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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, 2003
--------------------------------------------
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 1-8923
HEALTH CARE REIT, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 34-1096634
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE SEAGATE, SUITE 1500, TOLEDO, OHIO 43604
- ------------------------------------- -----
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (419) 247-2800
---------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [x] No [ ]
As of October 23, 2003, the registrant had 49,239,128 shares of common stock
outstanding.
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INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 2003 and December 31, 2002............................ 3
Consolidated Statements of Income - Three and nine months ended September 30, 2003
and 2002.................................................................................... 4
Consolidated Statements of Stockholders' Equity - Nine months ended September 30, 2003
and 2002.................................................................................... 5
Consolidated Statements of Cash Flows - Nine months ended September 30, 2003 and 2002............. 6
Notes to Unaudited Consolidated Financial Statements.............................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk......................................... 16
Item 4. Controls and Procedures........................................................................... 16
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds......................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders............................................... 17
Item 6. Exhibits and Reports on Form 8-K.................................................................. 17
SIGNATURES .................................................................................................. 18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
HEALTH CARE REIT, INC. AND SUBSIDIARIES
SEPTEMBER 30 DECEMBER 31
2003 2002
(UNAUDITED) (NOTE)
----------- ------
ASSETS (IN THOUSANDS)
Real estate investments:
Real property owned
Land $ 157,608 $ 112,044
Buildings & improvements 1,656,499 1,288,520
Construction in progress 35,335 19,833
----------- -----------
1,849,442 1,420,397
Less accumulated depreciation (136,432) (113,579)
----------- -----------
Total real property owned 1,713,010 1,306,818
Loans receivable
Real property loans 200,292 208,016
Subdebt investments 45,028 14,578
----------- -----------
245,320 222,594
Less allowance for losses on loans receivable (5,705) (4,955)
----------- -----------
239,615 217,639
----------- -----------
Net real estate investments 1,952,625 1,524,457
Other assets:
Equity investments 7,649 7,494
Deferred loan expenses 8,098 9,291
Cash and cash equivalents 8,172 9,550
Receivables and other assets 55,067 43,318
----------- -----------
78,986 69,653
----------- -----------
Total assets $ 2,031,611 $ 1,594,110
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings under unsecured lines of credit obligations $ 143,000 $ 109,500
Senior unsecured notes 615,000 515,000
Secured debt 145,164 51,831
Accrued expenses and other liabilities 7,323 20,547
----------- -----------
Total liabilities 910,487 696,878
Stockholders' equity:
Preferred stock 145,150 127,500
Common stock 48,016 40,086
Capital in excess of par value 1,006,983 790,838
Cumulative net income 641,366 580,496
Cumulative dividends (718,174) (638,085)
Accumulated other
comprehensive income 128 (170)
Other equity (2,345) (3,433)
----------- -----------
Total stockholders' equity 1,121,124 897,232
----------- -----------
Total liabilities and stockholders' equity $ 2,031,611 $ 1,594,110
=========== ===========
NOTE: The consolidated balance sheet at December 31, 2002 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.
