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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-9381
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AMERICAN HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4084878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 FIDDLER'S GREEN CIRCLE, SUITE 1800, 80111
ENGLEWOOD, CO (Zip Code)
(Address of principal executive offices)
</TABLE>
(303) 796-9793
(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, $.01 PAR VALUE PER SHARE,
OUTSTANDING AT MAY 11, 1995 -- 20,865,539
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AMERICAN HEALTH PROPERTIES, INC.
MARCH 31, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
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Item 1. Consolidated Condensed Financial Statements:
Balance sheets as of March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . 2
Statements of operations for the three months ended March 31, 1995 and 1994 . . . . . . . 3
Statements of cash flows for the three months ended March 31, 1995 and 1994 . . . . . . . 4
Notes to 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
March 31, December 31,
1995 1994
- ------------------------------------------------------------ ----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Real estate investments
Real property and mortgage notes $ 591,429 $ 603,870
Construction loan and projects 24,633 21,383
Accumulated depreciation (71,624) (70,617)
- ------------------------------------------------------------ --------- ---------
544,438 554,636
Notes receivable and financing leases 8,692 13,244
Other assets 9,204 9,785
Cash and short-term investments 774 1,838
- ------------------------------------------------------------ --------- ---------
$ 563,108 $ 579,503
============================================================ ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term loan payable $ 4,000 $ 14,500
Notes and bonds payable 231,215 231,163
Accounts payable and accrued liabilities 18,363 21,657
Deferred income 4,239 4,682
- ------------------------------------------------------------ --------- ---------
257,817 272,002
- ------------------------------------------------------------ --------- ---------
Commitments and contingencies
Stockholders' equity
Preferred stock $.01 par value; 1,000 shares authorized;
none outstanding - -
Common stock $.01 par value; 25,000 shares authorized;
20,866 and 20,851 shares issued and outstanding 209 209
Additional paid-in capital 426,912 426,783
Cumulative net income 179,598 169,931
Cumulative dividends (301,428) (289,422)
- ------------------------------------------------------------ --------- ---------
305,291 307,501
- ------------------------------------------------------------ --------- ---------
$ 563,108 $ 579,503
============================================================ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
Three Months Ended March 31,
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1995 1994
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<S> <C> <C>
REVENUES
Rental income $16,614 $16,550
Mortgage interest income 1,470 1,445
Additional rental and interest income 2,636 2,291
Other interest income 1,011 1,267
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21,731 21,553
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EXPENSES
Depreciation and amortization 3,470 3,653
Interest expense 6,828 6,528
General and administrative 1,661 1,519
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11,959 11,700
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Minority interest 105 69
- ------------------------------------------------------------ ------- -------
NET INCOME $ 9,667 $ 9,784
============================================================ ======= =======
NET INCOME PER SHARE $ 0.46 $ 0.47
============================================================ ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 20,899 20,815
============================================================ ======= =======
CASH DIVIDENDS PER SHARE $ 0.575 $ 0.575
============================================================ ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,667 $ 9,784
Depreciation, amortization and other non-cash items 4,056 4,152
Deferred income (113) 189
Change in other assets 379 (524)
Change in accounts payable and accrued liabilities (3,611) (4,070)
- ------------------------------------------------------------ -------- --------
10,378 9,531
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition and construction of real estate properties (995) (14,376)
Proceeds from sale of property 10,825 0
Construction loan fundings (3,250) (12,642)
Construction loan paid 0 16,836
Other notes receivable 4,385 (559)
Direct financing leases 167 (1,534)
Administrative capital expenditures (27) (1)
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11,105 (12,276)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings (payments) on short-term loan payable (10,500) 0
Principal payments on mortgages 0 (14,468)
Financing costs paid (50) (8)
Proceeds from exercise of stock options 0 1,288
Dividends paid (11,997) (11,867)
- ------------------------------------------------------------ -------- --------
(22,547) (25,055)
- ------------------------------------------------------------ -------- --------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (1,064) (27,800)
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 1,838 35,670
- ------------------------------------------------------------ -------- --------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 774 $ 7,870
============================================================ ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
American Health Properties, Inc., a Delaware corporation (the Company,
which term refers to the Company and its subsidiaries unless the context
otherwise requires) is a self-administered real estate investment trust (REIT)
that commenced operations in 1987. The Company has investments in health care
facilities, including acute care, rehabilitation and psychiatric hospitals, a
medical office building and a long-term care facility.
