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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _____________________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-3997619
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4675 MACARTHUR COURT, SUITE 1170 92660
NEWPORT BEACH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code: (714) 251-1211
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock, $.10 Par Value New York Stock Exchange
6.25% Convertible Debentures Due 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Company is approximately $815,450,000 as of January 31, 1996.
38,726,532
(NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JANUARY 31, 1996
AS ADJUSTED TO REFLECT TWO-FOR-ONE STOCK SPLIT TO BE EFFECTIVE ON MARCH 8,
1996)
Part III is incorporated by reference from the registrant's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 19, 1996.
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PART I
ITEM 1. BUSINESS.
Nationwide Health Properties, Inc., a Maryland corporation organized in
October 1985 (the "Company"), is a real estate investment trust ("REIT") which
invests primarily in health care related facilities and provides financing to
health care providers. As of December 31, 1995, the Company had investments in
210 facilities located in 30 states. The facilities include 173 long-term
health care facilities, 35 assisted living facilities and two rehabilitation
hospitals.
As of December 31, 1995, the Company had direct ownership of 136 long-term
health care facilities, 30 assisted living facilities and two rehabilitation
hospitals (the "Properties"). All of the Company's owned facilities are leased
under "net" leases (the "Leases"), which are accounted for as operating
leases, to 33 health care providers (the "Lessees") including Beverly
Enterprises, Inc. ("Beverly"), ARV Assisted Living, Inc., Sun Healthcare
Group, Inc., Horizon/CMS Healthcare Corporation, Living Centers of America,
Inc., GranCare, Inc., Integrated Health Services, Inc. and HEALTHSOUTH
Corporation. Of the Lessees, only Beverly is expected to account for more than
10% of the Company's revenues in 1996.
The Leases have initial terms ranging from 10 to 19 years, and the Leases
generally have two or more multiple-year renewal options. The Company earns
fixed monthly minimum rents and may earn periodic additional rents. The
additional rent payments are generally computed as a percentage of facility
net patient revenues in excess of base amounts. The base amounts, in most
cases, are net patient revenues for the first year of the lease. Most Leases
contain cross collateralization and cross default provisions tied to other
Leases with the same Lessee, as well as grouped lease renewals and grouped
purchase options. Obligations under the Leases have corporate guarantees, and
leases covering 99 facilities are backed by irrevocable letters of credit or
security deposits which cover from 1 to 12 months of monthly minimum rents.
Under the terms of the Leases, the Lessee is responsible for all maintenance,
repairs, taxes and insurance on the leased properties.
As of December 31, 1995, the Company held 28 mortgage loans secured by 37
long-term health care facilities and five assisted living facilities. Such
loans had an aggregate outstanding principal balance of approximately
$144,232,000 and a net book value of approximately $133,226,000 at December
31, 1995. The mortgage loans have individual outstanding principal balances
ranging from approximately $819,000 to $13,141,000 and have maturities ranging
from 1996 to 2047.
During 1995, the Company acquired 27 assisted living facilities for an
aggregate purchase price of $141,278,000. Additionally, the Company provided
five mortgage loans, secured by two long-term health care facilities and four
assisted living facilities in an aggregate amount of $35,237,000.
The Company anticipates providing lease or mortgage financing for health
care facilities to qualified operators and acquiring additional health care
related facilities, including long-term health care facilities, assisted
living facilities and acute care hospitals. Financing for such future
investments may be provided by borrowings under the Company's bank line of
credit, private placements or public offerings of debt or equity, and the
assumption of secured indebtedness.
TAXATION OF THE COMPANY
The Company believes that it has operated in such a manner as to qualify for
taxation as a "real estate investment trust" under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its taxable year ending December 31, 1985, and the Company intends to continue
to operate in such a manner. If the Company qualifies for taxation as a real
estate investment trust, it will generally not be subject to federal corporate
income taxes on its net income that is currently distributed to stockholders.
This treatment substantially eliminates the "double taxation" (e.g. at the
corporate and stockholder levels) that generally results from investment in
stock of a corporation.
1
PROPERTIES
Of the 210 facilities in which the Company has investments, the Company has
direct ownership of 136 long-term health care facilities, 30 assisted living
facilities and two rehabilitation hospitals. The properties are leased to
other parties under terms which require the lessee, in addition to paying
rent, to pay all additional charges, taxes, assessments, levies and fees
incurred in the operation of the leased properties.
Long-Term Health Care Facilities
Long-term health care facilities provide rehabilitative, restorative,
skilled nursing and medical treatment for patients and residents who do not
require the high-technology, care-intensive, high-cost setting of an acute-
care or rehabilitative hospital. Treatment programs include physical,
occupational, speech, respiratory and other therapeutic programs, including
sub-acute clinical protocols such as wound care and intravenous drug
treatment.
Assisted Living Facilities
Assisted living facilities provide services to aid in everyday living, such
as bathing, routine or special meals, security, transportation, recreation,
medication supervision and limited therapeutic programs. More intensive
medical needs of the residents are often met within the Company's assisted
living facilities by home health providers, close coordination with the
individual's physician and skilled nursing facilities. Assisted living
facilities are increasingly successful as lower cost, less institutional
alternatives to the health problems of the elderly or medically frail.
Rehabilitation Hospitals
Rehabilitation hospitals provide inpatient and outpatient medical care to
patients requiring high intensity physical, respiratory, neurological,
orthopedic and other treatment protocols and for intermediate periods in their
recovery. These programs are often the most effective in treating severe
skeletal or neurological injuries and traumatic diseases such as stroke or
acute arthritis.
2
The following table sets forth certain information regarding the Company's
owned facilities as of December 31, 1995.
NUMBER NUMBER ANNUAL 1995
OF OF BEDS/ MINIMUM ADDITIONAL
FACILITY LOCATION FACILITIES UNITS(1) INVESTMENT RENT(2) RENT(2)
----------------- ---------- -------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
LONG-TERM HEALTH CARE FACILITIES:
Arizona..................... 2 274 $ 6,076 $ 789 $ 154
Arkansas.................... 2 397 5,982 666 288
California.................. 10 1,207 34,236 3,959 949
Colorado.................... 1 117 3,116 307 5
Connecticut................. 5 674 14,727 1,486 550
Florida..................... 7 1,057 22,928 2,494 985
Georgia..................... 1 163 7,343 867 28
Idaho....................... 1 64 792 81 43
Illinois.................... 2 222 5,549 701 125
Indiana..................... 7 1,027 27,085 3,136 644
Kansas...................... 8 644 11,804 1,216 183
Maryland.................... 4 740 22,055 2,634 905
Massachusetts............... 8 859 29,841 3,238 332
Minnesota................... 9 1,122 29,629 3,621 946
Missouri.................... 1 108 2,740 337 119
Nevada...................... 1 140 4,034 480 65
New Jersey.................. 1 180 6,809 749 135
North Carolina.............. 1 150 2,360 294 153
Ohio........................ 6 811 29,537 2,740 614
Oklahoma.................... 3 253 3,939 404 108
Oregon...................... 4 356 6,760 833 221
Tennessee................... 8 883 24,003 2,420 85
Texas....................... 26 3,009 55,607 6,101 1,439
Virginia.................... 4 613 18,568 2,291 676
Washington.................. 5 506 18,522 1,903 179
Wisconsin................... 9 970 21,169 2,301 980
--- ------ -------- ------- -------
Subtotals................. 136 16,546 $415,211 $46,048 $10,911
--- ------ -------- ------- -------
ASSISTED LIVING FACILITIES:
California.................. 12 1,580 73,036 7,403 8
Colorado.................... 3 377 18,954 1,877 85
Florida..................... 2 119 8,106 863 --
Idaho....................... 1 80 6,025 597 --
Michigan.................... 1 144 7,239 810 --
Ohio........................ 1 121 4,238 479 --
Oklahoma.................... 1 113 4,771 407 7
Oregon...................... 6 462 23,989 2,364 --
Tennessee................... 1 48 2,901 274 --
Texas....................... 1 100 4,526 361 7
Washington.................. 1 128 6,055 600 --
--- ------ -------- ------- -------
Subtotals................. 30 3,272 $159,840 $16,035 $ 107
--- ------ -------- ------- -------
REHABILITATION HOSPITALS:
Arizona..................... 2 116 16,826 1,770 214
--- ------ -------- ------- -------
Subtotals................. 2 116 $ 16,826 $ 1,770 $ 214
--- ------ -------- ------- -------
TOTAL ALL OWNED FACILITIES 168 19,934 $591,877 $63,853 $11,232
=== ====== ======== ======= =======
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(1) Assisted living facilities are measured in units, all other facilities are
measured by bed count.