See notes to unaudited consolidated financial statements
3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------
2003 2002 2003 2002
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Rental income $ 43,306 $ 32,182 $121,798 $ 88,423
Interest income 5,797 7,127 15,927 21,022
Commitment fees and other income 872 839 2,108 2,144
-------- -------- -------- --------
49,975 40,148 139,833 111,589
Expenses:
Interest expense 13,093 9,556 37,093 28,234
Provision for depreciation 12,945 9,222 35,004 25,328
General and administrative 2,995 2,496 8,452 7,040
Loan expense 717 599 2,032 1,756
Impairment of assets 550
Loss on extinguishment of debt 403
Provision for loan losses 250 250 750 750
-------- -------- -------- --------
30,000 22,123 83,331 64,061
-------- -------- -------- --------
Income from continuing operations 19,975 18,025 56,502 47,528
Discontinued operations:
Net gain (loss) on sales of properties 4,278 439 4,312 584
Income (loss) from discontinued operations, net 1,048 1,299 2,846 4,372
-------- -------- -------- --------
5,326 1,738 7,158 4,956
Net income 25,301 19,763 63,660 52,484
Preferred stock dividends 1,910 2,878 7,074 9,596
Preferred stock redemption charge 2,790 2,790
-------- -------- -------- --------
Net income available to common stockholders $ 20,601 $ 16,885 $ 53,796 $ 42,888
======== ======== ======== ========
Average number of common shares outstanding:
Basic 44,181 38,628 41,602 35,695
Diluted 44,833 39,324 42,165 36,451
Earnings per share:
Basic:
Income from continuing operations
available to common stockholders $ 0.35 $ 0.40 $ 1.12 $ 1.06
Discontinued operations, net 0.12 0.04 0.17 0.14
-------- -------- -------- --------
Net income available to common stockholders $ 0.47 $ 0.44 $ 1.29 $ 1.20
Diluted:
Income from continuing operations
available to common stockholders $ 0.34 $ 0.39 $ 1.11 $ 1.04
Discontinued operations, net 0.12 0.04 0.17 0.14
-------- -------- -------- --------
Net income available to common stockholders $ 0.46 $ 0.43 $ 1.28 $ 1.18
Dividends declared and paid per common share $ 0.585 $ 0.585 $ 1.755 $ 1.755
See notes to unaudited consolidated financial statements
4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------------------------
CAPITAL IN
PREFERRED COMMON EXCESS OF CUMULATIVE
STOCK STOCK PAR VALUE NET INCOME
----- ----- --------- ----------
(IN THOUSANDS)
Balances at beginning of period $ 127,500 $ 40,086 $ 790,838 $ 580,496
Comprehensive income:
Net income 63,660
Other comprehensive income:
Unrealized gain (loss) on equity investments
Foreign currency translation adjustment
Total comprehensive income
Proceeds from issuance of common shares
from dividend reinvestment and stock
incentive plans, net of forfeitures 1,826 49,226
Proceeds from issuance of common shares 4,783 134,750
Proceeds from issuance of preferred shares 126,500 (3,150)
Redemption of preferred stock (75,000) 2,790 (2,790)
Conversion of preferred stock (33,850) 1,321 32,529
Restricted stock amortization
Compensation expense related
to stock options
Cash dividends paid
--------- -------- ----------- ---------
Balances at end of period $ 145,150 $ 48,016 $ 1,006,983 $ 641,366
========= ======== =========== =========
NINE MONTHS ENDED SEPTEMBER 30, 2003
------------------------------------------------------------
ACCUMULATED
OTHER
CUMULATIVE COMPREHENSIVE OTHER
DIVIDENDS INCOME EQUITY TOTAL
--------- ------ ------ -----
(IN THOUSANDS)
Balances at beginning of period $ (638,085) $ (170) $ (3,433) $ 897,232
Comprehensive income:
Net income 63,660
Other comprehensive income:
Unrealized gain (loss) on equity investments (11) (11)
Foreign currency translation adjustment 309 309
-----------
Total comprehensive income 63,958
-----------
Proceeds from issuance of common shares
from dividend reinvestment and stock
incentive plans, net of forfeitures 53 51,105
Proceeds from issuance of common shares 139,533
Proceeds from issuance of preferred shares 123,350
Redemption of preferred stock (75,000)
Conversion of preferred stock 0
Restricted stock amortization 887 887
Compensation expense related
to stock options 148 148
Cash dividends paid (80,089) (80,089)
----------- ------ --------- -----------
Balances at end of period $ (718,174) $ 128 $ (2,345) $ 1,121,124
========== ====== ======== ===========
NINE MONTHS ENDED SEPTEMBER 30, 2002
--------------------------------------------------------------
CAPITAL IN
PREFERRED COMMON EXCESS OF CUMULATIVE
STOCK STOCK PAR VALUE NET INCOME
----- ----- --------- ----------
(IN THOUSANDS)
