<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-3997619
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
(Address of principal executive offices)
(949) 718-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Shares of registrant's common stock, $.10 par value, outstanding at April
30, 1998 - 44,639,534.
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<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
March 31, 1998
TABLE OF CONTENTS
Part I--Financial Information
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets................ 2
Condensed Consolidated Statements of Operations...... 3
Condensed Consolidated Statements of Cash Flows...... 4
Notes to Condensed Consolidated Financial Statements. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 7
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K..................... 9
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Investments in real estate
Real estate properties:
Land........................................ $ 123,543 $ 120,236
Buildings and improvements.................. 814,040 809,217
Construction in progress.................... 48,994 31,078
---------- ----------
986,577 960,531
Less accumulated depreciation............... (112,163) (107,077)
---------- ----------
874,414 853,454
Mortgage loans receivable, net................... 200,363 199,819
---------- ----------
1,074,777 1,053,273
Cash and cash equivalents.......................... 14,047 10,192
Receivables........................................ 4,502 4,362
Other assets....................................... 10,168 9,567
---------- ----------
$1,103,494 $1,077,394
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings................................... $ 21,600 $ 19,600
Senior notes due 2000-2037........................ 370,000 355,000
Convertible debentures............................ 59,815 64,512
Notes and bonds payable........................... 58,161 58,297
Accounts payable and accrued liabilities.......... 36,385 26,939
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000
shares authorized; Issued and outstanding:
1998-1,000,000; 1997-1,000,000, stated
at liquidation preference of $100 per share.. 100,000 100,000
Common stock $.10 par value; 100,000,000 shares
authorized; Issued and outstanding:
1998-43,350,449; 1997-43,128,889............. 4,334 4,313
Capital in excess of par value................. 495,428 490,737
Cumulative net income.......................... 383,786 363,896
Cumulative dividends........................... (426,015) (405,900)
---------- ----------
Total stockholders' equity.............. 557,533 553,046
---------- ----------
$1,103,494 $1,077,394
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Minimum rent.......................................... $23,790 $18,278
Interest and other income............................. 5,693 4,723
Additional rent and additional interest............... 3,675 3,301
------- -------
33,158 26,302
Expenses:
Interest and amortization of deferred financing costs. 8,252 6,101
Depreciation and non-cash charges..................... 6,145 4,558
General and administrative............................ 1,192 888
------- -------
15,589 11,547
------- -------
Net income before gain on sale of properties........... 17,569 14,755
Gain on sale of properties............................. 2,321 --
------- -------
Net income............................................. 19,890 14,755
Preferred stock dividends.............................. (1,919) --
------- -------
Net income available to common stockholders............ $17,971 $14,755
======= =======
Per share amounts:
Basic/diluted income from continuing operations
available to common stockholders.................... $ .36 $ .35
======= =======
Basic/diluted net income available to common
stockholders........................................ $ .42 $ .35
======= =======
Dividends paid per share.............................. $ .42 $ .39
======= =======
Weighted average shares outstanding.................... 43,265 41,800
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income.......................................... $ 19,890 $ 14,755
Gain on sale of properties.......................... (2,321) --
Depreciation and non-cash charges................... 6,145 4,558
Amortization of deferred financing costs............ 225 187
Net decrease in other assets and liabilities........ 8,091 2,731
-------- --------
Net cash provided by operating activities....... 32,030 22,231
Cash flow from investing activities:
Acquisition of real estate properties............... (30,191) (48,450)
Disposition of real estate properties............... 5,496 --
Investment in mortgage loans receivable............. (707) (11,550)
Principal payments on mortgage loans receivable..... 532 515
-------- --------
Net cash used in investing activities........... (24,870) (59,485)
Cash flow from financing activities:
Bank borrowings..................................... 33,900 68,900
Repayment of bank borrowings........................ (31,900) (38,200)
Issuance of senior unsecured debt................... 15,000 25,000
Dividends paid...................................... (20,115) (16,304)
Principal payments on notes and bonds............... (83) (20)
Other, net.......................................... (107) (253)
-------- --------
Net cash provided by (used in) financing
activities..................................... (3,305) 39,123
-------- --------
Increase in cash and cash equivalents................... 3,855 1,869
Cash and cash equivalents, beginning of period.......... 10,192 11,709
-------- --------
Cash and cash equivalents, end of period................ $ 14,047 $ 13,578
======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month periods ended March 31, 1998 and 1997
pursuant to the rules and regulations of the Securities and Exchange Commission.
