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 June 30, 1998 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
25,409,750 shares of common stock were outstanding as of July 28, 1998.
<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>
June 30 Dec. 31
1998 1997
(unaudited)
<S> <C> <C>
ASSETS
Real estate properties:
Land $ 20,767 $ 20,468
Buildings and improvements 213,914 205,631
Construction in progress 6,589 10,899
241,270 236,998
Less accumulated depreciation (41,302) (36,929)
Real estate properties, net 199,968 200,069
Mortgage and other notes receivable 424,567 445,603
Investment in real estate mortgage
investment conduits 36,694 37,157
Cash and cash equivalents 64,813 64,915
Marketable securities 20,764 ---
Interest and rent receivable 4,381 5,185
Deferred costs and other assets 3,139 3,670
Total Assets $754,326 $756,599
LIABILITIES AND DEFERRED INCOME
Long-term debt $154,033 $155,659
Credit facilities --- ---
Convertible subordinated debentures 100,631 119,038
Accounts payable and other accrued expenses 7,051 4,266
Accrued interest 6,401 6,928
Dividends payable 18,801 18,318
Deferred income 7,557 8,310
Commitments, contingencies and guarantees --- ---
Total Liabilities and Deferred Income 294,474 312,519
STOCKHOLDERS' EQUITY
Cumulative convertible preferred stock,
$.01 par value; 10,000,000 shares
authorized; 790,094 and 833,664
shares, respectively, issued and
outstanding; stated at liquidation
preference of $25 per share 19,752 20,842
Common stock, $.01 par value:
40,000,000 shares authorized;
25,408,041 and 24,753,570 shares,
respectively, issued and outstanding 254 248
Capital in excess of par value of common stock 454,534 434,135
Cumulative net income 306,637 270,902
Cumulative dividends (320,442) (282,047)
Unrealized gains (losses) on securities (883) ---
Total Stockholders' Equity 459,852 444,080
Total Liabilities and Stockholders' Equity $754,326 $756,599
</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, 1997 is taken
from the audited financial statements at that date.
2
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
(in thousands,
except share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Mortgage interest income $ 13,811 $ 16,750 $ 28,041 $ 32,892
Rental income 10,461 9,842 20,914 19,638
Investment interest and
other income 1,585 612 2,982 1,119
25,857 27,204 51,937 53,649
EXPENSES:
Interest 4,638 5,614 9,508 11,044
Depreciation of real estate 2,197 1,929 4,379 3,858
Amortization of loan and
organization costs 168 210 354 409
General and administrative 965 926 1,961 1,871
7,968 8,679 16,202 17,182
NET INCOME $ 17,889 $ 18,525 $ 35,735 $ 36,467
Dividends to Preferred
Stockholders 421 484 852 1,008
NET INCOME APPLICABLE TO
COMMON STOCK $ 17,468 $ 18,041 $ 34,883 $ 35,459
NET INCOME PER COMMON SHARE:
Basic $ .69 $ .74 $ 1.39 $ 1.47
Diluted $ .68 $ .72 $ 1.37 $ 1.43
WEIGHED AVERAGE COMMON SHARES OUTSTANDING:
Basic 25,370,530 24,372,355 25,149,282 24,177,957
Diluted 29,020,920 28,993,807 29,014,925 28,747,060
Common dividends per share
declared $ .74 $ .74 $ 1.48 $ 1.48
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these financial statements.