Psychiatric Group Preferred Stock Distribution On January 31, 1995,
the Company's Board of Directors authorized management to pursue a transaction
which is designed to separate the economic attributes of its investments in
psychiatric hospitals (the Psychiatric Group) and its investments in acute care
and rehabilitation hospitals, a medical office building and a long-term care
facility (the Core Group) into two distinct portfolios, with two distinct
classes of publicly traded shares intended to represent those portfolios. The
transaction would entail the distribution to holders of Common Stock of
depositary shares representing a new series of preferred stock, par value $0.01
per share, to be designated Psychiatric Group Preferred Stock (the Psychiatric
Group Stock). The Psychiatric Group Stock would be intended to reflect the
separate performance of the Psychiatric Group. The Company's existing Common
Stock would be intended to reflect the separate performance of the Core Group.
In connection with the proposed transaction, the Company would specifically
identify or allocate its assets, liabilities and stockholders' equity, and its
revenues, expenses and cash flow items, between the Core Group and Psychiatric
Group. However, each holder of Common Stock or Psychiatric Group Stock would be
a holder of an issue of capital stock of the entire Company and would be
subject to the risks associated with an investment in the Company and all of
its businesses, assets and liabilities. The conversion rights of the Company's
convertible subordinated bonds, and the Common Stock reserved for issuance upon
conversion, will be appropriately adjusted in accordance with the terms of the
indenture to reflect the planned distribution. In addition, appropriate
adjustments will be made to the Company's stock incentive plans. A
registration statement relating to the proposed distribution was filed with the
Securities and Exchange Commission on February 28, 1995.
Basis of Presentation The consolidated condensed financial statements
of the Company included herein have been prepared by the Company without audit
and include all normal, recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations
pursuant to the rules and regulations of the Securities and Exchange
Commission. These financial statements should be read in conjunction with
those included in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
Interest Paid Interest paid, net of interest capitalized, was
$8,979,000 and $8,726,000 for the three months ended March 31, 1995 and 1994,
respectively. The Company had no capitalized interest for the three months
ended March 31, 1995 and had $258,000 of capitalized interest for the three
months ended March 31, 1994.
5
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
2. STOCKHOLDERS' EQUITY
Stock Incentive Plans During the three months ended March 31, 1995,
options to purchase 183,537 shares of the Company's common stock at a weighted
average exercise price of $20.86 per share and 14,859 restricted stock awards
were issued pursuant to the Company's stock incentive plans.
3. COMMITMENTS
Other Notes Receivable The Company provides financing at variable
rates to certain psychiatric hospital operators under revolving credit
agreements secured by accounts receivable. The aggregate commitment under
these credit agreements was $5.7 million at March 31, 1995 of which $1.2
million was unfunded.
Construction Loan/Mortgage Notes Receivable As of March 31, 1995, the
Company had funded $24.6 million of a $30 million commitment to participate in
an $86 million construction and mortgage financing of a 670,000 square foot
integrated hospital and medical office complex presently under construction in
Austin, Texas.
Real Estate Properties The Company has the right to approve capital
expenditures at all of its properties, the option to fund certain capital
expenditures and in certain situations, is obligated to fund approved capital
expenditures on terms comparable to the original investment. At March 31,
1995, the Company had remaining commitments to fund approximately $4.7 million
of capital expenditures pursuant to these rights and obligations. The base and
additional rent provisions of the leases are amended when such capital
expenditures are funded to reflect the Company's increased investment.
The Company has provided a $4 million commitment to finance the
construction of a 96-bed Alzheimer's care facility in Houston, Texas and will
purchase the facility upon completion in early 1996 and enter into a long-term
lease. The developer of the facility intends to enter into a management
agreement for the facility with an experienced operator of long-term care
facilities.
In May 1995, the Company completed a $22.5 million investment in a
66-bed acute care hospital in Cheraw, South Carolina and a 60-bed acute care
hospital in Bennettsville, South Carolina. Both properties are leased to a
single operator pursuant to a long-term master lease.
6
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
4. PROPERTY SALES AND RESTRUCTURINGS
In February 1995, the Company sold its Westwood and Pembroke,
Massachusetts psychiatric hospital investments. The cash proceeds of
$13,825,000 represented payment for the $10,825,000 net book value of the real
property and repayment of the $3,000,000 balance outstanding under a revolving
credit agreement that had been provided to the operator. The Company's total
revenues from these two investments was $412,000 and $722,000 for the three
months ended March 31, 1995 and 1994, respectively, and $3,000,000 for the full
year in 1994.
