FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 of 15(d)
of the Securities Exchange Act of 1934
For quarter ended September 30, 1997 Commission file number 33-41863
NATIONAL HEALTH INVESTORS, INC.
(Exact name of registrant as specified in its Charter)
Maryland 62-1470956
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
100 Vine Street
Murfreesboro, TN 37130
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (615) 890-9100
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.
Yes x No
(2) Has been subject to such filing requirements for the past 90 days.
Yes x No
24,711,376 shares of common stock were outstanding as of October 31, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<CAPTION>
Sept. 30 Dec. 31
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Real estate properties:
Land $ 20,467 $ 20,468
Buildings and improvements 199,629 192,095
Construction in progress 13,225 587
233,321 213,150
Less accumulated depreciation (34,767) (28,895)
Real estate properties, net 198,554 184,255
Mortgage and other notes receivable 590,177 519,229
Investment in real estate mortgage
investment conduits 35,951 36,562
Cash and cash equivalents 14,120 3,400
Interest and rent receivable 4,597 5,382
Deferred costs and other assets 4,348 2,269
Total Assets $847,747 $751,097
LIABILITIES AND DEFERRED INCOME
Long-term debt $207,343 $160,008
Credit facilities 45,000 59,000
Convertible subordinated debentures 120,133 90,735
Accounts payable and other accrued expenses 2,026 3,131
Accrued interest 4,126 1,984
Dividends payable 18,266 17,371
Deferred income 9,243 9,185
Total Liabilities and Deferred Income 406,137 341,414
Commitments, contingencies and guarantees
STOCKHOLDERS' EQUITY
Cumulative convertible preferred stock,
$.01 par value; 10,000,000 shares
authorized; 861,981 and 1,050,122
shares, respectively, issued and
outstanding; stated at liquidation
preference of $25 per share 21,550 26,253
Common stock, $.01 par value:
40,000,000 shares authorized;
24,684,259 and 23,474,751 shares,
respectively, issued and outstanding 247 235
Capital in excess of par value 432,059 395,204
Cumulative net income 251,037 195,514
Cumulative dividends (263,283) (207,523)
Total Stockholders' Equity 441,610 409,683
Total Liabilities and Stockholders' Equity $847,747 $751,097
</TABLE>
The accompanying notes to interim condensed consolidated financial statements
are an integral part of these financial statements.
The interim condensed balance sheet at December 31, 1996 is taken from the
audited financial statements at that date.
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Mortgage interest income $ 17,552 $ 15,735 $ 50,444 $ 45,612
Rental income 10,093 9,135 29,731 25,270
Investment interest and
other income 715 405 1,834 1,624
28,360 25,275 82,009 72,506
EXPENSES:
Interest 6,163 5,190 17,207 15,033
Depreciation of real estate 2,014 1,805 5,872 4,873
Amortization of loan and
organization costs 200 388 609 919
Other operating 927 953 2,798 2,703
9,304 8,336 26,486 23,528
NET INCOME $ 19,056 $ 16,939 $ 55,523 $ 48,978
Dividends to preferred
stockholders 462 695 1,470 2,558
NET INCOME APPLICABLE TO
COMMON STOCK $ 18,594 $ 16,244 $ 54,053 $ 46,420
NET INCOME PER COMMON SHARE:
Primary $ .76 $ .73 $ 2.22 $ 2.15
Fully diluted $ .74 $ .71 $ 2.16 $ 2.07
WEIGHED AVERAGE COMMON SHARES OUTSTANDING:
Primary 24,523,128 22,218,269 24,315,652 21,596,934
Fully diluted 29,013,987 27,192,171 28,842,183 27,154,986
Common dividends per share
declared $ .74 $ .70 $ 2.22 $ 2.10
</TABLE>
The accompanying notes to interim condensed consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months Ended
September 30
1997 1996
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55,523 $ 48,978
Depreciation of real estate 5,872 4,873
Amortization of loan and organization costs 609 919
Deferred income 1,354 6,054
Amortization of deferred income (1,296) (4,260)
Interest on debenture conversion 285 209
Decrease in interest & rent receivable 785 346
(Increase) decrease in other assets (462) 39
Increase in accounts payable
and accrued liabilities 1,037 2,226
NET CASH PROVIDED BY OPERATING ACTIVITIES 63,707 59,384
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in mortgage notes receivable (108,001) (99,840)
Collection of mortgage notes receivable 6,049 5,853
Prepayment of mortgage notes receivable 31,615 79,811
