<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
For the fiscal year ended December 31, 1999
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.)
</TABLE>
610 Newport Center Drive, Suite 1150, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(949) 718-4400
(Registrant's telephone number, including area code)
----------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -----------------------
<S> <C>
Common Stock, $.10 Par Value New York Stock Exchange
7.677% Series A Cumulative Preferred None
</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. [_]
The aggregate market value of the voting stock held by non-affiliates of the
Company is approximately $524,375,000 as of February 29, 2000.
46,226,484
(Number of shares of common stock outstanding as of February 29, 2000)
Part III is incorporated by reference from the registrant's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 18, 2000.
- -------------------------------------------------------------------------------
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<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, 1999, the Company had investments in
341 facilities located in 37 states and operated by 57 healthcare providers.
The facilities include 197 skilled nursing facilities, 124 assisted living
facilities, 14 continuing care retirement communities, 3 residential care
facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic.
As of December 31, 1999, the Company had direct ownership of 159 skilled
nursing facilities, 116 assisted living facilities, 9 continuing care
retirement communities, 3 residential care facilities for the elderly,
2 rehabilitation hospitals and 1 medical clinic (the "Properties").
Substantially all of the Company's owned facilities are leased under "net"
leases (the "Leases"), which are accounted for as operating leases, to
44 healthcare providers (the "Lessees") including Alterra Healthcare
Corporation ("Alterra"), American Retirement Corporation, ARV Assisted Living,
Inc., Balanced Care Corporation, Beverly Enterprises, Inc. ("Beverly"),
Harborside Healthcare Corporation, HEALTHSOUTH Corporation, Integrated Health
Services, Mariner Post-Acute Network, and Sun Healthcare Group, Inc. Of the
Lessees, only Alterra is expected to account for more than 10% of the
Company's revenues in 2000.
The Leases have initial terms ranging from 9 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 or as a percentage of the
increase in the Consumer Price Index. Additional rents are generally
calculated and payable monthly or quarterly. Most of the leases contain
provisions such that the total rent cannot decrease from one year to the next.
In addition, most of the 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 197 facilities are
backed by irrevocable letters of credit or security deposits that cover 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, 1999, the Company held 37 mortgage loans secured by 38
skilled nursing facilities, 8 assisted living facilities, 5 continuing care
retirement communities and 4 parcels of land. Such loans had an aggregate
outstanding principal balance of approximately $210,297,000 and a net book
value of approximately $203,362,000 at December 31, 1999, net of an aggregate
discount of approximately $6,935,000. The mortgage loans have individual
outstanding balances ranging from approximately $422,000 to $17,725,000 and
have maturities ranging from 2003 to 2025.
During 1999, the Company acquired 7 residential care facilities for the
elderly in 1 transaction for an aggregate investment of approximately
$2,304,000. The Company also completed the construction of 19 assisted living
facilities in which the Company's total aggregate investment was approximately
$141,201,000. Additionally, the Company funded approximately $11,024,000 in
capital improvements at certain facilities in accordance with certain existing
lease provisions. Such capital improvements result in an increase in the
minimum rents earned by the Company on these facilities. During 1999, the
Company also provided 4 mortgage loans, secured by 4 parcels of land, in the
aggregate amount of $4,698,000.
The Company has historically provided lease or mortgage financing for
healthcare facilities to qualified operators and acquired additional
healthcare related facilities, including skilled nursing facilities, assisted
living facilities, acute care hospitals and medical office buildings.
Financing for such investments was 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.
1
<PAGE>
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, 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 341 facilities in which the Company has investments, the Company has
direct ownership of 159 skilled nursing facilities, 116 assisted living
facilities, 9 continuing care retirement communities, 3 residential care
facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic.
Substantially all of 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.
Skilled Nursing Facilities
Skilled nursing 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.
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
2
<PAGE>
recovery. These programs are often the most effective in treating severe
skeletal or neurological injuries and traumatic diseases such as stroke or
acute arthritis.
The following table sets forth certain information regarding the Company's
owned facilities as of December 31, 1999.
<TABLE>
<CAPTION>
Number
of Annual 1999
Number Beds/ Minimum Additional
Facility Location of Facilities Units(1) Investment Rent(2) Rent(2)
----------------- ------------- ------- ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Skilled Nursing
Facilities:
Arizona................. 1 130 $ 3,540 $ 481 $ 128
Arkansas................ 10 1,220 40,030 3,217 127
California.............. 8 963 26,481 3,065 986
Connecticut............. 2 239 6,192 611 175
Florida................. 11 1,481 34,307 2,583 692
Georgia................. 2 263 11,020 1,230 116
Idaho................... 1 64 792 81 116
Illinois................ 2 224 5,549 701 215
Indiana................. 11 1,269 36,416 4,521 960
Kansas.................. 10 732 13,979 1,310 241
Maryland................ 4 749 22,057 2,265 859
Massachusetts........... 17 1,820 73,838 5,819 665
Minnesota............... 10 1,242 37,877 1,182 869
Mississippi............. 1 120 4,270 388 --
Missouri................ 1 108 2,740 355 96
Nevada.................. 1 140 4,034 480 97
New Jersey.............. 1 180 6,808 591 160
North Carolina.......... 1 150 2,360 374 158
Ohio.................... 6 811 29,551 3,304 160
Oklahoma................ 3 253 3,939 404 109
Oregon.................. 1 85 1,215 -- 72
Tennessee............... 10 1,120 35,506 3,631 466
Texas................... 25 2,803 55,529 5,853 1,661
Virginia................ 4 605 18,568 3,233 860
Washington.............. 7 717 29,313 2,801 339
Wisconsin............... 9 900 21,169 2,721 989
--- ------ -------- ------- -------
Subtotals............. 159 18,388 $527,080 $51,201 $11,316
--- ------ -------- ------- -------
Assisted Living
Facilities:
Alabama................. 2 166 5,953 515 35
Arizona................. 2 142 7,868 743 17
Arkansas................ 1 28 1,661 144 2
California.............. 13 1,620 79,578 8,191 1,149
Colorado................ 5 514 32,708 3,076 74
Delaware................ 1 54 5,292 556 --
Florida................. 19 1,260 83,869 7,941 277
Idaho................... 1 158 11,800 1,176 91
Illinois................ 1 178 11,076 1,037 78
Indiana................. 1 50 4,656 458 6
Kansas.................. 4 231 13,470 1,196 10
Kentucky................ 1 44 2,657 273 4
Louisiana............... 1 104 7,352 809 --
Maryland................ 1 60 4,318 425 --
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Number Annual 1999
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>
Assisted Living Facilities
(continued):
Massachusetts............ 2 183 $ 17,478 $ 1,545 $ 17
Michigan................. 1 144 7,305 817 124
Missouri................. 1 31 2,529 223 6
Nevada................... 2 155 13,616 1,254 4
New Jersey............... 1 52 4,085 353 3
North Carolina........... 1 42 2,916 257 6
Ohio..................... 11 659 37,198 3,607 90
Oklahoma................. 3 188 8,100 771 34
Oregon................... 6 536 28,831 2,851 86
Pennsylvania............. 2 188 12,879 1,289 --
Rhode Island............. 1 90 10,001 923 --
South Carolina........... 4 162 11,040 943 9
Tennessee................ 5 302 22,248 2,136 16
Texas.................... 16 909 75,536 6,671 78
Washington............... 4 341 22,934 2,267 58
West Virginia............ 1 62 5,180 490 --
Wisconsin................ 2 422 29,062 2,050 59
--- ------ ---------- -------- -------
Subtotals.............. 116 9,075 583,196 54,987 2,333
--- ------ ---------- -------- -------
Continuing Care Retirement
Communities:
California............... 1 279 12,427 1,222 242
Colorado................. 1 119 3,115 307 17
Georgia.................. 1 187 11,492 909 6
Kansas................... 1 199 13,204 1,267 45
Massachusetts............ 1 178 13,889 561 6
Texas.................... 2 550 37,149 3,161 48
Wisconsin................ 2 942 64,351 5,913 110
--- ------ ---------- -------- -------
Subtotals.............. 9 2,454 155,627 13,340 474
--- ------ ---------- -------- -------
Residential Care Facilities
for the Elderly:
California............... 3 18 517 -- --
--- ------ ---------- -------- -------
Rehabilitation Hospitals:
Arizona.................. 2 116 16,826 1,770 674
--- ------ ---------- -------- -------
Medical Clinic:
Alabama.................. 1 -- 2,433 -- 7
--- ------ ---------- -------- -------
Construction in Progress... -- -- 45,694 -- --
--- ------ ---------- -------- -------
Total All Owned
Facilities................ 290 30,051 $1,331,373 $121,298 $14,804
=== ====== ========== ======== =======
</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 or increases
in the Consumer Price Index, may also be paid. The 1999 additional rent
amounts reflect additional rent earned in 1999.
As of December 31, 1999, 47 of the Company's 290 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 24 properties operated by such parties. The
Company expects that
4
<PAGE>
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.
As of December 31, 1999, 54 of the owned facilities are leased to and
operated by subsidiaries of Alterra.
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. Effective for cost reporting years
beginning after July 1, 1998, the payment methodology for nursing homes under
the Medicare program was changed. Under the new methodology, Medicare
reimburses nursing home operators for nursing care, ancillary services and
capital costs at a flat per diem rate. In the past, a cost-based system of
reimbursement was used. This new reimbursement methodology is being phased in
over four years. Payments under the new methodology are generally lower than
the payments the facilities had historically received. 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. Any changes in reimbursement
levels could have an adverse impact on the revenues of the operators of the
Company's facilities, which could in turn adversely impact their abilities to
make their monthly lease or debt payments to the Company.
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 CONs 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 (the "Board"), 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 29, 2000.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
R. Bruce Andrews........ 59 President and Chief Executive Officer
Mark L. Desmond......... 41 Senior Vice President and Chief Financial Officer
T. Andrew Stokes........ 52 Senior Vice President of Corporate Development
Steven J. Insoft........ 36 Vice President of Development
John J. Sheehan, Jr..... 42 Vice President of Development
Gary E. Stark........... 44 Vice President and General Counsel
</TABLE>
5
<PAGE>
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 CenterTrust Retail Properties, 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.
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 29, 2000, the Company had fourteen 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, 1998 to December 31, 1999 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>
1999
First quarter.............................. $22 1/4 $16 3/4 $.45
Second quarter............................. 21 17 3/4 .45
Third quarter.............................. 19 3/16 14 15/16 .45
Fourth quarter............................. 17 1/16 11 3/4 .45
1998
First quarter.............................. $26 15/16 $24 1/4 $.42
Second quarter............................. 25 7/8 23 3/16 .42
Third quarter.............................. 25 3/8 19 3/8 .42
Fourth quarter............................. 23 1/4 20 .42
</TABLE>
As of February 29, 2000 there were approximately 1,100 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,
-------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Total revenues........ $ 163,865 $ 142,584 $ 115,705 $ 95,776 $ 81,039
Income from
operations........... 71,148 67,427 62,988 54,944 49,382
Gain (loss) on sale of
facilities........... (335) 2,321 829 -- 989
Net income............ 70,813 69,748 63,817 54,944 50,371
Preferred stock
dividends............ (7,677) (7,677) (1,962) -- --
Net income available
to common
stockholders......... 63,136 62,071 61,855 54,944 50,371
Dividends paid on
common stock......... 83,480 75,128 65,734 59,581 53,182
Per Share Data:
Basic/diluted income
from continuing
operations available
to common
stockholders (1)..... $ 1.37 $ 1.34 $ 1.45 $ 1.36 $ 1.30
Basic/diluted net
income available to
common stockholders.. 1.37 1.39 1.47 1.36 1.33
Dividends paid on
common stock......... 1.80 1.68 1.56 1.48 1.41
Balance Sheet Data:
Investments in real
estate, net.......... $1,372,064 $1,316,685 $1,053,273 $722,506 $ 652,231
Total assets.......... 1,430,056 1,357,303 1,077,394 744,984 670,111
Senior unsecured notes
due 2000-2038........ 657,900 545,150 355,000 190,000 100,000
Bank borrowings....... 75,300 42,000 19,600 32,300 93,900
Convertible
debentures........... -- 57,431 64,512 64,920 65,000
Notes and bonds
payable.............. 64,048 64,623 58,297 9,229 23,364
Stockholders' equity.. 585,590 605,558 553,046 428,588 371,822
Other Data:
Net cash provided by
operating
activities........... $ 94,659 $ 106,067 $ 86,010 $ 74,129 $ 66,972
Net cash used in
investing
activities........... (89,753) (282,968) (267,302) (85,034) (151,476)
Net cash provided by
(used in) financing
activities........... (4,949) 182,891 179,775 14,677 88,699
Funds from operations
available to common
stockholders (2)..... 99,602 92,726 80,851 71,667 63,267
Weighted average
shares outstanding... 46,216 44,637 42,164 40,373 37,808
</TABLE>
- -------
(1) For per share purposes, income from continuing operations is defined as
income before the effect of any gains or losses on sales of properties.
