<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-9028
----------------
NATIONWIDE HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-3997619
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
(Address of principal executive offices)
(949) 718-4400
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Shares of registrant's common stock, $.10 par value, outstanding at April 30,
2000--46,226,484.
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<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
March 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Part I--Financial Information
<C> <S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets....................... 2
Condensed Consolidated Statements of Operations............. 3
Condensed Consolidated Statements of Cash Flows............. 4
Notes to Condensed Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 12
</TABLE>
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Investments in real estate
Real estate properties:
Land.............................................. $ 144,979 $ 146,712
Buildings and improvements........................ 1,148,341 1,146,921
Construction in progress.......................... 24,138 37,740
---------- ----------
1,317,458 1,331,373
Less accumulated depreciation..................... (162,270) (162,671)
---------- ----------
1,155,188 1,168,702
Mortgage loans receivable, net...................... 198,663 203,362
---------- ----------
1,353,851 1,372,064
Cash and cash equivalents............................. 17,851 16,139
Receivables........................................... 6,174 7,614
Other assets.......................................... 45,436 34,239
---------- ----------
$1,423,312 $1,430,056
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Bank borrowings........................................ $ 66,000 $ 75,300
Senior notes due 2000-2038............................. 647,900 657,900
Notes and bonds payable................................ 63,964 64,048
Accounts payable and accrued liabilities............... 65,644 47,218
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized;
Issued and outstanding: 2000--1,000,000; 1999--
1,000,000,
stated at liquidation preference of $100 per share... 100,000 100,000
Common stock $.10 par value; 100,000,000 shares
authorized;
Issued and outstanding: 2000--46,226,484; 1999--
46,216,484.......................................... 4,623 4,622
Capital in excess of par value......................... 556,483 556,373
Cumulative net income.................................. 522,390 504,457
Cumulative dividends................................... (603,692) (579,862)
---------- ----------
Total stockholders' equity......................... 579,804 585,590
---------- ----------
$1,423,312 $1,430,056
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------
2000 1999
------- -------
(Unaudited)
<S> <C> <C>
Revenues:
Minimum rent............................................... $32,269 $29,396
Interest and other income.................................. 6,335 5,931
Additional rent and additional interest.................... 4,212 3,982
------- -------
42,816 39,309
Expenses:
Interest and amortization of deferred financing costs...... 14,560 11,497
Depreciation and non-cash charges.......................... 9,842 8,730
General and administrative................................. 1,497 1,352
------- -------
25,899 21,579
------- -------
Net income before gain on sale of properties................. 16,917 17,730
Gain on sale of properties................................... 1,016 --
------- -------
Net income................................................... 17,933 17,730
Preferred stock dividends.................................... (1,919) (1,919)
------- -------
Net income available to common stockholders.................. $16,014 $15,811
======= =======
Per share amounts:
Basic/diluted income from continuing operations available
to common stockholders.................................... $ .32 $ .34
======= =======
Basic/diluted net income available to common stockholders.. $ .35 $ .34
======= =======
Dividends paid per common share............................ $ .46 $ .45
======= =======
Weighted average shares outstanding.......................... 46,224 46,214
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-----------------
2000 1999
-------- -------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income................................................ $ 17,933 $17,730
Gain on sale of properties................................ (1,016) --
Depreciation and non-cash charges......................... 9,842 8,730
Amortization of deferred financing costs.................. 258 220
Net increase in other assets and liabilities.............. 11,939 18,887
-------- -------
Net cash provided by operating activities............... 38,956 45,567
Cash flow from investing activities:
Investment in real estate properties...................... (7,743) (50,123)
Disposition of real estate properties..................... 9,819 --
Investment in mortgage loans receivable................... (246) (96)
Principal payments on mortgage loans receivable........... 4,198 544
-------- -------
Net cash provided by (used in) investing activities..... 6,028 (49,675)
Cash flow from financing activities:
Bank borrowings........................................... 36,500 106,100
Repayment of bank borrowings.............................. (45,800) (86,600)
Issuance of senior unsecured debt......................... -- 63,750
Dividends paid............................................ (23,830) (22,717)
Repayments of senior unsecured debt....................... (10,000) --
Principal payments on convertible debentures, notes and
bonds.................................................... (103) (57,543)
Other, net................................................ (39) (622)
-------- -------
Net cash provided by (used in) financing activities..... (43,272) 2,368
-------- -------
Increase (decrease) in cash and cash equivalents............ 1,712 (1,740)
Cash and cash equivalents, beginning of period.............. 16,139 16,182
-------- -------
Cash and cash equivalents, end of period.................... $ 17,851 $14,442
======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month periods ended March 31, 2000 and 1999
pursuant to the rules and regulations of the Securities and Exchange
Commission. All such adjustments are of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although the
Company believes that the disclosures in the financial statements included
herein are adequate to make the information presented not misleading, these
condensed consolidated financial statements should be read in conjunction with
the Company's financial statements and the notes thereto included in the
Company's 1999 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The results of operations for the three-month periods
ended March 31, 2000 and 1999 are not necessarily indicative of the results for
a full year.