Acquisition of property and equipment, net (20,171) (66,837)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (90,508) (81,013)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of credit facilities (106,000) (46,750)
Proceeds from credit facilities 92,000 64,500
Proceeds from long-term debt 99,651 78,168
Principal payments on long-term debt (52,316) (82,658)
Proceeds from sale of subordinated
convertible debentures 60,000 56,190
Financing costs paid (2,662) (1,548)
Dividends paid to shareholders (54,866) (48,237)
Sale of stock and exercise of options 1,714 1,271
NET CASH USED IN FINANCING ACTIVITIES 37,521 20,936
INCREASE IN CASH AND CASH EQUIVALENTS 10,720 (693)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,400 2,122
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,120 $ 1,429
</TABLE>
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months Ended
September 30
1997 1996
(in thousands)
<S> <C> <C>
Supplemental Information:
Cash payments for interest expense $ 12,154 $ 10,364
During the September months ended September 30, 1997
and September 30, 1996, $30,602,000 and $24,980,000
respectively, of Senior Subordinated Convertible
Debentures were converted into 984,036 shares
and 916,811 shares, respectively, of NHI's
common stock:
Senior subordinated convertible debentures $(30,602) $(24,980)
Financing costs $ 437 $ 384
Accrued interest $ (285) $ (209)
Common stock $ 10 $ 10
Capital in excess of par $ 30,440 $ 24,795
</TABLE>
The accompanying notes to interim condensed consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(dollars in thousands)
<CAPTION>
Cumulative Convertible Capital in Total
Preferred Stock Common Stock Excess of Cumulative Cumulative Stockholders
Shares Amount Shares Amount Par Value Net Income Dividends Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT 12/31/96 1,050,122 $ 26,253 23,474,751 $235 $395,204 $195,514 $(207,523) $409,683
Net income -- -- -- -- -- 55,523 -- 55,523
Shares sold -- -- 54,243 -- 1,714 -- -- 1,714
Shares issued in con-
version of con-
vertible debentures
to common stock -- -- 985,036 10 30,440 -- -- 30,450
Shares issued in
conversion of pre-
ferred stock to
common stock (188,141) (4,703) 170,229 2 4,701 -- -- --
Common shares sold -- -- -- -- -- -- -- --
Dividends to common
shareholders ($2.22
per share) -- -- -- -- -- -- (54,290) (54,290)
Dividends to preferred
shareholders ($1.594
per share) -- -- -- -- -- -- (1,470) (1,470)
BALANCE AT 9/30/97 861,981 $ 21,550 24,684,259 $247 $432,059 $251,037 $(263,283) $441,610
BALANCE AT 12/31/95 2,311,533 $ 57,788 20,535,014 $205 $311,908 $128,350 $(141,270) $356,981
Net income -- -- -- -- -- 48,978 -- 48,978
Shares sold -- -- 45,524 -- 1,271 -- -- 1,271
Shares issued in con-
version of con-
vertible debentures
to common stock -- -- 916,811 10 24,795 -- -- 24,805
Shares issued in
conversion of pre-
ferred stock to
common stock (1,020,077) (25,502) 923,108 9 25,493 -- -- --
Dividends to common
shareholders ($1.40
per share) -- -- -- -- -- -- (45,773) (45,773)
Dividends to preferred
shareholders ($1.0625
per share) -- -- -- -- -- -- (2,558) (2,558)
BALANCE AT 9/30/96 1,291,456 $ 32,286 22,420,457 $224 $363,467 $177,328 $(189,601) $383,704
</TABLE>
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Note 1. SIGNIFICANT ACCOUNTING POLICIES:
The unaudited financial statements furnished herein in the opinion of
the management include all adjustments which are necessary to fairly present
the financial position, results of operations and cash flows of National
Health Investors, Inc. ("NHI" or "Company"). NHI assumes that users of the
interim financial statements herein have read or have access to the audited
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the preceding fiscal years ended
December 31, 1996, 1995 and 1994 and that the adequacy of additional
disclosure needed for a fair presentation, except in regard to material
contingencies, may be determined in that context. Accordingly, footnotes and
other disclosures which would substantially duplicate the disclosure contained
in the Company's most recent annual report to stockholders have been omitted.
The interim financial information contained herein is not necessarily
indicative of the results that may be expected for a full year because of
various reasons including changes in interest rates, rents and the timing of
debt and equity financings.