(2) 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 adjusted for
certain non-cash items, primarily real estate depreciation, less
gains/losses 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 healthcare industry, the amount of any additional
investments, access to capital markets and changes in the ratings of the
Company's debt securities.
Operating Results
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Minimum rent increased $19,721,000 or 19% in 1999 as compared to 1998. The
increase was primarily due to minimum rent resulting from the 19 developments
completed during 1999, combined with a full year of revenues earned by
investments in additional facilities in 1998. Interest and other income
increased by $518,000 or 2% in 1999 as compared to 1998. The increase was
primarily due to approximately $7,617,000 of working capital loans provided
during 1999. Additional rent and additional interest increased by $1,042,000
or 7% in 1999 as compared to 1998. The increase was 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.
Interest and amortization of deferred financing costs increased $14,090,000
or 38% in 1999 as compared to 1998. The increase was primarily due to the
issuance of $112,750,000 in medium-term notes during 1999, a full year of
interest expense related to the issuance of $190,150,000 of medium-term notes
in 1998 and a rise in interest rates during 1999. Depreciation and non-cash
charges increased $8,155,000 or 29% in 1999 as compared to 1998. The increase
was attributable to increased depreciation due to the developments completed
in 1999 and a full year of depreciation related to facilities acquired in
1998. General and administrative costs increased $315,000 or 7% in 1999 as
compared to 1998 due to general cost increases and additional costs associated
with the Company's larger asset base.
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 at individual facilities 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. In addition, the Company is currently
negotiating a new lease with Beverly Enterprises, Inc. ("Beverly") which will
incorporate 38 of their 47 current facilities' leases, the majority of which
are up for renewal in 2000. The other 9 facilities are on a separate lease
that does not expire until 2010. The new lease will have new base rent amounts
for each facility that will generally incorporate the former additional rents.
This will result in a shift in revenues from additional rent to base rent. The
new lease will probably result in a decrease in total rent from Beverly as it
is likely that Beverly will purchase 5 facilities from the Company and certain
rent concessions will probably be made with regard to a few specific
facilities. 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 at least partially offset by
rents or interest income associated with the investments.
9
<PAGE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Minimum rent increased $24,618,000 or 31% in 1998 as compared to 1997. The
increase was primarily due to minimum rent resulting from investments in 57
net additional leased facilities in 1998, combined with a full year of
revenues earned by investments in additional facilities in 1997. Interest and
other income increased by $405,000 or 2% in 1998 as compared to 1997. The
increase was primarily due to the increase in mortgage loans during 1998.
Additional rent and additional interest increased by $1,856,000 or 14% in 1998
as compared to 1997. The increase was 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.
Interest and amortization of deferred financing costs increased $8,632,000
or 30% in 1998 as compared to 1997. The increase was primarily due to the
issuance of $190,150,000 in medium-term notes during 1998 and a full year of
interest expense related to the issuance of $165,000,000 of medium-term notes
in 1997. Depreciation and non-cash charges increased $8,151,000 or 41% in 1998
as compared to 1997. The increase was attributable to increased depreciation
due to the acquisition of additional facilities in 1998 and a full year of
depreciation related to facilities acquired in 1997. General and
administrative costs increased $657,000 or 16% in 1998 as compared to 1997.
The increase was due in part to adding two additional employees, increased
wages and increases in other general expenses. The impairment of long-lived
assets was due to recording a provision of $5,000,000 as a reduction in the
carrying amount of the Company's investment in three medical clinics that were
constructed for and leased to a company that has declared bankruptcy.
Information Regarding Certain Operators
Three of the companies that operate facilities owned by the Company have
filed for bankruptcy protection. The table below summarizes the filing dates
of the bankruptcies, the number of the Company's facilities operated by each
operator, the Company's investment in facilities subject to the bankruptcies,
the percentage of the Company's revenue for 1999 relating to the facilities
operated by each operator and cash deposits and letters of credit held by the
Company as security for each operator.
<TABLE>
<CAPTION>
Number of Investment Percentage
Bankruptcy Facilities in of 1999 Security
Operator Filing Date Operated Facilities Revenue Deposits
-------- ---------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Sun Healthcare Group,
Inc.................... October 14, 1999 23 $ 85,650,000 6% $3,064,000
Mariner Post-Acute
Network................ January 18, 2000 21 67,851,000 6% 3,055,000
Integrated Health
Services, Inc.......... February 2, 2000 11 45,904,000 4% 1,277,000
--- ------------ --- ----------
Totals................ 55 $199,405,000 16% $7,396,000
=== ============ === ==========
</TABLE>
The number of facilities and investment in facilities amounts above include
investments in mortgage loans. The Company has one mortgage directly with
Mariner Post-Acute Network in the amount of $7,497,000 secured by 1 facility.
The remaining mortgage loans, aggregating $19,294,000, are secured by 2
facilities operated by Sun Healthcare Group, Inc. and 4 facilities operated by
Integrated Health Services. The operators are not the borrowers under the non-
direct mortgage loans, and the borrowers are responsible for making the
interest payments to the Company. The Company's interest continues to be paid
each month on a timely basis.
Under bankruptcy statutes, the court must either affirm the Company's lease
or reject it and return the property to the Company. The court cannot change
the rental amount or other lease provisions that could financially impact the
Company. The likelihood that the Company's leases would be affirmed rests
primarily on whether the properties that are operated by the tenant are
providing positive cash flows. Only a few of the fifty-five facilities leased
to and operated by these three companies are not providing adequate cash flows
on their own to cover the rent under the leases. The Company's rent continues
to be paid each month on a timely basis. While there is a possibility that
these properties may be returned by the courts, the Company has already
identified parties interested in leasing these facilities, however such leases
would be at a slightly lower rental rate.
10
<PAGE>
Liquidity and Capital Resources
During 1999, the Company acquired 7 residential care facilities for the
elderly in 1 transaction for an aggregate investment of approximately
$2,304,000. During 1999, the Company provided new construction financing of
approximately $96,408,000. Construction of 19 assisted living facilities was
completed in 1999, in which the Company's total aggregate investment was
approximately $141,201,000; $60,485,000 of this amount was a current year
investment included in the new construction financing amount above. Upon
acquisition or completion of construction, as applicable, the facilities were
concurrently leased under terms generally similar to the Company's existing
Leases. During 1999, the Company also funded approximately $11,024,000 in
capital improvements at certain facilities in accordance with certain existing
lease provisions. Such capital improvements result in an increase in the
minimum rents earned by the Company on these facilities. The acquisitions,
construction advances and capital improvements were funded by bank borrowings
on the Company's bank line of credit and cash on hand.
During 1999, the Company provided 4 mortgage loans secured by 4 parcels of
land in the aggregate amount of $4,698,000. In addition, the Company funded an
additional $313,000 on existing mortgage loans. Such additional amounts funded
result in an increase in interest income earned by the Company on these loans.
The mortgage loans and the additional amounts funded were financed by
borrowings on the Company's bank line of credit and by cash on hand.
During 1999, the Company disposed of 5 skilled nursing facilities, 2
assisted living facilities, 21 residential care facilities for the elderly and
2 medical clinics in 27 separate transactions for aggregate proceeds of
approximately $20,272,000. The Company recognized an aggregate loss of
$335,000 related to the disposal of these facilities. The proceeds of the
disposals were used to repay borrowings on the Company's bank line of credit.
During 1999, the Company issued $112,750,000 in aggregate principal amount
of medium-term notes. The notes bear fixed interest at a weighted average
interest rate of 8.62% and have a weighted average maturity of 7 years. The
proceeds were used to repay borrowings on the Company's bank line of credit.
On January 1, 1999, $57,431,000 of the Company's convertible debentures
matured. Of the total maturing, debentures totaling $57,423,000 were repaid
and the remaining debentures, totaling $8,000, were converted into 356 shares
of common stock. The repayment was funded by bank borrowings on the Company's
bank line of credit and cash on hand.
At December 31, 1999, the Company had $24,700,000 available under its
$100,000,000 bank line of credit that expires on March 31, 2002. The Company
also had effective shelf registrations on file with the Securities and
Exchange Commission under which the Company may issue (a) up to $442,100,000
in aggregate principal amount of medium-term notes and (b) up to $178,247,000
of securities including debt, convertible debt, common and preferred stock.
The Company anticipates making additional investments in health care related
facilities, although the level of new investments is decreasing and the
Company does not anticipate making additional investments beyond its current
commitments until such time as access to long-term capital is under more
favorable terms. 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 anticipated future investments as well as repay
borrowings at or prior to their maturity.
Year 2000 Readiness Disclosure Update
All statements contained in the following section are "Year 2000 Readiness
Disclosures" within the meaning of the Year 2000 Information and Disclosure
Act.
11
<PAGE>
The Year 2000 issue (the "Year 2000 Issue") in computers arose from the
common industry practice of using two digits to represent a date in computer
software code and databases to enhance both processing time and save storage
space. Therefore, when dates in the year 2000 and beyond are indicated and
computer programs read the date "00," the computers may default to the year
"1900" rather than the correct "2000." This could result in incorrect
calculations, faulty data and computer shutdowns, which could cause
disruptions of operations.
During 1999, the Company reviewed the risks of the Year 2000 Issue with
regard to the Company's own internal operations, information systems and
software applications and the impact on the Company of its outside vendors',
lessees' and borrowers' ability to operate. During the second quarter of 1999,
unrelated to the Year 2000 Issue, the Company replaced its entire computer
system, which consists of a local area network of twelve personal computers
and three servers. The system was replaced to enable the Company to upgrade
its accounting software package, which was completed during the third quarter
of 1999. The Company believed its own internal operations, information systems
and software applications were compliant based upon reasonable assurance by
vendors and the Company's information systems consultants. The cost to
remediate the Year 2000 Issues with regard to the Company's internal
operations, information systems and software applications was not material.
Subsequent to January 1, 2000, the Company has not experienced any hardware
or software problems related to the Year 2000 Issue with regard to its own
internal operations and systems.
The Company's vendors that provide banking, communications and payroll
services and the Company's lessees and borrowers were also likely to be
affected by the Year 2000 Issue. If the Company's vendors, lessees and
borrowers were not Year 2000 compliant, or if they faced disruptions in their
operations or cash flows due to Year 2000 Issues, the Company could have faced
significant temporary disruptions in rent and mortgage payments and,
therefore, cash flows after that date. At this time, the Company is not aware
of any significant issues that may have impacted these vendors, lessees and
borrowers, and there have been no disruptions in rent or mortgage payments.
The Company also had risks associated with Year 2000 Issues in non-
information technology areas as it related to owned properties. There was a
risk that embedded chips in elevators, security systems, electrical systems
and similar technology-driven devices may have stopped functioning due to Year
2000 Issues. Substantially all of the Company's owned properties are leased
under triple-net leases and as such, the cost to remediate any of these items
was paid by the lessees. At the current time, the Company is unaware of any
significant disruptions of these sorts at any of its owned properties.