Balances at beginning of period $ 150,000 $ 32,740 $ 608,942 $ 512,837
Comprehensive income:
Net income 52,484
Other comprehensive income:
Unrealized gain (loss) on equity investments
Foreign currency translation adjustment
Total comprehensive income
Proceeds from issuance of common shares
from dividend reinvestment and stock
incentive plans, net of forfeitures 1,083 22,818
Proceeds from issuance of common shares 4,356 110,879
Conversion of preferred stock (22,500) 878 21,622
Restricted stock amortization
Cash dividends paid
--------- -------- --------- ---------
Balances at end of period $ 127,500 $ 39,057 $ 764,261 $ 565,321
========= ======== ========= =========
NINE MONTHS ENDED SEPTEMBER 30, 2002
------------------------------------------------------------
ACCUMULATED
OTHER
CUMULATIVE COMPREHENSIVE OTHER
DIVIDENDS INCOME EQUITY TOTAL
--------- ------ ------ -----
(IN THOUSANDS)
Balances at beginning of period $(540,946) $ (923) $ (4,780) $ 757,870
Comprehensive income:
Net income 52,484
Other comprehensive income:
Unrealized gain (loss) on equity investments (44) (44)
Foreign currency translation adjustment 597 597
---------
Total comprehensive income 53,037
---------
Proceeds from issuance of common shares
from dividend reinvestment and stock
incentive plans, net of forfeitures (189) 23,712
Proceeds from issuance of common shares 115,235
Conversion of preferred stock 0
Restricted stock amortization 1,207 1,207
Cash dividends paid (71,419) (71,419)
--------- -------- -------- ---------
Balances at end of period $(612,365) $ (370) $ (3,762) $ 879,642
========= ======== ======== =========
See notes to unaudited consolidated financial statements
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
2003 2002
--------- ---------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $ 63,660 $ 52,484
Adjustments to reconcile net income to
net cash provided from operating
activities:
Provision for depreciation 36,772 28,662
Amortization 2,855 2,961
Provision for loan losses 750 750
Impairment of assets 550
Commitment fees earned
greater than cash received (1,530)
Rental income in excess of
cash received (7,025) (5,346)
Equity in (earnings) losses of affiliated companies (270) 220
(Gain) loss on sales of properties (4,312) (584)
Increase (decrease) in accrued expenses and
other liabilities (13,223) (5,536)
Decrease (increase) in receivables and
other assets (4,535) (1,460)
--------- ---------
Net cash provided from (used in) operating activities 74,672 71,171
INVESTING ACTIVITIES
Investment in real property (367,124) (291,439)
Investment in loans receivable
and subdebt investments (90,088) (61,433)
Other investments, net of payments 414 (228)
Principal collected on loans receivable
and subdebt investments 54,929 35,203
Proceeds from sales of properties 65,160 49,519
Other (202) (485)
--------- ---------
Net cash provided from (used in) investing activities (336,911) (268,863)
FINANCING ACTIVITIES
Net increase (decrease) under unsecured
line of credit arrangements 33,500 72,600
Net increase (decrease) under secured
line of credit arrangements (29,000)
Proceeds from issuance of senior notes 100,000 150,000
Principal payments on senior notes (40,000)
Principal payments on secured debt (4,411) (7,527)
Net proceeds from the issuance of common stock 190,638 138,947
Net proceeds from the issuance of preferred stock 96,850
Redemption of preferred stock (75,000)
Decrease (increase) in deferred loan expense (627) (4,295)
Cash distributions to stockholders (80,089) (71,419)
--------- ---------
Net cash provided from (used in) financing activities 260,861 209,306
--------- ---------
Increase (decrease) in cash and cash equivalents (1,378) 11,614
Cash and cash equivalents at beginning of period 9,550 9,826
--------- ---------
Cash and cash equivalents at end of period $ 8,172 $ 21,440
========= =========
Supplemental cash flow information-interest paid $ 47,634 $ 35,935
========= =========
See notes to unaudited consolidated financial statements
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
HEALTH CARE REIT, INC. AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered for a fair
presentation have been included. Operating results for the nine months ended
September 30, 2003 are not necessarily an indication of the results that may be
expected for the year ending December 31, 2003. For further information, refer
to the financial statements and footnotes thereto included in our annual report
on Form 10-K for the year ended December 31, 2002.