3
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1998 1997
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,735 $ 36,467
Depreciation of real estate 4,379 3,858
Amortization of loan and organization costs 354 409
Interest on debenture conversion 317 169
Deferred income 695 691
Amortization of deferred income (1,448) (799)
(Increase) decrease in interest & rent receivable 804 (31)
(Increase) decrease in other assets (50) (529)
Increase (decrease) in accounts payable
and accrued liabilities 2,258 1,451
NET CASH PROVIDED BY OPERATING ACTIVITIES 43,044 41,686
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in mortgage notes receivable (43,916) (40,074)
Collection of mortgage notes receivable 2,154 4,081
Prepayment of mortgage notes receivable 63,261 9,173
Acquisition of property and equipment, net (4,278) (166)
Investment in marketable securities (21,647) ---
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (4,426) (26,986)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of credit facilities --- (98,000)
Proceeds from credit facilities --- 39,000
Proceeds from long-term debt 229 99,651
Principal payments on long-term debt (1,855) (51,833)
Proceeds from sale (payments) of subordinated
convertible debentures (40) 60,000
Financing costs paid --- (2,436)
Dividends paid to shareholders (37,912) (36,338)
Sale of stock and exercise of options 858 1,456
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (38,720) 11,500
INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS (102) 26,200
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 64,915 3,400
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 64,813 $ 29,600
</TABLE>
4
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1998 1997
(in thousands)
<S> <C> <C>
Supplemental Information:
Cash payments for interest expense $ 8,580 $ 7,477
During the six months ended June 30, 1998
and June 30, 1997, $18,367,000 and $23,747,000
respectively, of Senior Subordinated Convertible
Debentures were converted into 589,952 shares
and 764,654 shares, respectively, of NHI's
common stock:
Senior subordinated convertible debentures $(18,367) $(23,747)
Financing costs $ 227 $ 316
Accrued interest $ (317) $ (169)
Common stock $ 6 $ 7
Capital in excess of par $ 18,451 $ 23,593
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these financial statements.
5
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(dollars in thousands)
<CAPTION>
Cumulative Convertible Capital in Unrealized Total
Preferred Stock Common Stock Excess of Cumulative Cumulative Gains(Losses) Stock.
Shares Amount Shares Amount Par Value Net Income Dividends on Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT 12/31/97 833,664 $ 20,842 24,753,570 $248 $434,135 $270,902 $(282,047) $ --- $444,080
Net income --- --- --- --- --- 35,735 --- --- 35,735
Unrealized gains (losses)
on securities --- --- --- --- --- --- --- (883) (883)
Total Comprehensive
Income 34,852
Shares sold --- --- 25,102 --- 858 --- --- --- 858
Shares issued in con-
version of converti-
ble debentures to
common stock --- --- 589,951 6 18,451 --- --- --- 18,457
Shares issued in con-
version of preferred
stock to common stock (43,570) (1,090) 39,418 --- 1,090 --- --- --- ---
Dividends to common
shareholders (1.48
per share) --- --- --- --- --- --- (37,543) --- (37,543)
Dividends to preferred
shareholders ($1.0625
per share) --- --- --- --- --- --- (852) --- (852)
BALANCE AT 6/30/98 790,094 $ 19,752 25,408,041 $ 254 $454,534 $306,637 $(320,442) $(883) $459,852
BALANCE AT 12/31/96 1,050,122 $ 26,253 23,474,751 $ 235 $395,204 $195,514 $(207,523) $ --- $409,683
Net income --- --- --- --- --- 36,467 --- --- 36,467
Shares sold --- --- 46,679 --- 1,456 --- --- --- 1,456
Shares issued in con-
version of convertible
debentures to common
stock --- --- 764,654 7 23,593 --- --- --- 23,600
Shares issued in con-
version of preferred
stock to common stock(145,810) (3,645) 131,929 2 3,643 --- --- --- ---
Dividends to common
shareholders ($1.48
per share) --- --- --- --- --- --- (36,027) --- (36,027)
Dividends to preferred
shareholders ($1.0625
per share) --- --- --- --- --- --- (1,008) --- (1,008)
BALANCE AT 6/30/97 904,312 $ 22,608 24,418,013 $ 244 $423,896 $231,981 $(244,558) $ --- $434,171
</TABLE>
6
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(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, 1997, 1996 and 1995 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. NET INCOME PER COMMON SHARE
Basic earnings per common share is based on the weighted average number
of common and common equivalent shares outstanding. Net income is reduced by
dividends to holders of cumulative convertible preferred stock.
Diluted earnings per common share assumes 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 the net income used in the calculation of basic and diluted
earnings per share.