At this time there have been no indications that the Company's vendors,
lessees, borrowers and third parties upon which they are dependent have
experienced any Year 2000 Issues which would have a material impact on the
future operations and/or financial results of the Company, and the Company
does not expect any future disruptions related to its vendors, lessees and
borrowers.
Readers are cautioned that many of the statements contained in the "Year
2000 Readiness Disclosure Update" paragraphs are forward looking and should be
read in conjunction with the Company's disclosures under the heading
"Statement Regarding Forward Looking Disclosure" set forth above.
Impact of New Accounting Pronouncements
The adoption of Statement of Financial Accounting Standards ("SFAS") No. 133
Accounting for Derivative Instruments and Hedging Activities does not have an
impact on the Company's financial statements as the Company does not utilize
derivatives or engage in any hedging activities.
Market Risk Exposure
The Company is exposed to market risks related to fluctuations in interest
rates on its mortgage loans receivable and debt. The Company does not utilize
interest rate swaps, forward or option contracts on foreign
12
<PAGE>
currencies or commodities, or other types of derivative financial instruments.
The purpose of the following analyses is to provide a framework to understand
the Company's sensitivity to hypothetical changes in interest rates as of
December 31, 1999. Readers are cautioned that many of the statements contained
in the "Market Risk Exposure" paragraphs are forward looking and should be
read in conjunction with the Company's disclosures under the heading
"Statement Regarding Forward Looking Disclosure" set forth above.
The Company provides mortgage loans to operators of healthcare facilities as
part of its normal operations. The majority of the loans have fixed rates.
Four of the mortgage loans have adjustable rates; however, the rates adjust
only once or twice over the loan lives and the minimum adjusted rate is equal
to the current rate. Therefore, all mortgage loans receivable are treated as
fixed rate notes in the table and analysis below.
The Company utilizes debt financing primarily for the purpose of making
additional investments in healthcare facilities. Historically, the Company has
made short-term borrowings on its bank line of credit to fund its acquisitions
until market conditions were appropriate, based on management's judgment, to
issue stock or fixed rate debt to provide long-term financing. The Company
holds variable rate debt in the form of housing revenue bonds, which were
assumed in connection with certain healthcare facility acquisitions because of
the favorable interest rates, which in turn provided favorable lease rates to
the sellers/lessees. Pursuant to the associated lease arrangements, increases
or decreases in the interest rates on the housing revenue bonds would be
substantially offset by increases or decreases in the associated rent received
by the Company on the properties securing this debt. Therefore, there is
substantially no market risk associated with the Company's variable rate debt.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but not earnings or cash flows. Conversely, for variable rate
debt, changes in interest rates generally do not impact fair market value, but
do affect the future earnings and cash flows. The Company generally cannot
prepay fixed rate debt prior to maturity, therefore, interest rate risk and
changes in fair market value should not have a significant impact on the fixed
rate debt until the Company would be required to refinance such debt. Holding
the variable rate debt balance constant, and including the bank borrowings as
variable rate debt due to its nature, each one percentage point increase in
interest rates would result in an increase in interest expense for the coming
year of approximately $878,000.
The table below details the principal amount and the average interest rates
for the mortgage loans receivable and debt for each category based on the
final maturity dates. Certain of the mortgage loans receivable and certain
items in the various categories of debt require periodic principal payments
prior to the final maturity date. The fair value estimates for the mortgage
loans receivable are based on the estimates of management and on rates
currently prevailing for comparable loans. The fair market value estimates for
debt securities are based on discounting future cash flows utilizing current
rates offered to the Company for debt of the same type and remaining maturity.
<TABLE>
<CAPTION>
Maturity Date
--------------------------------------------------------------------------
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
------- ------- ------- ------- ------- ---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Mortgage loans
receivable............ -- -- -- $ 2,418 $ 4,698 $196,246 $203,362 $189,820
Average interest
rate................ -- -- -- 10.05% 9.00% 10.27% 10.24%
Liabilities
Debt
Fixed rate............ $30,000 $78,150 $50,000 $66,000 $67,750 $417,596 $709,496 $618,236
Average interest
rate................ 7.43% 6.89% 7.35% 7.49% 9.08% 7.39% 7.50%
Variable rate......... -- -- -- -- -- $ 12,452 $ 12,452 $ 12,452
Average interest
rate................ -- -- -- -- -- 4.21% 4.21%
Bank borrowings....... -- -- $75,300 -- -- -- $ 75,300 $ 75,185
Average interest
rate................ -- -- 7.32% -- -- -- 7.32%
</TABLE>
13
<PAGE>
Increases in interest rates during 1999 resulted in an increase in interest
expense for the Company primarily related to the bank line of credit and
medium-term notes issued during the year at rates somewhat higher than in
prior years. These interest rate increases have made it more expensive for the
Company to borrow on its bank line of credit and to access debt capital
through its medium-term note program. Any future interest rate increases will
further increase the cost of any borrowings to finance future acquisitions or
replace current long-term debt as it matures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. 15
Consolidated Balance Sheets............................................... 16
Consolidated Statements of Operations..................................... 17
Consolidated Statements of Stockholders' Equity........................... 18
Consolidated Statements of Cash Flows..................................... 19
Notes to Consolidated Financial Statements................................ 20
</TABLE>
14
<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, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Orange County, California
January 20, 2000
15
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
(In thousands)
ASSETS
------
<S> <C> <C>
Investments in real estate
Real estate properties:
Land............................................... $ 146,712 $ 148,388
Buildings and improvements......................... 1,146,921 1,024,637
Construction in progress........................... 37,740 70,363
---------- ----------
1,331,373 1,243,388
Less accumulated depreciation...................... (162,671) (133,316)
---------- ----------
1,168,702 1,110,072
Mortgage loans receivable, net....................... 203,362 206,613
---------- ----------
1,372,064 1,316,685
Cash and cash equivalents.............................. 16,139 16,182
Receivables............................................ 7,614 6,712
Other assets........................................... 34,239 17,724
---------- ----------
$1,430,056 $1,357,303
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Bank borrowings........................................ $ 75,300 $ 42,000
Senior notes due 2000-2038............................. 657,900 545,150
Notes and bonds payable................................ 64,048 64,623
Convertible debentures................................. -- 57,431
Accounts payable and accrued liabilities............... 47,218 42,541
Commitments and contingencies..........................
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized; issued and outstanding: 1,000,000 as of
December 31, 1999 and 1998; 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: 46,216,484 and
46,206,128 as of December 31, 1999 and 1998,
respectively........................................ 4,622 4,621
Capital in excess of par value....................... 556,373 555,998
Cumulative net income................................ 504,457 433,644
Cumulative dividends................................. (579,862) (488,705)
---------- ----------
Total stockholders' equity......................... 585,590 605,558
---------- ----------
$1,430,056 $1,357,303
========== ==========
</TABLE>
See accompanying notes.
16
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Minimum rent................................... $123,926 $104,205 $ 79,587
Interest and other income...................... 23,377 22,859 22,454
Additional rent and additional interest........ 16,562 15,520 13,664
-------- -------- --------
163,865 142,584 115,705
-------- -------- --------
Expenses:
Interest and amortization of deferred financing
costs......................................... 51,621 37,531 28,899
Depreciation and non-cash charges.............. 36,131 27,976 19,825
General and administrative..................... 4,965 4,650 3,993
Impairment of long-lived assets................ -- 5,000 --
-------- -------- --------
92,717 75,157 52,717
-------- -------- --------
Income before gain (loss) on sale of facilities.. 71,148 67,427 62,988
Gain (loss) on sale of facilities................ (335) 2,321 829
-------- -------- --------
Net income....................................... 70,813 69,748 63,817
Preferred stock dividends........................ (7,677) (7,677) (1,962)
-------- -------- --------
Net income available to common stockholders...... $ 63,136 $ 62,071 $ 61,855
======== ======== ========
Per share amounts:
Basic/diluted income from continuing operations
available to common stockholders.............. $ 1.37 $ 1.34 $ 1.45
======== ======== ========
Basic/diluted net income available to common
stockholders.................................. $ 1.37 $ 1.39 $ 1.47
======== ======== ========
Weighted average shares outstanding.............. 46,216 44,637 42,164
======== ======== ========
</TABLE>
See accompanying notes.
17
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Capital
in
Common stock Preferred Stock excess Total
------------- --------------- of par Cumulative Cumulative stockholders'
Shares Amount Shares Amount value net income dividends equity
------ ------ ------ -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Issuance of common
stock................. 2,761 276 -- -- 58,248 -- -- 58,524
Conversion of
debentures............ 316 32 -- -- 7,013 -- -- 7,045
Net income............. -- -- -- -- -- 69,748 -- 69,748
Preferred dividends.... -- -- -- -- -- -- (7,677) (7,677)
Common dividends....... -- -- -- -- -- -- (75,128) (75,128)
------ ------ ----- -------- -------- -------- --------- --------
Balances at December 31,
1998................... 46,206 4,621 1,000 100,000 555,998 433,644 (488,705) 605,558
Issuance of common
stock................. 10 1 -- -- 327 -- -- 328
Conversion of
debentures............ -- -- -- -- 8 -- -- 8
Stock options.......... -- -- -- -- 40 -- -- 40
Net income............. -- -- -- -- -- 70,813 -- 70,813
Preferred dividends.... -- -- -- -- -- -- (7,677) (7,677)
Common dividends....... -- -- -- -- -- -- (83,480) (83,480)
------ ------ ----- -------- -------- -------- --------- --------
Balances at December 31,
1999................... 46,216 $4,622 1,000 $100,000 $556,373 $504,457 ($579,862) $585,590
====== ====== ===== ======== ======== ======== ========= ========
</TABLE>
See accompanying notes.
18
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 70,813 $ 69,748 $ 63,817
Depreciation and non-cash charges........... 36,131 27,976 19,825
(Gain) loss on sale of properties........... 335 (2,321) (829)
Impairment of long-lived assets............. -- 5,000 --
Amortization of deferred financing costs.... 940 980 801
Net change in other assets and liabilities.. (13,560) 4,684 2,396
--------- --------- ---------
Net cash provided by operating
activities............................... 94,659 106,067 86,010
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate properties........ (110,590) (279,384) (239,775)
Disposition of real estate properties....... 23,669 5,496 4,812
Investment in mortgage loans receivable..... (5,011) (18,711) (44,947)
Principal payments on mortgage loans
receivable................................. 2,179 9,631 12,608
--------- --------- ---------
Net cash used in investing activities..... (89,753) (282,968) (267,302)
--------- --------- ---------
Cash flows from financing activities:
Bank borrowings............................. 262,600 308,800 263,700
Repayment of bank borrowings................ (229,300) (286,400) (276,400)
Issuance of common stock, net............... -- 53,062 --
Issuance of preferred stock, net............ -- -- 97,250
Issuance of senior unsecured debt........... 112,750 190,150 165,000
Issuance of notes and bonds................. -- 4,507 --
Principal payments on convertible
debentures, notes and bonds................ (58,470) (2,729) (474)
Dividends paid.............................. (91,157) (82,805) (67,696)
Deferred financing costs.................... (1,372) (1,694) (1,605)
--------- --------- ---------
Net cash provided by (used in) financing
activities............................... (4,949) 182,891 179,775
--------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................. (43) 5,990 (1,517)
Cash and cash equivalents, beginning of
period....................................... 16,182 10,192 11,709
--------- --------- ---------
Cash and cash equivalents, end of period...... $ 16,139 $ 16,182 $ 10,192
========= ========= =========
Supplemental schedule of cash flow
information:
Cash interest paid.......................... $ 49,402 $ 38,402 $ 22,467
========= ========= =========
</TABLE>
See accompanying notes.
19
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1999, 1998 and 1997
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, 1999 had investments in 341 health care
facilities, including 197 skilled nursing facilities, 124 assisted living
facilities, 14 continuing care retirement communities, 3 residential care
facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic.
At December 31, 1999, the Company owned 159 skilled nursing facilities, 116
assisted living facilities, 9 continuing care retirement communities,
3 residential care facilities for the elderly, 2 rehabilitation hospitals and
1 medical clinic. The Company also held 37 mortgage loans secured by 38
skilled nursing facilities, 8 assisted living facilities, 5 continuing care
retirement communities and 4 parcels of land. In addition, at December 31,
1999, the Company had 7 assisted living facilities under construction. The
Company has no foreign facilities or operations.
