.625
Weighted average fair
value of options
granted................. $ 2.14 $ 2.77
Restricted Stock:
Outstanding at
beginning of year..... 109,100 103,900 81,300
Awarded................ 10,000 10,000 32,200
Vested................. 24,200 4,800 9,600
Forfeited.............. -- -- --
------- ------- -------
Outstanding at end of
year.................... 94,900 109,100 103,900
======= ======= =======
Weighted average fair
value of restricted
stock awarded........... $23.19 $20.88 $18.19
</TABLE>
Stock options granted under the Plan become exercisable each year following
the date of grant in annual increments of one-third and are exercisable at the
market price of the Company's common stock on the date of grant. Options at
December 31, 1997 have a weighted average contractual life of 8.5 years.
25
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Risk free rate of return....................................... 6.30% 6.43%
Dividend yield................................................. 6.78% 7.13%
Option Term.................................................... 10 10
Volatility..................................................... 16.45% 22.78%
</TABLE>
The restricted stock awards are granted at no cost. Restricted stock awards
vest at the third anniversary of the award date with respect to non-employee
directors and at the fifth anniversary with respect to officers and employees.
The restricted stock awards are amortized over their respective vesting
periods. Expense is determined based upon the market value at the date of
award of the restricted stock and is recognized over the vesting period.
Expense recorded in 1997, 1996 and 1995 related to restricted stock awards was
approximately $368,000, $372,000 and $379,000, respectively.
Awards of dividend equivalents accompany the 1997 and 1996 stock option
grants on a one-for-one basis. Such dividend equivalents are payable in cash
until such time as the corresponding stock option is exercised, based upon a
formula approved by the Compensation Committee. That formula depends on the
Company's performance measured for a minimum of a three-year period and up to
a five-year period by total return to stockholders (increase in stock price
and dividends paid) compared to peer companies and other companies comprising
a general index of real estate investment trusts, in each case as selected by
the Compensation Committee. Dividend equivalents may be earned in all or part
depending upon the actual total return to shareholders as compared to peer
groups of other real estate investment trusts.
Due to the uncertainty of the ultimate payment of dividend equivalents, no
compensation expense was recorded during 1997 or 1996 with respect to dividend
equivalents. Compensation expense will be recognized when and if the
performance criteria are met.
No stock appreciation rights have been issued under the Plan.
12. PENSION PLAN
During 1991, the Company adopted an unfunded benefit pension plan covering
the current non-employee members of its board of directors upon completion of
five years of service on the board. The benefits, limited to the number of
years of service on the board, are based upon the then current annual retainer
in effect.
The following tables set forth the amounts recognized in the Company's
financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ 789,000 $ 694,000
========= =========
Accumulated benefit obligation....................... $ 834,000 $ 723,000
========= =========
Projected benefit obligation........................... $ 887,000 $ 780,000
Unrecognized prior service cost........................ (101,000) (129,000)
Unrecognized net gain.................................. 10,000 38,000
========= =========
Accrued pension cost................................... $ 796,000 $ 689,000
========= =========
</TABLE>
26
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net pension cost for the year included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current service cost............................. $ 47,000 $ 87,000 $ 73,000
Interest cost.................................... 58,000 53,000 48,000
Amortization of prior service cost............... 27,000 27,000 27,000
-------- -------- --------
Net periodic pension cost........................ $132,000 $167,000 $148,000
======== ======== ========
</TABLE>
Discount rates of 7.0%, 7.5% and 7.0% in 1997, 1996 and 1995, respectively
and a 5.0% increase in the annual retainer every other year were used in
determining the actuarial present value of the projected benefit obligation.
13. TRANSACTIONS WITH BEVERLY ENTERPRISES, INC.
As of December 31, 1997, 40 of the owned facilities are leased to and
operated by subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has
guaranteed certain obligations of its subsidiaries and of certain parties
unaffiliated with Beverly in connection with 26 properties operated by such
parties. Additionally, Beverly is the Borrower on four of the Company's
mortgage loans. Revenues from Beverly were approximately $19,712,000,
$21,837,000 and $21,921,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
One of the directors of the Company is also an officer and director of
Beverly.
14. DIVIDENDS
Dividend payments by the Company to the stockholders were characterized in
the following manner for tax purposes:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Ordinary income........................................... $1.505 $1.48 $1.24
Capital gain.............................................. .055 -- .17
Return of capital......................................... -- -- --
------ ----- -----
Total dividends paid.................................... $1.560 $1.48 $1.41
====== ===== =====
</TABLE>
27
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
----------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
---------- -------- ------------- ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997:
Revenues................... $26,302 $27,198 $29,296 $32,909
Net income available to
common stockholders....... 14,755 14,914 16,499 15,687
Basic/diluted net income
per share................. .35 .36 .39 .36
Dividends per share........ .39 .39 .39 .39
1996:
Revenues................... $22,931 $23,300 $24,304 $25,241
Net income available to
common stockholders....... 12,579 13,009 14,455 14,901
Basic/diluted net income
per share................. .32 .33 .35 .36
Dividends per share........ .37 .37 .37 .37
</TABLE>
16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Mortgage Loans Receivable
Fair values are based upon the estimates of management and on rates
currently prevailing for comparable loans.