(ii) The Company invests in healthcare related real estate and, as of March
31, 2000, had investments in 333 facilities located in 37 states. The
facilities include 187 skilled nursing facilities, 126 assisted living
facilities, 14 continuing care retirement communities, 3 residential care
facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic.
The Company's facilities are operated by 59 different operators, including the
following publicly traded companies: Alterra Healthcare Corporation, American
Retirement Corporation, ARV Assisted Living, Inc., Balanced Care Corporation,
Beverly Enterprises, Inc., Harborside Healthcare Corporation, HEALTHSOUTH
Corporation, Integrated Health Services, Mariner Post-Acute Network and Sun
Healthcare Group, Inc. Of the operators of the facilities, only Alterra
Healthcare Corporation and Beverly Enterprises, Inc. account for more than 10%
of the Company's revenues. They each accounted for 12% of the Company's total
revenues for the three months ended March 31, 2000.
As of March 31, 2000, the Company had direct ownership of 149 skilled
nursing facilities, 118 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
Company's owned facilities are leased under "net" leases (the "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 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
the Leases covering 185 facilities are backed by irrevocable letters of credit
or security deposits that cover 1 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 March 31, 2000, 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. As of March 31, 2000, the
mortgage loans had a net book value of approximately $198,663,000 with
individual outstanding balances ranging from approximately $451,000 to
$15,823,000 and maturities ranging from 2001 to 2025.
5
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 31, 2000
(Unaudited)
(iii) Basic earnings per share is computed by dividing income from
continuing operations available to common stockholders by the weighted average
common shares outstanding. Income available to common stockholders is
calculated by deducting dividends declared on preferred stock from income from
continuing operations and net income. Diluted earnings per share includes the
effect of the potential shares outstanding: dilutive stock options.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
2000 1999
-------------- --------------
Income Shares Income Shares
------- ------ ------- ------
(In thousands)
<S> <C> <C> <C> <C>
Income before gain on sale of properties......... $16,917 $17,730
Less: preferred stock dividends.................. 1,919 1,919
------- -------
Amounts used to calculate Basic EPS.............. 14,998 46,224 15,811 46,214
Effect of dilutive securities:
Stock options.................................. -- -- -- --
------- ------ ------- ------
Amounts used to calculate Diluted EPS............ $14,998 46,224 $15,811 46,214
======= ====== ======= ======
</TABLE>
(iv) The Company qualifies as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended. The Company
intends to continue to qualify as such and therefore to distribute at least
ninety-five percent (95%) of its taxable income to its stockholders.
Accordingly, no provision has been made for federal income taxes.
(v) During the three months ended March 31, 2000, the Company has provided
new construction financing of approximately $7,689,000. The Company completed
construction of two assisted living facilities in 2000, in which the Company's
total aggregate investment was approximately $21,080,000; $3,340,000 of this
amount was a current year investment included in the new construction financing
amount above. Upon completion of construction, the facilities were concurrently
leased under terms generally similar to the Company's existing Leases. During
the three-month period ended March 31, 2000, the Company also funded
approximately $1,038,000 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 the three-month period ended March 31, 2000, the Company disposed of
four skilled nursing facilities in one transaction for aggregate proceeds of
approximately $9,400,000. The Company recognized an aggregate gain of
$1,016,000 related to the disposal of these facilities.
During the three months ended March 31, 2000, a $3,666,000 portion of one of
the mortgage loans securing one skilled nursing facility was repaid. In
addition, one skilled nursing facility was acquired by the Company under a
purchase option provision of the mortgage loan provided by the Company. The
facility was concurrently leased under terms generally similar to the Company's
existing Leases.
During the three-month period ended March 31, 2000, the Company repaid
$10,000,000 in aggregate principal amount of medium-term notes. The notes bore
interest at a fixed rate of 8.48%.
6
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 31, 2000
(Unaudited)
(vi) 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 for the
three months ended March 31, 2000 and 1999 was $608,000 and $1,478,000,
respectively.