Note 2. EARNINGS PER SHARE
Primary earnings per share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent shares
result from the dilutive effect of stock options computed using the treasury
stock method. Net income is reduced by dividends to holders of cumulative
convertible preferred stock.
Fully diluted earnings per share assumes, in addition to the above, the
conversion of convertible subordinated debentures, the conversion of
cumulative convertible preferred stock and the exercise of all stock options
using the treasury stock method. Net income is increased for interest expense
on the convertible subordinated debentures.
The following table summarizes the earnings and the average number of
common shares and common equivalent shares used in the calculation of primary
and fully diluted earnings per share.
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
PRIMARY:
Weighted avg. common
shares 24,485,556 22,189,714 24,283,213 21,568,250
Stock options 37,572 28,555 32,439 28,684
Average common shares
outstanding 24,523,128 22,218,269 24,315,652 21,596,934
Net income $19,056,000 16,939,000 55,523,000 $48,978,000
Dividends paid to pre-
ferred shareholders (462,000) (695,000) (1,470,000) (2,558,000)
Net income available to
common stockholders $18,594,000 $16,244,000 $54,053,000 $46,420,000
Net income per common
share $ .76 $ .73 $ 2.22 $ 2.15
FULLY DILUTED:
Weighted average common
shares 24,485,556 22,189,714 24,283,213 21,568,250
Stock options 37,572 29,964 36,830 29,964
Convertible subordinated
debentures 3,685,206 3,723,291 3,666,080 4,008,791
Cumulative convertible
preferred stock 805,653 1,249,202 856,060 1,547,981
Average common shares
outstanding 29,013,987 27,192,171 28,842,183 27,154,986
Net income $19,056,000 $16,939,000 55,523,000 48,978,000
Interest expense on
convertible sub-
ordinated debentures 2,297,000 2,239,000 6,853,000 7,122,000
Net income assuming con-
version of subordinated
convertible debentures
to common stock $21,353,000 $19,178,000 62,376,000 56,100,000
Net income per common
share $ .74 $ .71 $ 2.16 $ 2.07
</TABLE>
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Note 3. COMMITMENTS AND GUARANTEES:
At September 30, 1997, NHI was committed, subject to due diligence and
financial performance goals, to fund approximately $169,254,000 in health care
real estate projects of which approximately $99,254,000 is eligible to be
funded within the next 12 months. The commitments include mortgage loans or
purchase leaseback agreements for five long-term care centers, six retirement
centers, three medical office buildings, and 16 assisted living facilities,
all at rates ranging from 9.5% to 11.5%. Also, included in the $169,254,000
of commitments is a $95,300,000 commitment which declines, if unused, by
$30,000,000 annually. NHI has recorded deferred income for commitment fees
related to these loans where applicable.
In order to obtain the consent of appropriate lenders to NHC's transfer
of assets to NHI, NHI guaranteed certain debt ($22,718,000 at September 30,
1997) of NHC. The debt is at fixed and variable interest rates with a
weighted average interest rate of 8.4% at September 30, 1997. NHI receives
from NHC compensation of approximately $114,000 per annum for the guarantees
which is credited against NHC's base rent requirements.
In management's opinion, these guarantee fees approximate the guarantee
fees that NHI would currently charge to enter into similar guarantees.
All of the guaranteed indebtedness discussed above is secured by first
mortgages and rights which may be enforced if either party is required to pay
under their respective guarantees. NHC has agreed to indemnify and hold
harmless NHI against any and all loss, liability or harm incurred by NHI as a
result of having to perform under its guarantee of any or all of the
guaranteed debt.
Also additionally, NHI has also guaranteed bank loans in the amount of
$2,075,000 to key employees and directors which amount was utilized for the
exercise of NHI stock options. Shares of NHI stock are held as security by
NHI and the loans are limited to $100,000 per individual per year.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
NOTE 4. DEBT
On June 25, 1997, NHI received proceeds from the sale of $100,000,000 of
7.3% notes payable (the Notes). The Notes mature on July 16, 2007 and have no
sinking fund provisions. Interest on the Notes is payable semi-annually on
January 15 and July 15.
The Notes are general unsecured obligations of NHI and rank equal with
NHI's other unsecured and unsubordinated debt. NHI agrees in the note
indenture that it will limit liens on assets to certain percentages of
tangible assets and that it will limit the issuance of new debt to certain
multiples of capital or net worth.