Long-Term Debt
The fair value of long-term debt is estimated based on the quoted market
prices for publicly traded debt and on the current rates offered to the
Company for debt of the same remaining maturity.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents............... $ 10,192 $ 10,192 $ 11,709 $ 11,709
Mortgage loans receivable............... 199,819 225,997 160,464 178,437
Long-term debt.......................... 497,409 513,034 296,449 306,491
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Directors
of Nationwide Health Properties, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Nationwide Health
Properties, Inc.'s annual report to shareholders included in this Form 10-K,
and have issued our report thereon dated January 16, 1998. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the index of consolidated financial statements is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Orange County, California
January 16, 1998
29
<PAGE>
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INITIAL COST COST GROSS AMOUNT AT WHICH
TO COMPANY CAPITALIZED CARRIED AT CLOSE OF PERIOD(1) LIFE ON
------------ SUBSEQUENT ---------------------------------- ORIGINAL WHICH
FACILITY TYPE BUILDING AND TO BUILDING AND ACCUM. CONSTRUCTION DATE DEPR. IS
AND LOCATION IMPROVEMENTS ACQUISITION LAND(2) IMPROVEMENTS TOTAL DEPR. DATE ACQUIRED COMPUTED
- ------------- ------------ ----------- ---------- ------------ ---------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM HEALTH
CARE
FACILITIES:
Hot Springs AR $2,320,549 $ 0 $ 53,647 $2,320,549 $2,374,196 $ 756,941 1972 1986 35
Jacksonville AR 3,452,650 0 155,206 3,452,650 3,607,856 1,126,221 1962 1986 35
Prescott AZ 2,351,967 0 183,341 2,351,967 2,535,308 711,995 1985 1988 40
Scottsdale AZ 2,790,266 100,000 650,000 2,890,266 3,540,266 617,084 1963 1991 30
Chowchilla CA 1,119,040 0 108,996 1,119,040 1,228,036 286,754 1964 1987 40
Gilroy CA 1,891,735 0 714,000 1,891,735 2,605,735 394,111 1968 1991 30
Hayward CA 1,221,698 220,882 795,000 1,442,580 2,237,580 283,153 1967 1991 30
Orange CA 5,059,079 0 1,140,921 5,059,079 6,200,000 685,083 1987 1992 40
Pomona CA 1,247,000 0 365,000 1,247,000 1,612,000 427,738 1963 1985 35
San Diego CA 4,925,213 0 842,000 4,925,213 5,767,213 834,550 1965 1992 30
San Jose CA 1,136,353 571,191 1,595,000 1,707,544 3,302,544 310,783 1968 1991 30
Santa Cruz CA 1,595,864 439,900 1,492,000 2,035,764 3,527,764 389,495 1967 1991 30
Bloomfield CT 2,826,635 0 670,000 2,826,635 3,496,635 306,219 1967 1994 30
Torrington CT 2,555,400 0 140,000 2,555,400 2,695,400 702,735 1969 1987 40
West Haven CT 1,437,616 0 234,521 1,437,616 1,672,137 395,344 1965 1986 40
Ft. Pierce FL 2,758,000 0 125,000 2,758,000 2,883,000 946,032 1965 1985 35
Jacksonville FL 1,758,683 0 1,503,375 1,758,683 3,262,058 25,647 1997 1997 40
Jacksonville FL 1,852,616 0 160,748 1,852,616 2,013,364 478,592 1964 1987 40
Jacksonville FL 2,787,093 0 498,000 2,787,093 3,285,093 131,612 1965 1996 30
Lakeland FL 5,028,699 0 1,000,000 5,028,699 6,028,699 544,776 1982 1994 30
Live Oak FL 3,217,008 0 50,390 3,217,008 3,267,398 1,049,357 1983 1986 35
Pensacola FL 1,833,333 0 76,923 1,833,333 1,910,256 481,250 1969 1987 40
Tampa FL 2,726,244 0 563,461 2,726,244 3,289,705 755,398 1971 1986 40
Winter Park FL 3,326,824 0 208,935 3,326,824 3,535,759 1,085,178 1983 1986 35
Lawrenceville GA 3,993,005 2,549,381 800,619 6,542,386 7,343,005 827,965 1988 1991 40
Buhl ID 777,353 0 14,754 777,353 792,107 213,772 1913 1986 40
Lasalle IL 2,702,896 0 127,000 2,702,896 2,829,896 578,120 1975 1991 30
Litchfield IL 2,688,920 0 30,000 2,688,920 2,718,920 575,130 1972 1991 30
Brookville IN 4,119,500 0 80,500 4,119,500 4,200,000 532,102 1987 1992 40
Evansville IN 5,324,304 0 280,000 5,324,304 5,604,304 1,138,809 1968 1991 30
Gas City IN 3,082,041 0 147,000 3,082,041 3,229,041 102,737 1976 1996 30
Ligonier IN 1,668,811 0 54,000 1,668,811 1,722,811 55,627 1976 1997 30
Muncie IN 888,187 0 109,000 888,187 997,187 29,606 1975 1997 30
Muncie IN 1,141,065 0 983,000 1,141,065 2,124,065 32,602 1989 1997 35
New Castle IN 5,172,887 0 43,000 5,172,887 5,215,887 1,106,423 1972 1991 30
Petersburg IN 2,351,555 0 32,654 2,351,555 2,384,209 767,055 1968 1986 35
Richmond IN 2,519,523 0 114,022 2,519,523 2,633,545 821,845 1974 1986 35
Rochester IN 4,055,338 250,000 161,000 4,305,338 4,466,338 885,425 1969 1991 30
Wabash IN 2,789,896 0 40,000 2,789,896 2,829,896 596,728 1974 1991 30
Belleville KS 1,886,682 0 213,318 1,886,682 2,100,000 298,725 1977 1993 30
Colby KS 599,074 0 49,863 599,074 648,937 167,242 1974 1986 40
Derby KS 2,481,763 0 132,800 2,481,763 2,614,563 475,672 1978 1992 30
Hutchinson KS 1,855,444 160,594 75,000 2,016,038 2,091,038 256,284 1964 1994 30
Kensington KS 638,627 0 6,241 638,627 644,868 208,314 1965 1986 35
Oakley KS 414,311 0 7,123 414,311 421,434 115,662 1964 1986 40
Onaga KS 651,993 0 5,811 651,993 657,804 212,674 1959 1986 35
Salina KS 2,463,266 134,986 27,000 2,598,252 2,625,252 333,399 1981 1994 30
Amesbury MA 4,240,885 0 229,000 4,240,885 4,469,885 58,901 1971 1997 30
Brighton MA 2,211,935 0 300,000 2,211,935 2,511,935 239,626 1969 1994 30
Brockton MA 3,586,307 0 525,000 3,586,307 4,111,307 498,098 1971 1993 30