(2) Annual Minimum Rent (as defined in the Leases) for each of the Company's
owned properties. Additional rent, generally contingent upon increases in
the facility net patient revenues in excess of a base amount, may also be
paid. The 1995 additional rent amounts reflect additional rent accrued in
1995.
3
As of December 31, 1995, 45 of the Company's 168 owned facilities were being
leased to and operated by subsidiaries of Beverly Enterprises, Inc.
("Beverly"). Beverly has guaranteed certain obligations of its subsidiaries
and of certain parties unaffiliated with Beverly in connection with 24
properties operated by such parties. The Company expects that as new
facilities are acquired, an increasing percentage of its facilities will be
leased to operators unaffiliated with Beverly. For additional financial
information regarding Beverly, see Appendix 1 attached as part of this Annual
Report on Form 10-K.
COMPETITION
The Company generally competes with other REITs, real estate partnerships,
health care providers and other investors, including, but not limited to,
banks and insurance companies, in the acquisition, leasing and financing of
health care facilities. The operators of the health care facilities compete on
a local and regional basis with operators of facilities that provide
comparable services. Operators compete for patients based on quality of care,
reputation, physical appearance of facilities, services offered, family
preferences, physicians, staff and price.
REGULATION
Payments for health care services provided by the operators of the Company's
facilities are received principally from four sources: Medicaid, a medical
assistance program for the indigent, operated by individual states with the
financial participation of the federal government; private funds; Medicare, a
federal health insurance program for the aged and certain chronically disabled
individuals; and health and other insurance plans. Government revenue sources,
particularly Medicaid programs, are subject to statutory and regulatory
changes, administrative rulings, and government funding restrictions, all of
which may materially increase or decrease the rates of payment to nursing
facilities and the amount of additional rents payable to the Company under the
Leases. There is no assurance that payments under such programs will remain at
levels comparable to the present levels or be sufficient to cover all the
operating and fixed costs allocable to Medicaid and Medicare patients.
Health care facilities in which the Company invests are also generally
subject to state licensure statutes and regulations and statutes which may
require regulatory approval, in the form of a certificate of need ("CON"),
prior to the addition or construction of new beds, the addition of services or
certain capital expenditures. CON requirements generally do not apply to
assisted living facilities. CON requirements are not uniform throughout the
United States and are subject to change. The Company cannot predict the impact
of regulatory changes with respect to licensure and CON's on the operations of
the Company's lessees and mortgagees.
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the name, position and age of each executive
officer of the Company. Each executive officer of the Company is appointed by
its Board of Directors, serves at the pleasure of the Board and holds office
until a successor is elected, or until the earliest of death, resignation or
removal. There is no "family relationship" between any of the named executive
officers or any director of the Company. All information is given as of
January 31, 1996.
NAME POSITION AGE
---- -------- ---
Milton J. Brock, Jr. ............ Chairman of the Board............ 80
President and Chief Executive
R. Bruce Andrews................. Officer.......................... 55
T. Andrew Stokes................. Senior Vice President of
Corporate Development........... 47
Mark L. Desmond.................. Senior Vice President and Chief
Financial Officer............... 37
Vice President and General
Gary E. Stark.................... Counsel.......................... 40
4
MILTON J. BROCK, JR.--Chairman of the Board of the Company since September
1989 and a director of the Company since its inception. Mr. Brock served as
President and Chief Executive Officer of the Company from June 1988 to
September 1989. Mr. Brock began his career with M. J. Brock & Sons, Inc., a
real estate contractor and developer in 1940 and he was elected President in
1959, Chairman and Chief Executive Officer in 1973 and Chairman Emeritus upon
his retirement in 1985. Mr. Brock was a director of Bank of America REIT (now
BRE Properties) from its inception until his retirement in 1985, and had
served for 26 years as a director of Hollywood Presbyterian Medical Center.
R. BRUCE ANDREWS--President and Chief Executive Officer of the Company since
September 1989 and a director of the Company since October 1989. Mr. Andrews
had previously served as a director of American Medical International, Inc., a
hospital management company, and served as its Chief Financial Officer from
1970 to 1985 and its Chief Operating Officer in 1985 and 1986. From 1986
through 1989, Mr. Andrews was engaged in various private investments. Mr.
Andrews is also a director of Alexander Haagen Properties, Inc. and ARV
Assisted Living, Inc.
T. ANDREW STOKES--Senior Vice President of Corporate Development of the
Company since January 1996. Mr. Stokes was Vice President of Development of
the Company from August 1992 to December 1995. From 1984 to 1988, Mr. Stokes
served as Vice President, Corporate Development for American Medical
International, Inc., a hospital management company. From 1989 until joining
the Company, Mr. Stokes was Healthcare Group Director of Houlihan, Lokey,
Howard & Zukin, a national financial advisory firm.
MARK L. DESMOND-- Senior Vice President and Chief Financial Officer of the
Company since January 1996. Mr. Desmond was Vice President and Treasurer of
the Company from May 1990 to December 1995 and Controller, Chief Accounting
Officer and Assistant Treasurer of the Company from June 1988 to April 1990.
From 1986 until joining the Company, Mr. Desmond held various accounting
positions with Beverly, an operator of nursing facilities, pharmacies and
pharmacy related outlets.
GARY E. STARK--Vice President and General Counsel of the Company since
January 1993. From January 1988 to December 1989, Mr. Stark held the position
of General Counsel with Care Enterprises, Inc., an operator of nursing
facilities, pharmacies and other ancillary health care services, and served as
its Corporate Counsel from April 1985 through December 1987. From January 1990
through August 1991, Mr. Stark was engaged in the private practice of law. Mr.
Stark served as Vice President of Legal Services of Life Care Centers of
America, Inc., an operator and manager of nursing facilities and retirement
centers from July 1992 to December 1992 and served as General Counsel from
September 1991 to July 1992.
EMPLOYEES
As of January 31, 1996, the Company employed ten full-time employees.
ITEM 2. PROPERTIES.
See Item 1 for details.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal proceedings pending to which the Company is a party
or to which some of its properties are subject arising in the normal course of
business. The Company does not believe that the ultimate resolution of these
proceedings will have a material adverse effect on the Company's consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
5
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock Exchange. It has
been the Company's policy to declare quarterly dividends to holders of the
Company's common stock so as to comply with applicable sections of the
Internal Revenue Code governing real estate investment trusts. Set forth below
are the high and low sales prices of the Company's common stock from January
1, 1994 to December 31, 1995 as reported by the New York Stock Exchange and
the cash dividends per share paid with respect to such periods. The figures
are restated for the two-for-one stock split effective March 8, 1996.
HIGH LOW DIVIDEND
-------- --------- --------
1995
First quarter................................ $18 3/4 $17 7/16 $.34
Second quarter............................... 19 1/2 17 13/16 .35
Third quarter................................ 20 9/16 19 .36
Fourth quarter............................... 21 1/16 19 1/4 .36
1994
First quarter................................ $21 3/8 $17 5/8 $.32
Second quarter............................... 20 7/8 19 1/8 .32
Third quarter................................ 19 1/2 17 11/16 .33
Fourth quarter............................... 19 5/16 15 13/16 .34
As of January 31, 1996 there were approximately 1,300 holders of record of
the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected financial data with respect to the
Company, restated for the two-for-one stock split effective March 8, 1996.
Certain of this financial data has been derived from the Company's audited
financial statements included elsewhere in this Annual Report on Form 10-K and
should be read in conjunction with those financial statements and accompanying
notes and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Reference is made to Note 3 of Notes to
Consolidated Financial Statements for information regarding extraordinary
items and to Note 4 of Notes to Consolidated Financial Statements for
information regarding the Company's acquisitions.