NOTE B - REAL ESTATE INVESTMENTS
During the nine months ended September 30, 2003, we invested $345,091,000 in
real property, provided permanent mortgage and loan financings of $63,367,000,
made construction advances of $22,033,000 and funded $26,721,000 of subdebt
investments. As of September 30, 2003, we had approximately $24,877,000 in
unfunded construction commitments. Also during the nine months ended September
30, 2003, we sold real property generating $65,160,000 of net proceeds and
collected $54,929,000 and $414,000 as repayment of principal on loans receivable
and subdebt investments, respectively.
NOTE C - EQUITY INVESTMENTS
We have an investment in Atlantic Healthcare Finance L.P., a property group that
specializes in the financing, through sale and leaseback transactions, of
nursing and care homes located in the United Kingdom. This investment is
accounted for using the equity method of accounting because we have the ability
to exercise significant influence, but not control, over the investee due to our
31% ownership interest. In October 2003, we sold our investment in Atlantic
Healthcare Finance L.P. generating a net gain of approximately $800,000 which
will be recognized in the fourth quarter.
Other equity investments, which consist of investments in private and public
companies for which we do not have the ability to exercise influence, are
accounted for under the cost method. Under the cost method of accounting,
investments in private companies are carried at cost and are adjusted only for
other-than-temporary declines in fair value, distributions of earnings and
additional investments. For investments in public companies that have readily
determinable fair market values, we classify our equity investments as
available-for-sale and, accordingly, record these investments at their fair
market values with unrealized gains and losses included in accumulated other
comprehensive income, a separate component of stockholders' equity. These
investments represent a minimal ownership interest in these companies.
NOTE D - DISTRIBUTIONS PAID TO COMMON STOCKHOLDERS
On February 20, 2003, we paid a dividend of $0.585 per share to stockholders of
record on January 31, 2003. This dividend related to the period from October 1,
2002 through December 31, 2002.
On May 20, 2003, we paid a dividend of $0.585 per share to stockholders of
record on April 30, 2003. This dividend related to the period from January 1,
2003 through March 31, 2003.
On August 20, 2003, we paid a dividend of $0.585 per share to stockholders of
record on July 31, 2003. This dividend related to the period from April 1, 2003
through June 30, 2003.
7
NOTE E - DISCONTINUED OPERATIONS
In August 2001, the Financial Accounting Standards Board issued Statement No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is
effective for fiscal years beginning after December 15, 2001. We adopted the
standard effective January 1, 2002.
During the nine months ended September 30, 2003, we sold fourteen assisted
living facilities, two skilled nursing facilities and one parcel of land with
carrying values of $60,848,000 for a net gain of $4,312,000. In accordance with
Statement No. 144, we have reclassified the income and expenses attributable to
all properties sold subsequent to January 1, 2002 to discontinued operations.
Expenses include an allocation of interest expense based on property carrying
values and our weighted average cost of debt. The following illustrates the
reclassification impact of Statement No. 144 as a result of classifying the
properties as discontinued operations (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------- -----------------
2003 2002 2003 2002
------ ------ ------ ------
Revenues
Rental income $1,541 $3,187 $5,833 $9,828
Expenses
Interest expense 180 894 1,219 2,246
Provision for depreciation 313 994 1,768 3,210
------ ------ ------ ------
Income (loss) from discontinued operations, net $1,048 $1,299 $2,846 $4,372
====== ====== ====== ======
NOTE F - CONTINGENT LIABILITIES
We have guaranteed the payment of industrial revenue bonds for one assisted
living facility, in the event that the present owner defaults upon its
obligations. In consideration for this guaranty, we receive and recognize fees
annually related to this agreement. This guaranty expires upon the repayment of
the industrial revenue bonds which currently mature in 2009. At September 30,
2003, we were contingently liable for $3,195,000 under this guaranty.