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.
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 that 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, 1999 is approximately $9,731,000.
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.
Additional rent is generally computed as a percentage of facility net patient
revenues in excess of base amounts
20
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
or as a percentage of the increase in the Consumer Price Index. Additional
rent is generally calculated and payable monthly or quarterly. 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.
Accounting for Stock-Based Compensation
During 1999, the Company adopted the accounting provisions of SFAS No. 123
Accounting for Stock-Based Compensation. This Statement establishes a fair
value based method of accounting for stock-based compensation. Accounting for
stock-based compensation under this Statement causes the fair value of stock
options granted to be amortized into expense over the vesting period of the
stock and causes any dividend equivalents earned to be treated as dividends
for financial reporting purposes. Previously, the Company provided footnote
disclosure of the pro forma effect of options granted as calculated under the
provisions of SFAS No. 123. The impact of the adoption of this pronouncement
was immaterial to the Company's financial position and results of operations.
Capitalization of Interest
The Company capitalizes interest on facilities under construction. The
capitalization rates used are based on rates for the Company's senior
unsecured notes and bank line of credit, as applicable. Capitalized interest
in 1999, 1998 and 1997 was $4,190,000, $4,693,000 and $1,651,000,
respectively.
Impact of New Accounting Pronouncements
The adoption of Statement of Financial Accounting Standards ("SFAS") No. 133
Accounting for Derivative Instruments and Hedging Activities does not have an
impact on the Company's financial statements as the Company does not utilize
derivatives or engage in any hedging activities.
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,
-----------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Income Shares Income Shares Income Shares
------- ------ ------- ------ ------- ------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income before gain on sale of
facility..................... $71,148 $67,427 $62,988
Less: preferred stock
dividends.................... (7,677) (7,677) (1,962)
------- ------- -------
Basic EPS..................... 63,471 46,216 59,750 44,637 61,026 42,164
Effect of dilutive securities:
Stock options................. -- -- -- 8 -- 9
------- ------ ------- ------ ------- ------
Diluted EPS................... $63,471 46,216 $59,750 44,645 $61,026 42,173
======= ====== ======= ====== ======= ======
</TABLE>
21
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Real Estate Properties
Substantially 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 9 to 19 years, and generally the leases 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 or as a percentage of the increase in the Consumer Price
Index. Additional rents are generally calculated and payable monthly or
quarterly. Most leases contain provisions such that the total rent cannot
decrease from one year to the next. In addition, 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
197 facilities are backed by irrevocable letters of credit or security
deposits that cover 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.
Minimum future rentals on non-cancelable leases as of December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Minimum
Year Rentals
---- --------------
(In thousands)
<S> <C>
2000........................................................ $120,702
2001........................................................ 116,794
2002........................................................ 112,720
2003........................................................ 109,999
2004........................................................ 106,424
2005........................................................ 93,493
2006........................................................ 86,289
2007........................................................ 73,223
2008........................................................ 63,427
2009........................................................ 51,507
Thereafter.................................................. $106,943
</TABLE>
During 1999, the Company acquired 7 residential care facilities for the
elderly in 1 transaction for an aggregate investment of approximately
$2,304,000. During 1999, the Company provided new construction financing of
approximately $96,408,000. Construction of 19 assisted living facilities was
completed in 1999, in which the Company's total aggregate investment was
$141,201,000; $60,485,000 of this amount was a current year investment
included in the new construction financing amount above. Upon acquisition or
completion of construction, as applicable, the facilities were concurrently
leased under terms generally similar to the Company's existing leases. The
Company also funded approximately $11,024,000 in capital improvements at
certain facilities in accordance with certain existing lease provisions. Such
capital improvements will result in an increase in the minimum rents earned by
the Company on these facilities.
During 1999, the Company disposed of 5 skilled nursing facilities, 2
assisted living facilities, 21 residential care facilities for the elderly and
2 medical clinics in 27 separate transactions for aggregate proceeds of
approximately $20,272,000. The Company recognized an aggregate loss of
$335,000 related to the disposal of these facilities. The Company has deferred
recognition of additional payments received totaling approximately $4,109,000
related to four facilities pending resolution of renewal negotiations of the
master lease relating to such facilities.
22
<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, 1999:
<TABLE>
<CAPTION>
Notes
Buildings 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>
Skilled Nursing
Facilities:
Arizona............... 1 $ 650 $ 2,890 $ 3,540 $ 810 $ --
Arkansas.............. 10 2,900 37,130 40,030 3,579 2,220
California............ 8 7,053 19,428 26,481 4,801 --
Connecticut........... 2 810 5,382 6,192 1,325 --
Florida............... 11 4,712 29,595 34,307 7,036 --
Georgia............... 2 1,363 9,657 11,020 1,227 --
Idaho................. 1 15 777 792 253 --
Illinois.............. 2 157 5,392 5,549 1,513 --
Indiana............... 11 2,044 34,372 36,416 8,191 --
Kansas................ 10 767 13,212 13,979 2,861 --
Maryland.............. 4 845 21,212 22,057 8,069 --
Massachusetts......... 17 7,488 66,350 73,838 9,139 --
Minnesota............. 10 2,559 35,318 37,877 14,467 --
Mississippi........... 1 750 3,520 4,270 126 --
Missouri.............. 1 51 2,689 2,740 1,076 --
Nevada................ 1 740 3,294 4,034 679 --
New Jersey............ 1 360 6,448 6,808 3,740 --
North Carolina........ 1 116 2,244 2,360 898 --
Ohio.................. 6 1,316 28,235 29,551 8,412 --
Oklahoma.............. 3 98 3,841 3,939 1,243 --
Oregon................ 1 100 1,115 1,215 496 --
Tennessee............. 10 2,354 33,152 35,506 4,946 --
Texas................. 25 4,757 50,772 55,529 12,550 --
Virginia.............. 4 1,036 17,532 18,568 7,015 --
Washington............ 7 2,973 26,340 29,313 3,636 --
Wisconsin............. 9 1,621 19,548 21,169 7,500 --
--- ------- -------- -------- -------- -------
Subtotals........... 159 47,635 479,445 527,080 115,588 2,220
--- ------- -------- -------- -------- -------
Continuing Care Retirement Communities:
California............ 1 1,600 10,827 12,427 1,415 --
Colorado.............. 1 400 2,715 3,115 520 --
Georgia............... 1 723 10,769 11,492 295 --
Kansas................ 1 687 12,517 13,204 842 2,600
Massachusetts......... 1 1,351 12,538 13,889 521 --
Texas................. 2 2,681 34,468 37,149 1,822 --
Wisconsin............. 2 11,057 53,294 64,351 3,533 24,518
--- ------- -------- -------- -------- -------
Subtotals........... 9 18,499 137,128 155,627 8,948 27,118
--- ------- -------- -------- -------- -------
</TABLE>
23
<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)
Assisted Living Facilities:
<S> <C> <C> <C> <C> <C> <C>
Alabama.................. 2 $ 1,681 $ 4,272 $ 5,953 $ 373 $ --
Arizona.................. 2 1,024 6,844 7,868 562 --
Arkansas................. 1 182 1,479 1,661 67 --
California............... 13 15,105 64,473 79,578 7,901 --
Colorado................. 5 2,861 29,847 32,708 2,404 --
Delaware................. 1 345 4,947 5,292 90 --
Florida.................. 19 10,839 73,030 83,869 3,765 --
Idaho.................... 1 544 11,256 11,800 973 --
Illinois................. 1 603 10,473 11,076 786 --
Indiana.................. 1 805 3,851 4,656 160 --
Kansas................... 4 1,885 11,585 13,470 593 --
Kentucky................. 1 110 2,547 2,657 134 --
Louisiana................ 1 831 6,521 7,352 24 --
Maryland................. 1 533 3,785 4,318 47 --
Massachusetts............ 2 3,463 14,015 17,478 519 --
Michigan................. 1 300 7,005 7,305 960 --
Missouri................. 1 414 2,115 2,529 116 --
Nevada................... 2 1,219 12,397 13,616 656 6,764
New Jersey............... 1 655 3,430 4,085 107 --
North Carolina........... 1 385 2,531 2,916 111 --
Ohio..................... 11 3,623 33,575 37,198 1,729 --
Oklahoma................. 3 745 7,355 8,100 1,029 --
Oregon................... 6 2,078 26,753 28,831 2,911 8,957
Pennsylvania............. 2 1,066 11,813 12,879 251 --
Rhode Island............. 1 1,200 8,801 10,001 55 --
South Carolina........... 4 779 10,261 11,040 359 --
Tennessee................ 5 2,664 19,584 22,248 658 --
Texas.................... 16 7,283 68,253 75,536 2,961 --
Washington............... 4 1,841 21,093 22,934 1,439 --
West Virginia............ 1 705 4,475 5,180 26 --
Wisconsin................ 2 4,843 24,219 29,062 1,410 18,989
--- -------- ---------- ---------- -------- -------
Subtotals.............. 116 70,611 512,585 583,196 33,176 34,710
--- -------- ---------- ---------- -------- -------
Residential Care Facilities
for the Elderly:
California............... 3 101 416 517 80 --
--- -------- ---------- ---------- -------- -------
Rehabilitation Hospitals:
Arizona.................. 2 1,517 15,309 16,826 3,480 --
--- -------- ---------- ---------- -------- -------
Medical Clinic:............
Alabama.................. 1 248 2,185 2,433 1,399 --
--- -------- ---------- ---------- -------- -------
Construction In Progress... -- 8,101 37,593 45,694 -- --
--- -------- ---------- ---------- -------- -------
Total Owned Facilities..... 290 $146,712 $1,184,661 $1,331,373 $162,671 $64,048
=== ======== ========== ========== ======== =======
</TABLE>
- --------
(1) Also represents the approximate aggregate cost for Federal income tax
purposes.
24
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Mortgage Loans Receivable
During 1999, the Company provided 4 mortgage loans secured by 4 parcels of
land in the aggregate amount of $4,698,000. In addition, the Company funded an
additional $313,000 on existing mortgage loans. Such additional amounts funded
will result in an increase in interest income earned by the Company. At
December 31, 1999, the Company had 37 mortgage loans receivable secured by 38
skilled nursing facilities, 8 assisted living facilities, 5 continuing care
retirement communities and 4 parcels of land. The loans have an aggregate
principal balance of approximately $210,297,000 and are reflected in the
Company's financial statements net of an aggregate discount of approximately
$6,935,000. The principal balances of mortgage loans receivable as of December
31, 1999 mature approximately as follows: $2,802,000 in 2000, $2,588,000 in
2001, $2,787,000 in 2002, $6,161,000 in 2003, $7,294,000 in 2004 and
$188,665,000 thereafter.
