<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____ to ____
Commission file number 1-11314
LTC PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
Maryland 71-0720518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
(Address of principal executive offices)
(805) 981-8655
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports 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 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, outstanding at October 31,
1996 - 19,477,715
================================================================================
<PAGE>
LTC PROPERTIES, INC.
FORM 10-Q
SEPTEMBER 30, 1996
INDEX
PART I -- FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets....................... 3
Condensed Consolidated Statements of Income................. 4
Condensed Consolidated Statements of Cash Flows............. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations... 10
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 14
2
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
(Unaudited)
<S> (In thousands)
ASSETS <C> <C>
Real Estate Investments:
Buildings and improvements, net of
accumulated depreciation and
amortization: 1996 - $9,799;
1995 - $5,487 $ 185,304 $ 104,546
Land 10,136 7,236
Mortgage loans receivable, net of
allowance for doubtful accounts:
1996 - $1,000; 1995 - $997 150,634 161,059
Mortgage-backed securities 92,744 67,384
----------- -----------
Real estate investments, net 438,818 340,225
Other Assets:
Cash and cash equivalents 2,421 1,434
Restricted cash - 8,300
Debt issue costs, net 4,387 3,331
Interest receivable 2,542 2,093
Prepaid expenses and other assets 2,832 1,779
----------- -----------
12,182 16,937
----------- -----------
Total assets $ 451,000 $ 357,162
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible subordinated debentures due
1999 - 2004 $ 137,843 $ 94,641
Bank borrowings 38,000 48,470
Mortgage loans payable 54,308 16,707
Bonds payable and capital lease
obligations 14,140 14,265
Accrued interest 3,019 3,196
Accrued expenses and other liabilities 3,591 2,415
Distributions payable 6,634 5,764
----------- -----------
Total liabilities 257,535 185,458
Minority interest 10,258 1,098
Commitments - -
Stockholders' equity:
Preferred stock $0.01 par value:
10,000,000 shares authorized; none issued
and outstanding - -
Common stock $0.01 par value;
40,000,000 shares authorized; shares
issued and outstanding: 1996 -
19,350,883; 1995 - 18,297,254 194 183
Capital in excess of par value 193,259 178,453
Cumulative net income 59,678 42,988
Cumulative distributions (69,924) (51,018)
----------- -----------
Total stockholders' equity 183,207 170,606
----------- -----------
Total liabilities and stockholders' $ 451,000 $ 357,162
equity =========== ===========
</TABLE>
See Accompanying Notes
3
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 5,712 $ 2,695 $14,773 $ 6,894
Interest income from mortgage loans 4,137 3,594 12,969 8,892
Interest income from mortgage-backed
securities 3,867 2,583 10,654 8,283
Interest and other income 576 360 1,179 1,228
-------- ------- ------- -------
Total revenues 14,292 9,232 39,575 25,297
Expenses:
Interest expense 5,501 2,582 14,990 5,999
Depreciation and amortization 1,690 830 4,436 2,181
Amortization of Founders' stock 19 63 95 199
Minority interest 325 28 597 28
Operating and other expenses 1,139 758 2,767 2,002
-------- ------- ------- -------
Total expenses 8,674 4,261 22,885 10,409
-------- ------- ------- -------
Net income $ 5,618 $ 4,971 $16,690 $14,888
======== ======= ======= =======
Net income per share $ 0.29 $ 0.27 $ 0.88 $ 0.82
======== ======= ======= =======
Weighted average share and share
equivalents outstanding 19,296 18,366 19,033 18,173
======== ======= ======= =======
</TABLE>
See Accompanying Notes
4
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 16,690 $ 14,888
Depreciation on real estate 4,405 2,803
Depreciation, other amortization and non-cash charges 1,397 783
Amortization of Founders' stock 95 199
--------- ---------
Cash flow from operating activities available for distribution or reinvestment 22,587 18,673
Net change in other assets and liabilities (123) (1,871)
--------- ---------
Net cash provided by operating activities 22,464 16,802
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debentures, net 57,887 59,091
Borrowings, net (10,470) 16,800
Distributions paid (18,036) (15,473)
Repurchase of common stock (1,831) (18,089)
Other (105) (243)
--------- ---------
Net cash provided by financing activities 27,445 42,086
CASH FLOWS USED IN INVESTING ACTIVITIES:
Investment in real estate mortgages (72,565) (83,121)
Acquisitions of real estate properties, net (77,048) (8,346)