(vii) During the three months ended March 31, 2000, and effective January 1,
2000, the Company negotiated a new lease and settlement with Beverly
Enterprises, Inc. ("Beverly") that incorporates 38 of their 47 leased
facilities, which were up for renewal at various dates from December 1998 to
December 2000. As a result of the renewal and settlement, 18 of the 38
facilities have been leased to Beverly for an initial five-year lease term. The
Company has also returned 5 facilities to Beverly, including 2 of the 38
facilities above and 3 other facilities that Beverly had previously subleased
to other operators. In addition, Beverly was removed as a guarantor of
facilities that they had previously subleased to other operators and Beverly
was not required to renew the remaining 18 facilities. Beverly will continue to
operate the 18 facilities at reduced rentals until the earlier of January 1,
2001 or the date the Company is able to lease the facilities to new operators.
As a part of the renewal settlement, the Company recorded a note receivable
from Beverly of approximately $16,208,000, net of deferred income of
approximately $8,165,000 that is being recognized under the installment method.
Such revenues are included in additional rent on the accompanying income
statements. The promissory note bears interest at 9.0% and has quarterly
payments due through its final maturity on December 31, 2004.
7
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 2000
(Unaudited)
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, deterioration of the operating
results or financial condition, including bankruptcies, of the Company's
tenants, the ability of the Company to attract new operators for certain
facilities, the amount of any additional investments, access to capital
markets, year 2000 risks and uncertainties and changes in the ratings of the
Company's debt securities.
Operating Results
Three Months 2000 Compared to Three Months 1999
Minimum rent increased $2,873,000 or 10% over the same period in 1999. The
increase was primarily due to minimum rent from investments in additional
leased facilities during the last twelve months and a shift in the
characterization of rent from additional rent to minimum rent due to the lease
negotiation discussed below. Interest and other income increased by $404,000 or
7% over the same period in 1999. The increase was primarily due to the funding
of five mortgage loans during the last twelve months, an increase in working
capital loans to two operators of facilities owned by the Company over the last
twelve months and interest on the note receivable from Beverly Enterprises,
Inc. ("Beverly") discussed below, partially offset by the conversion of four
mortgaged facilities to leases and the payoff of one mortgage loan during the
last twelve months. Additional rent and additional interest increased by
$230,000 or 6% over the same period in 1999. The increase was primarily
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 $3,063,000
or 27% over the same period in 1999. The increase was primarily due to the
issuance of $49,000,000 in fixed rate medium-term notes during the last twelve
months, the issuance of $63,750,000 in fixed rate medium-term notes during the
first quarter of 1999, the interest on which is now included for a full
quarter, increases in the average interest rates on the Company's $100,000,000
bank line of credit and a reduction in interest capitalized on construction
projects, partially offset by the repayment of $10,000,000 in medium-term notes
in February of 2000. Depreciation and non-cash charges increased $1,112,000 or
13% over the same period in 1999. The increase was primarily attributable to
increased depreciation due to the completion of additional facilities over the
last twelve months. General and administrative costs increased $145,000 or 11%
over the same period in 1999. The increase was primarily due to increases in
compensation and other general expenses.
During the three-month period ended March 31, 2000 and effective January 1,
2000, the Company negotiated a new lease and settlement with Beverly that
incorporates 38 of their 47 leased facilities, most of which were up for
renewal in 2000. The other 9 facilities leased to Beverly are on a separate
lease that does not expire until 2010. The new lease provides for an initial
five-year lease term for 18 of the 38 facilities. As part of the renewal
settlement, 2 of the 38 facilities as well as 3 other facilities that Beverly
had previously subleased to other operators were returned to Beverly. The
renewal settlement included a promissory note of
8
<PAGE>
approximately $16,208,000 that bears interest at 9.0% and has quarterly
payments due through its final maturity on December 31, 2004. The future
revenues related to the promissory note will decrease as the quarterly
principal payments are received. Beverly is operating the remaining 18
facilities at reduced rentals until the earlier of January 1, 2001 or the date
the Company is able to lease the facilities to new operators. The Company
anticipates having new operators in place at the facilities by June 30, 2000 at
rental rates approximately equal to the aggregate rental currently being paid
by Beverly; however there is no guarantee that new operators will be in place
by that date or that the Company will receive rental rates equal to the
aggregate rental currently being paid by Beverly.
The Company expects to receive 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. The Company expects that
additional rent and additional interest may decrease due to lease renewals
which may result in a shift in the characterization of revenue from additional
rent to minimum rent. The aggregate impact of this shift in the
characterization of revenue may be a decrease in the total rent received by the
Company. Additional investments in healthcare 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.
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 owned facilities currently
operated by each operator, the Company's current investment in facilities
subject to the bankruptcies, the percentage of the Company's revenue for the
three months ended March 31, 2000 relating to the facilities operated by each
operator and cash deposits and letters of credit currently held by the Company
as security for each operator.