In March 1995, the Company restructured the terms of its two Florida
psychiatric hospital investments that were included in a $30 million write-down
recorded by the Company in 1994 against its psychiatric portfolio. The level
of restructured rent agreed to by the Company is consistent with the current
carrying value of these properties. Pursuant to the restructuring effective
January 1, 1995, the annual minimum rental obligation of The Retreat
psychiatric hospital in Sunrise, Florida was reduced from $2,359,000 to
$1,100,000, and the annual minimum rental obligation of The Manors psychiatric
hospital in Tarpon Springs, Florida was reduced from $855,000 to $600,000. As
part of the restructuring, The Retreat used an existing $1,000,000 lease
reserve fund to pay down outstanding borrowings under a revolving credit
agreement provided by the Company, and the maximum amount available for
borrowing under the credit agreement was reduced from $2,250,000 to $1,000,000.
The Manors used an existing $325,000 lease reserve fund to pay down outstanding
borrowings under a $2,000,000 revolving credit agreement provided by the
Company.
7
<PAGE> 9
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a discussion of the financial condition and results of
operations of the Company which should be read in conjunction with the
consolidated condensed financial statements and accompanying notes.
On January 31, 1995, the Company's Board of Directors authorized
management to pursue a transaction which is designed to separate the economic
attributes of its investments in psychiatric hospitals (the "Psychiatric
Group") and its core investments in acute care and rehabilitation hospitals, a
medical office building and a long-term care facility (the "Core Group") into
two distinct portfolios, with two distinct classes of publicly traded shares
intended to represent those portfolios. The transaction would entail the
distribution to holders of Common Stock of depositary shares representing a new
series of preferred stock, par value $0.01 per share, to be designated
Psychiatric Group Preferred Stock (the "Psychiatric Group Stock"). The
Psychiatric Group Stock would be intended to reflect the separate performance
of the Psychiatric Group. The Company's existing Common Stock would be
intended to reflect the separate performance of the Core Group. In connection
with the proposed transaction, the Company would specifically identify or
allocate its assets, liabilities and stockholders' equity, and its revenues,
expenses and cash flow items, between the Core Group and Psychiatric Group.
However, each holder of Common Stock or Psychiatric Group Stock would be a
holder of an issue of capital stock of the entire Company and would be subject
to the risks associated with an investment in the Company and all of its
businesses, assets and liabilities. A registration statement relating to the
proposed distribution was filed with the Securities and Exchange Commission on
February 28, 1995.
OPERATING RESULTS
First Quarter 1995 Compared With 1994
For the first quarter of 1995, the Company reported net income of
$9,667,000 or $.46 per share compared with net income of $9,784,000 or $.47 per
share for the first quarter of 1994.
Rental income was $16,614,000 for the first quarter of 1995, an
increase of $64,000 from $16,550,000 for the first quarter of 1994. This net
increase was primarily attributable to rental income from new properties
acquired and various capital additions subsequent to the first quarter of 1994
partially offset by a reduction in rental income due to the sale of three
psychiatric properties and the lease restructurings of two psychiatric
investments. These factors, combined with lower depreciation expense on
psychiatric properties written down in June 1994, resulted in a net decrease in
depreciation and amortization of $183,000 to $3,470,000 for the first quarter
of 1995 compared with the first quarter of 1994.
Additional rental and interest income was $2,636,000 for the first
quarter of 1995, an increase of $345,000 or 15% from $2,291,000 for the first
quarter of 1994. This increase was attributable to first-time additional rent
from several properties and a net increase in additional rent from the
Company's remaining portfolio of properties.
8
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other interest income decreased $256,000 to $1,011,000 for the first
quarter of 1995 from $1,267,000 for the first quarter of 1994. An increase in
interest income resulting from a higher average balance of construction loans
during the first quarter of 1995 was partially offset by a decrease in interest
income resulting from a lower average balance of short-term investments. In
addition, the first three months of 1994 included the recognition of $520,000
of fee income related to the prepayment of a construction loan in February
1994.
Interest expense was $6,828,000 for the first quarter of 1995, an
increase of $300,000 or 5% from $6,528,000 for the first quarter of 1994. This
increase was primarily attributable to higher average short-term borrowings
during the first quarter of 1995 and a reduction in capitalized interest as a
result of the Company having no construction in progress during the first
quarter of 1995. The first quarter of 1994 included interest expense from
mortgage notes payable until the balance of $14.4 million was prepaid in
February 1994.
General and administrative expenses increased to $1,661,000 for the
first quarter of 1995 from $1,519,000 for the first quarter of 1994. The
increase for the first quarter of 1995 was primarily attributable to higher
expense from the Company's stock incentive plans and increased shareholder
reporting costs associated with the proposed distribution of the Psychiatric
Group Stock.
Future Operating Results
The nature of health care delivery in the United States is currently
undergoing change and further review at both the national and state levels.