Proceeds from sale of mortgage-backed securities, net 86,674 19,216
Proceeds from sale of real estate properties 7,589 -
Principal payments on mortgage loans payable and capital lease obligations (3,689) (18)
Restricted cash 8,300 -
Principal payments on real estate mortgages 2,025 535
Deferred facility fee, net 376 361
Other (584) 64
--------- ---------
Net cash used in investing activities (48,922) (71,309)
--------- ---------
Increase (decrease) in cash and cash equivalents 987 (12,421)
Cash and cash equivalents, beginning of period 1,434 14,266
--------- ---------
Cash and cash equivalents, end of period $ 2,421 $ 1,845
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 14,333 $ 6,387
========= =========
Non-cash investing and financing transactions:
Conversion of debentures into common stock $ 16,798 $ 19,357
Assumption of mortgage loans payable relating to acquisitions of real estate properties 9,641 13,406
Exchange of mortgage loans for mortgage-backed securities 80,962 -
Issuance of mortgage loans payable for mortgage-backed securities 31,525 -
Minority interest related to acquisitions of real estate properties 8,932 1,041
</TABLE>
See Accompanying Notes
5
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(i) The condensed consolidated financial statements included herein
have been prepared by LTC Properties, Inc. (the "Company"), without audit, and
include all adjustments which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the three-month and nine-
month periods ended September 30, 1996 and 1995 pursuant to the rules and
regulations of the Securities and Exchange Commission. The accompanying
consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries and controlled partnerships. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures in the accompanying financial
statements are adequate to make the information presented not misleading. The
results of operations for the three-month and nine-month periods ended September
30, 1996 and 1995 are not necessarily indicative of the results for a full year.
(ii) No provision has been made for federal income taxes. The Company
qualifies as a real estate investment trust ("REIT") under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. As such, the Company is
not taxed on its income provided that at least 95 percent of its taxable income
is distributed to its stockholders.
(iii) During the nine-month period ended September 30, 1996, the
Company invested $71,565,000 in mortgage loans secured by, among other things,
28 skilled nursing facilities located in 14 states with a total of 3,457 beds
and certain guarantees. The mortgage loans, which individually range from
$1,000,000 to $11,250,000 in principal amount, have stated maturities of 7 to 20
years, generally have 25-year amortization schedules, have an initial weighted
average interest rate of 10.56%, generally provide for increases in the interest
rate and contain certain facility fees. In addition, the Company provided a
$1,000,000 additional advance on a previously existing loan.
In March 1996, the Company provided non-recourse mortgage loans
secured by long-term care facilities to three of its wholly owned subsidiaries
and to certain partnerships in which the Company was a general partner totaling
$31,525,000. Concurrent with the closing of the loans, the Company completed a
real estate mortgage investment conduit ("REMIC") transaction in which loans
totaling $112,487,000, including the $31,525,000 originated in 1996, were
exchanged for mortgage pass-through certificates for an equal amount. See note
(iv).
In addition to the mortgage loans, the Company acquired for
approximately $27,430,000 14 assisted living residences ("ALFs") in Alabama,
Texas and Washington with a total of 509 units. Thirteen of these ALFs were
purchased for a total of $26,180,000 and have been leased to Assisted Living
Concepts, Inc. ("ALC") for a total annual rent of approximately $2,485,000
(subject to increases) pursuant to long-term non-cancelable agreements. Included
in the leases to ALC were five ALFs in Washington which were purchased for
$11,280,000 and had been financed by the Company through the issuance of
$8,300,000 of multi-family tax-exempt revenue bonds in December 1995 that have a
total cost of funds of approximately 5.9%. As of September 30, 1996, the Company
had acquired all five of
6
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
the Washington ALFs and had leased them to ALC generating an initial annual rent
of approximately $948,000. The Company also acquired for $14,450,000 four
skilled nursing facilities in Alabama, Georgia and Tennessee with a total of 472
beds.