<TABLE>
<CAPTION>
Number of Percentage
Bankruptcy Facilities Investment of 2000 Security
Operator Filing Date Operated in Facilities Revenues Deposits
-------- ---------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mariner Post-Acute
Network................ January 18, 2000 20 $ 60,354,000 6% $2,655,000
Sun Healthcare Group,
Inc.................... October 14, 1999 18 61,904,000 4 1,844,000
Integrated Health
Services, Inc.......... February 2, 2000 7 35,110,000 3 643,000
--- ------------ --- ----------
Totals................ 45 $157,368,000 13% $5,142,000
=== ============ === ==========
</TABLE>
In addition to the above, the Company has one mortgage loan directly with
Mariner Post-Acute Network in the amount of $7,497,000 that is secured by one
facility. The revenues from this mortgage loan represent approximately 1% of
the Company's revenues for the three months ended March 31, 2000 and the
mortgage loan has a security deposit in the amount of $400,000. The Company has
not received any payments on this mortgage loan subsequent to March of 2000.
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 forty-five facilities leased
to and operated by these three companies are not providing adequate cash flows
on
9
<PAGE>
their own to cover the rent under the leases. The Company's rent has been paid
each month on a timely basis. Although there is a possibility that these
properties may be returned by the courts, the Company has identified parties
interested in leasing these facilities; however, such leases may be at a lower
rental rate.
Liquidity and Capital Resources
During the three months ended March 31, 2000, the Company provided new
construction financing of approximately $7,689,000. The Company completed
construction of two assisted living facilities in 2000, in which the Company's
total aggregate investment was $21,080,000; $3,340,000 of this amount was a
current year investment included in the new construction financing amount
above. Upon completion of construction, the facilities were concurrently leased
under terms generally similar to the Company's existing leases. During the
three-month period ended March 31, 2000, the Company also funded approximately
$1,038,000 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
construction advances and capital improvement advances were funded by
borrowings on the Company's bank line of credit and by cash on hand.
During the three-month period ended March 31, 2000, the Company disposed of
four skilled nursing facilities in one transaction for aggregate proceeds of
approximately $9,400,000. The Company recognized an aggregate gain of
$1,016,000 related to the disposal of these facilities. The proceeds received
were used to repay borrowings on the Company's bank line of credit.
During the three months ended March 31, 2000, a $3,666,000 portion of one of
the mortgage loans securing one skilled nursing facility was repaid. The
proceeds received were used to repay borrowings on the Company's bank line of
credit.
During the three-month period ended March 31, 2000, the Company repaid
$10,000,000 in aggregate principal amount of medium-term notes. The notes bore
interest at a fixed rate of 8.48%. The repayment was funded by borrowings on
the Company's bank line of credit and by cash on hand.
At March 31, 2000, the Company had $34,000,000 available under its
$100,000,000 bank line of credit which expires on March 31, 2002. The Company
has 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 approximately $178,247,000 of
securities including debt, convertible debt, common and preferred stock.
The Company may make additional investments in healthcare related
facilities, although the level of the Company's new investments has decreased
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 future investments by the Company 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, maintain its current
dividend level and 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. This Year 2000 Readiness Disclosure Update should be read in conjunction
with the Company's Year 2000 Readiness Disclosure Update included in the
Company's 1999 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
Subsequent to January 1, 2000, the Company has not experienced any hardware
or software problems related to the year 2000 date changeover with regard to
its own internal operations and systems. At this time,
10
<PAGE>
the Company is not aware of any significant issues that may have impacted its
vendors, lessees and borrowers, and there have been no disruptions in rent or
mortgage payments. The Company is also unaware of any significant disruptions
at any of its owned properties related to non-information technology areas,
which would include embedded chips in elevators, security systems, electrical
systems and similar technology-driven devices.
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; although there can
be no assurances that the Company will not experience 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" 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.
Market Risk Exposure
This "Market Risk Exposure" discussion is an update of material changes to
the "Market Risk Exposure" discussion included in the Company's 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission and
should be read in conjunction with such discussion. Readers are cautioned that
many of the statements contained in the "Market Risk Exposure" discussion 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 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 currencies or
commodities, or other types of derivative financial instruments.
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.
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 variable rate 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.
During the three months ended March 31, 2000, the Company repaid $10,000,000
of fixed rate debt at a rate of 8.48%. In addition, the bank borrowings under
the Company's bank line of credit have decreased to $66,000,000 from
$75,300,000.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but do not affect 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.
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 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.
11
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2000
NATIONWIDE HEALTH PROPERTIES, INC.
/s/ Mark L. Desmond
By __________________________________
Mark L. Desmond
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
13
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