The following table lists the Company's mortgage loans receivable at
December 31, 1999:
<TABLE>
<CAPTION>
Final Estimated Original Face Carrying
Number Interest Maturity Balloon Amount of Amount of
Location of Facilities of Facilities Rate Date Payment(1) Mortgages Mortgages(2)
---------------------- ------------- -------- -------- ---------- ------------- ------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Skilled Nursing
Facilities:
Arkansas.............. 3 10.00% 12/06 $4,946 $ 5,500 $ 5,101
California............ 1 10.00% 05/25 1,489 8,200 8,120
California............ 2 9.50% 03/09 5,336 7,841 7,277
Connecticut........... 2 10.00% 06/22 -- 8,862 5,801
Florida............... -- 10.95% 07/03 -- 4,400 766
Florida............... 1 11.25% 07/06 4,400 4,400 4,400
Illinois.............. 1 9.00% 01/24 -- 9,500 8,263
Indiana............... 1 10.95% 07/03 -- 785 422
Kansas................ 1 9.25% 09/03 1,169 1,550 1,229
Louisiana............. 1 10.89% 04/15 2,407 3,850 3,796
Maryland.............. 1 10.90% 06/21 -- 7,800 7,497
Massachusetts......... 1 8.75% 02/24 -- 9,000 7,489
Michigan.............. 3 12.61% 12/06 6,904 7,817 6,988
Michigan.............. 2 12.66% 01/05 2,506 3,000 2,599
Michigan.............. 1 11.70% 01/05 1,501 1,800 1,605
Missouri.............. 7 11.14% 08/11 17,725 17,725 17,725
South Dakota.......... 1 10.55% 05/05 -- 4,275 734
Tennessee............. 1 10.22% 01/07 8,550 8,550 8,550
Texas................. 1 12.00% 03/08 -- 1,460 915
Texas................. 1 9.50% 09/13 5,760 5,760 5,760
Virginia.............. 1 10.50% 04/13 10,192 16,250 15,847
Washington............ 4 11.00% 10/19 112 6,000 5,687
Wisconsin............. 1 10.55% 05/05 -- 1,350 473
------ ------- -------
Subtotals........... 38 72,997 145,675 127,044
------ ------- -------
</TABLE>
25
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Final Estimated Original Face Carrying
Number Interest Maturity Balloon Amount of Amount of
Location of Facilities of Facilities Rate Date Payment(1) Mortgages Mortgages(2)
---------------------- ------------- -------- -------- ---------- ------------- ------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assisted Living
Facilities:
Alabama............... -- 9.00% 06/04 $ 710 $ 710 $ 710
Florida............... 1 10.79% 11/06 5,500 5,500 5,500
Florida............... 2 10.31% 09/20 -- 7,230 7,230
Florida............... -- 9.00% 04/04 1,013 1,013 1,013
Michigan.............. -- 9.00% 07/04 1,675 1,675 1,675
North Carolina........ 2 10.44% 05/07 2,841 2,841 2,950
Pennsylvania.......... -- 9.00% 06/04 1,300 1,300 1,300
Pennsylvania.......... 1 8.94% 09/08 2,900 2,900 2,900
South Carolina........ 1 8.94% 09/08 2,955 2,955 2,955
Washington............ 1 9.95% 12/15 6,403 6,557 6,557
-------- -------- --------
Subtotals........... 8 25,297 32,681 32,790
-------- -------- --------
Continuing Care Retirement Communities:
California............ 1 9.50% 03/09 2,831 4,159 3,861
Florida............... 1 10.00% 06/09 14,200 14,200 14,200
Massachusetts......... 1 9.52% 06/23 -- 12,350 12,170
Oklahoma.............. 1 9.55% 03/24 2,250 11,200 10,297
Tennessee............. 1 10.40% 02/07 3,000 3,000 3,000
-------- -------- --------
Subtotals........... 5 22,281 44,909 43,528
-------- -------- --------
Total................... 51 $120,575 $223,265 $203,362
======== ======== ========
</TABLE>
- --------
(1) Most loans require monthly principal and interest payments at level
amounts over life to maturity. Some loans have interest rates which
periodically adjust, but cannot decrease, which results in 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) Also represents the approximate aggregate cost for Federal income tax
purposes.
The following table summarizes the changes in mortgage loans receivable
during 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at January 1,.......................... $206,613 $199,819 $160,464
New mortgage loans........................... 5,011 18,711 50,134
Accretion of discount on loans............... 1,217 1,214 1,829
Reclassification of loans to leases.......... (7,300) (3,500) --
Collection of principal...................... (2,179) (9,631) (12,608)
-------- -------- --------
Balance at December 31,........................ $203,362 $206,613 $199,819
======== ======== ========
</TABLE>
26
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Bank Borrowings
The Company has a $100,000,000 unsecured credit agreement with certain banks
which matures on March 31, 2002. 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 (8.5% at December 31, 1999) or LIBOR plus
70 basis points (6.575% at December 31, 1999). The Company pays a facility fee
of .3% per annum on the total commitment under the agreement.
Under covenants contained in the credit agreement, the Company is required
to maintain, among other things: (i) a minimum net worth of $550,000,000; (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 2.5 to 1.0;
and (iii) a ratio of total liabilities to net worth of not more than 1.5 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, 1999 of approximately
$111,374,000. The principal balances of the notes and bonds payable as of
December 31, 1999 mature approximately as follows: $1,078,000 in 2000,
$1,141,000 in 2001, $1,217,000 in 2002, $1,292,000 in 2003, $1,389,000 in
2004, and $57,931,000 thereafter.
8. Senior Unsecured Notes Due 2000-2038
During 1999, the Company issued $112,750,000 in aggregate principal amount
of medium term notes. The aggregate principal amount of Senior Notes
outstanding at December 31, 1999 was $657,900,000. The weighted average
interest rate on the Senior Notes was 7.5% and the weighted average maturity
was 13.8 years. The principal balances of the Senior Notes as of December 31,
1999 mature approximately as follows: $30,000,000 in 2000, $78,150,000 in
2001, $50,000,000 in 2002, $66,000,000 in 2003, $67,750,000 in 2004 and
$366,000,000 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. There
are $41,500,000 of medium term notes due in 2028 which may be put back to the
Company at their face amount at the option of the holder on November 20th of
any of the following years: 2003, 2008, 2013, 2018, or 2023. There are
$40,000,000 of medium term notes due in 2038 which may be put back to the
Company at their face amount at the option of the holder on July 7th of any of
the following years: 2003, 2008, 2013, 2018, 2023, or 2028.
9. Convertible Debentures
During 1993, the Company issued $65,000,000 of 6.25% unsecured convertible
debentures due January 1, 1999. The debentures were 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 1999, $8,000 of such debentures converted
into 356 shares of common stock and the remaining debentures, totaling
$57,423,000, were repaid. During 1998, $7,081,000 of such debentures converted
into 315,921 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
27
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 began accounting for
the Plan under SFAS No. 123 Accounting for Stock-Based Compensation during
1999 for options granted in 1999. Prior to 1999, the Company accounted for the
Plan under Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees. Had compensation cost for the Plan been determined
consistent with SFAS No. 123 Accounting for Stock-Based Compensation for the
years prior to 1999, the Company's net income and net income per share in
1999, 1998 and 1997 would have been the following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income available to common
stockholders:
As reported......................... $63,136,000 $62,071,000 $61,855,000
Pro forma........................... 62,977,000 61,840,000 61,712,000
Basic/diluted net income per share:
As reported......................... $ 1.37 $ 1.39 $ 1.47
Pro forma........................... 1.36 1.39 1.46
</TABLE>
28
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Because the pro forma calculation reflects only amounts attributable to
options granted since January 1, 1995, and the Company adopted SFAS No. 123
during 1999, future pro forma affects will decrease as the prior period
options fully amortize. A summary of the status of the Plan at December 31,
1999, 1998 and 1997 and changes during the years then ended are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
Wtd Avg Wtd Avg Wtd Avg
Ex Ex Ex
Shares Price Shares Price Shares Price
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at
beginning of year.... 279,000 $ 23.42 179,000 $ 21.89 89,000 $ 20.78
Granted............... 125,000 20.56 100,000 26.14 90,000 23.00
Exercised............. -- -- -- -- -- --
Forfeited............. -- -- -- -- -- --
Expired............... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Outstanding at end of
year................. 404,000 22.53 279,000 23.42 179,000 21.89
======= ======= ======= ======= ======= =======
Exercisable at end of
year................. 182,327 $ 22.50 89,328 $ 21.52 29,667 $ 20.78
Weighted average fair
value of options
granted.............. $ 1.04 $ 2.69 $ 2.14
Restricted Stock:
Outstanding at
beginning of year.... 73,400 94,900 109,100
Awarded............... 10,000 12,000 10,000
Vested................ (30,400) (33,500) (24,200)
Forfeited............. -- -- --
------- ------- -------
Outstanding at end of
year................. 53,000 73,400 94,900
======= ======= =======
Weighted average fair
value of restricted
stock awarded........ $20.56 $26.12 $23.19
</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, 1999 have a weighted average contractual life of 8 years.
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>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Risk free rate of return.............................. 5.18% 6.30% 6.30%
Dividend yield........................................ 8.75% 6.43% 6.78%
Option term........................................... 10 10 10
Volatility............................................ 18.96% 16.45% 16.45%
</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.
Subsequent to 1995, only non-employee directors receive restricted stock
awards. 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 1999, 1998 and 1997 related to restricted stock awards was
approximately $325,000, $440,000 and $368,000, respectively.
29
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Awards of dividend equivalents accompany the 1999, 1998 and 1997 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 of the Board of
Directors. 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 select financial measures compared to peer companies, 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. SFAS No. 123 provides that payments related to the dividend
equivalents are treated as dividends.
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>
12/31/99 12/31/98
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................... $684,000 $723,000
======== ========
Accumulated benefit obligation.......................... $695,000 $730,000
======== ========
Projected benefit obligation............................ $764,000 $814,000
Unrecognized prior service cost......................... (47,000) (74,000)
Unrecognized net gain................................... 264,000 163,000
-------- --------
Accrued pension cost................................... $981,000 $903,000
======== ========
</TABLE>
<TABLE>
<CAPTION>
Net pension cost for the year included the
following components:
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current service cost.......................... $ 54,000 $ 43,000 $ 47,000
Interest cost................................. 53,000 61,000 58,000
Amortization of prior service cost............ 19,000 27,000 27,000
-------- -------- --------
Net periodic pension cost.................... $126,000 $131,000 $132,000
======== ======== ========
</TABLE>
Discount rates of 6.75%, 7.0% and 7.5% in 1999, 1998 and 1997, 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 Alterra Healthcare Corporation and Beverly Enterprises,
Inc.
As of December 31, 1999, 53 of the owned facilities are leased to and
operated by subsidiaries of Alterra Healthcare Corporation ("Alterra").
Additionally, Alterra is the borrower on one of the Company's mortgage loans.
Revenues from Alterra were approximately $19,117,000, $17,114,000 and
$10,274,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
As of December 31, 1999, 47 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
30
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
unaffiliated with Beverly in connection with 24 properties operated by such
parties. Additionally, Beverly is the borrower on four of the Company's
mortgage loans. Revenues from Beverly were approximately $21,211,000,
$21,161,000 and $19,712,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
One of the directors of the Company is also an officer and director of
Beverly.
14. Impairment of Long-lived Assets
During 1998, the Company recorded a provision of $5,000,000 as a reduction
in the value of the Company's investment in three medical clinics constructed
for and leased to a company that declared bankruptcy. The fair value of the
medical clinics was determined based on discounted estimated future cash
flows. During 1999, the Company disposed of two of the medical clinics and
continues to look for another party to whom it may lease or sell the remaining
facility.
15. Dividends
Dividend payments by the Company to the common stockholders were
characterized in the following manner for tax purposes:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ------
<S> <C> <C> <C>
Ordinary income........................................... $1.30 $1.63 $1.505
Capital gain.............................................. .10 .05 .055
Return of capital......................................... .40 -- --
----- ----- ------
Total dividends paid.................................... $1.80 $1.68 $1.560
===== ===== ======
</TABLE>
16. 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>
1999:
Revenues.................... $39,309 $40,871 $41,525 $42,160
New income available to
common stockholders........ 15,811 15,305 15,775 16,246
Basic/diluted net income per
share...................... .34 .33 .34 .35
Dividends per share......... .45 .45 .45 .45
1998:
Revenues.................... $33,158 $34,491 $36,625 $38,310
Net income available to
common stockholders........ 17,971 16,227 16,407 11,467
Basic/diluted net income per
share...................... .42 .37 .37 .25
Dividends per share......... .42 .42 .42 .42
</TABLE>
17. 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.