During the nine months ended September 30, 1996, six newly formed
limited partnerships, of which the Company is the general partner, acquired 16
skilled nursing facilities in Alabama, Arizona, Iowa and Texas for a total of
approximately $53,741,000. These facilities were purchased subject to mortgage
loans of approximately $9,641,000. Under the partnership agreements, the
Company has guaranteed payment of a 10% preferred return to the holders of the
$8,932,000 in limited partnership interests. Under certain circumstances, the
limited partnership interests can be exchanged, at the option of the holder,
into 628,511 shares of the Company's common stock commencing in January and July
1997. The mortgage loans of $9,641,000 assumed by the Company have an initial
average interest rate of 11.64%, are due in 2002-2005 and are currently owned by
REMICs formed by the Company in 1993 and 1994. In conjunction with these
REMICs, the Company sold senior certificates to third parties in 1993 and 1994
at a blended interest rate of approximately 7.1% and 8.9%, respectively, and
retained the remaining certificates.
(iv) On March 29, 1996, the Company securitized approximately
$112,487,000 of loans by creating a REMIC which, in turn, issued mortgage pass-
through certificates for the same amount in the form of various classes of
certificates (the "Certificates"). As part of the securitization, the Company
sold approximately $90,552,000 of Certificates to third parties at an effective
interest rate of 7.19%. The Company retained the remaining $21,935,000 face
amount of such Certificates which are effectively subordinated in right of
payment to the Certificates sold to third parties. The net proceeds from the
REMIC transaction were used to repay borrowings outstanding under the Company's
lines of credit. The mortgage loans represented by the Certificates consists of
34 mortgage loans, including the loans provided to the Company's wholly owned
subsidiaries and to the limited partnerships totaling $31,525,000, and are
secured by 55 skilled nursing facilities in 17 states. The mortgage loans in
the REMIC pool had an initial weighted average mortgage interest rate of 10.69%
and a weighted average remaining term to stated maturity of approximately 107
months. Concurrently with the closing of the REMIC transaction, the Company's
interest rate swap agreement entered into in May 1995 was terminated at a cost
of approximately $1,500,000. Because the purpose of the agreement was to hedge
the interest rate spread on the mortgages underlying a portion of the
Certificates sold to third parties, the costs of terminating the swap, along
with other costs of the transaction are reflected in the carrying value of the
retained Certificates. The Certificates retained by the Company have a weighted
average effective yield of approximately 18.0%.
The mortgage-backed securities owned by the Company, which at
September 30, 1996 had a carrying value of $92,744,000, are subordinated to
approximately $211,600,000 of senior Certificates which carry a weighted average
interest rate of 7.84%. The Company's mortgage-backed securities have a
weighted average effective yield of approximately 16.65%.
7
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(v) On February 5, 1996, the Company sold, through a public offering,
$30,000,000 aggregate principal amount of 7.75% Convertible Subordinated
Debentures due January 1, 2002. The debentures are convertible at any time
prior to maturity into shares of the Company's common stock at a conversion
price of $16.50 per share, subject to adjustments under certain circumstances.
Interest on the debentures is payable semi-annually on January 1 and July 1 each
year, commencing on July 1, 1996. The net proceeds were used to repay
borrowings outstanding under the Company's lines of credit.
(vi) During the nine-month period ended September 30, 1996, holders of
$2,293,000 in principal amount of 9.75% Convertible Subordinated Debentures due
2004 elected to convert the debentures into 229,300 shares of common stock at
$10.00 per share. During the nine months ended September 30, 1996, holders of
$6,207,000 in principal amount of 8.5% Convertible Subordinated Debentures due
2000 elected to convert into 413,796 shares of common stock at $15.00 per share.
In addition, holders of $6,298,000 in principal amount of 8.5% Convertible
Subordinated Debentures due 2001 elected to convert the debentures into 406,321
shares of common stock at $15.50 per share. Holders of $2,000,000 in principal
amount of 7.75% Convertible Subordinated Debentures due 2002 elected to convert
into 121,212 shares of common stock at $16.50 per share. The conversions during
the nine months ended September 30, 1996 resulted in an additional equity of
approximately $16,270,000, net of unamortized issuance costs of approximately
$528,000. There was approximately $245,000 of non-cash interest expense that
was accrued but was not required to be paid as a result of the conversions of
the debentures.