Buzzards Bay MA 4,815,000 0 415,000 4,815,000 5,230,000 1,651,611 1911 1985 35
Danvers MA 3,210,915 0 327,000 3,210,915 3,537,915 44,596 1966 1997 30
Danvers MA 2,890,708 0 305,000 2,890,708 3,195,708 40,149 1969 1997 30
Haverhill MA 1,399,002 0 775,000 1,399,002 2,174,002 194,306 1962 1993 30
Haverhill MA 5,707,175 0 660,000 5,707,175 6,367,175 792,663 1973 1993 30
New Bedford MA 2,357,000 0 93,000 2,357,000 2,450,000 808,520 1889 1985 35
N. Billerica MA 3,137,206 300,000 800,000 3,437,206 4,237,206 405,430 1969 1994 30
Norton MA 2,571,792 0 781,000 2,571,792 3,352,792 135,733 1968 1996 30
Saugus MA 5,262,233 0 374,000 5,262,233 5,636,233 73,087 1967 1997 30
Sharon MA 1,096,678 0 844,000 1,096,678 1,940,678 57,880 1975 1996 30
Wellesley MA 2,435,000 0 325,000 2,435,000 2,760,000 835,238 1962 1985 35
Clinton MD 5,016,873 0 399,794 5,016,873 5,416,667 1,337,833 1965 1987 40
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
INITIAL COST COST GROSS AMOUNT AT WHICH
TO COMPANY CAPITALIZED CARRIED AT CLOSE OF PERIOD(1) LIFE ON
------------ SUBSEQUENT ---------------------------------- ORIGINAL WHICH
FACILITY TYPE BUILDING AND TO BUILDING AND ACCUM. CONSTRUCTION DATE DEPR. IS
AND LOCATION IMPROVEMENTS ACQUISITION LAND(2) IMPROVEMENTS TOTAL DEPR. DATE ACQUIRED COMPUTED
- ------------- ------------ ----------- ---------- ------------ ---------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM HEALTH
CARE FACILITIES:
Cumberland MD $5,260,000 $ 0 $ 150,000 $5,260,000 $5,410,000 $1,804,252 1968 1985 35
Hagerstown MD 4,140,000 0 215,000 4,140,000 4,355,000 1,420,076 1972 1985 35
Westminster MD 6,795,000 0 80,000 6,795,000 6,875,000 2,330,778 1974 1985 35
Deluth MN 7,046,928 0 1,014,000 7,046,928 8,060,928 58,724 1971 1997 30
Faribault MN 2,785,000 0 90,000 2,785,000 2,875,000 1,251,892 1967 1985 35
Minneapolis MN 3,833,000 0 322,000 3,833,000 4,155,000 1,785,852 1962 1985 35
Minneapolis MN 2,934,000 0 141,000 2,934,000 3,075,000 1,064,693 1914 1985 35
Minneapolis MN 5,752,000 0 333,000 5,752,000 6,085,000 2,261,174 1973 1985 35
Minneapolis MN 4,184,000 0 436,000 4,184,000 4,620,000 1,598,759 1961 1985 35
Osseo MN 2,927,000 0 123,000 2,927,000 3,050,000 1,004,001 1957 1985 35
Ostrander MN 947,229 0 8,560 947,229 955,789 262,461 1968 1986 40
Owatonna MN 2,140,014 0 58,680 2,140,014 2,198,694 588,504 1965 1986 40
Willmar MN 2,582,000 0 33,000 2,582,000 2,615,000 945,905 1905 1985 35
Maryville MO 2,689,000 0 51,000 2,689,000 2,740,000 922,364 1979 1985 35
Hendersonville NC 2,244,000 0 116,000 2,244,000 2,360,000 769,723 1979 1985 35
Lakewood NJ 6,448,340 0 360,357 6,448,340 6,808,697 2,866,103 1966 1987 40
Sparks NV 3,294,261 0 740,000 3,294,261 4,034,261 514,729 1988 1991 40
Alliance OH 1,861,163 0 83,000 1,861,163 1,944,163 397,652 1962 1991 30
Boardman OH 7,045,285 0 60,000 7,045,285 7,105,285 1,506,329 1962 1991 30
Columbus OH 4,332,851 0 342,550 4,332,851 4,675,401 1,244,603 1985 1988 40
Galion OH 3,418,805 0 24,000 3,418,805 3,442,805 730,719 1967 1991 30
Warren OH 7,487,808 0 450,000 7,487,808 7,937,808 1,600,938 1967 1991 30
Wash Ct House OH 4,085,813 0 356,047 4,085,813 4,441,860 1,214,453 1983 1988 40
Maud OK 802,731 0 12,464 802,731 815,195 222,423 1960 1986 40
Sapulpa OK 2,243,607 0 67,961 2,243,607 2,311,568 616,992 1970 1986 40
Tonkawa OK 794,801 0 17,838 794,801 812,639 211,947 1962 1987 40
Corvallis OR 1,710,000 0 115,000 1,710,000 1,825,000 586,558 1962 1985 35
Eugene OR 2,280,000 0 140,000 2,280,000 2,420,000 782,076 1969 1985 35
Eugene OR 1,220,000 0 80,000 1,220,000 1,300,000 418,477 1965 1985 35
Portland OR 1,115,000 0 100,000 1,115,000 1,215,000 382,461 1954 1985 35
Brownsville TN 2,957,367 0 100,000 2,957,367 3,057,367 410,745 1970 1993 30
Celina TN 853,001 0 150,000 853,001 1,003,001 118,472 1972 1993 30
Clarksville TN 3,479,066 0 350,000 3,479,066 3,829,066 483,203 1970 1993 30
Columbia TN 2,240,415 0 225,000 2,240,415 2,465,415 266,716 1984 1993 35
Jonesborough TN 2,536,323 0 65,000 2,536,323 2,601,323 352,267 1981 1993 30
Hohenwald TN 3,732,032 0 90,000 3,732,032 3,822,032 518,338 1975 1993 30
Martin TN 4,121,244 0 32,500 4,121,244 4,153,744 572,395 1977 1993 30
Selmer TN 2,256,591 1,200,000 28,000 3,456,591 3,484,591 338,871 1985 1993 35
Baytown TX 1,853,302 0 61,000 1,853,302 1,914,302 335,911 1966 1990 40
Baytown TX 2,326,487 0 90,000 2,326,487 2,416,487 421,676 1975 1990 40
Bogota TX 1,820,005 0 13,463 1,820,005 1,833,468 593,669 1963 1986 35
Bridge City TX 2,156,306 0 60,000 2,156,306 2,216,306 390,831 1970 1990 40
Carrollton TX 1,373,892 0 236,000 1,373,892 1,609,892 249,018 1967 1990 40
Center TX 1,388,420 0 22,000 1,388,420 1,410,420 251,651 1970 1990 40
Eagle Lake TX 1,786,891 0 25,000 1,786,891 1,811,891 323,874 1972 1990 40
El Paso TX 1,888,156 0 166,027 1,888,156 2,054,183 529,659 1980 1988 40
Garland TX 1,573,127 0 238,000 1,573,127 1,811,127 285,130 1970 1990 40
Gilmer TX 2,065,000 0 750,000 2,065,000 2,815,000 708,323 1970 1985 35
Gladewater TX 2,017,965 0 124,642 2,017,965 2,142,607 308,300 1971 1993 30
Houston TX 4,154,533 0 408,300 4,154,533 4,562,833 646,260 1986 1993 35
Humble TX 1,772,363 0 140,000 1,772,363 1,912,363 321,240 1973 1990 40