31
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 discounting future
cash flows utilizing current rates offered to the Company for debt of the same
type and remaining maturity.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(In millions)
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 16 $ 16 $ 16 $ 16
Mortgage loans receivable...................... 203 190 207 212
Long-term debt................................. 797 706 709 694
</TABLE>
32
<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 20, 2000. 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 20, 2000
33
<PAGE>
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Gross Amount at which Carried at
Costs Close of Period(1)
Initial Cost Capitalized --------------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Skilled Nursing Facilities:
Benton............... AR $ 4,532 $ 4 $ 685 $ 4,536 $ 5,221 $ 205 1992 1998
Bryant............... AR 4,693 4 320 4,697 5,017 212 1989 1998
Hot Springs.......... AR 2,320 0 54 2,320 2,374 890 1972 1986
Jacksonville......... AR 3,453 0 155 3,453 3,608 1,323 1962 1986
Lake Village......... AR 3,872 15 261 3,887 4,148 154 1997 1998
Monticello........... AR 3,244 8 300 3,252 3,552 129 1993 1998
Morrilton............ AR 5,092 2 308 5,094 5,402 202 1996 1998
Morrilton............ AR 3,635 2 250 3,637 3,887 164 1988 1998
Wilmot............... AR 2,217 20 240 2,237 2,477 118 1964 1998
Wynne (3)............ AR 4,015 2 327 4,017 4,344 182 1990 1998
Scottsdale........... AZ 2,790 100 650 2,890 3,540 810 1963 1991
Chowcilla............ CA 1,119 0 109 1,119 1,228 343 1964 1987
Gilroy............... CA 1,892 0 714 1,892 2,606 520 1968 1991
Hayward.............. CA 1,222 221 795 1,443 2,238 381 1968 1991
Orange............... CA 5,059 0 1,141 5,059 6,200 938 1987 1992
Pomona............... CA 1,247 0 365 1,247 1,612 499 1963 1985
San Diego............ CA 4,925 0 842 4,925 5,767 1,163 1965 1992
San Jose............. CA 1,136 571 1,595 1,707 3,302 429 1968 1991
Santa Cruz........... CA 1,596 440 1,492 2,036 3,528 528 1964 1991
Bloomfield........... CT 2,827 0 670 2,827 3,497 494 1967 1994
Torrington........... CT 2,555 0 140 2,555 2,695 831 1969 1987
Dania................ FL 1,962 102 178 2,064 2,242 38 1970 1997
Ft. Pierce........... FL 2,758 0 125 2,758 2,883 1,104 1965 1985
Jacksonville......... FL 2,787 0 498 2,787 3,285 317 1965 1996
Jacksonville......... FL 1,853 0 161 1,853 2,014 571 1965 1987
Jacksonville......... FL 1,759 0 1,503 1,759 3,262 114 1997 1997
Lakeland............. FL 5,029 0 1,000 5,029 6,029 880 1982 1994
Live Oak............. FL 3,217 0 50 3,217 3,267 1,233 1983 1986
Maitland............. FL 3,327 0 209 3,327 3,536 1,275 1983 1986
Pensacola............ FL 1,833 0 77 1,833 1,910 573 1969 1987
Tampa................ FL 2,726 0 563 2,726 3,289 892 1971 1986
Tampa................ FL 2,053 189 348 2,242 2,590 39 1970 1997
Flowery Branch....... GA 3,115 0 562 3,115 3,677 61 1970 1997
Lawrenceville........ GA 3,993 2,549 801 6,542 7,343 1,166 1988 1991
Buhl................. ID 777 0 15 777 792 253 1913 1986
LaSalle.............. IL 2,703 0 127 2,703 2,830 758 1975 1991
Litchfield........... IL 2,689 0 30 2,689 2,719 755 1972 1991
Brookville........... IN 4,120 0 80 4,120 4,200 738 1987 1992
Evansville........... IN 5,324 0 280 5,324 5,604 1,494 1968 1991
Gas City............. IN 3,082 0 147 3,082 3,229 308 1976 1996
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at Close of
Costs Period(1)
Initial Cost Capitalized ---------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- ------- ------------ ------ ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ligonier................ IN $1,669 $ 0 $ 54 $1,669 $1,723 $ 167 1976 1997
Muncie.................. IN 1,141 1,009 983 2,150 3,133 119 1989 1997
Muncie.................. IN 888 0 109 888 997 89 1975 1997
New Castle.............. IN 5,173 0 43 5,173 5,216 1,451 1972 1991
Petersburg.............. IN 2,352 0 33 2,352 2,385 901 1968 1986
Richmond................ IN 2,519 0 114 2,519 2,633 966 1974 1986
Rochester............... IN 4,055 250 161 4,305 4,466 1,175 1969 1991
Wabash.................. IN 2,790 0 40 2,790 2,830 783 1974 1991
Belleville.............. KS 1,887 0 213 1,887 2,100 425 1977 1993
Colby................... KS 599 0 50 599 649 197 1974 1986
Derby................... KS 2,482 0 133 2,482 2,615 641 1978 1992
Hiwatha................. KS 788 0 150 788 938 28 1974 1998
Hutchinson.............. KS 1,855 161 75 2,016 2,091 391 1964 1994
Kensington.............. KS 639 0 6 639 645 245 1965 1986
Oakley.................. KS 414 0 7 414 421 136 1964 1986
Onaga................... KS 652 0 6 652 658 250 1959 1986
Salina.................. KS 2,463 135 27 2,598 2,625 507 1981 1994
Topeka.................. KS 1,137 0 100 1,137 1,237 41 1973 1998
Amesbury................ MA 4,241 607 229 4,848 5,077 373 1971 1997
Beverly................. MA 3,748 0 392 3,748 4,140 94 1998 1998
Brighton................ MA 2,212 0 300 2,212 2,512 387 1969 1994
Brockton................ MA 3,591 16 525 3,607 4,132 741 1971 1993
Buzzards Bay............ MA 4,815 0 415 4,815 5,230 1,926 1911 1985
Danvers................. MA 4,248 0 392 4,248 4,640 106 1998 1998
Danvers................. MA 3,211 1,144 327 4,355 4,682 312 1962 1997
Danvers................. MA 2,891 487 305 3,378 3,683 263 1969 1997
Haverhill............... MA 5,707 1,756 660 7,463 8,123 1,176 1973 1993
Haverhill............... MA 1,414 3 775 1,417 2,192 291 1962 1993
Melrose................. MA 4,029 186 432 4,215 4,647 224 1965 1998
N. Bellerica............ MA 3,137 300 800 3,437 4,237 636 1969 1994
New Bedford............. MA 2,357 0 93 2,357 2,450 943 1889 1985
Northborough............ MA 2,509 387 300 2,896 3,196 112 1969 1998
Saugus.................. MA 5,262 514 374 5,776 6,150 450 1967 1997
Sharon.................. MA 1,097 4,046 844 5,143 5,987 131 1975 1996
Wellesley............... MA 2,435 0 325 2,435 2,760 974 1962 1985
Clinton................. MD 5,017 0 400 5,017 5,417 1,589 1965 1987
Cumberland.............. MD 5,260 0 150 5,260 5,410 2,105 1968 1985
Hagerstown.............. MD 4,140 0 215 4,140 4,355 1,656 1972 1985
Westminster............. MD 6,795 0 80 6,795 6,875 2,719 1974 1985
Duluth.................. MN 7,047 0 1,014 7,047 8,061 529 1971 1997
Fairbault............... MN 2,785 0 90 2,785 2,875 1,391 1967 1985
Minneapolis............. MN 5,752 0 333 5,752 6,085 2,578 1973 1985
Minneapolis............. MN 4,184 0 436 4,184 4,620 1,834 1961 1985
Minneapolis............. MN 3,833 0 322 3,833 4,155 1,972 1962 1985
Minneapolis............. MN 2,934 187 141 3,121 3,262 2,892 1914 1985
Osseo................... MN 2,927 0 123 2,927 3,050 1,171 1957 1985
Ostrander............... MN 947 0 8 947 955 310 1968 1986
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at Close of
Costs Period(1)
Initial Cost Capitalized ---------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- ------- ------------ ------ ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Owatonna................ MN $2,140 $ 0 $ 59 $2,140 $2,199 $ 695 1965 1986
Willmar................. MN 2,582 0 33 2,582 2,615 1,095 1905 1985
Maryville............... MO 2,689 0 51 2,689 2,740 1,076 1979 1985
Columbus................ MS 3,520 0 750 3,520 4,270 126 1976 1998
Hendersonville.......... NC 2,244 0 116 2,244 2,360 898 1978 1985
Lakewood................ NJ 6,448 0 360 6,448 6,808 3,740 1966 1987
Sparks.................. NV 3,294 0 740 3,294 4,034 679 1988 1991
Alliance................ OH 1,862 0 83 1,862 1,945 522 1962 1991
Boardman................ OH 7,046 0 60 7,046 7,106 1,976 1962 1991
Columbus................ OH 4,333 0 343 4,333 4,676 1,449 1984 1988
Galion.................. OH 3,419 0 24 3,419 3,443 959 1967 1991
Warren.................. OH 7,489 0 450 7,489 7,939 2,100 1967 1991
Wash Ct. House.......... OH 4,086 0 356 4,086 4,442 1,406 1984 1988
Maud.................... OK 803 0 12 803 815 262 1960 1986
Sapulpa................. OK 2,243 0 68 2,243 2,311 729 1970 1986
Tonkawa................. OK 795 0 18 795 813 252 1962 1987
Portland................ OR 1,115 0 100 1,115 1,215 496 1954 1985
Brownsville............. TN 2,957 0 100 2,957 3,057 608 1970 1993
Celina.................. TN 853 0 150 853 1,003 175 1972 1993
Clarksville............. TN 3,479 0 350 3,479 3,829 715 1970 1993
Columbia................ TN 2,240 0 225 2,240 2,465 395 1984 1993
Decatur................. TN 3,330 0 193 3,330 3,523 143 1981 1998
Hohenwald............... TN 3,732 0 90 3,732 3,822 767 1975 1993
Jonesborough............ TN 2,551 3 65 2,554 2,619 525 1981 1983
Madison................. TN 6,415 0 1,120 6,415 7,535 229 1967 1998
Martin.................. TN 4,121 0 33 4,121 4,154 847 1977 1993
Selmer.................. TN 2,263 1,208 28 3,471 3,499 542 1985 1993
Baytown................. TX 2,388 0 90 2,388 2,478 552 1975 1990
Baytown................. TX 1,902 0 61 1,902 1,963 440 1966 1990
Bogota.................. TX 1,820 0 14 1,820 1,834 698 1963 1986
Center.................. TX 1,424 0 22 1,424 1,446 329 1970 1990
Eagle Lake.............. TX 1,833 0 25 1,833 1,858 424 1972 1990
El Paso................. TX 1,888 0 166 1,888 2,054 620 1980 1988
Garland................. TX 1,619 0 238 1,619 1,857 375 1970 1990
Gilmer.................. TX 3,033 0 248 3,033 3,281 116 1990 1998
Gilmer.................. TX 2,065 0 750 2,065 2,815 826 1970 1985
Gladewater.............. TX 2,018 0 125 2,018 2,143 443 1971 1993
Houston................. TX 4,155 0 408 4,155 4,563 923 1986 1993
Humble.................. TX 1,821 0 140 1,821 1,961 421 1973 1990
Huntsville.............. TX 1,930 0 135 1,930 2,065 446 1968 1990
Linden.................. TX 2,520 0 25 2,520 2,545 553 1968 1993
Marshall................ TX 865 0 19 865 884 385 1964 1986
McKinney................ TX 1,456 0 1,318 1,456 2,774 464 1967 1987
Mount Pleasant.......... TX 2,505 0 40 2,505 2,545 550 1970 1993
Nacogdoches............. TX 1,104 0 135 1,104 1,239 255 1973 1990
New Boston.............. TX 2,366 0 44 2,366 2,410 519 1966 1993
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which Carried
Costs at Close of Period(1)
Initial Cost Capitalized -----------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- ------- ------------ -------- ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Omaha................... TX $ 1,579 $ 0 $ 28 $ 1,579 $ 1,607 $ 347 1970 1993
San Antonio............. TX 2,033 0 32 2,033 2,065 470 1963 1990
San Antonio............. TX 1,636 0 221 1,636 1,857 378 1965 1990
Sherman................. TX 2,075 0 67 2,075 2,142 455 1971 1993
Texarkana............... TX 1,244 0 87 1,244 1,331 477 1983 1986
Waxahachie.............. TX 3,493 0 319 3,493 3,812 1,084 1976 1987
Annadale................ VA 7,752 0 487 7,752 8,239 3,102 1961 1985
Charlottsville.......... VA 4,620 0 362 4,620 4,982 1,849 1966 1985
Petersburg.............. VA 2,945 0 94 2,945 3,039 1,178 1977 1985
Petersburg.............. VA 2,215 0 93 2,215 2,308 886 1973 1985
Battleground............ WA 2,226 0 84 2,226 2,310 723 1963 1986
Kennewick............... WA 4,459 0 297 4,459 4,756 347 1959 1997
Moses Lake.............. WA 4,307 1,326 304 5,633 5,937 744 1972 1994
Moses Lake.............. WA 2,385 0 164 2,385 2,549 424 1988 1994
Seattle................. WA 5,752 0 1,223 5,752 6,975 791 1993 1994
Shelton................. WA 4,382 0 326 4,382 4,708 119 1998 1997
Tacoma.................. WA 1,503 0 575 1,503 2,078 488 1939 1987