(vii) On March 15, 1996, the Company filed a shelf-registration
statement with the Securities and Exchange Commission covering up to
$125,000,000 of debt and equity securities to be sold from time to time in the
future. The registration statement was declared effective on April 4, 1996.
Pursuant to the shelf registration, the Company completed the sale of
$30,000,000 of 8.25% Convertible Subordinated Debentures due 2001 in August
1996. The debentures are convertible into shares of the Company's common stock
at a price of $17.25. Net proceeds from the offering were used to repay short-
term borrowings.
(viii) In 1996, the Company's Board of Directors approved the
issuance of 160,000 shares of restricted stock to certain employees and non-
employee directors pursuant to the Company's Amended and Restated Option Plan.
The restricted shares will vest over seven years, beginning January 1998.
Dividends are payable on the restricted shares to the extent and on the same
date as dividends are paid on all of the Company's common stock.
(ix) During the nine months ended September 30, 1996, the Company
repurchased and retired 120,000 shares of common stock for an aggregate purchase
price of approximately $1,830,800.
Subsequent to September 30, 1996, the Company invested in additional
mortgage loans totaling $1,700,000. As of November 1, 1996, the Company had
outstanding commitments totaling $101,384,000 consisting of approximately
$12,450,000 in mortgage loans
8
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
and the acquisition of 39 assisted living facilities for an aggregate purchase
price of approximately $88,934,000, including the $48,959,000 commitment to
Assisted Living Concepts, Inc. as discussed in note (xi). The Company expects to
fund at least $23,050,000 of these commitments by the end of 1996.
Subsequent to September 30, 1996, an additional $8,830,000 in
principal amount of Convertible Subordinated Debentures converted into 609,686
shares of the Company's common stock.
(x) In September 1996, a quarterly dividend of $0.34 per share
aggregating approximately $6,634,000 was declared by the Board of Directors
payable on October 15, 1996 to stockholders of record on September 30, 1996.
The dividend has been reflected as distributions payable in the accompanying
financial statements as of September 30, 1996.
(xi) In 1996, the Company's Board of Directors authorized an increase
in the Company's investment in assisted living facilities ("ALFs") from 10% to
20% of its adjusted gross real estate investment portfolio (adjusted to include
the mortgage loans to third parties underlying the $92,744,000 investment in
mortgage-backed securities). In addition, the Board of Directors also
authorized an increase in the Company's investment in properties operated by
Assisted Living Concepts, Inc. ("ALC"), an owner, operator and developer of ALFs
whose securities are listed on the American Stock Exchange, from 5% to 10% of
its adjusted gross real estate investment portfolio (which was approximately
$600,747,000 as of September 30, 1996). Currently, two of the Company's
executive officers serve as members of the Board of Directors of ALC. As of
November 1, 1996, three executive officers of the Company own approximately 5.5%
of ALC's common stock. As of September 30, 1996, the Company had investments in
ALFs and properties operated by ALC of approximately 6.2% and 3.6%, respectively
of the Company's total adjusted gross real estate investment portfolio.
In July 1996, in connection with obtaining a $48,959,000 commitment to
enter into a sale leaseback transaction with ALC, the Company agreed to sell
back four ALFs it acquired during 1996 in Texas to ALC for approximately
$7,589,000. There was no gain or loss recognized on the sale, however, the
Company received an administration fee of approximately $214,000 in conjunction
with the sale of the four ALF facilities. In connection with the commitment,
the Company entered into a one-year forward ten-year interest rate swap
agreement (the "Agreement"). Under the Agreement, the Company will be credited
interest at a three-month LIBOR and will incur interest at a fixed rate of
6.835% on a $40,000,000 notional amount beginning on November 7, 1997. The
Agreement will be terminated on or before November 7, 1998 which is the latest
date by which the Company anticipates having long-term financing in place on
these residences.
9
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Nine months 1996 Compared to Nine months 1995
During the nine months ended September 30, 1996, cash flow from
operating activities available for distribution or reinvestment was $22,587,000
versus $18,673,000 for the comparable period in 1995, an increase of $3,914,000
or 21%. Revenues for the nine months ended September 30, 1996 were $39,575,000
versus $25,297,000 for the same period in 1995. Revenues increased $14,278,000
primarily as a result of increased rental income of $7,879,000 and increased
interest income on mortgage loans of $4,077,000 attributable to investments of
approximately $233,000,000 in long-term care facilities the Company completed
since September 30, 1995. Revenues also increased $2,371,000 as a result of
interest income from mortgage-backed securities. These increases were offset by
a decrease in other income of $49,000.