Generally accepted goals of reform continue to include controlling costs and
improving access to medical care. The Company's Board and management are
monitoring potential changes closely. The Company believes that these
potential changes may pose risks for certain institutions that are unwilling or
unable to respond. However, the Company believes that this changing health
care environment will provide the Core Group with new opportunities for
investment in its current facilities as well as new facilities.
The Company recognizes that the health care industry in the United
States is undergoing significant evolution. The ongoing changes in the health
care industry include trends toward shorter lengths of hospital stay, increased
outpatient services, downward pressure on reimbursement rates from government,
insurance company and managed care payors and an increasing trend toward
capitation of health care delivery costs (delivery of services on a fixed price
basis to a defined group of covered parties). Outpatient business is expected
to increase as advances in medical technologies allow more procedures to be
performed on an outpatient basis. Payors continue to direct more patients from
inpatient care to outpatient care. The portion of providers' patient services
reimbursed under Medicare and Medicaid continues to increase as the population
ages and states expand Medicaid programs. States and insurance companies
continue to negotiate actively the amounts they will pay for services. In
addition, the entrance of insurance companies into managed care programs is
accelerating the introduction of managed care in new localities. As a result,
the revenues and margins may decrease at the Company's hospitals.
9
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Notwithstanding the potential for increasing government regulation,
the Company believes that health care will continue to be delivered on a local
basis and that well-managed, high-quality, cost-controlled facilities will
continue to be an integral part of local health care delivery systems. The
Company also believes that certain acute care hospitals will need to
reconfigure or expand existing facilities or to affiliate themselves with other
providers so as to become part of comprehensive and cost-effective health care
systems. Such systems will likely include lower cost treatment settings, such
as ambulatory care clinics, outpatient surgery centers, skilled nursing
facilities and medical office buildings. In general, the Core Group facilities
are part of local health care delivery systems or are in the process of
becoming integrated into such systems.
The Company's future operating results could be affected by the
operating performance of the Company's lessees and borrowers. The rental and
interest obligations of its facility operators are primarily supported by the
facility-specific operating cash flow. Real estate investments in the
Company's portfolio are further supported by one or more credit enhancements
that take the form of cross-default provisions, letters of credit, corporate
and personal guarantees, security interests in cash reserve funds, accounts
receivable or other personal property and requirements to maintain specified
financial ratios.
Fundamental changes in the psychiatric industry continue to negatively
impact the facility-specific operating cash flow at the Company's psychiatric
properties. Institutions responsible for providing insurance coverage to
patients who use inpatient psychiatric treatment services have directed efforts
toward decreasing their payments for such services, thereby reducing hospital
operating revenues. Some cost-cutting measures used by such institutions
include decreasing the inpatient length of stay, intensively reviewing
utilization, directing patients from inpatient care to outpatient care and
negotiating reduced reimbursement rates for services. In addition, such
institutions have extended the length of time for making payments, resulting in
increases in accounts receivable. The wider use of psychotropic drugs has also
resulted in significant declines in the average length of stay. Although the
operators of the psychiatric hospitals are responding by developing lower cost
outpatient and daypatient programs, increasing case management and reducing
operating costs, their efforts are generally not consistently mitigating the
negative impact of these fundamental psychiatric industry changes. For
example, as the inpatient length of stay has decreased, offset by an increased
number of admissions in some cases, the costs of performing initial testing and
other administrative procedures associated with each admission have increased.
As a result, certain of the psychiatric hospital operators have had difficulty
meeting their payment obligations to the Company on a timely basis and their
can be no assurance that they will be able to meet their payment obligations in
the future.
10
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is currently providing working capital loans to the
operators of four of its psychiatric hospitals. As of May 11, 1995,
outstanding working capital loans totaled $5,000,000, and the Company has
committed to make an additional $1,200,000 of such working capital loans upon
request, subject to certain conditions. These working capital loans, which are
secured by accounts receivable and certain personal property and which contain
events of default that would be triggered by defaults under the lease or
mortgage loan relating to the relevant psychiatric hospital, are the primary
source of financing for these operators' operating and capital needs. These
psychiatric hospitals have, from time to time, been unable to generate
sufficient cash flow for working capital and the development of new programs.
In certain cases, these psychiatric hospitals have not been able to pay down
the working capital loans provided by the Company or to secure replacement
loans from third-party lenders. To the extent the psychiatric hospitals have
increased working capital needs in the future, the Company may be the only
source of such financing.