7
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
BASIC:
Weighted avg. common
shares 25,370,530 24,372,355 25,149,282 24,177,957
Net income $17,889,000 $18,525,000 $35,735,000 $36,467,000
Dividends paid to pre-
ferred shareholders (421,000) (484,000) (852,000) (1,008,000)
Net income available to
common stockholders $17,468,000 $18,041,000 $34,883,000 $35,459,000
Net income per
common share $ .69 $ .74 $ 1.39 $ 1.47
DILUTED:
Weighted average common
shares 25,370,530 24,372,355 25,149,282 24,177,957
Stock options 10,885 29,084 24,302 31,348
Convertible subordinated
debentures 2,913,794 3,748,594 3,104,517 3,655,855
Cumulative convertible pre-
ferred stock 725,711 843,774 736,824 881,900
Average common shares
outstanding 29,020,920 28,993,807 29,014,925 28,747,060
Net income $17,889,000 $18,525,000 $35,735,000 $36,467,000
Interest expense on
convertible sub-
ordinated debentures 1,856,000 2,344,000 3,937,000 4,556,000
Net income assuming con-
version of subordinated
convertible debentures
to common stock $19,745,000 $20,869,000 $39,672,000 $41,023,000
Net income per common
share $ .68 $ .72 $ 1.37 $ 1.43
</TABLE>
NOTE 3. INVESTMENTS IN MARKETABLE SECURITIES:
NHI considers its investments in marketable securities as available for
sale securities and unrealized gains and losses are recorded in shareowners'
equity in accordance with SFAS 115. Realized gains and losses from securities
sales are determined on the specific identification of the securities.
8
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 4. COMMITMENTS, CONTINGENCIES AND GUARANTEES:
At June 30, 1998, NHI was committed, subject to due diligence and
financial performance goals, to fund approximately $133,453,000 in health care
real estate projects of which approximately $41,222,000 is expected to be
funded within the next 12 months. The commitments include mortgage loans or
purchase leaseback agreements for five long-term care centers, four medical
office buildings, 10 assisted living facilities, and approximately 80
residential projects for the developmentally disabled, all at rates ranging
from 9.0% to 11.9%.
In order to obtain the consent of appropriate lenders to NHC's transfer
of assets to NHI, NHI guaranteed certain debt ($19,358,000 at June 30, 1998)
of NHC. The debt is at fixed and variable interest rates with a weighted
average interest rate of 8.3% at June 30, 1998. NHI receives from NHC
compensation of approximately $97,000 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.
Additionally, NHI has also guaranteed bank loans in the amount of
$1,449,570 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.
NOTE 5. CONVERTIBLE SUBORDINATED DEBENTURES:
At June 30, 1998, $56,286,000 of 7% convertible subordinated debentures
(the "1997 debentures") remain outstanding. The 1997 debentures are
convertible at the option of the holder into common stock at a conversion
price of $37.50, subject to adjustment. During the six months ended June 30,
1998, $3,349,000 of the 1997 debentures have been converted into 89,302 shares
of common stock. NHI has reserved 1,500,960 shares of common stock for
conversions of 1997 debentures.
At June 30, 1998, $38,580,000 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 six months
ended June 30, 1998, $8,842,000 of the 1995 debentures have been converted
into 279,585 shares of common stock. NHI has reserved 1,219,921 shares of
common stock for conversion of the 1995 debentures.
9
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
At June 30, 1998, $5,535,000 of debentures remain outstanding related to
"1995 debt service debentures" 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. During the six months ended June 30, 1998, $871,000 of the
debentures have been converted into 26,394 shares of common stock. NHI has
reserved 157,419 shares of common stock for conversion of 1995 debt service
debentures.
During the six months ended June 30, 1998, $5,345,000 of the 7.375%
convertible subordinated debentures (the "1993 debentures") were converted
into 194,671 shares of common stock. None of the 1993 debentures remain
outstanding at June 30, 1998.
At June 30, 1998, $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 six months ended June 30, 1998, none of the senior
debentures were converted. 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 June 30, 1998 $19,752,350 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 715,017
shares of common stock for Preferred Stock conversions.
The Preferred Stock is listed on the NYSE under the symbol "NHIPr."
10
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130") effective for fiscal years beginning after December 15,
1997. SFAS 130 requires that changes in the amounts of certain items,
including gains and losses on certain securities, be shown in the financial
statements. NHI has adopted the provisions of SFAS 130 effective January 1,
1998. NHI has elected to disclose comprehensive income, which includes net
income and unrealized gains and losses on securities in the Consolidated
Statement of Stockholders' Equity.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131") effective for fiscal years beginning after December
15, 1997. This statement establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. NHI will be required to adopt SFAS 131
in the fourth quarter of 1998 and is currently determining the impact that
SFAS 131 will have on its financial statements. If appropriate, NHI will
begin disclosing the required information accordingly.