Note 5. CONVERTIBLE SUBORDINATED DEBENTURES:
On January 29, 1997, NHI sold $60,000,000 of 7% convertible subordinated
debentures (the "1997 debentures") due on February 1, 2004. The 1997
debentures are convertible at the option of the holder into common stock at a
conversion price of $37.50, subject to adjustment. The 1997 debentures will
not be redeemable prior to February 8, 2002 except in the event of certain
tax-related events or to the extent necessary to preserve and protect NHI's
status as a real
estate investment trust. The 1997 debentures are subordinated in right of
payment to the prior payment in full of all senior indebtedness of NHI.
Interest is payable semiannually on February 1 and August 1 of each year. NHI
has reserved 1,600,000 shares of common stock for conversions of 1997
debentures.
At September 30, 1997, $47,537,000 of 7.75% convertible subordinated
debentures (the "1995 debentures") remain outstanding. The 1995 debentures
are convertible at the option of the holder into the common stock of NHI at a
conversion price of $31.625, subject to adjustment. During the nine months
ended September 30, 1997, $27,357,000 of the 1995 debentures have been
converted into 865,030 shares of common stock. NHI has reserved 1,503,146
shares of common stock for conversions of 1995 debentures.
At September 30, 1997, debentures in the amount of $6,406,000, bearing
interest at 7% (the "1995 debt service debentures") have been issued to
mortgagees or lessees to satisfy debt service escrow requirements. The
debentures are convertible at the option of the holder into common stock of
the Company at a conversion price of 110% of the market price on the date of
issuance of the debentures, subject to adjustment. At September 30, 1997,
none of the debentures have been converted.
At September 30, 1997, $5,960,000 of 7.375% convertible subordinated
debentures (the "1993 debentures") remain outstanding. The 1993 debentures
are convertible at the option of the holder into the common stock of the
Company at a conversion price of $27.25 per share, subject to adjustment.
During the nine months ended September 30, 1997, $3,175,000 of the 1993
debentures were converted into 116,506 shares of common stock. The Company
has reserved 218,716 shares of common stock for conversion of the 1993
debentures.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
At September 30, 1997, $230,000 of the 10% senior convertible
subordinated debentures (the "senior debentures") remain outstanding. The
senior debentures are convertible into the common stock of the Company at $20
per share. During the nine months ended September 30, 1997, $70,000 of the
senior debentures were converted into 3,500 shares of common stock. The
Company has reserved 11,500 shares of common stock for conversion of the
senior debentures.
Note 6. CUMULATIVE CONVERTIBLE PREFERRED STOCK
In February and March, 1994, NHI issued $109,558,000 of 8.5% Cumulative
Convertible Preferred Stock ("Preferred Stock") with a liquidation preference
of $25 per share. Dividends at an annual rate of $2.125 are cumulative from
the date of issuance and are paid quarterly. At September 30, 1997
$21,550,000 of the preferred stock remains outstanding.
The Preferred Stock is convertible into NHI common stock at the option
of the holder at any time at a conversion price of $27.625 per share of common
stock, which is equivalent to a conversion rate of 0.905 per share of common
stock for each share of Preferred Stock, subject to adjustment in certain
circumstances.
The Preferred Stock is not redeemable by NHI prior to February 15, 1999
and is not redeemable for cash. On or after February 15, 1999, the Preferred
Stock will be redeemable by NHI for common stock. NHI may redeem the
Preferred Stock only if the trading price of the Common Stock on the New York
Stock Exchange (NYSE) exceeds $27.625 per share for 20 trading days within a
period of 30 trading days prior to the exercise. NHI has reserved 780,090
shares of common stock for Preferred Stock conversions.
The Preferred Stock is listed on the NYSE under the symbol "NHIPr."
Note 7. NEW ACCOUNTING PRONOUNCEMENTS:
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure", ("SFAS
129"). SFAS 129 establishes standards for disclosing information about an
entity's capital structure. NHI will be required to adopt SFAS 129 in the
fourth quarter of 1997. Management does not expect the adoption to have a
material impact on NHI's financial position, results of options or cash flow.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", ("SFAS 128"), has been issued effective for fiscal periods ending
after December 15, 1997. SFAS No. 128 establishes standards for computing and
presenting earnings per share. NHI is required to adopt the provisions of
SFAS No. 128 in the fourth quarter of 1997. Under the standards established
by SFAS 128, earnings per share is measured at two levels: basic earnings per
share and diluted earnings per share. Basic earnings per share is computed by
dividing net income by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares after
considering the additional dilution related to preferred stock, convertible
debt, options and warrants. Management does not expect the adoption to have a
material impact on NHI's financial position, results of operation or cash
flows.