Total expenses for the nine months ended September 30, 1996 were
$22,885,000 versus $10,409,000 for the same period in 1995. The increase of
$12,476,000 is due in large part to an increase of $8,991,000 in interest
expense. Interest expense increased by $5,966,000 due to the issuance of
convertible subordinated debentures in September 1995 and during 1996 in the
amount of $61,500,000 and $60,000,000, respectively. Interest expense also
increased by $3,334,000 as a result of the multi-family tax-exempt revenue bond
financing and assumption of capital leases and mortgage loans by the Company.
The remaining increase of $728,000 was due to interest on borrowings under the
Company's lines of credit which was offset by a decrease of $1,037,000 as a
result of conversions of convertible subordinated debentures since September 30,
1995. Depreciation and amortization expense increased by $2,151,000 primarily
due to the acquisition of 43 additional skilled nursing and assisted living
facilities in the past year. Operating and other expenses increased by $765,000
principally due to higher administrative costs. The remaining increase in total
expenses of $569,000 related to the payments made to the holders of the limited
partnership interests.
Third Quarter 1996 Compared to Third Quarter 1995
During the three months ended September 30, 1996, cash flow from
operating activities available for distribution or reinvestment was $7,900,000
versus $6,468,000 for the comparable period in 1995. Revenues for the three
months ended September 30, 1996 were $14,292,000 versus $9,232,000 for the same
period in 1995. Revenues increased
10
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
$5,060,000 primarily as a result of increased rental income of $3,017,000,
increased interest income on mortgage-backed securities of $1,284,000 and
increased interest income on mortgage loans of $543,000. Other income increased
$216,000 primarily due to an administration fee received by the Company in
connection with the sale of the four assisted living facilities in Texas.
Total expenses for the three months ended September 30, 1996 were
$8,674,000 versus $4,261,000 for the same period in 1995. The increase of
$4,413,000 is due in large part to an increase of $2,919,000 in interest
expense. Interest expense increased primarily due to the issuance of convertible
subordinated debentures in September 1995 and 1996 and debt assumed by the
Company as previously described. Depreciation and amortization expense increased
by $816,000 primarily due to the acquisition of additional skilled nursing and
assisted living facilities in the past year. Operating and other expenses
increased by $381,000 principally due to higher administrative costs. The
remaining increase in total expenses of $297,000 related principally to the
payments made to the holders of the limited partnership interests formed in June
1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company's real estate investment
portfolio consisted of approximately $205,239,000 invested in owned skilled
nursing and assisted living facilities, approximately $151,634,000 invested in
mortgage loans and approximately $92,744,000 invested in mortgage-backed
securities. The Company's portfolio consists of 250 skilled nursing facilities
and 19 assisted living facilities in 30 states.
During the nine month period ended September 30, 1996, the Company
completed investments totaling approximately $168,186,000 which consisted of
purchases of 34 long-term care facilities for approximately $95,621,000 and
mortgage loans for approximately $72,565,000. The Company financed its
investments through the sale of $60,000,000 aggregate principal amount of
Convertible Subordinated Debentures in February and August 1996, the sale of
$90,552,000 of mortgage-backed securities in March 1996, the assumption of non-
recourse mortgage loans totaling $9,641,000, the $8,932,000 in limited
partnership interests, short-term borrowings and cash on hand.
In July 1996, in connection with obtaining a $48,959,000 commitment to
enter into a sale leaseback transaction with Assisted Living Concepts,
Inc.("ALC"), the Company agreed to sell back four assisted living facilities
("ALFs") it acquired during 1996 in Texas to ALC for approximately $7,589,000.
There was no gain or loss recognized on the sale, however, the Company received
an administration fee of approximately $214,000 in conjunction with the sale of
the four ALF facilities. In connection with the commitment, the Company entered
into a one-year forward ten-year interest rate swap agreement (the "Agreement").
Under the Agreement, the Company will be credited interest at a three-month
LIBOR and will incur interest at a fixed rate of 6.835% on a $40,000,000
notional amount beginning on November 7, 1997. The Agreement will be terminated
on or before November 7, 1998
11
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
which is the latest date by which the Company anticipates having long-term
financing in place on these residences.