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Total revenues.................... $ 82,028 $ 69,985 $ 60,385 $ 49,945 $ 36,378
Income before extraordinary items. 50,371 44,813 40,996 29,681 21,541
Net income........................ 50,371 44,813 38,992 29,681 18,081
Dividends paid.................... 53,182 47,751 42,883 33,349 26,245
PER SHARE DATA:
Income before extraordinary items. $ 1.33 $ 1.23 $ 1.17 $ 1.00 $ .84
Net income........................ 1.33 1.23 1.11 1.00 .70
Dividends paid.................... 1.41 1.31 1.21 1.11 1.03
BALANCE SHEET DATA:
Investments in real estate, net... $652,231 $501,862 $428,473 $380,539 $289,761
Total assets...................... 670,111 513,809 440,165 396,664 305,837
Bank borrowings................... 93,900 80,200 3,800 9,950 --
Senior notes due 2000-2015........ 100,000 -- -- -- --
Convertible debentures............ 65,000 67,690 73,609 44,455 50,000
Notes and bonds payable........... 23,364 20,520 23,047 32,116 33,124
Stockholders' equity.............. 371,822 336,106 332,927 301,895 218,772
OTHER DATA:
Funds from operations (1)......... $ 63,267 $ 57,057 $ 51,111 $ 38,762 $ 29,126
Weighted average shares outstand-
ing.............................. 37,808 36,356 35,188 29,734 25,674
- --------
(1) Industry analysts generally consider funds from operations to be an
alternative measure of the performance of an equity REIT. Funds from
operations is generally defined as income before extraordinary items plus
certain non-cash items, primarily depreciation, less gains on sales of
facilities. Funds from operations does not represent cash generated from
operating activities as defined by generally accepted accounting
principles (funds from operations does not include changes in operating
assets and liabilities) and, therefore, should not be considered as an
alternative to net income as the primary indicator of operating
performance or to cash flow as a measure of liquidity.
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the Company acquired 27 assisted living facilities in 14
separate transactions for an aggregate purchase price of approximately
$141,278,000. The acquisitions were funded by bank borrowings on the Company's
bank line of credit, cash on hand and assumed indebtedness of approximately
$9,304,000. The facilities were concurrently leased under terms generally
similar to the Company's existing leases. Additionally, the Company provided
five mortgage loans secured by two long-term health care facilities and four
assisted living facilities in the aggregate amount of $35,237,000. Such
mortgages were funded by bank borrowings on the Company's bank line of credit
and cash on hand. In addition, the Company received a principal repayment of
approximately $9,800,000 in connection with the maturity of one mortgage loan
secured by two long-term health care facilities. The proceeds were used to
repay short-term bank borrowings.
In addition to the acquisitions, the Company provided capital improvement
funding in the aggregate amount of approximately $3,061,000 in accordance with
certain existing lease provisions. Such capital improvements will result in an
increase in the minimum rents earned by the Company.
During April 1995, the Company sold two long-term health care facilities to
Beverly Enterprises, Inc., the lessee of such facilities, for an aggregate
purchase price of $6,250,000. The Company received $625,000 in cash and
$5,625,000 in mortgage notes which are secured by the two facilities. The
related gain of approximately $3,864,000 on such sale will be recognized into
income on a deferred basis in proportion to the receipt of principal payments
on the mortgage loans provided by the Company.
During 1995, the Company issued $100,000,000 in aggregate principal amount
of medium-term notes. The notes bear fixed interest at a weighted average
interest rate of 7.8% and have a weighted average maturity of 7.3 years. The
proceeds were used to paydown borrowings on the Company's bank line of credit.
In May 1995, the Company issued a notice of redemption and expiration of
conversion privilege in connection with its 8.9% senior subordinated
convertible debentures due 2001. Of the $2,277,000 in debentures outstanding
at the time of notice, $2,267,000 of debentures were converted into 177,788
shares of the Company's common stock and the remaining $10,000 in debentures
were redeemed at par plus accrued interest.
In June 1995, the Company issued 2,000,000 shares of common stock in a
public offering at a price of $18.75 per share. Proceeds from the offering,
net of underwriters' fees and associated expenses, were approximately
$35,484,000. The net proceeds were used to repay borrowings under the
Company's bank line of credit.
In July 1995, the Company amended the terms of its bank line of credit to,
among other things, extend its maturity date to March 31, 1998 and to provide
the Company with the option to automatically extend the bank line of credit to
a three year maturity with concurrence of the bank group. Additionally, the
pricing structure was amended to provide for reduced borrowing costs as the
Company's debt ratings are upgraded and to reduce the current pricing from
LIBOR plus 125 basis points to LIBOR plus 90 basis points. In January 1996,
the maturity date of the Company's bank line of credit was extended to March
31, 1999.
During September 1995, the Company sold one long-term health care facility
to the lessee of such facility pursuant to a purchase option in the facility's
lease. The Company received cash of approximately $8,344,000 of which
approximately $4,796,000 was used to repay a mortgage secured by such facility
and the balance was used to repay bank borrowings. The sale resulted in a gain
of approximately $989,000.
At December 31, 1995, the Company had $6,100,000 available under its
$100,000,000 bank line of credit. At January 31, 1996, the Company has
effective shelf registrations on file with the Securities and Exchange
Commission under which the Company may issue (a) up to $200,000,000 in
aggregate principal amount of medium-term notes and (b) up to $97,500,000 of
securities including debt, convertible debt, common and preferred stock. The
Company anticipates issuing securities under such shelf registrations to repay
borrowings under the Company's bank line of credit.
7
The Company anticipates making additional investments in health care related
facilities. Financing for such future investments may be provided by
borrowings under the Company's bank line, private placements or public
offerings of debt or equity, and the assumption of secured indebtedness. The
Company believes it has sufficient liquidity and financing capability to
finance future investments as well as repay borrowings at or prior to their
maturity.
OPERATING RESULTS
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues increased $12,043,000, or 17% in 1995 as compared to 1994. The
increase was primarily due to increased minimum rent and interest income
resulting from the addition of 33 facilities during 1995, combined with a full
year of revenues earned by facilities acquired in 1994. The increase was also
attributable to increased additional rent and additional interest earned under
the Company's existing leases and mortgage loans receivable and to a gain on
the sale of one of the Company's facilities.
Total expenses increased $6,485,000, or 26% in 1995 as compared to 1994. The
increase was primarily due to increased interest expense as a result of
increased borrowings on the Company's bank line of credit and the issuance of
$100,000,000 in medium-term notes during 1995. The increase in total expenses
was also attributable to increased depreciation due to the acquisition of
additional facilities in the last 12 months.
The Company expects increased rental revenues due to the addition of
facilities to its property base during 1995 and due to increased additional
rents under its leases. The Company also expects increased interest income
resulting from additional investments in mortgage loans during 1995.
Additional investments in health care facilities would also increase rental
and/or interest income. As additional investments in facilities are made,
depreciation and/or interest expense could also increase. Any such increases,
however, are expected to be more than offset by rents or interest income
associated with the investments.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Revenues increased $9,600,000, or 16% in 1994 as compared to 1993. The
increase was primarily due to increased minimum rent as a result of the
addition of 15 facilities in 1994, combined with a full year's minimum rent on
facilities acquired in 1993. The increase was also attributable to increased
additional rent resulting from increased facility patient revenues and
increased interest income due to additional investments in mortgage loans.
Total expenses increased $5,783,000, or 30% in 1994 as compared to 1993. The
increase was primarily due to an increase in interest expense due to the
issuance of $65,000,000 of convertible debentures in November 1993 and to
increased levels of bank borrowings and higher short-term interest rates in
1994. The increase was partially offset by a decrease in interest expense in
connection with the conversion of a portion of the Company's senior
subordinated convertible debentures during 1994. Increased expenses were also
attributable to increased depreciation as a result of acquisitions during 1994
and 1993.
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992
Revenues increased $10,440,000, or 21% in 1993 as compared to 1992. The
increase was primarily due to increased minimum rent and interest income as a
result of the addition of 19 facilities and five mortgage loans to the
Company's portfolio in 1993, combined with a full year's minimum rent and
interest income on facilities and mortgage loans acquired in 1992. Revenues
also increased due to increased additional rent resulting from increased
facility patient revenues and an increase in the number of facilities from
which the Company earns additional rent.
Total expenses decreased $875,000, or 4% in 1993 as compared to 1992. The
decrease was primarily due to a decrease in interest expense in connection
with the conversion of a substantial portion of the Company's senior
subordinated convertible debentures. Of the original issuance of $50,000,000
in aggregate principal amount of debentures in October 1991, $35,846,000 and
$5,545,000 of such debentures were converted into shares of the Company common
stock in 1993 and 1992, respectively. This decrease was partially offset by
increased interest
8
expense due to the issuance of $65,000,000 of convertible debentures in
November 1993, increased depreciation as a result of acquisitions during 1993
and 1992 and increased general and administrative expenses.
The Company recorded an extraordinary charge of $2,004,000 in 1993,
representing the write-off of unamortized deferred financing costs and fees
associated with the prepayment of a mortgage bond due in the year 2000 secured
by 19 of the Company's facilities.