Note 8. STOCK OPTION PLAN
On January 15, 1997, NHI granted options to purchase 194,000 shares of
NHI at $36.00 per share. During the nine months ended September 30, 1997,
options to purchase 37,315 shares of NHI were exercised at exercise prices
ranging from $25.00 to $36.00.
In October 1995, the Financial Accounting Standards Board issued State-
ment of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation ("SFAS 123"). SFAS 123 establishes new financial
accounting and reporting standards for stock-based compensation plans. NHI
has adopted the disclosure-only provisions of SFAS 123. As a result, no
compensation cost has been recognized for NHI's stock option plans. Based on
the number of options outstanding and the historical and expected future
trends of factors affecting valuation of those options, management believes
that any compensation cost attributable to options granted is immaterial.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Overview
National Health Investors, Inc. ("NHI" or the "Company") is a real
estate investment trust which invests primarily in income producing health
care properties with emphasis on the long-term care sector. As of September
30, 1997, NHI had interests in net real estate owned by it and mortgage
investments totaling $824.7 million. NHI's strategy is to invest in health
care real estate which generates current income which will be distributed to
stockholders. NHI intends to implement this strategy by making mortgage loans
and acquiring properties to lease nationwide.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
September 30, 1997
(Unaudited)
As of September 30, 1997, the Company has investments in 267 health care
facilities located in 27 states consisting of 219 long-term care facilities,
three acute care hospitals, nine medical office buildings, ten assisted living
facilities, nine independent living centers, and 17 residential projects for
the developmentally disabled. These investments consist of approximately
$590.2 million aggregate principal amount of loans to 48 borrowers, $198.6
million of purchase leaseback transactions with six lessees and $36.0 million
invested in REMIC pass through certificates backed by first mortgage loans to
five operators. Of these 267 facilities, 43 are leased to NHC and nine
additional facilities are managed by NHC. (NHC is the Company's investment
advisor.) Consistent with its strategy of diversification, the Company has
reduced the portion of its portfolio operated by NHC from 100.0% of total real
estate assets on October 17, 1991 to approximately 19.1% of total real estate
assets on September 30, 1997.
Capital Resources and Liquidity
NHI has generated net cash from operating activities for the first nine
months of 1997 in the amount of $63.7 million. The funds were used along with
$58.5 million net proceeds from the sale of subordinated convertible
debentures, $99.7 million proceeds from the issuance of 7.3% senior unsecured
notes, $37.7 million from prepayments and collections of mortgage notes
receivable, $92.0 million proceeds from credit facilities and $1.7 million
from the sale of common stock to make additional investments in income
producing assets and real estate properties totaling approximately $128.2
million, to repay debt and credit facilities of $158.3 million and to pay
dividends to stockholders of $54.9 million.
During the second quarter NHI received an investment grade rating of
BBB- from Standard & Poor's which confirms comparable ratings previously
received by Moody's and Duff & Phelps. These ratings have already allowed NHI
to lower its costs of both debt and equity capital and expand its financing
alternatives. To illustrate, in June, NHI successfully placed its first $100
million public debt offering of 7.3% senior unsecured notes due 2007.
The amount available to be drawn on NHI's $100 million revolving line of
credit was $55 million at September 30, 1997. The Company's balance sheet was
further strengthened by the conversion of $4.7 million of NHI's outstanding
convertible preferred stock and $30.6 million of convertible debentures to
common equity during the first nine months of 1997. NHI's nonconvertible debt
as a percentage of total capitalization has been lowered from 45% at the end
of 1994 to 30% at December 31, 1996 and to 27% at September 30, 1997. The
Company continues to be well positioned to take advantage of new investment
opportunities.
In October after the close of the third quarter, NHI received prepayment
of mortgages receivable of $149.8 million. Prepayment penalties and
commitments arrangements with the borrower are expected to offset the reduced
net income from this investment while the amount repaid is being reinvested.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
September 30, 1997
(Unaudited)
At September 30, 1997, the Company was committed, subject to due
diligence and financial performance goals, to fund approximately $169.2
million in health care real estate projects, of which approximately $99.2
million is eligible to be funded within the next 12 months. The commitments
include mortgage loans or purchase leaseback agreements for five long-term
health care centers, six retirement centers, 16 assisted living centers and
three medical office buildings, generally at rates ranging from 9.5% to 11.5%.