The Company has the option to redeem, without penalty, its currently
outstanding $848,000 aggregate principal amount of 9.75% Convertible
Subordinated Debentures at any time. Since such debentures are convertible into
common stock of the Company at a conversion price of $10.00 per share, the
Company anticipates that substantially all of such debentures will be converted
if it elects to redeem the debentures.
In May 1996, the terms of the Company's unsecured line of credit were
amended, including certain financial covenants, to increase the amount of the
line from $35,000,000 to $45,000,000 and to extend the expiration date from
December 31, 1996 to May 31, 1998. As of November 1, 1996, the Company had
$42,000,000 in borrowings outstanding under its secured and unsecured lines of
credit bearing a weighted average interest rate of approximately 6.9%.
Subsequent to September 30, 1996, the Company invested in additional
mortgage loans totaling $1,700,000. As of November 1, 1996, the Company had
outstanding commitments totaling $101,384,000 consisting of approximately
$12,450,000 in mortgage loans and the acquisition of 39 assisted living
facilities for an aggregate purchase price of approximately $88,934,000,
including the $48,959,000 commitment to Assisted Living Concepts, Inc. The
Company expects to fund at least $23,050,000 of these commitments by the end of
1996.
At November 1, 1996, the Company had approximately $95,000,000
available under its shelf registration statement for future issuance of capital
from time to time. In addition, based on the current level of collateral, there
was approximately $70,597,000 available under its lines of credit which will be
increased to $87,000,000 when additional collateral is accepted.
The Company also anticipates completing a securitization transaction
within the next year, the proceeds of which will be used to repay borrowings
outstanding under its repurchase agreement and its unsecured line of credit. In
connection with such securitization, the Company, in September 1995, entered
into a seven-year forward interest rate swap agreement (the "September 1995
Agreement"), which effectively locked-in the net interest margin on $60,000,000
principal amount of senior certificates that will be sold. The September 1995
Agreement will be terminated at the earlier of (i) the completion of the
securitization or (ii) February 28, 1997 and has been accounted for as a hedging
transaction. As of September 30, 1996, the Company had an unrealized gain of
approximately $820,000 on the September 1995 Agreement.
In June 1996, the Financial Accounting Standards Board issued
Statement No. 125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" which will require the Company to reclassify
its investments in mortgage-backed securities that can contractually be prepaid
to available-for-sale and to be measured like
12
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
investments in debt securities consistent with Statement 115. Adoption of
Statement No. 125 is not required until January 1, 1997 and the effect of
adoption cannot be assessed at this time.
The Company believes that its current cash from operations available
for distribution or reinvestment and its borrowing capacity are sufficient to
provide for payment of its operating costs, provide funds for distribution to
its stockholders and to fund additional investments.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Certain information contained in this report includes forward looking
statements, which can be identified by the use of forward looking terminology
such as "may", "will", "expect", "should" or comparable terms or negative
thereof. These statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the statements.
These risks and uncertainties include (without limitation) the following: the
effect of economic and market conditions and changes in interest rates,
government policy relating to the health care industry including changes in
reimbursement levels under the Medicare and Medicaid programs, changes in
reimbursement by other third party payors, the financial strength of the
operators of the Company's facilities as it affects the continuing ability of
such operators to meet their obligations to the Company under the terms of the
Company's agreements with its borrowers and operators, the amount and the timing
of additional investments, access to capital markets and changes in tax laws and
regulations affecting real estate investment trusts.
13
<PAGE>
PART II
LTC PROPERTIES, INC.
OTHER INFORMATION
SEPTEMBER 30, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11.1 Computation of earnings per share
27 Financial Data
In accordance with Item 601(b)(4)(iii) of
Regulation S-K, certain instruments pertaining
to Registrant's long-term debt have not been
filed; copies thereof will be furnished to the
Securities and Exchange Commission upon request.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company
during the three months ended September 30,
1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LTC PROPERTIES, INC.
Registrant
Dated: November 13, 1996 By: /s/ JAMES J. PIECZYNSKI
-----------------------
James J. Pieczynski
Senior Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT 11.1
LTC PROPERTIES, INC.
COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
Three months ended September 30,
1996 1995
---------- ----------
<S> <C> <C>
PRIMARY:
Net income applicable to common shares $ 5,618 $ 4,971
========== ==========
Applicable common shares:
Weighted average outstanding shares during the period 18,861 18,073
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using
the treasury stock method) 435 293
---------- ----------
Total 19,296 18,366
========== ==========
Net income per share of common stock $ 0.29 $ 0.27
========== ==========
FULLY DILUTED:
Net income $ 5,618 $ 4,971
Add back minority interest - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 9.75% convertible subordinated debentures 24 287
Reduction of interest and amortization expenses resulting from assumed
conversion of 8.5% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 8.25% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 7.75% convertible subordinated debentures - (a) N/A
Less applicable income taxes - -
---------- ----------
Adjusted net income applicable to common shares $ 5,642 $ 5,258
========== ==========
Applicable common shares:
Weighted average outstanding shares during the period 18,861 18,073
Weighted average shares issuable upon exercise of common stock equivalents
outstanding (principally stock options using the treasury stock method) 435 332
Assumed conversion of partnership units - (a) - (a)
Assumed conversion of 9.75% convertible subordinated debentures 95 1,148
Assumed conversion of 8.5% convertible subordinated debentures - (a) - (a)
Assumed conversion of 8.25% convertible subordinated debentures - (a) - (a)
Assumed conversion of 7.75% convertible subordinated debentures - (a) N/A
Less contingent shares - -
---------- ----------
Total 19,391 19,553
========== ==========
Net income per share of common stock $ 0.29 $ 0.27
========== ==========
</TABLE>
a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of fully diluted net income per share of common stock.
<PAGE>
EXHIBIT 11.1
LTC PROPERTIES, INC.
COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
Nine months ended September 30,
1996 1995
---------- ----------
<S> <C> <C>
PRIMARY:
Net income applicable to common shares $ 16,690 $ 14,888
========== ==========
Applicable common shares:
Weighted average outstanding shares during the period 18,609 17,940
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using
the treasury stock method) 424 233
---------- ----------
Total 19,033 18,173
========== ==========
Net income per share of common stock $ 0.88 $ 0.82
========== ==========
FULLY DILUTED:
Net income $ 16,690 $ 14,888
Add back minority interest - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 9.75% convertible subordinated debentures 124 1,160
Reduction of interest and amortization expenses resulting from assumed
conversion of 8.5% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 8.25% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 7.75% convertible subordinated debentures - (a) N/A
Less applicable income taxes - -
---------- ----------
Adjusted net income applicable to common shares $ 16,814 $ 16,048
========== ==========
Applicable common shares:
Weighted average outstanding shares during the period 18,609 17,940
Weighted average shares issuable upon exercise of common stock equivalents
outstanding (principally stock options using the treasury stock method) 433 332
Assumed conversion of partnership units - (a) - (a)
Assumed conversion of 9.75% convertible subordinated debentures 164 1,532
Assumed conversion of 8.5% convertible subordinated debentures - (a) - (a)
Assumed conversion of 8.25% convertible subordinated debentures - (a) - (a)
Assumed conversion of 7.75% convertible subordinated debentures - (a) N/A
Less contingent shares - -
---------- ----------
Total 19,206 19,804
========== ==========
Net income per share of common stock $ 0.88 $ 0.81
========== ==========
</TABLE>
a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of fully diluted net income per share of common stock.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996
<CASH> 0 2,421
<SECURITIES> 0 92,744
<RECEIVABLES> 0 151,634
<ALLOWANCES> 0 1,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 205,239
<DEPRECIATION> 0 9,799
<TOTAL-ASSETS> 0 451,000
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 8,300
0 0
0 0
<COMMON> 0 194
<OTHER-SE> 0 183,013
<TOTAL-LIABILITY-AND-EQUITY> 0 451,000
<SALES> 0 0
<TOTAL-REVENUES> 14,292 39,575
<CGS> 0 0
<TOTAL-COSTS> 8,674 22,885
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,501 14,990
<INCOME-PRETAX> 5,618 16,690
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,618 16,690
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,618 16,690
<EPS-PRIMARY> .291 .877
<EPS-DILUTED> .291 .875
</TABLE>