In addition, we have an outstanding letter of credit issued to a bank, which
bank provided additional financing for a residential retirement community
project. We have also guaranteed the payment of a loan made by the bank on this
project. The letter of credit currently expires in 2004 and the guaranty expires
upon the repayment of the loan, which currently matures in 2004. At September
30, 2003, obligations under these agreements for which we were contingently
liable aggregated approximately $3,500,000.
As of September 30, 2003, we had approximately $24,877,000 of unfunded
construction commitments.
On November 20, 2002, Doctors Community Health Care Corporation and five
subsidiaries filed for Chapter 11 bankruptcy protection. Doctors has stated that
the bankruptcy filing was due to the bankruptcy of National Century Financial
Enterprises and affiliates, who halted payments to health care providers,
including Doctors. We have provided mortgage financing to Doctors in the form of
a loan secured by the Pacifica Hospital of the Valley in Sun Valley, CA, and the
other assets of the Pacifica of the Valley Corporation, one of the debtor
subsidiaries. The outstanding principal balance of the loan was approximately
$18.8 million at September 30, 2003. The assets of the Doctors debtors are
currently out for bid under bankruptcy court supervision. Doctors anticipates a
confirmation hearing on its plan of reorganization to be held on December 10,
2003. Doctors did not make an interest payment for the nine months ended
September 30, 2003. We believe we are entitled to all accrued but unrecognized
interest, however, as previously stated, we do not currently intend to recognize
any interest on the loan if payment is not received.
Alterra Healthcare Corporation filed for Chapter 11 bankruptcy protection on
January 23, 2003. We have a master lease with Alterra for 45 assisted living
facilities with a depreciated book value of $104.0 million at September 30,
2003. A joint venture between Fortress Investment Group LLC and Emeritus
Corporation was the winning bidder at an auction held on July 17, 2003. The $76
million acquisition was approved by the bankruptcy court on July 23, 2003.
Subject to confirmation of Alterra's plan of reorganization, our master lease
should be assumed by the reorganized Alterra. A hearing on confirmation of
Alterra's plan of reorganization is scheduled for October 24, 2003. Alterra has
remained current on rental payments throughout the bankruptcy process.
8
NOTE G - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- --------------------
2003 2002 2003 2002
------- ------- ------- -------
Numerator for basic and diluted earnings
per share - net income available to common
stockholders $20,601 $16,885 $53,796 $42,888
======= ======= ======= =======
Denominator for basic earnings per
share - weighted average shares 44,181 38,628 41,602 35,695
Effect of dilutive securities:
Employee stock options 450 441 361 501
Non-vested restricted shares 202 255 202 255
------- ------- ------- -------
Dilutive potential common shares 652 696 563 756
------- ------- ------- -------
Denominator for diluted earnings per
share - adjusted weighted average shares 44,833 39,324 42,165 36,451
======= ======= ======= =======
Basic earnings per share $ 0.47 $ 0.44 $ 1.29 $ 1.20
======= ======= ======= =======
Diluted earnings per share $ 0.46 $ 0.43 $ 1.28 $ 1.18
======= ======= ======= =======
The diluted earnings per share calculation excludes the dilutive effect of 0
shares for the three and nine month periods ended September 30, 2003,
respectively, and 10,000 and 10,000 shares for the same periods in 2002, because
the exercise price was greater than the average market price. The Series C
Cumulative Convertible Preferred Stock and the Series E Cumulative Convertible
and Redeemable Preferred Stock were not included in this calculation as the
effect of the conversions were anti-dilutive.
NOTE H - OTHER EQUITY
Other equity consists of the following (in thousands):
SEPTEMBER 30
--------------------
2003 2002
------- -------
Accumulated compensation expense related
to stock options $ 148 $ 0
Unamortized restricted stock (2,493) (3,762)
------- -------
$(2,345) $(3,762)
======= =======
Unamortized restricted stock represents the unamortized value of restricted
stock granted to employees and directors. Expense, which is recognized as the
shares vest based on the market value at the date of the award, totaled $887,000
and $1,207,000 for the nine months ended September 30, 2003 and September 30,
2002, respectively.