Huntsville TX 1,878,206 0 135,000 1,878,206 2,013,206 340,425 1968 1990 40
Linden TX 2,519,626 0 24,909 2,519,626 2,544,535 384,942 1968 1993 30
Marshall TX 864,650 0 19,300 864,650 883,950 241,382 1964 1986 40
McKinney TX 1,455,904 0 1,318,310 1,455,904 2,774,214 391,274 1967 1987 40
Mount Pleasant TX 2,504,551 0 39,960 2,504,551 2,544,511 382,639 1970 1993 30
Nacogdoches TX 1,072,965 0 135,000 1,072,965 1,207,965 194,475 1973 1990 40
New Boston TX 2,366,334 0 44,246 2,366,334 2,410,580 361,523 1966 1993 30
Omaha TX 1,579,149 0 27,907 1,579,149 1,607,056 241,258 1970 1993 30
San Antonio TX 1,981,974 0 32,000 1,981,974 2,013,974 359,232 1963 1990 40
San Antonio TX 1,589,730 0 221,000 1,589,730 1,810,730 288,139 1965 1990 40
Sherman TX 2,075,495 0 67,200 2,075,495 2,142,695 317,089 1971 1993 30
Texarkana TX 1,243,520 0 87,270 1,243,520 1,330,790 405,625 1983 1986 35
Waxahachie TX 3,493,338 0 318,798 3,493,338 3,812,136 909,724 1976 1987 40
Annandale VA 7,752,000 0 487,000 7,752,000 8,239,000 2,659,042 1961 1985 35
Charlottesville VA 4,620,250 0 362,000 4,620,250 4,982,250 1,584,809 1966 1985 35
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
INITIAL COST COST GROSS AMOUNT AT WHICH
TO COMPANY CAPITALIZED CARRIED AT CLOSE OF PERIOD(1) LIFE ON
------------ SUBSEQUENT ----------------------------------- ORIGINAL WHICH
FACILITY TYPE BUILDING AND TO BUILDING AND ACCUM. CONSTRUCTION DATE DEPR. IS
AND LOCATION IMPROVEMENTS ACQUISITION LAND(2) IMPROVEMENTS TOTAL DEPR. DATE ACQUIRED COMPUTED
- ------------- ------------ ----------- ---------- ------------ ----------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM HEALTH
CARE
FACILITIES:
Petersburg VA $ 2,214,500 $ 0 $ 93,000 $ 2,214,500 $ 2,307,500 $ 759,604 1973 1985 35
Petersburg VA 2,944,750 0 94,000 2,944,750 3,038,750 1,010,089 1977 1985 35
Battleground WA 2,225,787 0 84,100 2,225,787 2,309,887 612,091 1963 1986 40
Kennewick WA 4,459,156 0 297,000 4,459,156 4,756,156 49,546 1959 1997 30
Moses Lake WA 2,384,662 0 164,000 2,384,662 2,548,662 264,962 1988 1994 30
Moses Lake WA 4,306,902 1,030,417 304,000 5,337,319 5,641,319 410,181 1972 1994 35
Seattle WA 5,752,182 0 1,222,737 5,752,182 6,974,919 503,316 1993 1994 40
Tacoma WA 1,503,190 0 575,000 1,503,190 2,078,190 413,377 1939 1987 40
Chilton WI 2,275,183 0 54,953 2,275,183 2,330,136 742,143 1964 1986 35
Florence WI 1,529,108 0 14,984 1,529,108 1,544,092 498,780 1971 1986 35
Green Bay WI 2,254,673 0 299,765 2,254,673 2,554,438 735,453 1969 1986 35
Oconto WI 2,070,879 0 49,976 2,070,879 2,120,855 675,501 1972 1986 35
Sheboygan WI 1,696,673 0 219,243 1,696,673 1,915,916 549,399 1969 1986 35
Shorewood WI 5,743,643 0 705,880 5,743,643 6,449,523 1,859,846 1971 1986 35
St. Francis WI 535,325 0 79,725 535,325 615,050 173,342 1968 1986 35
Tomah WI 1,745,000 0 115,000 1,745,000 1,860,000 598,559 1975 1985 35
Wisconsin Dells WI 1,697,231 0 81,432 1,697,231 1,778,663 549,580 1972 1986 35
----------- ---------- ---------- ----------- ----------- ----------
400,513,373 6,957,351 41,283,047 407,470,724 448,753,771 90,491,151
----------- ---------- ---------- ----------- ----------- ----------
ASSISTED LIVING
FACILITIES:
Decatur AL 1,824,028 0 1,484,000 1,824,028 3,308,028 65,141 1987 1996 35
Hanceville AL 2,447,169 0 197,000 2,447,169 2,644,169 81,572 1996 1996 40
Mesa AZ 1,391,652 2,700,025 519,000 4,091,677 4,610,677 188,263 1985 1996 35
Capistrano CA 3,833,162 0 1,225,000 3,833,162 5,058,162 292,050 1985 1995 35
Capistrano CA 6,344,458 0 700,000 6,344,458 7,044,458 362,540 1985 1995 35
Carmichael CA 7,928,799 700,000 1,500,000 8,628,799 10,128,799 720,976 1983 1995 30
Chula Vista CA 6,280,839 0 950,000 6,280,839 7,230,839 388,814 1989 1995 35
Encinitas CA 5,016,511 0 1,000,000 5,016,511 6,016,511 402,196 1984 1995 35
Mission Viejo CA 3,544,429 0 900,000 3,544,429 4,444,429 261,613 1985 1995 35
Novato CA 3,657,065 0 2,500,000 3,657,065 6,157,065 264,121 1978 1995 30
Placentia CA 3,800,106 0 1,320,000 3,800,106 5,120,106 327,231 1983 1995 30
Rancho Cucamonga CA 4,155,552 0 610,000 4,155,552 4,765,552 306,719 1987 1995 35
San Dimas CA 3,576,323 0 1,700,000 3,576,323 5,276,323 258,290 1975 1995 30
Santa Maria CA 2,649,424 0 1,500,000 2,649,424 4,149,424 191,347 1977 1995 30
Vista CA 3,700,603 0 350,000 3,700,603 4,050,603 236,427 1980 1996 30
Aurora CO 7,922,586 0 919,116 7,922,586 8,841,702 528,172 1983 1995 30
Boulder CO 4,738,529 0 184,356 4,738,529 4,922,885 270,773 1992 1995 40
Boulder CO 4,811,336 0 832,530 4,811,336 5,643,866 240,567 1985 1995 35
Brighton CO 2,158,078 0 210,000 2,158,078 2,368,078 26,976 1997 1997 40
Gainesville FL 2,699,035 0 356,000 2,699,035 3,055,035 28,115 1997 1997 40
Hudson FL 8,137,951 334,130 1,665,000 8,472,081 10,137,081 435,916 1987 1996 35
Jacksonville FL 2,375,479 0 366,000 2,375,479 2,741,479 44,540 1997 1997 40
Jacksonville FL 2,769,701 0 226,000 2,769,701 2,995,701 17,311 1997 1997 40
LeHigh Acres FL 2,599,506 0 307,000 2,599,506 2,906,506 10,831 1997 1997 40
Naples FL 4,082,689 0 1,182,453 4,082,689 5,265,142 42,528 1997 1997 40
North Miami FL 3,467,124 0 261,000 3,467,124 3,728,124 288,927 1970 1995 30
Palm Coast FL 2,579,797 0 406,000 2,579,797 2,985,797 0 1997 1997 40