NEW ACCOUNTING STANDARDS
The Company will be required to adopt new accounting standards in the
future. In 1996, the Company will be required to adopt Statement of Accounting
Standards ("SFAS") No. 121 Accounting for the Impairment if Certain Long-Lived
Assets and for Long-Lived Assets to be Disposed of and SFAS No. 123 Accounting
for Stock Based Compensation. The Company anticipates that the adoption of
SFAS No. 121 and SFAS No. 123 will not materially impact the financial
statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE
----
Report of Independent Public Accountants............................. 10
Consolidated Balance Sheets.......................................... 11
Consolidated Statements of Operations................................ 12
Consolidated Statements of Stockholders' Equity...................... 13
Consolidated Statements of Cash Flows................................ 14
Notes to Consolidated Financial Statements........................... 15
9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Directors,
Nationwide Health Properties, Inc.
We have audited the accompanying consolidated balance sheets of Nationwide
Health Properties, Inc. (a Maryland corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Health
Properties, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
January 31, 1996
10
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS)
Investments in real estate
Real estate properties:
Land................................................. $ 61,748 $ 39,981
Buildings and improvements........................... 530,979 418,137
--------- ---------
592,727 458,118
Less accumulated depreciation.......................... (73,722) (62,080)
--------- ---------
519,005 396,038
Mortgage loans receivable, net......................... 133,226 105,824
--------- ---------
652,231 501,862
Cash and cash equivalents................................ 7,937 3,742
Receivables.............................................. 3,478 2,936
Other assets............................................. 6,465 5,269
--------- ---------
$670,111 $ 513,809
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings.......................................... $ 93,900 $ 80,200
Senior notes due 2000-2015............................... 100,000 --
Convertible debentures................................... 65,000 67,690
Notes and bonds payable.................................. 23,364 20,520
Accounts payable and accrued liabilities................. 16,025 9,293
Commitments and contingencies
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized; none issued or outstanding................ -- --
Common stock $.10 par value; 100,000,000 shares
authorized; issued and outstanding: 38,720,532 and
36,476,386 as of December 31, 1995 and 1994,
respectively.......................................... 3,872 3,648
Capital in excess of par value........................... 401,438 363,135
Cumulative net income.................................... 245,135 194,764
Cumulative dividends..................................... (278,623) (225,441)
--------- ---------
Total stockholders' equity........................... 371,822 336,106
--------- ---------
$ 670,111 $ 513,809
========= =========
See accompanying notes.
11
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER
31,
-----------------------
1995 1994 1993
------- ------- -------
Revenues:
Minimum rent........................................ $54,504 $47,805 $40,758
Additional rent and additional interest............. 11,776 9,767 8,417
Interest and other income........................... 14,759 12,413 11,210
Gain on sale of facilities.......................... 989 -- --
------- ------- -------
82,028 69,985 60,385
Expenses:
Depreciation and non-cash charges................... 13,885 12,244 10,115
Interest and amortization of deferred financing
costs.............................................. 14,628 9,921 6,186
General and administrative.......................... 3,144 3,007 3,088
------- ------- -------
31,657 25,172 19,389
------- ------- -------
Income before extraordinary items..................... 50,371 44,813 40,996
Extraordinary charge.................................. -- -- (2,004)
------- ------- -------
Net income............................................ $50,371 $44,813 $38,992
======= ======= =======
Per share amounts:
Income before extraordinary items................... $ 1.33 $ 1.23 $ 1.17
======= ======= =======
Net income.......................................... $ 1.33 $ 1.23 $ 1.11
======= ======= =======
Weighted average shares outstanding................... 37,808 36,356 35,188
======= ======= =======
See accompanying notes.
12
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
COMMON STOCK CAPITAL IN TOTAL
------------- EXCESS OF CUMULATIVE CUMULATIVE STOCKHOLDERS'
SHARES AMOUNT PAR VALUE NET INCOME DIVIDENDS EQUITY
------ ------ ---------- ---------- ---------- -------------
Balances at December 31,
1992................... 33,074 $3,308 $322,435 $110,959 $(134,807) $301,895
Issuance of stock..... 26 -- 178 -- -- 178
Exercise of stock
options.............. 48 4 287 -- -- 291
Conversion of
debentures........... 2,812 282 34,172 -- -- 34,454
Net income............ -- -- -- 38,992 -- 38,992
Dividends............. -- -- -- -- (42,883) (42,883)
------ ------ -------- -------- --------- --------
Balances at December 31,
1993................... 35,960 3,594 357,072 149,951 (177,690) 332,927
Issuance of stock..... 26 6 252 -- -- 258
Exercise of stock
options.............. 26 2 148 -- -- 150
Conversion of
debentures........... 464 46 5,663 -- -- 5,709
Net income............ -- -- -- 44,813 -- 44,813
Dividends............. -- -- -- -- (47,751) (47,751)
------ ------ -------- -------- --------- --------
Balances at December 31,
1994................... 36,476 3,648 363,135 194,764 (225,441) 336,106
Issuance of stock..... 2,032 203 35,714 -- -- 35,917
Exercise of stock
options.............. 2 -- 10 -- -- 10
Conversion of
debentures........... 210 21 2,579 -- -- 2,600
Net income............ -- -- -- 50,371 -- 50,371
Dividends............. -- -- -- -- (53,182) (53,182)
------ ------ -------- -------- --------- --------
Balances at December 31,
1995................... 38,720 $3,872 $401,438 $245,135 $(278,623) $371,822
====== ====== ======== ======== ========= ========
See accompanying notes.
13
NATIONWIDE HEALTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
--------- -------- --------
Cash flows from operating activities:
Net income.................................... $ 50,371 $ 44,813 $ 38,992
Extraordinary charge.......................... -- -- 2,004
Depreciation and non-cash charges............. 13,885 12,244 10,115
Gain on sale of facilities.................... (989) -- --
--------- -------- --------
Funds from operations......................... 63,267 57,057 51,111
Net (increase) decrease in other assets and
liabilities.................................. 3,705 (301) (1,386)
--------- -------- --------
Net cash provided by operating activities... 66,972 56,756 49,725
Cash flows from investing activities:
Acquisition of real estate properties......... (136,783) (62,768) (57,293)
Disposition of real estate properties......... 8,940 -- 2,650
Investment in mortgage loans receivable....... (35,437) (30,289) (27,450)
Principal payments on mortgage loans
receivable................................... 11,804 9,872 25,832
--------- -------- --------
Net cash used in investing activities....... (151,476) (83,185) (56,261)
Cash flows from financing activities:
Bank borrowings............................... 205,600 126,700 82,000
Repayment of bank borrowings.................. (191,900) (50,300) (88,150)
Issuance of common stock...................... 35,494 117 291
Issuance of senior debt....................... 100,000 -- --
Issuance of convertible debentures............ -- -- 65,000
Principal payments on notes and bonds payable. (6,460) (2,074) (12,733)
Dividends paid................................ (53,182) (47,751) (42,883)
Deferred financing costs...................... (853) (148) (2,679)
Refund of debt service reserve................ -- -- 1,036
--------- -------- --------
Net cash provided by financing activities... 88,699 26,544 1,882
--------- -------- --------
Increase (decrease) in cash and cash
equivalents.................................... 4,195 115 (4,654)
Cash and cash equivalents, beginning of period.. 3,742 3,627 8,281
--------- -------- --------
Cash and cash equivalents, end of period........ $ 7,937 $ 3,742 $ 3,627
========= ======== ========
Supplemental schedule of cash flow information:
Cash paid for interest........................ $ 12,680 $ 9,102 $ 6,025
========= ======== ========
See accompanying notes.
14
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION
Nationwide Health Properties, Inc. (the "Company") was incorporated on
October 14, 1985 in the State of Maryland. The Company operates as a real
estate investment trust specializing in investments in health care related
properties and as of December 31, 1995 had investments in 210 health care
facilities, consisting of 173 long-term health care facilities, 35 assisted
living facilities and two rehabilitation hospitals. At December 31, 1995, the
Company owned 136 long-term health care facilities, 30 assisted living
facilities and two rehabilitation hospitals and held 28 mortgage loans secured
by 37 long-term health care facilities and five assisted living facilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and its investment in its majority owned and
controlled joint venture. All material intercompany accounts and transactions
have been eliminated.