All such adjustments are of a normal recurring nature. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Although the Company believes
that the disclosures in such financial statements are adequate to make the
information presented not misleading, these condensed consolidated financial
statements should be read in conjunction with the Company's financial statements
and the notes thereto included in the Company's 1997 Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The results of operations for
the three-month periods ended March 31, 1998 and 1997 are not necessarily
indicative of the results for a full year.
(ii) Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average 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
effect of common stock options is immaterial. The effect of convertible
debentures was not dilutive in 1998 and 1997.
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
---------------- ---------------
(in thousands) Income Shares Income Shares
------- ------ ------ ------
<S> <C> <C> <C> <C>
Income before gain on sale of properties $17,569 $14,755
Less: preferred stock dividends 1,919 --
------- -------
Amounts used to calculate Basic EPS 15,650 43,265 14,755 41,800
Effect of dilutive securities:
Stock options -- 3 -- 3
6.25% Convertible debentures -- -- -- --
------- ------ ------- ------
Amounts used to calculate Diluted EPS $15,650 43,268 $14,755 41,803
======= ====== ======= ======
</TABLE>
(iii) 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 ninety-five percent (95%) of its taxable income to its stockholders.
Accordingly, no provision has been made for federal income taxes.
(iv) The Company invests in health care related real estate and, as of
March 31, 1998, had investments in 297 facilities, including 189 skilled nursing
facilities, 79 assisted living facilities, 12 continuing care retirement
communities, 14 residential care facilities for the elderly, two rehabilitation
hospitals and one medical clinic. The Company's facilities are operated by 61
different operators.
5
<PAGE>
The Company's facilities which are owned and leased under "net"
leases are accounted for as operating leases. The leases have initial terms
ranging from 10 to 19 years, and the leases generally have two or more multiple-
year renewal options. The Company earns fixed monthly minimum rents and may earn
periodic additional rents. The additional rent payments are generally computed
as a percentage of facility net patient revenues in excess of base amounts
and/or increases in the Consumer Price Index. 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 base rent. Under the terms of the leases, the lessee is
responsible for all maintenance, repairs, taxes and insurance on the leased
properties. Forty of the Company's 240 owned facilities were leased to and
operated by subsidiaries of Beverly Enterprises, Inc.
(v) During the three-month period ended March 31, 1998, the Company
acquired one continuing care retirement community and six residential care
facilities for the elderly in three separate transactions for an aggregate
purchase price of approximately $4,118,000. Construction of one assisted living
facility was also completed, in which the Company's total investment was
$2,674,000. These facilities were concurrently leased under terms generally
similar to the Company's existing leases. During the three-month period ended
March 31, 1998, the Company provided new construction financing of approximately
$22,344,000. The Company also funded approximately $1,777,000 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.
During the three-month period ended March 31, 1998, the Company sold
two skilled nursing facilities in two separate transactions for an aggregate
price of approximately $5,512,000, less transaction costs, resulting in an
aggregate gain of approximately $2,321,000.
During the three months ended March 31, 1998, the Company issued
$15,000,000 in aggregate principal amount of medium-term notes. The notes bear
fixed interest at a weighted average rate of 6.71% and have a weighted average
maturity of 10.3 years.
(vi) On April 29, 1998, the Company issued 1,048,128 shares of common
stock resulting in aggregate proceeds, net of the underwriter's fee, of
approximately $23,214,000 before expenses related to the offering. The net
proceeds were used to repay borrowings under the Company's bank line of credit.
(vii) The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information which were issued in
June 1997. The adoption of SFAS No. 130 and SFAS No. 131 has not materially
impacted the Company's financial statements.
Issue No. 97-11 Accounting for Internal Costs Relating to Real Estate
Property Acquisitions released by the Emerging Issues Task Force of the
Financial Accounting Standards Board which prohibits the capitalization of
internal costs related to the acquisition of operating property became effective
during the first quarter of 1998. The impact of this pronouncement is
immaterial to the Company's financial statements.
6
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1998
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 or preferred stock.
Operating Results
Three Months 1998 Compared to Three Months 1997
Revenues for the three months ended March 31, 1998 increased $6,856,000 or
26% over the same period in 1997. The increase is due to increased minimum rent
and interest income resulting from additional investments in real estate
properties and mortgage loans receivable during the last twelve months. The
increase was also attributable to increased additional rent and additional
interest earned under the Company's existing leases and mortgage loans
receivable based on increases in the facility revenues and the Consumer Price
Index.