The Company is currently discussing with the operator of the two Four
Winds psychiatric hospitals in New York possible alternatives for creating
additional available capital for the development and expansion of the
hospitals' programs, including the release of certain collateral securing the
Company's mortgage loan investments. The Company is currently reviewing the
operator's plan for these new programs which are intended to address the
potential negative consequences of the expected changes in Medicaid
reimbursement and the increase in managed care penetration in the State of New
York.
In 1992, the Company recorded a $45,000,000 write-down of its
investments in two psychiatric hospitals and restructured the payment
obligations of these two facilities. In addition, at June 30, 1994, in view of
negative trends that caused declining cash flow at a number of the psychiatric
hospitals, the Company recorded a $30,000,000 write-down of its investments in
the psychiatric hospitals. Although management believes that the recorded
investments in psychiatric hospitals are realizable, if the cash flow at the
psychiatric hospitals continues to decline, the Company may be required to
further restructure payment obligations or make additional write-downs of the
value of its investments in the psychiatric hospitals. The Company is pursuing
alternatives for the psychiatric portfolio including selected sales of
hospitals to operators or other parties, restructuring of financial obligations
or other approaches that might allow the effective separation of these assets
from the Company's core portfolio of acute care and rehabilitation hospitals, a
medical office building and a long-term care facility. As part of this
initiative, the Company sold its psychiatric property in Torrance, California
in October 1994 for $5,772,000 in cash (at net book value), sold two of its
psychiatric properties in Massachusetts in February 1995 for $13,825,000 in
cash (at net book value), restructured the leases and working capital loans of
its two Florida psychiatric investments in March 1995 and is issuing the
Psychiatric Group Stock.
11
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Additional rental income and interest income from the Company's
existing investments will be affected by changes in the revenues of the
underlying business operations upon which such income is based. The Company's
acute care investments accounted for 87% of net additional rental and interest
income for the first quarter of 1995, while rehabilitation and psychiatric
investments accounted for 5% and 8%, respectively. Over the years, a
substantial portion of the Company's additional rental and interest income has
been attributable to six of the Company's original acute care properties (the
"Original Properties"). Also, with the significant revenue growth at a
majority of the Original Properties in recent years, two properties had reached
the additional rent transition point at the end of 1994 and it is anticipated
that other properties may do so over the next few years. The Company's revenue
participation rate for the six Original Properties declines from 5% to 1% when
the additional rent transition point is reached. At December 31, 1994, the
amount of potential additional rent at the 5% revenue participation rate for
the six Original Properties was approximately $2.8 million per annum. As a
result, the Company anticipates slower growth in additional rental and interest
income in the near term from its current portfolio of properties.
The future operating results of the Company will be affected by
additional factors including the amount, timing and yield of additional real
estate investments and the competition for such investments. Operating results
will also be affected by the availability and terms of the Company's future
equity and debt financing. The Company's financing strategy includes the
objective to reduce its cost of capital over time and enhance its financial
flexibility to facilitate future growth. The proposed distribution of
depository shares representing Psychiatric Group Stock is intended to
facilitate this objective.
In August 1994, the Company's BBB- implied senior debt rating was
affirmed by Standard & Poor's but the outlook was revised to negative from
stable. Duff & Phelps Credit Rating Co. assigned an initial implied senior
debt rating of BBB- in November 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of May 11, 1995, the Company had commitments of $12.3 million to
fund construction obligations and capital expenditures over approximately the
next twelve months. Aggregate unfunded commitments under revolving credit
agreements provided to facility operators totaled $1.2 million as of May 11,
1995. The Company's 1989 issue of senior notes payable requires a principal
payment of $24 million on May 31, 1995.
The Company has continued to increase its liquidity and enhance its
financial flexibility. In April 1994, the Company increased its unsecured
revolving credit facility to $100 million. The facility bears interest at
either LIBOR plus a margin of 125 to 200 basis points or the prime rate plus,
in certain circumstances, a margin of 50 basis points, and matures on December
31, 1996. Currently, the Company is able to borrow at either LIBOR plus 125
basis points or the prime rate. As of May 11, 1995, the Company had $17.5
million of borrowings under its credit facility. The Company expects to use
short-term bank financing to fund the $24 million senior note maturity on May
31, 1995. The Company currently believes it has sufficient capital to meet its
commitments and that its cash flow and liquidity will continue to be sufficient
to fund current operations and to provide for the payment of dividends to
stockholders in compliance with the applicable sections of the Internal Revenue
Code governing real estate investment trusts.
12
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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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 1995
AMERICAN HEALTH PROPERTIES, INC.
By: /s/ VICTOR C. STREUFERT
--------------------------------
Victor C. Streufert
Executive Vice President & Chief
Financial Officer
(Principal Financial and Accounting
Officer)
13
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
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<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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