Stock Split & Reclassifications
On January 19, 1996, the Board of Directors of Nationwide Health Properties,
Inc. authorized a two-for-one split of the Company's common stock to be
effective on March 8, 1996. The financial statements included herein have been
restated to reflect the stock split. Additionally, certain amounts in the 1994
and 1993 financial statements have been reclassified for consistent financial
statement presentation.
Land, Buildings and Improvements
The Company records properties at cost and uses the straight-line method of
depreciation for buildings and improvements over their estimated remaining
useful lives of up to 40 years. The Company provides accelerated depreciation
on certain of its investments based primarily on an estimation of net
realizable value of such investments at the end of the primary lease terms.
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in money market mutual
funds, commercial paper and repurchase agreements with maturities of three
months or less. Such investments are deemed to be cash equivalents for
purposes of presentation in the financial statements.
Federal Income Taxes
The Company qualifies as a real estate investment trust under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. The Company
intends to continue to qualify as such and therefore to distribute at least
95% of its real estate investment trust taxable income to its stockholders.
Accordingly, the Company will not be subject to Federal income taxes on its
income which is distributed to stockholders. Therefore, no provisions for
Federal income taxes have been made in the Company's financial statements. The
net difference in the tax basis and the reported amounts of the Company's
assets and liabilities as of December 31, 1995 is approximately ($4,262,000).
Revenue Recognition
Rental income from operating leases is accrued as earned over the life of
the lease agreements. Interest income on real estate mortgages is recognized
using the effective interest method based upon the expected payments over the
lives of the mortgages.
15
Net Income Per Share
Net income per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. The effect of
common stock options and converted debentures is immaterial, and the effect of
convertible debentures is anti-dilutive.
Funds From Operations
Industry analysts generally consider funds from operations to be an
alternative measure of the performance of an equity REIT. Funds from
operations is generally defined as net income plus certain non-cash items,
primarily depreciation of real property, less gains on sales of facilities.
Funds from operations does not represent cash generated from operating
activities as defined by generally accepted accounting principles (funds from
operations does not include changes in operating assets and liabilities) and,
therefore, should not be considered as an alternative to net income as the
primary indicator of operating performance or to cash flow as a measure of
liquidity.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. EXTRAORDINARY ITEMS
The prepayment of a portion of the Company's secured debt during 1993
resulted in an extraordinary charge of $2,004,000, representing the write-off
of unamortized deferred financing costs and fees associated with such
prepayment.
4. REAL ESTATE PROPERTIES
All of the Company's owned facilities are leased under "net" leases which
are accounted for as operating leases. The leases have initial terms ranging
from 10 to 19 years, and the leases generally have two or more multiple-year
renewal options. The Company earns fixed monthly minimum rents and may earn
periodic additional rents. The additional rent payments are generally computed
as a percentage of facility net patient revenues in excess of base amounts.
The base amounts, in most cases, are net patient revenues for the first year
of the lease. Certain of the leases contain provisions such that the
percentage of further revenue increases due to the Company as additional rent
is limited to 1% at such time as additional rent exceeds 41% of minimum rent.
Under the terms of the leases, the lessee is responsible for all maintenance,
repairs, taxes and insurance on the leased properties.
Minimum future rentals on non-cancelable leases as of December 31, 1995 are
as follows:
MINIMUM
YEAR RENTALS
---- --------------
(IN THOUSANDS)
1996...................... 63,853
1997...................... 63,524
1998...................... 61,341
1999...................... 58,303
2000...................... 44,439
2001...................... 36,507
2002...................... 30,848
2003...................... 28,246
2004...................... 24,208
2005...................... 19,568
Thereafter................ 59,139
During 1995, the Company acquired 27 assisted living facilities in 14
separate transactions for an aggregate purchase price of $141,278,000. The
facilities were concurrently leased under terms generally similar to the
Company's existing leases. The acquisitions were funded by bank borrowings on
the Company's bank line of credit, cash on hand and assumed indebtedness of
approximately $9,304,000.
16
In addition to the acquisitions, the Company provided capital improvement
funding in the aggregate amount of approximately $3,061,000 in accordance with
certain existing lease provisions. Such capital improvements will result in an
increase in the minimum rents earned by the Company.
During 1995, the Company sold one long-term health care facility to the
lessee of such facility pursuant to a purchase option in the facility's lease.
The Company received cash of approximately $8,344,000 of which approximately
$4,796,000 was used to repay a mortgage secured by such facility and the
balance was used to repay bank borrowings. The sale resulted in a gain of
approximately $989,000.
The following table lists the Company's real estate properties as of December
31, 1995:
FACILITY NUMBER OF BUILDINGS AND TOTAL ACCUMULATED NOTES AND
LOCATION FACILITIES LAND IMPROVEMENTS INVESTMENT(1) DEPRECIATION BONDS PAYABLE
-------- ---------- ------- ------------- ------------- ------------ -------------
(DOLLAR AMOUNTS IN THOUSANDS)
LONG-TERM CARE FACILI-
TIES:
Arizona............... 2 $ 833 $ 5,243 $ 6,076 $ 1,028 $ 1,147
Arkansas.............. 2 209 5,773 5,982 1,553 --
California............ 10 7,753 26,483 34,236 2,778 --
Colorado.............. 1 400 2,716 3,116 158 --
Connecticut........... 5 1,465 13,262 14,727 2,466 --
Florida............... 7 2,186 20,743 22,928 4,153 --
Georgia............... 1 801 6,542 7,343 490 --
Idaho................. 1 15 777 792 175 --
Illinois.............. 2 157 5,392 5,549 794 3,554
Indiana............... 7 751 26,334 27,085 4,190 8,744
Kansas................ 8 517 11,287 11,804 1,344 615
Maryland.............. 4 845 21,210 22,055 5,716 --
Massachusetts......... 8 3,893 25,948 29,841 3,786 --
Minnesota............. 9 1,545 28,084 29,629 9,384 --
Missouri.............. 1 51 2,689 2,740 769 --
Nevada................ 1 740 3,294 4,034 350 --
New Jersey............ 1 360 6,449 6,809 2,224 --
North Carolina........ 1 116 2,244 2,360 641 --
Ohio.................. 6 1,316 28,221 29,537 4,979 --
Oklahoma.............. 3 98 3,841 3,939 859 --
Oregon................ 4 435 6,325 6,760 1,808 --
Tennessee............. 8 1,040 22,963 24,003 1,552 --
Texas................. 26 4,805 50,802 55,607 7,324 --
Virginia.............. 4 1,036 17,532 18,568 5,012 --
Washington............ 5 2,350 16,172 18,522 1,325 --
Wisconsin............. 9 1,621 19,547 21,169 5,266 --
--- ------- -------- -------- ------- -------
Subtotals........... 136 $35,338 $379,873 $415,211 $70,124 $14,060
--- ------- -------- -------- ------- -------
ASSISTED LIVING FACILITIES:
California............ 12 15,305 57,731 73,036 873 --
Colorado.............. 3 1,936 17,018 18,954 -- --
Florida............... 2 2,261 5,845 8,106 68 --
Idaho................. 1 466 5,559 6,025 -- --
Michigan.............. 1 300 6,939 7,239 165 --
Ohio.................. 1 225 4,013 4,238 95 --
Oklahoma.............. 1 392 4,379 4,771 218 --
Oregon................ 6 2,078 21,911 23,989 -- 9,304
Tennessee............. 1 600 2,301 2,901 33 --
Texas................. 1 308 4,218 4,526 197 --
Washington............ 1 172 5,883 6,055 -- --
--- ------- -------- -------- ------- -------
Subtotals........... 30 $24,043 $135,797 $159,840 $ 1,649 $ 9,304
--- ------- -------- -------- ------- -------
REHABILITATION HOSPITALS:
Arizona............... 2 1,517 15,309 16,826 1,949 --
--- ------- -------- -------- ------- -------
Subtotal............ 2 $ 1,517 $ 15,309 $ 16,826 $ 1,949 $ --
--- ------- -------- -------- ------- -------
TOTAL OWNED FACILITIES.. 168 $60,898 $530,979 $591,877 $73,722 $23,364
=== ======= ======== ======== ======= =======
- --------
(1) Also represents the approximate aggregate cost for Federal income tax
purposes.