Total expenses for the three-month period ended March 31, 1998 increased
$4,042,000 or 35% over the same period in 1997. The increase is primarily due
to increased interest expense as a result of the issuance of fixed rate medium-
term notes during the last twelve months and to increased depreciation in
connection with the acquisition of additional facilities during the last twelve
months.
In addition, during the three months ended March 31, 1998, the Company
recognized a gain of approximately $2,321,000 from the sale of two skilled
nursing facilities.
The Company expects increased rental revenues and interest income due to
the addition of facilities to its property base and mortgage loans receivable
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 and/or increases in the Consumer Price Index.
Historically, revenues at the Company's facilities and the Consumer Price Index
generally have increased; although, there are no assurances that they will
continue to increase in the future. Sales of facilities or repayments of
mortgages would serve to offset the aforementioned revenue increases. Additional
investments in health care facilities would also increase rental and/or interest
income. As additional investments in facilities are made, depreciation and/or
interest expense could also increase. Any such increases, however, are expected
to be more than offset by rents or interest income associated with the
investments.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information which were issued in
June 1997. The adoption of SFAS No. 130 and SFAS No. 131 has not materially
impacted the Company's financial statements.
7
<PAGE>
Issue No. 97-11 Accounting for Internal Costs Relating to Real Estate
Property Acquisitions released by the Emerging Issues Task Force of the
Financial Accounting Standards Board which prohibits the capitalization of
internal costs related to the acquisition of operating property became effective
during the first quarter of 1998. The impact of this pronouncement is immaterial
to the Company's financial statements.
Liquidity and Capital Resources
During the three-month period ended March 31, 1998, the Company acquired
one continuing care retirement community and six residential care facilities for
the elderly in three separate transactions for an aggregate purchase price of
approximately $4,118,000. Construction of one assisted living facility was also
completed, in which the Company's total investment was 2,674,000. These
facilities were concurrently leased under terms generally similar to the
Company's existing leases. During the three-month period ended March 31, 1998,
the Company provided new construction financing of approximately $22,344,000.
The Company also funded approximately $1,777,000 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
acquisitions, construction advances and capital improvement advances were funded
by borrowings on the Company's bank line of credit and by cash on hand.
During the three-month period ended March 31, 1998, the Company sold two
skilled nursing facilities in two separate transactions for an aggregate price
of approximately $5,512,000, less transaction costs, resulting in an aggregate
gain of approximately $2,321,000. The proceeds of the sales were used to repay
borrowings on the Company's bank line of credit.
During the three months ended March 31, 1998, the Company issued
$15,000,000 in aggregate principal amount of medium-term notes. The notes bear
fixed interest at a weighted average rate of 6.71% and have a weighted average
maturity of 10.3 years. The proceeds were used to repay borrowings on the
Company's bank line of credit.
At March 31, 1998, the Company had $78,400,000 available under its
$100,000,000 bank line of credit. The Company has effective shelf registrations
on file with the Securities and Exchange Commission under which the Company may
issue (a) up to $230,000,000 in aggregate principal amount of medium term notes
and (b) up to approximately $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.
On April 29, 1998, the Company issued 1,048,128 shares of common stock
resulting in aggregate proceeds, net of the underwriter's fee, of approximately
$23,214,000 before expenses related to the offering. The proceeds were used to
repay borrowings under the Company's bank line of credit. This issuance reduced
the amount of securities including debt, convertible debt, common and preferred
stock the Company may issue under its effective shelf registrations on file with
the Securities and Exchange Commission to approximately $208,622,000.
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 of credit, 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.
8
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the three-month period ended March 31, 1998.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1998
NATIONWIDE HEALTH PROPERTIES, INC.
By /s/ MARK L. DESMOND
-----------------------------------------
Mark L. Desmond
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 14,047
<SECURITIES> 0
<RECEIVABLES> 4,502
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,717
<PP&E> 986,577
<DEPRECIATION> 112,163
<TOTAL-ASSETS> 1,103,494
<CURRENT-LIABILITIES> 36,385
<BONDS> 509,576
0
100,000
<COMMON> 4,334
<OTHER-SE> 453,199
<TOTAL-LIABILITY-AND-EQUITY> 1,103,494
<SALES> 0
<TOTAL-REVENUES> 33,158
<CGS> 0
<TOTAL-COSTS> 7,337
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,252
<INCOME-PRETAX> 17,569
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,569
<DISCONTINUED> 0
<EXTRAORDINARY> 2,321
<CHANGES> 0
<NET-INCOME> 19,890
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