NOTE 8. STOCK OPTION PLAN
On March 31, 1998, NHI granted options to purchase 45,000 shares of NHI
at $39.875 per share. During the six months ended June 30, 1998, options to
purchase 25,133 shares of NHI were exercised at exercise prices ranging from
$25.00 to $36.00.
In October 1995, the Financial Accounting Standards Board issued
Statement 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.
11
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
June 30, 1998
(Unaudited)
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 June 30,
1998, NHI had interests in net real estate owned by it and mortgage
investments totaling $661.2 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.
As of June 30, 1998, the Company has investments in 206 health care
facilities located in 27 states consisting of 162 long-term care facilities,
two acute care hospitals, nine medical office buildings, ten assisted living
facilities, six retirement centers, and 17 residential projects for the
developmentally disabled. These investments consist of approximately $424.6
million aggregate principal amount of loans to 54 borrowers, $200.0 million of
purchase leaseback transactions with six lessees and $36.7 million invested in
REMIC pass through certificates backed by first mortgage loans to four
operators. Of these 206 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 23.5% of total real estate assets
on June 30, 1998.
Capital Resources and Liquidity
NHI has generated net cash from operating activities for the first six
months of 1998 in the amount of $43.0 million. The funds were used along with
$65.4 million from prepayments and collections of mortgage notes receivable
and $0.9 million from the sale of common stock to make additional investments
in income producing assets and real estate properties totaling approximately
$48.2 million, to make investments in marketable securities of $21.6 million,
to repay long-term debt $1.9 million and to pay dividends to stockholders of
$37.9 million.
The entire amount of NHI's $100 million revolving line of credit was
available to be drawn at June 30, 1998.
The Company's balance sheet was further strengthened by the conversion
of $1.1 million of NHI's outstanding convertible preferred stock and $18.4
million of convertible debentures to common equity during the first six months
of 1998. NHI's nonconvertible debt as a percentage of total capitalization
has been reduced to 20.4% at June 30, 1998. The Company continues into 1998
well positioned to take advantage of new investment opportunities.
12
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
June 30, 1998
(Unaudited)
At June 30, 1998, the Company was committed, subject to due diligence
and financial performance goals, to fund approximately $133.5 million in
health care real estate projects, of which approximately $41.2 million is
expected to be funded within the next 12 months. The commitments include
mortgage loans or purchase leaseback agreements for five long-term health care
centers, four medical office buildings, 10 assisted living facilities and
approximately 80 residential projects for the developmentally disabled
generally at rates ranging from 9.0% to 11.9%.
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, and the
assumption of secured or unsecured indebtedness or by the sale of all or a
portion of certain currently held investments.
Results of Operations
Three Months ended June 30, 1998 Compared to Three Months Ended June 30, 1997.
Net income for the three months ended June 30, 1998 is $17.9 million
versus $18.5 million for the same period of 1997, a decrease of 3.4%. Diluted
earnings per common share decreased four cents or 5.6% to 68 cents in the 1998
period from 72 cents in the 1997 period.
Total revenues for the three months ended June 30, 1998 decreased $1.3
million or 5.0% to $25.9 million from $27.2 million for the three months ended
June 30, 1997. Revenues from mortgage interest income decreased $2.9 million
or 17.5% in the 1998 period as compared to the 1997 period. Revenues from
rental income increased $0.6 million or 6.3% when compared to the same period
in 1997. Revenues from investment interest and other income increased $1.0
million or 159.0% compared to the same period a year ago.
The decrease in mortgage interest income is due to the receipt by NHI of
prepayments of $235.3 million of first mortgages receivable during the past
four quarters, compared to new mortgage investments of $119.7 million during
the same period. The increase in rental income resulted primarily from
investments of $28.0 million in additional real estate properties during the
last 12 months and also from increased "revenue participations" and
"additional rent" earned under NHI's existing mortgages and leases. The
increase in investment interest and other income is due to the temporary
investment of higher levels of cash.