In December 2002, the Financial Accounting Standards Board issued Statement No.
148, Accounting for Stock-Based Compensation - Transition and Disclosure, that
we are required to adopt for fiscal years beginning after December 15, 2002,
with transition provisions for certain matters. This Statement amends FASB
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. Effective January 1, 2003, we commenced
recognizing compensation expense in accordance with Statement 123 on a
prospective basis. Accumulated option compensation
9
expense represents the amount of amortized compensation costs related to stock
options awarded to employees and directors in 2003.
The following table illustrates the effect on net income available to common
stockholders if we had applied the fair value recognition provisions of
Statement 123 to stock-based compensation for options granted since 1995 but
prior to adoption at January 1, 2003 (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Numerator:
Net income available to common
stockholders - as reported $20,601 $16,885 $53,796 $42,888
Deduct: Stock based employee
compensation expense determined
under fair value based method for
all awards 103 136 315 409
------- ------- ------- -------
Net income available to common
stockholders - pro forma $20,498 $16,749 $53,481 $42,479
======= ======= ======= =======
Denominator:
Basic weighted average shares -
as reported and pro forma 44,181 38,628 41,602 35,695
Effect of dilutive securities:
Employee stock options - pro forma 409 398 316 413
Non-vested restricted shares 202 255 202 255
------- ------- ------- -------
Dilutive potential common shares 611 653 518 668
------- ------- ------- -------
Diluted weighted average shares -
pro forma 44,792 39,281 42,120 36,363
======= ======= ======= =======
Net income available to common
stockholders per share - as reported
Basic $ 0.47 $ 0.44 $ 1.29 $ 1.20
Diluted 0.46 0.43 1.28 1.18
Net income available to common
stockholders per share - pro forma
Basic $ 0.46 $ 0.43 $ 1.29 $ 1.19
Diluted 0.46 0.43 1.27 1.17
NOTE I - ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income includes unrealized gains or losses on
our equity investments and foreign currency translation adjustments. These items
are included as components of stockholders' equity. Other comprehensive income
for the three and nine months ended September 30, 2003 totaled ($125,000) and
$298,000, respectively, and $188,000 and $553,000 for same periods in 2002.
NOTE J - SIGNIFICANT CHANGES AND EVENTS
In March 2003, we sold $100,000,000 of 8.0% senior unsecured notes, maturing in
September 2012, at an effective yield of 7.40%. These notes were an add-on to
the $150,000,000 senior unsecured notes sold in September 2002. The aggregate
principal amount of outstanding notes of this series is now $250,000,000.
10
On July 9, 2003, we closed on a public offering of 4,000,000 shares of 7.875%
Series D Cumulative Redeemable Preferred Stock, which generated net proceeds of
approximately $96,850,000. The shares have a liquidation value of $25 per share.
The preferred stock, which has no stated maturity, may be redeemed by us at par
on or after July 9, 2008. A portion of the proceeds from this offering were used
to redeem all 3,000,000 shares of our 8.875% Series B Cumulative Redeemable
Preferred Stock on July 15, 2003, at a redemption price of $25 per share plus
accrued and unpaid dividends.
In July 2003, we issued 1,583,100 shares of common stock, $1 par value, at a
price of $30.32 per share, which generated net proceeds of approximately
$47,950,000.
In July 2003, we issued 594,000 shares of common stock, $1 par value, under our
dividend reinvestment and stock purchase plan's waiver program, which generated
net proceeds of approximately $17,900,000.
In September 2003, we issued 3,200,000 shares of common stock, $1 par value, at
a price of $30.25 per share, which generated net proceeds of approximately
$91,583,000. In October 2003, we issued an additional 480,000 shares of common
stock pursuant to the over-allotment exercise, which generated net proceeds of
approximately $13,795,000.