Pensacola FL 1,580,083 400,000 170,000 1,980,083 2,150,083 90,301 1979 1996 30
Port Charlotte FL 2,655,252 0 245,000 2,655,252 2,900,252 22,127 1997 1997 40
Punta Gorda FL 2,691,405 0 210,000 2,691,405 2,901,405 28,035 1997 1997 40
Rotunda FL 2,628,403 0 267,000 2,628,403 2,895,403 0 1997 1997 40
St. Petersburg FL 2,396,070 984,802 2,000,000 3,380,872 5,380,872 157,201 1993 1995 40
Travares FL 2,466,463 0 156,000 2,466,463 2,622,463 41,109 1997 1997 40
Venice FL 2,534,967 0 376,000 2,534,967 2,910,967 10,562 1997 1997 40
Winter Haven FL 2,530,512 0 287,000 2,530,512 2,817,512 15,816 1997 1997 40
Boise ID 5,586,258 5,669,959 543,691 11,256,217 11,799,908 401,247 1978 1995 30
Oak Park IL 10,473,486 0 603,000 10,473,486 11,076,486 261,837 1993 1997 40
Salina KS 1,921,388 0 200,000 1,921,388 2,121,388 36,026 1997 1997 40
Riverview MI 6,938,730 0 300,000 6,938,730 7,238,730 561,707 1987 1995 35
Sparks(3) NV 5,102,161 0 505,000 5,102,161 5,607,161 0 1991 1997 40
Sparks(4) NV 7,261,868 0 714,000 7,261,868 7,975,868 0 1993 1997 40
Dayton OH 1,916,264 0 270,000 1,916,264 2,186,264 3,992 1997 1997 40
Fairfield OH 1,917,248 0 270,000 1,917,248 2,187,248 19,971 1997 1997 40
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
INITIAL COST COST GROSS AMOUNT AT WHICH
TO COMPANY CAPITALIZED CARRIED AT CLOSE OF PERIOD(1) LIFE ON
------------ SUBSEQUENT -------------------------------------- ORIGINAL WHICH
FACILITY TYPE BUILDING AND TO BUILDING AND CONSTRUCTION DATE DEPR. IS
AND LOCATION IMPROVEMENTS ACQUISITION LAND(2) IMPROVEMENTS TOTAL ACCUM. DEPR. DATE ACQUIRED COMPUTED
- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING
FACILITIES:
Greenville OH $ 2,310,800 $ 0 $ 215,000 $ 2,310,800 $ 2,525,800 $ 24,071 1997 1997 40
Newark OH 2,047,242 0 225,000 2,047,242 2,272,242 25,591 1997 1997 40
Sharonville OH 4,012,894 0 225,000 4,012,894 4,237,894 324,853 1987 1995 35
Springdale OH 2,091,938 0 440,000 2,091,938 2,531,938 13,075 1997 1997 40
Urbana OH 2,117,731 0 150,000 2,117,731 2,267,731 8,824 1997 1997 40
Broken Arrow OK 1,444,544 0 178,000 1,444,544 1,622,544 36,114 1996 1997 40
Oklahoma City OK 3,897,246 481,666 392,000 4,378,912 4,770,912 511,643 1982 1994 30
Oklahoma City OK 1,531,497 0 175,000 1,531,497 1,706,497 38,287 1996 1997 40
Albany(5) OR 2,465,356 0 92,160 2,465,356 2,557,516 164,357 1984 1995 35
Albany OR 3,656,555 4,074,415 511,290 7,730,970 8,242,260 291,705 1968 1995 30
Forest Grove(6) OR 3,151,903 0 401,187 3,151,903 3,553,090 180,109 1994 1995 40
Gresham OR 4,646,900 0 0 4,646,900 4,646,900 265,537 1988 1995 35
McMinnville(7) OR 3,975,918 0 760,000 3,975,918 4,735,918 198,796 1989 1995 35
Medford OR 4,325,518 0 313,389 4,325,518 4,638,907 216,276 1990 1995 35
Brentwood TN 2,301,599 0 600,000 2,301,599 2,901,599 148,645 1995 1995 40
Corsicana TX 1,494,497 0 117,000 1,494,497 1,611,497 40,476 1996 1996 40
Dallas TX 3,499,928 718,334 308,000 4,218,262 4,526,262 480,433 1982 1994 30
Denton TX 1,425,035 0 185,000 1,425,035 1,610,035 38,595 1996 1996 40
Ennis TX 1,408,954 0 119,000 1,408,954 1,527,954 38,159 1996 1996 40
Lewisville TX 1,892,169 0 260,000 1,892,169 2,152,169 27,594 1997 1997 40
Mansfield TX 1,574,961 0 225,000 1,574,961 1,799,961 39,374 1996 1997 40
Paris TX 1,464,890 0 166,000 1,464,890 1,630,890 39,674 1996 1996 40
Richland Hills TX 1,592,030 0 223,000 1,592,030 1,815,030 39,801 1996 1997 40
Weatherford TX 1,596,002 0 145,000 1,596,002 1,741,002 26,600 1996 1997 40
Richland WA 6,051,886 117,641 172,102 6,169,527 6,341,629 346,118 1990 1995 35
Tacoma WA 4,902,629 0 402,500 4,902,629 5,305,129 61,283 1997 1997 40
Yakima WA 4,840,711 0 500,000 4,840,711 5,340,711 0 1997 1997 40
Menomonee
Falls(8) WI 13,189,925 0 4,161,000 13,189,925 17,350,925 94,214 1990 1997 30
West Allis(9) WI 81,197,184 0 682,000 8,117,184 8,799,184 50,732 1996 1997 30
------------ ----------- ------------ ------------ ------------ ------------
266,120,931 16,180,972 42,830,774 282,301,903 325,132,677 11,702,823
CCRCS:
Palm Desert CA 9,099,576 450,000 1,600,000 9,549,576 11,149,576 872,291 1989 1994 40
Sterling CO 2,715,537 0 400,000 2,715,537 3,115,537 339,442 1979 1994 30
Andover(10) KS 12,512,704 0 687,000 12,512,604 13,199,704 151,035 1987 1997 35
Corpus Christi TX 22,021,613 0 1,848,000 22,021,613 23,869,613 373,096 1985 1997 40
Glendale(11) WI 22,904,960 0 3,824,000 22,904,960 26,728,960 157,791 1988 1997 30
Waukesha(12) WI 28,559,636 0 7,233,000 28,559,636 35,792,636 226,797 1973 1997 30
------------ ----------- ------------ ------------ ------------ ------------
97,814,026 450,000 15,592,000 98,264,026 113,856,026 2,120,452
------------ ----------- ------------ ------------ ------------ ------------
REHABILITATION HOSPITALS:
Scottsdale AZ 5,874,213 0 241,762 5,874,213 6,115,975 1,407,363 1986 1988 40
Tucson AZ 9,434,562 0 1,275,438 9,434,562 10,710,000 1,307,080 1992 1992 40
------------ ----------- ------------ ------------ ------------ ------------
15,308,775 0 1,517,200 15,308,775 16,825,975 2,714,443
------------ ----------- ------------ ------------ ------------ ------------
RESIDENTIAL CARE
FACILITIES FOR THE ELDERLY:
Costa Mesa CA 229,483 0 60,000 229,483 289,483 1,912 1970 1997 30