Earnings for the quarter include $1.9 million or eight cents per share
basic or seven cents per share diluted of nonrecurring net income. The quarter
a year ago included nonrecurring income of $0.7 million or three cents per share
basic and diluted. This nonrecurring income is primarily from the receipt of
commitment fees and prepayment penalties from early loan repayments.
Total expenses for the 1998 three month period decreased $0.7 million or
8.2% to $8.0 million from $8.7 million for the 1997 three month period.
Interest expenses decreased $1.0 million or 17.4% in the 1998 three month
period as compared to the 1997 three month period. Depreciation and
amortization increased $0.3 million or 13.9% when compared to the same period
in 1997. General and administrative expenses in 1998 increased 4.2% to $1.0
million when compared to the 1997 period.
13
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
June 30, 1998
(Unaudited)
Interest expense decreased due to lower levels of long-term and
subordinated debt compared to the quarter a year ago. Depreciation increased
as a result of the Company's placing of newly constructed assets in service.
Six Months ended June 30, 1998 Compared to Six Months Ended June 30, 1997.
Net income for the six months ended June 30, 1998 is $35.7 million
versus $36.5 million for the same period of 1997, a decrease of 2.0%. Diluted
earnings per common share decreased six cents or 4.2% to $1.37 per share in
the 1998 period from $1.43 per share in the 1997 period.
Total revenues for the six months ended June 30, 1998 decreased $1.7
million or 3.2% to $51.9 million from $53.6 million for the six months ended
June 30, 1997. Revenues from mortgage interest income decreased $4.9 million
or 14.7% in the 1998 period as compared to the 1997 period. Revenues from
rental income increased $1.3 million or 6.5% when compared to the same period
in 1997. Revenues from investment interest and other revenue for the 1998
period increased $1.9 million or 166.5% to $3.0 million from $1.1 million when
compared to the 1997 period.
The decrease in mortgage interest income is due to the receipt by NHI of
prepayments of $235.3 million of first mortgages receivable during the past
four quarters, compared to new mortgage investments of $119.7 million during
the same period. The increase in rental income resulted primarily from the
net increase in investments in real estate properties during the last 12
months and also from increased "additional rent" and "revenue participations"
earned under the Company's existing leases and mortgage agreements. The
increase in investment interest and other income is due to the temporary
investment of higher cash amounts.
Earnings for the six months ended June 30, 1998 include $3.8 million or
$0.15 per share basic or $0.13 per share diluted of nonrecurring net income.
The six months last year included nonrecurring income of $2.0 million or eight
cents per share basic and seven cents per share diluted. This nonrecurring
income is primarily from the receipt of commitment fees and prepayment
penalties from early loan repayments.
Total expenses for the 1998 six month period decreased $1.0 million or
5.7% to $16.2 million from $17.2 million for the 1997 period. Interest
expenses decreased $1.5 million or 13.9% in the 1998 six month period as
compared to the 1997 period. Depreciation and amortization increased $0.5
million or 13.5% when compared to the same period in 1997.
Interest expense decreased due to lower levels of long-term and
subordinated debt compared to the six month period a year ago. Depreciation
increased as a result of the Company's placing of newly constructed assets in
service.
Future Growth
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.
14
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
June 30, 1998
(Unaudited)
Year 2000 Compliance
NHI is currently in the process of evaluating its information technology
infrastructure for Year 2000 compliance. NHI does not expect that the cost to
modify its information technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. NHI
does not anticipate any material disruption in its operations as a result of
any failure by NHI to be in compliance. NHI does not currently have any
information concerning the Year 2000 compliance status of its suppliers and
other customers. In the event that any of NHI's significant suppliers or
customers do not successfully and timely achieve Year 2000 compliance, NHI's
business or operations could be adversely affected.
Item 3. Quantitative and Qualitative Information About Market Risk
Not Applicable.
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 - Exhibit 27 - Financial Data Schedule
(for SEC purposes only)
(b) Reports on Form 8-K - none required
15
<PAGE>
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 July 29, 1998 /s/ Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr.
Secretary
Date July 29, 1998 /s/ Donald K. Daniel
Donald K. Daniel
Principal Accounting Officer
16
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