17
The following table summarizes the changes in real estate properties and
accumulated depreciation during 1995, 1994 and 1993:
REAL ESTATE ACCUMULATED
PROPERTIES DEPRECIATION
----------- ------------
(IN THOUSANDS)
Balance at December 31, 1992............. $344,062 $41,446
Additions.............................. 58,353 9,904
Sales.................................. (7,065) (1,170)
-------- -------
Balance at December 31, 1993............. $395,350 $50,180
-------- -------
Additions.............................. 62,768 11,900
Sales.................................. -- --
-------- -------
Balance at December 31, 1994............. $458,118 $62,080
-------- -------
Additions.............................. 146,087 13,408
Sales.................................. (11,478) (1,766)
-------- -------
Balance at December 31, 1995............. $592,727 $73,722
======== =======
The average age of the Company's facilities is 24 years. The Company
acquired 27 of its facilities on December 30, 1985, 31 facilities during 1986,
10 facilities during 1987, 5 facilities during 1988, 12 facilities during 1990,
17 facilities during 1991, 5 facilities during 1992, 19 facilities during 1993,
15 facilities during 1994 and 27 facilities during 1995.
5. MORTGAGE LOANS RECEIVABLE
During 1995, the Company provided five mortgage loans, secured by two long-
term health care facilities and four assisted living facilities in an aggregate
amount of $35,237,000. At December 31, 1995, the Company had 28 mortgage loans
receivable secured by 37 long-term health care facilities and five assisted
living facilities. The loans have an aggregate principal balance of
approximately $144,232,000 and are reflected in the Company's financial
statements net of an aggregate discount of approximately $11,006,000. The
principal balances of mortgage loans receivable as of December 31, 1995 mature
approximately as follows: $5,732,000 in 1996, $3,461,000 in 1997, $7,626,000 in
1998, $2,397,000 in 1999, $2,566,000 in 2000 and $122,450,000 thereafter.
18
The following table lists the Company's mortgage loans receivable at December
31, 1995:
FINAL ESTIMATED ORIGINAL FACE CARRYING
NUMBER OF INTEREST MATURITY BALLOON AMOUNT OF AMOUNT OF
LOCATION OF FACILITIES FACILITIES RATE DATE PAYMENT(1) MORTGAGES MORTGAGES(2)
---------------------- ---------- -------- -------- ---------- ------------- ------------
(DOLLARS IN THOUSANDS)
LONG-TERM HEALTH CARE FACILITIES:
Arkansas.............. 3 10.00% 12/06 $ 4,946 $ 5,500 $ 4,998
California............ 1 10.00% 05/25 1,549 8,200 8,200
California............ 1 7.86% 05/98 3,207 3,600 2,890
California............ 1 7.86% 05/98 2,182 2,425 1,962
California............ 3 9.50% 03/09 7,600 12,000 11,002
Florida............... 1 10.15% 07/03 -- 4,400 1,600
Illinois.............. 1 9.00% 01/24 -- 9,500 7,570
Indiana............... 1 10.15% 07/03 -- 785 898
Kansas................ 1 9.89% 05/97 1,311 1,550 1,244
Louisiana............. 1 10.89% 04/15 2,407 3,850 3,850
Maryland.............. 1 10.90% 06/03 5,278 6,900 6,659
Massachusetts......... 1 8.75% 02/24 -- 9,000 6,918
Michigan.............. 3 11.40% 12/06 6,846 7,817 7,165
Michigan.............. 2 10.82% 06/03 2,503 3,000 2,821
Michigan.............. 1 10.00% 01/05 1,501 1,800 1,759
New Mexico............ 1 7.86% 02/96 2,722 2,880 2,711
South Dakota.......... 1 9.75% 05/05 -- 1,350 819
Texas................. 1 9.88% 01/04 624 1,460 964
Texas................. 2 10.85% 01/02 1,963 2,519 2,267
Texas................. 3 10.75% 06/03 4,120 4,700 4,147
Texas................. 1 9.50% 12/96 853 2,825 924
Virginia.............. 1 10.50% 04/13 10,192 13,250 13,141
Washington............ 4 11.00% 10/19 112 6,000 5,944
Wisconsin............. 1 9.75% 05/05 -- 4,275 1,258
--- ------- -------- --------
Subtotals........... 37 $59,916 $119,586 $101,711
--- ------- -------- --------
ASSISTED LIVING FACILITIES:
Florida............... 2 10.31% 09/20 -- 7,230 7,230
Massachusetts......... 1 9.52% 06/23 -- 9,400 9,400
Oklahoma.............. 1 9.55% 03/24 -- 8,250 8,328
Washington............ 1 9.95% 12/47 -- 6,557 6,557
--- ------- -------- --------
Subtotals........... 5 $ -- $ 31,437 $ 31,515
--- ------- -------- --------
Total................... 42 $59,916 $151,023 $133,226
=== ======= ======== ========
- --------
(1) Most loans require monthly principal and interest payments at level amounts
over life to maturity. Some loans are adjustable rate mortgages with
varying principal and interest payments over life to maturity, in which
case the balloon payments reflected are an estimate. Five of the loans have
decreasing principal and interest payments over the life of the loans. Most
loans require a prepayment penalty based on a percentage of principal
outstanding or a penalty based upon a calculation maintaining the yield the
Company would have earned if prepayment had not occurred. Three loans have
a provision that no prepayments are acceptable.
(2) The aggregate cost for federal income tax purposes is approximately
$143,240,000.
19
The following table summarizes the changes in mortgage loans receivable
during 1995 and 1994:
1995 1994
-------- --------
(IN THOUSANDS)
Balance at January 1.................................. $105,824 $ 83,303
New mortgage loans.................................. 37,544 30,289
Accretion of discount on loans...................... 1,662 2,104
Collection of principal............................... (11,804) (9,872)
-------- --------
Balance at December 31................................ $133,226 $105,824
======== ========
6. BANK BORROWINGS
The Company has a $100,000,000 unsecured credit agreement with certain
banks. The terms of the bank line of credit were amended in July 1995 to,
among other things, extend its maturity date to March 31, 1998 and to provide
the Company with the option to automatically extend the bank line of credit to
a three year maturity with concurrence of the bank group. Additionally, the
pricing structure was amended to provide for reduced borrowing costs as the
Company's debt ratings are upgraded and to reduce the current pricing from
LIBOR plus 125 basis points to LIBOR plus 90 basis points. The Company pays a
facility fee of one-fourth of 1% per annum on the total commitment under the
agreement. In January 1996, the maturity date of the line of credit was
extended to March 31, 1999.
Under covenants contained in the credit agreement, the Company is required
to maintain: (i) a minimum net worth of $300,000,000; (ii) a ratio of cash
flow before interest expense and non-cash expenses to regularly scheduled debt
service payments on all debt of at least 2.0 to 1.0; and (iii) a ratio of
total liabilities to net worth of not more than 1.1 to 1.0.
The weighted average borrowings outstanding under the Company's credit
agreements during 1995, 1994 and 1993 were approximately $51,811,000,
$40,938,000 and $11,630,000, respectively. Maximum amounts outstanding at the
end of the months during 1995, 1994 and 1993 were $93,900,000, $80,200,000 and
$19,100,000, respectively. The weighted average interest rates during 1995,
1994 and 1993 were approximately 7.3%, 6.3% and 4.9%, respectively. The
weighted average interest rates at December 31, 1995, 1994 and 1993 were
approximately 6.8%, 7.5% and 6.0%, respectively.
7. NOTES AND BONDS PAYABLE
Notes and bonds payable are due through the year 2024, at interest rates
ranging from 8.6% to 10.9% and are secured by real estate properties with an
aggregate net book value as of December 31, 1995 of approximately $30,953,000.
The principal balances of the notes and bonds payable as of December 31, 1995
mature approximately as follows: $13,525,000 in 1996, $82,000 in 1997, $90,000
in 1998, $99,000 in 1999, $109,000 in 2000, and $9,459,000 thereafter.
8. SENIOR NOTES DUE 2000-2015
During 1995, the Company issued $100,000,000 in aggregate principal amount
of medium-term notes. The weighted average interest rate on the Senior Notes
was 7.8% and the weighted average maturity was 7.3 years. The principal
balances of the Senior Notes as of December 31, 1995 mature approximately as
follows: $30,000,000 in the year 2000 and $70,000,000 thereafter.
9. CONVERTIBLE DEBENTURES
During November 1993, the Company issued $65,000,000 of 6.25% convertible
debentures due January 1, 1999. The debentures are convertible at any time
prior to maturity into shares of the Company's common stock at a conversion
price of $22.41 per share. As of December 31, 1995, no debentures have been
converted.