Irvine CA 338,141 0 78,000 338,141 416,141 0 1976 1997 30
Irvine CA 340,515 0 90,000 340,515 430,515 2,838 1975 1997 30
Laguna Hills CA 208,481 0 72,000 208,481 280,481 1,737 1977 1997 30
Lake Forest CA 167,492 0 160,000 167,492 327,492 1,396 1975 1997 30
Lake Forest CA 186,473 0 64,000 186,473 250,473 1,554 1973 1997 30
Newport Beach CA 302,170 0 69,000 302,170 371,170 771 1962 1997 30
Newport Beach CA 444,669 0 111,000 444,669 555,669 0 1965 1997 30
------------ ----------- ------------ ------------ ------------ ------------
2,217,424 0 704,000 2,217,424 2,921,424 10,208
------------ ----------- ------------ ------------ ------------ ------------
CLINICS:
Heflin AL 3,654,241 0 248,000 3,654,241 3,902,241 38,065 1997 1997 40
CONSTRUCTION IN
PROGRESS: 31,078,268 0 18,060,733 31,078,268 49,139,001 0
------------ ----------- ------------ ------------ ------------ ------------
GRAND TOTAL $816,707,038 $23,588,323 $120,235,754 $840,295,361 $960,531,115 $107,077,142
============ =========== ============ ============ ============ ============
</TABLE>
33
<PAGE>
- -------
(1) Also represents the approximate cost for Federal income tax purposes.
(2) Gross amount at which land is carried at close of period also represents
initial cost to the Company.
(3) Real estate is security for notes payable in the aggregate of $3,744,638
at 12/31/97.
(4) Real estate is security for notes payable in the aggregate of $3,258,321
at 12/31/97.
(5) Real estate is security for notes payable in the aggregate of $2,103,354
at 12/31/97.
(6) Real estate is security for notes payable in the aggregate of $3,391,628
at 12/31/97.
(7) Real estate is security for notes payable in the aggregate of $3,652,212
at 12/31/97.
(8) Real estate is security for notes payable in the aggregate of $12,275,000
at 12/31/97.
(9) Real estate is security for notes payable in the aggregate of $4,250,863
at 12/31/97.
(10) Real estate is security for notes payable in the aggregate of $2,800,000
at 12/31/97.
(11) Real estate is security for notes payable in the aggregate of $13,226,256
at 12/31/97.
(12) Real estate is security for notes payable in the aggregate of $9,594,238
at 12/31/97.
<TABLE>
<CAPTION>
REAL ESTATE ACCUMULATED
PROPERTIES DEPRECIATION
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Balances at December 31, 1994: $458,118 $ 62,080
Acquisitions.................................... 143,944 13,227
Improvements.................................... 2,143 181
Sales........................................... (11,478) (1,766)
-------- --------
Balances at December 31, 1995: 592,727 73,722
-------- --------
Acquisitions.................................... 48,963 15,797
Improvements.................................... 10,319 448
Sales........................................... -- --
-------- --------
Balances at December 31, 1996: 652,009 89,967
-------- --------
Acquisitions.................................... 304,213 18,665
Improvements.................................... 15,608 574
Sales........................................... (11,299) (2,129)
-------- --------
Balances at December 31, 1997: $960,531 $107,077
======== ========
</TABLE>
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 17, 1998,
filed or to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 17, 1998,
filed or to be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 17, 1998,
filed or to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 17, 1998,
filed or to be filed pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Report of Independent Public Accountants
Schedule III Real Estate and Accumulated Depreciation
(b)Reports on Form 8-K
A Form 8-K dated October 7, 1997 was filed with respect to the
acquisition of assets during the period August 15, 1997 through October 1,
1997, including audited proforma statements of income for the acquired
facilities and unaudited proforma financial statements for the Company
giving effect to the acquisitions.
35
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
2.1 Agreement to Merge, dated August 19, 1997, among the Company,
Laureate Investments, Inc. and Laureate Properties, Inc., filed as
Exhibit 2.1 to the Company's Form 8-K dated October 7, 1997, and
incorporated herein by this reference.
3. Articles of Incorporation and Bylaws
3.1(a) Restated Articles of Incorporation, filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-11 (No. 33-1128),
effective December 19, 1985, and incorporated herein by this
reference.
3.1(b) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended March 31, 1989, and
incorporated herein by this reference.
3.1(c) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1(c) to the
Company's Registration Statement on Form S-11 (No. 33-32251),
effective January 23, 1990, and incorporated herein by this
reference.
3.1(d) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1(d) to the
Company's Form 10-K for the year ended December 31, 1994, and
incorporated herein by this reference.
3.1(e) Articles Supplementary to the Registrant's Amended and Restated
Articles of Incorporation, dated September 24, 1997, filed as
Exhibit 3.1 to the Company's Form 8-K dated September 24, 1997,
and incorporated herein by this reference.