Financing for NHI's current commitments and future commitments to others
may be provided by borrowings under NHI's bank credit facilities, new lines of
credit, private placements or public offerings of debt or equity, the
assumption of secured or unsecured indebtedness, repayments of existing
investments or by the sale of all or a portion of certain currently held
investments.
Results of Operations
Three Months ended September 30, 1997 Compared to Three Months Ended September
30, 1996.
Net income for the three months ended September 30, 1997 is $19.1
million versus $16.9 million for the same period of 1996, an increase of
12.4%. Fully diluted earnings per common share increased three cents or 4.2%
to 74 cents in the 1997 period from 71 cents in the 1996 period.
Total revenues for the three months ended September 30, 1997 increased
$3.1 million or 12.2% to $28.4 million from $25.3 million for the three months
ended September 30, 1996. Revenues from mortgage interest income increased
$1.8 million or 11.5% in the 1997 period as compared to the 1996 period.
Revenues from rental income increased $1.0 million or 10.5% when compared to
the same period in 1996. These increases resulted primarily from investments
in additional facilities during the last 12 months and increased "revenue
participations" and "additional rent" earned under NHI's existing mortgages
and leases.
Total expenses for the 1997 three month period increased $1.0 million or
11.6% to $9.3 million from $8.3 million for the 1996 three month period.
Interest expenses increased $1.0 million or 18.7% in the 1997 three month
period as compared to the 1996 three month period. Depreciation and
amortization increased $0.2 million or 11.6% when compared to the same period
in 1996. General and administrative expenses in 1997 remained constant at
$0.9 million when compared to the 1996 period.
The increase in interest expense was due to increased debt levels
compared to the quarter a year ago. The increase in interest expense was
offset in part by the conversion of $6.9 million of 7.375% and 7.75%
debentures during the three months ended September 30, 1997 and a reduced
interest rate on the $100 million term loan and the $100 million revolving
line of credit as a result of investment grade ratings. Depreciation
increased as a result of the Company's placing of newly constructed assets in
service in 1997 and 1996.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
September 30, 1997
(Unaudited)
Nine Months ended September 30, 1997 Compared to Nine Months Ended September
30, 1996.
Net income for the nine months ended September 30, 1997 is $55.6 million
versus $49.0 million for the same period of 1996, an increase of 13.3%. Fully
diluted earnings per common share increased 9 cents or 4.3% to $2.16 per share
in the 1997 period from $2.07 per share in the 1996 period.
Total revenues for the nine months ended September 30, 1997 increased
$9.5 million or 13.1% to $82.0 million from $72.5 million for the nine months
ended September 30, 1996. Revenues from mortgage interest income increased
$4.8 million or 10.6% in the 1997 period as compared to the 1996 period.
Revenues from rental income increased $4.5 million or 17.7% when compared to
the same period in 1996. These increases resulted primarily from the net
increase in investments in real estate properties during the last 12 months
and increased "additional rent" and "revenue participations" earned under the
Company's existing leases and mortgage agreements.
Total expenses for the 1997 nine month period increased $3.0 million or
12.6% to $26.5 million from $23.5 million for the 1996 period. Interest
expenses increased $2.2 million or 20.5% in the 1997 nine month period as
compared to the 1996 period. Depreciation and amortization increased $1.0
million or 20.5% when compared to the same period in 1996.
The increase in interest expense was due to increased debt levels
compared to the nine month period a year ago. The increase in interest
expense was offset in part by the conversion of $30.6 million of convertible
debentures during the nine months ended September 30, 1997, and by a reduced
interest rate on the $100 million term loan and $100 million revolving line of
credit as a result of investment grade ratings. Depreciation increased as a
result of the Company's placing of newly constructed assets in service in 1996
and 1997.
Future Growth
The Company expects increases in both mortgage interest income and
rental income from additional investments (net of repayments) in mortgage
loans and owned facilities during 1997 and 1998. The Company expects to
continue to make additional investments in health care facilities that would
increase interest and rental revenues as well as interest and depreciation
expense. Increases in revenues are expected to more than offset increases in
associated expenses.
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
September 30, 1997
(Unaudited)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. Not applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) List of exhibits - none required
(b) Reports on Form 8-K - none required
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.
NATIONAL HEALTH INVESTORS, INC.
(Registrant)
Date November 12, 1997 /s/ Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr.
Secretary
Date November 12, 1997 /s/ Donald K. Daniel
Donald K. Daniel
Principal Accounting Officer
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