Chilton................. WI 2,275 0 55 2,275 2,330 872 1963 1986
Florence................ WI 1,529 0 15 1,529 1,544 586 1970 1986
Green Bay............... WI 2,255 0 300 2,255 2,555 864 1968 1986
Oconto.................. WI 2,071 0 50 2,071 2,121 794 1972 1986
Sheboyan................ WI 1,697 0 219 1,697 1,916 647 1968 1986
Shorewood............... WI 5,744 0 706 5,744 6,450 2,188 1971 1986
St. Francis............. WI 535 0 80 535 615 204 1964 1986
Tomah................... WI 1,745 0 115 1,745 1,860 698 1974 1985
Wisconsin Dells......... WI 1,697 0 81 1,697 1,778 647 1972 1986
-------- ------- ------- -------- -------- --------
461,491 17,954 47,635 479,445 527,080 115,588
-------- ------- ------- -------- -------- --------
Assisted Living Facilities:
Decatur................. AL 1,825 0 1,484 1,825 3,309 169 1987 1996
Hanceville.............. AL 2,447 0 197 2,447 2,644 204 1996 1996
Benton.................. AR 1,479 0 182 1,479 1,661 67 1988 1998
Chandler................ AZ 2,753 0 505 2,753 3,258 97 1998 1998
Mesa.................... AZ 1,391 2,700 519 4,091 4,610 465 1985 1996
Capistrano.............. CA 6,344 235 700 6,579 7,279 746 1985 1995
Capistrano.............. CA 3,834 172 1,225 4,006 5,231 522 1985 1995
Carmichael.............. CA 7,929 755 1,500 8,684 10,184 1,300 1983 1995
Chula Vista............. CA 6,281 72 950 6,353 7,303 750 1989 1995
Encinitas............... CA 5,017 126 1,000 5,143 6,143 718 1984 1995
Mission Viejo........... CA 3,544 89 900 3,633 4,533 474 1985 1995
Novato.................. CA 3,658 403 2,500 4,061 6,561 549 1978 1995
Placentia............... CA 3,801 184 1,320 3,985 5,305 588 1983 1995
Rancho Cucamonga........ CA 4,156 269 610 4,425 5,035 565 1987 1995
San Dimas............... CA 3,577 225 1,700 3,802 5,502 505 1975 1995
San Jose................ CA 7,252 0 850 7,252 8,102 317 1998 1998
Santa Maria............. CA 2,649 118 1,500 2,767 4,267 381 1977 1995
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at Close of
Costs Period(1)
Initial Cost Capitalized ----------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- ------- ------------ ------- ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vista................... CA $ 3,701 $ 82 $ 350 $ 3,783 $ 4,133 $ 486 1980 1996
Aurora.................. CO 10,217 0 715 10,217 10,932 190 1999 1999
Aurora.................. CO 7,923 0 919 7,923 8,842 1,056 1983 1995
Boulder................. CO 4,811 0 833 4,811 5,644 481 1985 1995
Boulder................. CO 4,738 0 184 4,738 4,922 542 1992 1995
Brighton................ CO 2,158 0 210 2,158 2,368 135 1997 1997
Hockessin............... DE 4,947 0 345 4,947 5,292 90 1999 1999
Gainesville............. FL 2,699 0 356 2,699 3,055 163 1997 1997
Gainesville............. FL 3,313 0 310 3,313 3,623 83 1998 1998
Hudson.................. FL 8,139 550 1,665 8,689 10,354 927 1987 1996
Jacksonville............ FL 2,770 0 226 2,770 2,996 156 1997 1997
Jacksonville............ FL 2,376 0 366 2,376 2,742 163 1997 1997
LeHigh Acres............ FL 2,600 0 307 2,600 2,907 141 1997 1997
Naples.................. FL 10,844 0 1,140 10,844 11,984 222 1999 1999
Naples.................. FL 4,084 0 1,182 4,084 5,266 247 1997 1997
Palm Coast.............. FL 2,580 0 406 2,580 2,986 129 1997 1997
Panama City............. FL 2,659 0 353 2,659 3,012 94 1998 1998
Pensacola............... FL 4,486 0 408 4,486 4,894 64 1999 1999
Pensacola............... FL 1,580 400 170 1,980 2,150 219 1979 1996
Port Charlotte.......... FL 2,655 0 245 2,655 2,900 155 1997 1997
Punta Gorda............. FL 2,691 0 210 2,691 2,901 163 1997 1997
Rotunda................. FL 2,628 0 267 2,628 2,895 131 1997 1997
St. Petersburg.......... FL 2,396 985 2,000 3,381 5,381 328 1993 1995
Tallahassee............. FL 7,594 0 696 7,594 8,290 79 1999 1999
Travares................ FL 2,466 0 156 2.466 2,622 164 1997 1997
Venice.................. FL 2,535 0 376 2,535 2,911 137 1997 1997
Boise................... ID 5,586 5,670 544 11,256 11,800 973 1978 1995
Oak Park................ IL 10,473 0 603 10,473 11,076 786 1993 1997
Carmel.................. IN 3,851 0 805 3,851 4,656 160 1998 1998
Lawrence................ KS 3,822 0 932 3,822 4,754 159 1995 1998
Salina.................. KS 2,887 0 329 2,887 3,216 138 1989 1998
Salina.................. KS 1,921 0 200 1,921 2,121 132 1996 1997
Topeka.................. KS 2,955 0 424 2,955 3,379 164 1986 1998
Murray.................. KY 2,547 0 110 2,547 2,657 134 1998 1998
Mandeville.............. LA 6,521 0 831 6,521 7,352 24 1999 1999
Centerville............. MA 4,766 0 1,705 4,766 6,471 179 1998 1998
Pittsfield.............. MA 9,052 197 1,758 9,249 11,007 340 1998 1998
Hagerstown.............. MD 3,785 0 533 3,785 4,318 47 1999 1999
Riverview............... MI 6,939 66 300 7,005 7,305 960 1987 1995
Jackson................. MO 2,115 0 414 2,115 2,529 116 1990 1998
Hickory................. NC 2,531 0 385 2,531 2,916 111 1997 1998
Deptford................ NJ 3,430 0 655 3,430 4,085 107 1998 1998
Sparks (4).............. NV 7,278 0 714 7,278 7,992 364 1993 1997
Sparks (5).............. NV 5,119 0 505 5,119 5624 292 1991 1997
Dayton.................. OH 1,916 0 270 1,916 2,186 100 1997 1997
Dublin.................. OH 5,793 0 356 5,793 6,149 205 1998 1998
Fairfield............... OH 1,917 0 270 1,917 2,187 116 1997 1997
Greenville.............. OH 2,311 0 215 2,311 2,526 140 1997 1997
Hilliard................ OH 7,056 0 652 7,056 7,708 115 1999 1999
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which Carried at
Costs Close of Period(1)
Initial Cost Capitalized --------------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lancaster............... OH $ 2,084 $ 0 $ 350 $ 2,084 $ 2,434 $ 69 1998 1998
Newark.................. OH 2,047 0 225 2,047 2,272 128 1997 1997
Sharonville............. OH 4,013 37 225 4,050 4,275 555 1987 1995
Springdale.............. OH 2,092 0 440 2,092 2,532 118 1997 1997
Urbana.................. OH 2,118 0 150 2,118 2,268 115 1997 1997
Youngstown.............. OH 2,191 0 470 2,191 2,661 68 1998 1998
Broken Arrow............ OK 1,445 0 178 1,445 1,623 109 1996 1997
Oklahoma City........... OK 3,897 482 392 4,379 4,771 805 1982 1994
Oklahoma City........... OK 1,531 0 175 1,531 1,706 115 1996 1997
Albany.................. OR 3,657 4,531 511 8,188 8,699 861 1968 1995
Albany (6).............. OR 2,465 0 92 2,465 2,557 329 1984 1995
Forest Grove (7)........ OR 3,152 0 401 3,152 3,553 360 1994 1995
Gresham................. OR 4,647 0 0 4,647 4,647 531 1988 1995
McMinnville (8)......... OR 3,976 0 760 3,976 4,736 398 1989 1995
Medford................. OR 4,325 0 314 4,325 4,639 432 1990 1995
Bridgeville............. PA 8,023 0 653 8,023 8,676 151 1999 1999
York.................... PA 3,790 0 413 3,790 4,203 100 1999 1999
Portsmouth.............. RI 8,801 0 1,200 8,801 10,001 55 1999 1999
Clinton................. SC 2,560 0 87 2,560 2,647 80 1997 1998
Columbia................ SC 2,664 0 210 2,664 2,874 116 1997 1998
Greenwood............... SC 2,648 0 107 2,648 2,755 83 1998 1998
Greer................... SC 2,389 0 375 2,389 2,764 80 1998 1998
Brentwood............... TN 2,302 0 600 2,302 2,902 264 1995 1995
Bristol................. TN 4,130 0 406 4,130 4536 95 1999 1999
Germantown.............. TN 4,623 0 755 4,623 5,378 154 1998 1998
Johnson City............ TN 4,289 0 404 4,289 4,693 60 1999 1999
Murfreesboro............ TN 4,240 0 499 4,240 4,739 85 1999 1999
Corsicana............... TX 1,494 0 117 1,494 1,611 115 1996 1996
Dallas.................. TX 3,500 718 308 4,218 4,526 764 1982 1994
Denton.................. TX 1,425 0 185 1,425 1,610 110 1996 1996
Ennis................... TX 1,409 0 119 1,409 1,528 109 1996 1996
Houston................. TX 8,992 0 985 8,992 9,977 168 1999 1999
Houston................. TX 7,232 0 1,089 7,232 8,321 120 1999 1999
Houston................. TX 7,194 0 1,235 7,194 8,429 270 1998 1998
Houston................. TX 7,101 0 1,089 7,101 8,190 132 1999 1999
Lakeway................. TX 10,941 0 579 10,941 11,520 241 1999 1999
Lewisville.............. TX 1,892 0 260 1,892 2,152 122 1997 1997
Mansfield............... TX 1,575 0 225 1,575 1,800 118 1996 1997
Paris................... TX 1,465 0 166 1,465 1,631 113 1996 1996
Pearland................ TX 7,892 0 493 7,892 8,385 296 1998 1998
Richland Hills.......... TX 2,211 0 65 2,211 2,276 56 1998 1998
Richland Hills.......... TX 1,616 0 223 1,616 1,839 121 1996 1997
Weatherford............. TX 1,596 0 145 1,596 1,741 106 1996 1997
Bellevue................ WA 4,467 0 766 4,467 5,233 158 1998 1998
Richland................ WA 6,052 118 172 6,170 6,342 699 1990 1995
Tacoma.................. WA 5,208 0 403 5,208 5,611 326 1997 1997
Yakima.................. WA 5,248 0 500 5,248 5,748 256 1998 1998
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which Carried at
Costs Close of Period(1)
Initial Cost Capitalized --------------------------------
to Building Subsequent Buildings Original
and to and Accum. Construction Date
Facility Type and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired
- -------------------------- ------------ ----------- -------- ------------ ---------- ------ ------------ --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Menomonee
Falls (9).......... WI $ 13,190 $ 0 $ 4,161 $ 13,190 $ 17,351 $ 848 1990 1997
West Allis (10)...... WI 8,117 2,912 682 11,029 11,711 562 1996 1997
Scott Depot.......... WV 4,475 0 705 4,475 5,180 26 1999 1999
---------- ------- -------- ---------- ---------- -------- ---- ----
490,489 22,096 70,611 512,585 583,196 33,176
---------- ------- -------- ---------- ---------- --------
CCRCs
Palm Desert.......... CA 9,097 1,730 1,600 10,827 12,427 1,415 1989 1994
Sterling............. CO 2,715 0 400 2,715 3,115 520 1979 1994
Lawrenceville........ GA 10,769 0 723 10,769 11,492 295 1988 1998
Andover (11)......... KS 12,517 0 687 12,517 13,204 842 1987 1997
Norton............... MA 8,272 4,266 1,351 12,538 13,889 521 1968 1996
College Station...... TX 6,008 10 833 6,018 6,851 213 1994 1998
Corpus Christi....... TX 14,929 13,521 1,848 28,450 30,298 1,609 1985 1997
Glendale (12)........ WI 22,905 0 3,824 22,905 26,729 1,420 1988 1997
Waukesha (13)........ WI 28,562 1,827 7,233 30,389 37,622 2,113 1973 1997
---------- ------- -------- ---------- ---------- --------
115,774 21,354 18,499 137,128 155,627 8,948
---------- ------- -------- ---------- ---------- --------
RCFE's
Murrietta............ CA 154 0 38 154 192 68 1990 1998
Murrietta............ CA 144 0 35 144 179 8 1990 1998
Murrietta............ CA 118 0 28 118 146 4 1988 1998
---------- ------- -------- ---------- ---------- --------
416 0 101 416 517 80
---------- ------- -------- ---------- ---------- --------
Rehab
Scottsdale........... AZ 5,874 0 242 5,874 6,116 1,701 1986 1988
Tucson............... AZ 9,435 0 1,275 9,435 10,710 1,779 1992 1992
---------- ------- -------- ---------- ---------- --------
15,309 0 1,517 15,309 16,826 3,480
---------- ------- -------- ---------- ---------- --------
Clinic
Heflin............... AL 2,100 85 248 2,185 2,433 1,399 1997 1997
---------- ------- -------- ---------- ---------- --------
Construction in Progress 37,593 0 8,101 37,593 45,694 0
---------- ------- -------- ---------- ---------- --------
GRAND TOTAL $1,123,172 $61,489 $146,712 $1,184,661 $1,331,373 $162,671
========== ======= ======== ========== ========== ========
</TABLE>
- -------
(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 $2,220,000 at
12/31/99.