3.2 Bylaws of the Company as amended January 19, 1996, filed as
Exhibit 3.2 to the Company's Form 10-K for the year ended December
31, 1995, and incorporated herein by this reference.
4. Instruments Defining Rights of Security Holders, Including
Indentures
4.1 Indenture dated as of November 16, 1992, between Nationwide Health
Properties, Inc., Issuer to The Chase Manhattan Bank (National
Association), Trustee, filed as Exhibit 4.1 to the Company's Form
S-3 (No. 33-54870) dated November 24, 1992, and incorporated
herein by this reference.
4.2 Indenture dated as of June 30, 1993, between the Company and First
Interstate Bank of California, as Trustee, filed as Exhibit 4.2 to
the Company's Registration Statement on Form S-3 (No. 33-64798),
effective July 12, 1993, and incorporated herein by this
reference.
4.3 First Supplemental Indenture dated November 15, 1993, between the
Company and First Interstate Bank of California, as Trustee, filed
as Exhibit 4.1 to the Company's Form 8-K dated November 15, 1993,
and incorporated by reference herein.
4.4 Indenture dated as of January 12, 1996, between the Company and
The Bank of New York, as Trustee, filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (No 33-65423) dated
December 27, 1995, and incorporated herein by this reference.
10. Material Contracts
10.1 Master Lease Document--General Terms and Conditions dated December
30, 1985, for Leases between various subsidiaries of Beverly as
Lessees and the Company as Lessor, filed as Exhibit 10.3 to the
Company's Form 10-K for the year ended December 31, 1985, and
incorporated herein by this reference.
10.2 Guaranty by and between the Company and Beverly filed as Exhibit
10.7 to the Company's Registration Statement on Form S-11 (No. 33-
1128), effective December 19, 1985, and incorporated herein by
this reference.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.3 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases and Contract of Acquisition, dated as of August 1, 1986, of
Beverly as Guarantor in favor of the Company filed as Exhibit 10.3
to the Company's Registration Statement on Form S-11 (No. 33-
32251), effective January 23, 1990, and incorporated herein by
this reference.
10.4 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases and Contract of Acquisition, dated as of November 1, 1986,
of Beverly as Guarantor in favor of the Company filed as Exhibit
10.4 to the Company's Registration Statement on Form S-11 (No. 33-
32251), effective January 23, 1990, and incorporated herein by
this reference.
10.5 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases, dated as of July 31, 1987, of Beverly as Guarantor in
favor of the Company filed as Exhibit 10.5 to the Company's
Registration Statement on Form S-11 (No. 33-32251), effective
January 23, 1990, and incorporated herein by this reference.
10.6 1989 Stock Option Plan of the Company as Amended and Restated
January 19, 1996.
10.7 The Company's Retirement Plan for Directors effective July 26,
1991 filed as Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1991, and incorporated herein by this
reference.
10.8 Deferred Compensation Plan of the Company effective September 1,
1991 filed as Exhibit 10.14 to the Company's Form 10-K for the
year ended December 31, 1991, and incorporated herein by this
reference.
10.9 Commercial and Multi-family Mortgage Loan Sale Agreement dated as
of June 5, 1992 by and between Resolution Trust Corporation, as
Receiver, and Nationwide Health Properties, Inc. filed as Exhibit
A to the Company's Form 8-K dated May 29, 1992, and incorporated
herein by this reference.
10.10 Credit Agreement dated as of May 20, 1993 between the Company and
Wells Fargo Bank National Association, National Westminster Bank
USA, The Daiwa Bank Limited and Sanwa Bank of California filed as
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
June 30, 1993, and incorporated herein by this reference.
10.10(a) Amendment Number One to Credit Agreement dated as of May 20, 1993
between the Company and Wells Fargo Bank, National Association,
National Westminster Bank USA, The Daiwa Bank, Limited, and Sanwa
Bank California filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended March 31, 1994, and incorporated herein by
this reference.
10.10(b) Amendment Number Two to Credit Agreement dated as of May 20, 1993
between the Company and Wells Fargo Bank, National Association,
National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa
Bank California, filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended June 30, 1995, and incorporated herein by
this reference.
10.10(c) Amendment Number Three to Credit Agreement dated as of January 22,
1996 between the Company and Wells Fargo Bank, National
Association, National Westminster Bank USA, The Daiwa Bank,
Limited and Sanwa Bank California, filed as Exhibit 10.10 (c) to
the Company's Form 10-K for the year ended December 31, 1995, and
incorporated herein by this reference.
10.10(d) Amendment Number Four and Waiver to Credit Agreement dated
December 10, 1996 between the Company and Wells Fargo Bank,
National Association, The Sumitomo Bank Limited, The Bank of New
York, Sanwa Bank California and BHF-Bank Aktiengesellschaft.
10.10(e) Amendment Number Five to Credit Agreement dated April 1, 1997
between the Company and Wells Fargo Bank, National Association,
The Sumitomo Bank Limited, The Bank of New York, Sanwa Bank
California and BHF-Bank Aktiengesellschaft, filed as Exhibit 10.1
to the Company's Form 10-Q for the quarter ended March 31, 1997,
and incorporated herein by this reference.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.10(f) Amendment Number Six to Credit Agreement dated August 15, 1997
between the Company and Wells Fargo Bank, National Association,
the Sumitomo Bank Limited, The Bank of New York, Sanwa Bank
California and BHF-Bank Aktiengesellschaft, filed as exhibit 10.1
to the Company's Form 10-Q for the quarter ended September 30,
1997, and incorporated herein by this reference.
10.11 Form of Indemnity Agreement between officers and directors of the
Company including David R. Banks, Milton J. Brock, Jr., Sam A.
Brooks, Jr., Charles D. Miller and Jack D. Samuelson, R. Bruce
Andrews, Mark L. Desmond, Don M. Pearson, Gary E. Stark, and T.
Andrew Stokes, and John J. Sheehan, Jr., filed as Exhibit 10.11 to
the Company's Form 10-K for the year ended December 31, 1995, and
incorporated herein by this reference.
10.12 Executive Employment Security Policy, filed as Exhibit 10.12 to
the Company's Form 10-K for the year ended December 31, 1995, and
incorporated herein by this reference.
21. Subsidiaries of the Company
23. Consents of Experts and Counsel
23.1 Consent of Arthur Andersen LLP
27. Financial Data Schedule
</TABLE>
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
NATIONWIDE HEALTH PROPERTIES, INC.