20
During 1991, the Company issued $50,000,000 of 8.9% senior subordinated
convertible debentures due July 1, 2001. The debentures were convertible into
common stock of the Company at a conversion price of $12.75 per share of common
stock. The debentures were redeemable by the Company in whole or in part at par
plus accrued interest on any date subsequent to October 29, 1992. In May 1995,
the Company issued a notice of redemption and expiration of conversion
privilege. At the time of notice, all shares were converted into shares of the
Company's common stock with the exception of $10,000 in debentures which were
redeemed at par plus accrued interest. During 1995, 1994 and 1993, $2,267,000,
$5,919,000 and $35,846,000, respectively, of such debentures converted into
210,180, 464,212 and 2,811,412 shares of common stock, respectively.
10. STOCK INCENTIVE PLAN
Under the terms of a stock incentive plan (the "Plan"), the Company has
reserved for issuance 800,000 shares of common stock. Directors, officers and
employees of the Company are eligible to participate in the Plan. The following
is a summary of stock options granted, exercised and canceled, and restricted
stock awarded:
RESTRICTED
STOCK
STOCK OPTIONS AWARDS
---------------------- -----------
NUMBER
NUMBER EXERCISE OF
OF SHARES PRICE SHARES
--------- ------------ -------
Outstanding at December 31, 1992.... 98,368 $5.625-$8.75 27,400
Granted
1993.............................. -- -- 27,500
1994.............................. -- -- 28,400
1995.............................. -- -- 32,200
Canceled
1993.............................. 18,000 8.75 1,600
1994.............................. -- -- --
1995.............................. -- -- --
Exercised/Restrictions Lapsed
1993.............................. 48,368 5.625 400
1994.............................. 26,800 5.625 --
1995.............................. 1,800 5.625 9,600
Outstanding at December 31, 1995.... 3,400 $5.625 103,900
Stock options granted under the Plan become exercisable each year following
the date of grant in annual increments of one-third for non-management
directors of the Company and one-fifth for all other grant recipients. Stock
options covering 3,400 shares were exercisable at December 31, 1995.
The restricted stock awards are granted at no cost. Restricted stock awards
vest at the third anniversary of the award date with respect to non-employee
directors and at the fifth anniversary with respect to officers and employees.
The restricted stock awards are amortized over their respective vesting
periods. Expense is determined based upon the market value at the date of award
of the restricted stock and is recognized over the vesting period. Expense
recorded in 1995, 1994 and 1993 related to restricted stock awards was
approximately $433,000, $292,000 and $178,000, respectively.
11. PENSION PLAN
During 1991, the Company adopted an unfunded benefit pension plan covering
the current non-employee members of its board of directors upon completion of
five years of service on the board. The benefits, limited to the number of
years of service on the board, are based upon the then current annual retainer
in effect.
21
The following tables set forth the amounts recognized in the Company's
financial statements:
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
Actuarial present value of benefit
obligations:
Vested benefit obligation.................... $679,000 $493,000
======== ========
Accumulated benefit obligation............... $706,000 $504,000
======== ========
Projected benefit obligation................. $756,000 $561,000
Unrecognized prior service cost.............. 156,000 183,000
Unrecognized net (gain) or loss.............. 55,000 (20,000)
-------- --------
Accrued pension cost......................... $545,000 $398,000
======== ========
Net pension cost for the year included the following components:
1995 1994 1993
-------- -------- --------
Current service cost.......................... $ 73,000 $ 62,000 $ 56,000
Interest cost................................. 48,000 38,000 33,000
Amortization of prior service cost............ 27,000 27,000 27,000
-------- -------- --------
Net periodic pension cost..................... $148,000 $127,000 $116,000
======== ======== ========
Discount rates of 7.0% and 8.5% in 1995 and 1994, respectively and a 5.0%
increase in the annual retainer every other year were used in determining the
actuarial present value of the projected benefit obligation.
12. TRANSACTIONS WITH BEVERLY ENTERPRISES, INC.
As of December 31, 1995, 45 of the owned facilities are leased to and
operated by subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has
guaranteed certain obligations of its subsidiaries and of certain parties
unaffiliated with Beverly in connection with 24 properties operated by such
parties.
During 1995, the Company sold two long-term health care facilities to
Beverly, the lessee of such facilities, for an aggregate purchase price of
$6,250,000. The Company received $625,000 in cash and $5,625,000 in mortgage
notes which are secured by the two facilities. The related gain of
approximately $3,864,000 on such sale will be recognized into income on a
deferred basis in proportion to the receipt of principal payments on the
mortgage loans provided by the Company.
Revenues from Beverly were approximately $21,921,000, $22,776,000 and
$24,323,000, for the years ended December 31, 1995, 1994 and 1993,
respectively.
One of the directors of the Company is also an officer and director of
Beverly.
13. DIVIDENDS
Dividend payments by the Company to the stockholders were characterized in
the following manner for tax purposes:
1995 1994 1993
----- ----- -----
Ordinary income......................................... $1.24 $1.26 $1.12
Capital gain............................................ .17 .05 .09
Return of capital....................................... -- -- --
----- ----- -----
Total dividends paid.................................. $1.41 $1.31 $1.21
===== ===== =====
22
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
-----------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995:
Revenues...................... $18,852 $19,965 $21,854 $21,357
Net income.................... 11,457 12,197 13,890 12,827
Net income per share.......... .31 .33 .36 .33
Dividends per share........... .34 .35 .36 .36
1994:
Revenues...................... $16,500 $17,380 $17,875 $18,230
Net income.................... 10,944 11,208 11,371 11,290
Net income per share.......... .30 .31 .31 .31
Dividends per share........... .32 .32 .33 .34
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Mortgage Loans Receivable
Fair values are based upon the estimates of management and on rates on
currently prevailing for comparable loans.
Long-Term Debt
The fair value of long-term debt is estimated based on the quoted market
prices for publicly traded debt and on the current rates offered to the
Company for debt of the same remaining maturity.
The estimated fair values of the Company's financial instruments are as
follows:
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
Cash and cash equivalents............ $ 7,937 $ 7,937 $ 3,742 $ 3,742
Mortgage loans receivable............ 133,226 157,306 105,824 109,516
Long-term debt....................... 282,264 284,045 168,410 164,062
23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 19, 1996,
filed or to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 19, 1996,
filed or to be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 19, 1996,
filed or to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on April 19, 1996,
filed or to be filed pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements.
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
Note: Schedules have been omitted because the required information is
presented in the financial statements and the related notes or because
the schedules are not applicable.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three-month
period ended December 31, 1995
(c) Exhibits
24
EXHIBIT NO. DESCRIPTION
----------- -----------
3. Articles of Incorporation and Bylaws
3.1(a) Restated Articles of Incorporation, filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-11 (No. 33-1128),
effective December 19, 1985, and incorporated herein by this
reference.
3.1(b) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended March 31, 1989, and
incorporated herein by this reference.
3.1(c) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1(c) to the
Company's Registration Statement on Form S-11 (No. 33-32251),
effective January 23, 1990, and incorporated herein by this
reference.
3.1(d) Articles of Amendment of Amended and Restated Articles of
Incorporation of the Company, filed as Exhibit 3.1(d) to the
Company's Form 10-K for the year ended December 31, 1994, and
incorporated herein by this reference.
3.2 Bylaws of the Company as amended January 19, 1996.
4. Instruments Defining Rights of Security Holders, Including
Indentures
4.1 Indenture dated as of November 16, 1992, between Nationwide Health
Properties, Inc., Issuer to The Chase Manhattan Bank (National
Association), Trustee, filed as Exhibit 4.1 to the Company's Form
S-3 (No. 33-54870) dated November 24, 1992, and incorporated
herein by this reference.
4.2 Indenture dated as of June 30, 1993, between the Company and First
Interstate Bank of California, as Trustee, filed as Exhibit 4.2 to
the Company's Registration Statement on Form S-3
(No. 33-64798), effective July 12, 1993, and incorporated herein
by this reference.
4.3 First Supplemental Indenture dated November 15, 1993, between the
Company and First Interstate Bank of California, as Trustee, filed
as Exhibit 4.1 to the Company's Form 8-K dated
November 15, 1993, and incorporated by reference herein.
4.4 Indenture dated as of January 12, 1996, between the Company and
The Bank of New York, as Trustee, filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (No 33-65423) dated
December 27, 1995, and incorporated herein by this reference.
10. Material Contracts
10.1 Master Lease Document--General Terms and Conditions dated December
30, 1985, for Leases between various subsidiaries of Beverly as
Lessees and the Company as Lessor, filed as Exhibit 10.3 to the
Company's Form 10-K for the year ended December 31, 1985, and
incorporated herein by this reference.