(4) Real estate is security for notes payable in the aggregate of $3,147,000
at 12/31/99.
(5) Real estate is security for notes payable in the aggregate of $3,617,000
at 12/31/99.
(6) Real estate is security for notes payable in the aggregate of $2,070,000
at 12/31/99.
(7) Real estate is security for notes payable in the aggregate of $3,341,000
at 12/31/99.
(8) Real estate is security for notes payable in the aggregate of $3,546,000
at 12/31/99.
(9) Real estate is security for notes payable in the aggregate of $10,765,000
at 12/31/99.
(10)Real estate is security for notes payable in the aggregate of $8,224,000 at
12/31/99.
(11)Real estate is security for notes payable in the aggregate of $2,600,000 at
12/31/99.
(12)Real estate is security for notes payable in the aggregate of $13,015,000
at 12/31/99.
(13)Real estate is security for notes payable in the aggregate of $11,503,000
at 12/31/99.
40
<PAGE>
<TABLE>
<CAPTION>
Real
Estate Accumulated
Properties Depreciation
---------- ------------
(in thousands)
<S> <C> <C>
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
---------- --------
Acquisitions...................................... 261,702 26,193
Improvements...................................... 26,800 1,016
Reclassifications................................. 3,500 --
Impairment of long-lived assets................... (5,000) --
Sales............................................. (4,145) (970)
---------- --------
Balances at December 31, 1998....................... 1,243,388 133,316
---------- --------
Acquisitions...................................... 99,572 33,876
Improvements...................................... 11,100 1,381
Reclassifications................................. 7,300 --
Sales............................................. (29,987) (5,902)
---------- --------
Balances at December 31, 1999....................... $1,331,373 $162,671
---------- --------
</TABLE>
41
<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.
See Item 1 for details regarding executive officers. Details regarding
directors are incorporated herein by reference from the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on April 18,
2000, 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 18, 2000,
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 18, 2000,
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 18, 2000,
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, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
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
None.
42
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number 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.
3.3 Amended and Restated Bylaws of the Company, filed as Exhibit 3.1 to
the Company's Form 10-Q for the quarter ended September 30, 1998, 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>
43
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number 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, filed as Exhibit 10.6 to the Company's 10-K for the year
ended December 31, 1996, and incorporated herein by this reference.
10.6(a) Amended Stock Option Plan filed as Exhibit 10.1 to the Company's Form
10-Q for the quarter ended September 30, 1999, and incorporated
herein by this reference.
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 Amended and Restated Credit Agreement dated as of July 27, 1999
between the Company and Wells Fargo Bank National Association, Bank
of America, N.A., The Bank of New York and KBC Bank N.V. filed as
Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June
30, 1999, and incorporated herein by this reference.
10.11 Form of Indemnity Agreement between officers and directors of the
Company including John C. Argue, David R. Banks, Sam A. Brooks, Jr.,
William K. Doyle, Charles D. Miller and Jack D. Samuelson, R. Bruce
Andrews, Mark L. Desmond, Stephen J. Insoft, 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.
10.13 Employment agreement entered into by and between Nationwide Health
Properties, Inc. and R. Bruce Andrews dated as of February 25, 1998,
filed as Exhibit 10.13 to the Company's Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference.
10.14 Employment agreement entered into by and between Nationwide Health
Properties, Inc. and T. Andrew Stokes dated as of February 25, 1998,
filed as Exhibit 10.14 to the Company's Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference.
10.15 Employment agreement entered into by and between Nationwide Health
Properties, Inc. and Mark L. Desmond dated as of February 25, 1998,
filed as Exhibit 10.15 to the Company's Form 10-K for the year ended
December 31, 1998, 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>
44
<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.
/s/ R. Bruce Andrews
By: _________________________________
R. Bruce Andrews
President and Chief Executive
Officer
Dated: March 17, 2000
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
--------- ----- ----
<C> <S> <C>
/s/ Charles D. Miller Chairman and Director March 17, 2000
_______________________________
Charles D. Miller
/s/ R. Bruce Andrews President, Chief Executive March 17, 2000
_______________________________ Officer and Director
R. Bruce Andrews (Principal Executive
Officer)
/s/ Mark L. Desmond Senior Vice President and March 17, 2000
_______________________________ Chief Financial Officer
Mark L. Desmond (Principal Financial and
Accounting Officer)
/s/ John C. Argue Director March 17, 2000
_______________________________
John C. Argue
/s/ David R. Banks Director March 17, 2000
_______________________________
David R. Banks
/s/ William K. Doyle Director March 17, 2000
_______________________________
William K. Doyle
/s/ Jack D. Samuelson Director March 17, 2000
_______________________________
Jack D. Samuelson
</TABLE>
45
<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, 1998 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, 1999 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,
1999 1998
------------- ------------
<S> <C> <C>
Total current assets................................. $ 492,219 $ 695,970
Property and equipment, net.......................... 1,108,188 1,120,315
Total other assets................................... 369,665 344,226
---------- ----------
Total assets......................................... $1,970,072 $2,160,511
========== ==========
Total current liabilities............................ $ 345,194 $ 357,156
Long-term obligations................................ 776,276 878,270
Other liabilities and deferred items................. 174,696 148,879
Total stockholders' equity........................... 673,906 776,206
---------- ----------
Total liabilities and stockholders' equity........... $1,970,072 $2,160,511
========== ==========
</TABLE>
A-1-2
<PAGE>
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Nine months
ended Years ended
September 30, December 31,
------------- ----------------------
1999 1998 1997
------------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................. $1,907,038 $2,822,940 $3,230,300
Costs and expenses:
Operating and administrative............ 1,727,368 2,633,135 2,888,021
Interest................................ 54,029 65,938 82,713
Depreciation and amortization........... 74,511 93,722 107,060
Workforce reductions, asset impairments,
transaction costs and other unusual
items.................................. 199,043 69,443 44,000
Year 2000 remediation................... 10,672 9,719 --
Investigation costs..................... 3,404 1,865 --
---------- ---------- ----------
2,069,027 2,873,822 3,121,794
Income (loss) before provision for income
taxes and extraordinary charge........... (161,989) (50,882) 108,506
Provision for (benefit from) income
taxes.................................... (59,936) (25,936) 49,913
---------- ---------- ----------
Income (loss) before extraordinary charge
and cumulative effect of change in
accounting............................... (102,053) (24,946) 58,593
---------- ---------- ----------
Extraordinary charge, net of income
taxes.................................... -- (1,660) --
Cumulative effect of change in accounting,
net of income taxes...................... -- (4,415) --
---------- ---------- ----------
Net income (loss)..................... $ (102,053) $ (31,021) $ 58,593
========== ========== ==========
Income (loss) per share of common stock:
Basic:
Before extraordinary charge and
cumulative effect of change in
accounting............................ $ (1.00) $ (.24) $ .57
Extraordinary charge................... -- (.02) --
Cumulative effect of change in
accounting............................ -- (.04) --
---------- ---------- ----------
Net income per share.................. $ (1.00) $ (.30) $ .57
========== ========== ==========
Shares used to compute per share
amounts.............................. 102,490 103,762 102,060
========== ========== ==========
Diluted:
Before extraordinary charge and
cumulative effect of change in
accounting............................ $ (1.00) $ (.24) $ .57
Extraordinary change................... -- (.02) --
Cumulative effect of change in
accounting............................ -- (.04) --
---------- ---------- ----------
Net income per share.................. $ (1.00) $ (.30) $ .57
========== ========== ==========
Shares used to compute per share
amounts.............................. 102,490 103,762 103,422
========== ========== ==========
</TABLE>
A-1-3
<PAGE>
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months Years ended
Ended December 31,
September 30, ---------------------
1999 1998 1997
------------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................... $(102,053) $ (31,021) $ 58,593
--------- --------- ----------
Adjustments to reconcile net income to
net cash provided by operating
activities............................. 220,740 37,810 85,611
--------- --------- ----------
Net cash provided by operating
activities............................... 118,687 6,789 144,204
--------- --------- ----------
Net cash provided by (used for) investing
activities............................... (45,187) (230,586) 230,853
--------- --------- ----------
Net cash provided by (used for) financing
activities............................... (73,316) 135,845 (339,588)
--------- --------- ----------
Net increase (decrease) in cash and cash
equivalents.............................. 184 (87,952) 35,469
Cash and cash equivalents at beginning of
period................................... 17,278 105,230 69,761
--------- --------- ----------
Cash and cash equivalents at end of
period................................... $ 17,462 $ 17,278 $ 105,230
========= ========= ==========
</TABLE>
A-1-4
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
STATE OF
INCORPORATION OR
NAME ORGANIZATION
---- ----------------
<S> <C>
Nationwide Health Properties Finance Corporation............. Delaware
MLD Financial Capital Corporation............................ Delaware
MLD Wisconsin SNF, Inc. ..................................... Wisconsin
MLD Delaware Trust........................................... Delaware
MLD Properties, Inc. ........................................ Delaware
MLD Properties LLC........................................... Delaware
NH Texas Properties Limited Partnership...................... Texas
MLD Properties Limited Partnership........................... Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports 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, Registration Statement File No. 333-20589, and Registration
Statement File No. 333-70707.
/s/ ARTHUR ANDERSEN LLP
Orange County, California
March 17, 2000
1
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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0
100,000
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