By: /s/ R. Bruce Andrews
-----------------------------------
R. Bruce Andrews
President and Chief Executive
Officer
Dated: March 11, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles D. Miller Chairman and Director March 11, 1998
____________________________________
Charles D. Miller
/s/ R. Bruce Andrews President, Chief Executive March 11, 1998
____________________________________ Officer and Director
R. Bruce Andrews (Principal Executive
Officer)
/s/ Mark L. Desmond Senior Vice President and March 11, 1998
____________________________________ Chief Financial Officer
Mark L. Desmond (Principal Financial and
Accounting Officer)
/s/ John C. Argue Director March 11, 1998
____________________________________
John C. Argue
/s/ David R. Banks Director March 11, 1998
____________________________________
David R. Banks
/s/ Milton J. Brock, Jr. Director March 11, 1998
____________________________________
Milton J. Brock Jr.
/s/ Sam A. Brooks Director March 11, 1998
____________________________________
Sam A. Brooks
/s/ Jack D. Samuelson Director March 11, 1998
____________________________________
Jack D. Samuelson
</TABLE>
39
<PAGE>
APPENDIX 1
BEVERLY ENTERPRISES, INC.
SET FORTH BELOW IS CERTAIN CONDENSED FINANCIAL DATA OF BEVERLY ENTERPRISES,
INC. ("BEVERLY") WHICH IS TAKEN FROM BEVERLY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND THE BEVERLY QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AS FILED WITH THE COMMISSION.
The information and financial data contained herein concerning Beverly was
obtained and has been condensed from Beverly's public filings under the
Exchange Act. The Beverly financial data presented includes only the most
recent interim and fiscal year end reporting periods. The Company can make no
representation as to the accuracy and completeness of Beverly's public filings
but has no reason not to believe the accuracy and completeness of such
filings. It should be noted that Beverly has no duty, contractual or
otherwise, to advise the Company of any events subsequent to such dates which
might affect the significance or accuracy of such information.
Beverly is subject to the information filing requirements of the Exchange
Act, and in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Such reports, proxy statements and
other information may be inspected at the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available at
the following Regional Offices of the Commission: 7 World Trade Center, New
York, N.Y. 10048, and 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Such reports and other information concerning Beverly can also be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, Room 1102,
New York, New York 10005.
A-1-1
<PAGE>
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Total current assets................................. $ 694,151 $ 697,245
Property and equipment, net.......................... 1,195,019 1,248,785
Total other assets................................... 579,654 579,052
---------- ----------
Total assets ........................................ $2,468,824 $2,525,082
========== ==========
Total current liabilities............................ $ 379,672 $ 379,030
Long-term obligations................................ 845,886 1,106,256
Other liabilities and deferred items................. 175,698 178,701
Total stockholders' equity........................... 1,067,568 861,095
---------- ----------
Total liabilities and stockholders' equity........... $2,468,824 $2,525,082
========== ==========
</TABLE>
A-1-2
<PAGE>
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
NINE MONTHS ENDED 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
----------------- ---------- ----------
<S> <C> <C> <C>
Revenues............................. $2,448,871 $3,281,028 $3,242,781
Costs and expenses:
Operating and administrative....... 2,192,135 2,958,942 2,960,832
Interest........................... 64,303 91,111 84,245
Depreciation and amortization...... 81,489 105,468 103,581
Impairment of long lived assets.... -- -- 100,277
---------- ---------- ----------
2,337,927 3,155,521 3,248,935
Income (loss) before provision for
income taxes and extraordinary
charge.............................. 110,944 125,507 (6,154)
Provision for income taxes........... 44,378 73,481 1,969
Extraordinary charge, net of income
taxes............................... -- (1,726) --
---------- ---------- ----------
Net income (loss).................... $ 66,566 $ 50,300 $ (8,123)
========== ========== ==========
Net income (loss) applicable to
common shares $ 66,566 $ 50,300 $ (14,998)
========== ========== ==========
Income (loss) per share of common
stock:
Primary:
Before extraordinary charge........ $ .66 $ .52 $ (.16)
Extraordinary charge............... -- (.02) --
---------- ---------- ----------
Net income per share................. $ .66 $ .50 $ (.16)
========== ========== ==========
Shares used to compute per share
amounts............................. $ 101,206 $ 99,646 $ 92,233
========== ========== ==========
Fully-diluted:
Before extraordinary charge........ $ .66 $ .50 $ (.16)
Extraordinary change............... -- (.02) --
---------- ---------- ----------
Net income per share................. $ .66 $ .48 $ (.16)
========== ========== ==========
Shares used to compute per share
amounts............................. $ 101,622 $ 111,002 $ 92,233
========== ========== ==========
</TABLE>
A-1-3
<PAGE>
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1997 1996 1995
----------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............... $ 66,566 $ 50,300 $ (8,123)
--------- ----------- ------------
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities..................... 20,934 82,880 114,332
--------- ----------- ------------
Net cash provided by operating
activities....................... 87,500 133,180 106,209
--------- ----------- ------------
Net cash provided by (used for)
investing activities............. 6,137 (91,501) (144,554)
--------- ----------- ------------
Net cash provided by (used for)
financing activities............. (120,717) (28,221) 26,684
--------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents............. (27,080) 13,458 (11,661)
Cash and cash equivalents at
beginning of period.............. 69,761 56,303 67,964
--------- ----------- ------------
Cash and cash equivalents at end
of period........................ $ 42,681 $ 69,761 $ 56,303
========= =========== ============
</TABLE>
A-1-4
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
---- -------------
<S> <C>
Nationwide Health Properties Finance Corporation................. Delaware
MLD Financial Capital Corporation................................ Delaware
MLD Wisconsin SNF, Inc. ......................................... Wisconsin
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-35276, Registration Statement File No. 33-
64798, Registration Statement File No. 333-32135, Registration Statement File
No. 333-17061 and Registration Statement File No. 333-20589.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Orange County, California
January 16, 1998
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,192
<SECURITIES> 0
<RECEIVABLES> 4,362
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,121
<PP&E> 960,531
<DEPRECIATION> 107,077
<TOTAL-ASSETS> 1,077,394
<CURRENT-LIABILITIES> 26,939
<BONDS> 497,409
0
100,000
<COMMON> 4,313
<OTHER-SE> 448,733
<TOTAL-LIABILITY-AND-EQUITY> 1,077,394
<SALES> 0
<TOTAL-REVENUES> 115,705
<CGS> 0
<TOTAL-COSTS> 23,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,899
<INCOME-PRETAX> 62,988
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,988
<DISCONTINUED> 0
<EXTRAORDINARY> 829
<CHANGES> 0
<NET-INCOME> 63,817
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