10.2 Guaranty by and between the Company and Beverly filed as Exhibit
10.7 to the Company's Registration Statement on Form S-11 (No. 33-
1128), effective December 19, 1985, and incorporated herein by
this reference.
10.3 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases and Contract of Acquisition, dated as of August 1, 1986, of
Beverly as Guarantor in favor of the Company filed as Exhibit 10.3
to the Company's Registration Statement on Form S-11 (No. 33-
32251), effective January 23, 1990, and incorporated herein by
this reference.
10.4 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases and Contract of Acquisition, dated as of November 1, 1986,
of Beverly as Guarantor in favor of the Company filed as Exhibit
10.4 to the Company's Registration Statement on Form S-11 (No. 33-
32251), effective January 23, 1990, and incorporated herein by
this reference.
25
EXHIBIT NO. DESCRIPTION
----------- -----------
10.5 Corporate Guaranty of Obligations of Subsidiaries pursuant to
Leases, dated as of July 31, 1987, of Beverly as Guarantor in
favor of the Company filed as Exhibit 10.5 to the Company's
Registration Statement on Form S-11 (No. 33-32251), effective
January 23, 1990, and incorporated herein by this reference.
10.6 1989 Stock Option Plan of the Company as Amended and Restated
January 24, 1992 filed as Exhibit 10.8(a) to the Company's Form
10-K, and incorporated herein by this reference.
10.7 The Company's Retirement Plan for Directors effective July 26,
1991 filed as Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1991, and incorporated herein by this
reference.
10.8 Deferred Compensation Plan of the Company effective September 1,
1991 filed as Exhibit 10.14 to the Company's Form 10-K for the
year ended December 31, 1991, and incorporated herein by this
reference.
10.9 Commercial and Multi-family Mortgage Loan Sale Agreement dated as
of June 5, 1992 by and between Resolution Trust Corporation, as
Receiver, and Nationwide Health Properties, Inc. filed as Exhibit
A to the Company's Form 8-K dated May 29, 1992, and incorporated
herein by this reference.
10.10 Credit Agreement dated as of May 20, 1993 between the Company and
Wells Fargo Bank National Association, National Westminster Bank
USA, The Daiwa Bank Limited and Sanwa Bank of California filed as
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June
30, 1993, and incorporated herein by this reference.
10.10(a) Amendment Number One to Credit Agreement dated as of May 20, 1993
between the Company and Wells Fargo Bank, National Association,
National Westminster Bank USA, The Daiwa Bank, Limited, and Sanwa
Bank California filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended March 31, 1994, and incorporated herein by
this reference.
10.10(b) Amendment Number Two to Credit Agreement dated as of May 20, 1993
between the Company and Wells Fargo Bank, National Association,
National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa
Bank California, filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended June 30, 1995, and incorporated herein by
this reference.
10.10(c) Amendment Number Three to Credit Agreement dated as of January 22,
1996 between the Company and Wells Fargo Bank, National
Association, National Westminster Bank USA, The Daiwa Bank,
Limited and Sanwa Bank California.
10.11 Form of Indemnity Agreement between officers and directors of the
Company including David R. Banks, Milton J. Brock, Jr., Sam A.
Brooks, Jr., Charles D. Miller, Jack D. Samuelson, R. Bruce
Andrews, Mark L. Desmond, Don M. Pearson, Gary E. Stark, and T.
Andrew Stokes.
10.12 Executive Employment Security Policy
21. Subsidiaries of the Company
23. Consents of Experts and Counsel
23.1 Consent of Arthur Andersen LLP
27. Financial Data Schedule
26
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
NATIONWIDE HEALTH PROPERTIES, INC.
By: /s/ R. Bruce Andrews
-----------------------------------
R. Bruce Andrews
President and Chief Executive
Officer
Dated: February 16, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Milton J. Brock, Jr. Chairman and Director February 16, 1996
____________________________________
Milton J. Brock, Jr.
/s/ R. Bruce Andrews President, Chief Executive February 16, 1996
____________________________________ Officer and Director
R. Bruce Andrews (Principal Executive
Officer)
/s/ Mark L. Desmond Senior Vice President and February 16, 1996
____________________________________ Chief Financial Officer
Mark L. Desmond (Principal Financial and
Accounting Officer)
/s/ David R. Banks Director February 16, 1996
____________________________________
David R. Banks
/s/ Sam A. Brooks Director February 16, 1996
____________________________________
Sam A. Brooks
/s/ Charles D. Miller Director February 16, 1996
____________________________________
Charles D. Miller
/s/ Jack D. Samuelson Director February 16, 1996
____________________________________
Jack D. Samuelson
27
APPENDIX 1
BEVERLY ENTERPRISES, INC.
SET FORTH BELOW IS CERTAIN CONDENSED FINANCIAL DATA OF BEVERLY ENTERPRISES,
INC. ("BEVERLY") WHICH IS TAKEN FROM BEVERLY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND THE BEVERLY QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AS FILED WITH THE COMMISSION.
The information and financial data contained herein concerning Beverly was
obtained and has been condensed from Beverly's public filings under the
Exchange Act. The Beverly financial data presented includes only the most
recent interim and fiscal year end reporting periods. The Company can make no
representation as to the accuracy and completeness of Beverly's public filings
but has no reason not to believe the accuracy and completeness of such
filings. It should be noted that Beverly has no duty, contractual or
otherwise, to advise the Company of any events subsequent to such dates which
might affect the significance or accuracy of such information.
Beverly is subject to the information filing requirements of the Exchange
Act, and in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Such reports, proxy statements and
other information may be inspected at the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available at
the following Regional Offices of the Commission: 7 World Trade Center, New
York, N.Y. 10048, and 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Such reports and other information concerning Beverly can also be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, Room 1102,
New York, New York 10005.
I-1
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
Total current assets................................. $ 691,361 $ 652,337
Property and equipment, net.......................... 1,229,196 1,200,623
Total other assets................................... 624,407 469,618
---------- ----------
Total assets......................................... $2,544,964 $2,322,578
========== ==========
Total current liabilities............................ $ 446,148 $ 409,625
Long-term obligations................................ 897,103 918,018
Other liabilities and deferred items................. 171,032 167,691
Total stockholders' equity........................... 1,030,681 827,244
---------- ----------
Total liabilities and stockholders' equity........... $2,544,964 $2,322,578
========== ==========
I-2
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED
NINE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------
1995 1994 1993
----------------- ---------- ----------
Revenues............................. $2,431,166 $2,983,817 $2,899,720
Costs and expenses:
Operating and Administrative....... 2,199,581 2,715,496 2,662,946
Interest........................... 63,872 64,792 66,196
Depreciation and amortization...... 77,982 88,734 82,938
---------- ---------- ----------
2,341,435 2,869,022 2,812,080
========== ========== ==========
Income before provision for income
taxes
and extraordinary charge............ 89,731 114,795 87,640
Provision for income taxes........... 34,098 37,882 29,684
Extraordinary charge, net of income
taxes............................... -- (2,412) (2,345)
---------- ---------- ----------
Net income........................... $ 55,633 $ 74,501 $ 55,611
========== ========== ==========
Net income applicable to common
shares.............................. $ 49,455 $ 66,251 $ 31,173
========== ========== ==========
Income per share of common stock:
Primary:
Before redemption premium on Series
A preferred stock and
extraordinary charge.............. $ .54 $ .79 $ .66
Redemption premium on Series A
preferred stock -- -- (.25)
Extraordinary charge............... -- (.03) (.03)
---------- ---------- ----------
Net income per share............... $ .54 $ .76 $ .38
========== ========== ==========
Shares used to compute per share
amounts............................. 91,736 87,087 81,207
========== ========== ==========
I-3
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED
NINE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, --------------------
1995 1994 1993
----------------- --------- ---------
Cash flows from operating activities:
Net income........................... $ 55,633 $ 74,501 $ 55,611
Adjustments to reconcile net income to
net cash provided
by operating activities............... 74,786 19,719 73,378
--------- --------- ---------
Net cash provided by operating activi-
ties.................................. 130,419 94,220 128,989
Net cash used for investing activities. (138,503) (317,553) (147,126)
Net cash provided by (used for) financ-
ing activities........................ (4,202) 214,239 44,161
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents...................... (12,286) (9,094) 26,024
Cash and cash equivalents at beginning
of period............................. 67,964 77,058 51,034
--------- --------- ---------
Cash and cash equivalents at end of pe-
riod.................................. $ 55,678 $ 67,964 $ 77,058
========= ========= =========
I-4