On September 29, 2003, we issued 1,060,000 shares of 6% Series E Cumulative
Convertible and Redeemable Preferred Stock as partial consideration for an
acquisition of assets by the Company, with the shares valued at $26,500,000 for
such purposes. The shares were issued to Southern Assisted Living, Inc. and
certain of its shareholders without registration in reliance upon the federal
statutory exemption of Section 4(2) of the Securities Act of 1933, as amended.
The shares have a liquidation value of $25 per share. The preferred stock, which
has no stated maturity, may be redeemed by us at par on or after August 15,
2008. The preferred shares are convertible into common stock at a conversion
price of $32.66 per share at any time.
The holder of our Series C Cumulative Convertible Preferred Stock converted
1,354,000 shares into 1,321,000 shares of common stock during the nine months
ended September 30, 2003, and 376,000 shares into 367,000 shares of common stock
in October 2003.
In August and September 2003, we solicited the consents of registered holders of
our senior unsecured notes to the adoption of certain amendments to the
Indenture, dated as of April 17, 1997 (as amended and supplemented) (the "1997
Indenture"), with Fifth Third Bank, as trustee (the "Trustee"), and the
Indenture, dated as of September 6, 2002 (as amended and supplemented) (the
"2002 Indenture"), with the Trustee. After receiving the requisite number of
consents, we entered into Supplemental Indenture No. 5 to the 1997 Indenture
with the Trustee and Supplemental Indenture No. 2 to the 2002 Indenture with the
Trustee. As amended, the supplemental indentures modify the indentures to
require us to (a) limit the use of secured debt to 40% of undepreciated assets,
(b) limit total debt to 60% of undepreciated total assets, and (c) maintain
total unencumbered assets at 150% of total secured debt. These amendments to all
of our $615,000,000 of senior unsecured notes are intended to modernize the
covenant package and make it consistent with other investment-grade REITs.
NOTE K - NEW ACCOUNTING POLICIES
In April 2002, the Financial Accounting Standards Board (FASB) issued Statement
No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections. Statement 145 requires gains and
losses on extinguishments of debt to be classified as income or loss from
continuing operations rather than as extraordinary items as previously required
under Statement 4. Extraordinary treatment will be required for certain
extinguishments as provided in APB Opinion No. 30. Statement 145 is effective
for fiscal years beginning after December 15, 2002. We adopted the standard
effective January 1, 2003.
Effective January 1, 2003, we commenced recognizing compensation expense for
employee stock options in accordance with Statement 123 on a prospective basis.
See Note H.
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51 (the Interpretation). The Interpretation requires the consolidation of
variable interest entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally consolidated by an
enterprise that has a controlling financial interest through ownership of a
majority voting interest in the entity. The Interpretation is effective for
financial statements issued for the first period ending after December 15, 2003.
We are currently evaluating the effects, if any, of the issuance of the
Interpretation.
In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. Statement 150
requires that certain financial instruments be classified as liabilities (or
assets in certain circumstances) rather than as equity. Statement 150 is
effective at the beginning of the first interim period beginning after June 15,
2003. We adopted the standard effective July 1, 2003 and have determined that
none of our financial instruments are impacted by this Statement.
11
Emerging Issues Task Force (EITF) Topic D-42, "The Effect on the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,"
provides, among other things, that any excess of (1) the fair value of the
consideration transferred to the holders of preferred stock redeemed over (2)
the carrying amount of the preferred stock should be subtracted from net
earnings to determine net income available to common stockholders in the
calculation of earnings per share. At the July 31, 2003 meeting of the EITF, the
Securities and Exchange Commission (SEC) Observer clarified that for purposes of
applying EITF Topic D-42, the carrying amount of the preferred stock should be
reduced by the issuance costs of the preferred stock, regardless of where in the
stockholders' equity section those costs were initially classified upon
issuance. On July 15, 2003, we redeemed all three million shares of our 8.875%
Series B Cumulative Redeemable Preferred Stock. The costs to issue these
securities were recorded as a reduction to paid-in capital, and to implement the
clarified accounting pronouncement, we recorded a non-cash, non-recurring charge
of $2.79 million, or $0.06 per diluted share, in the third quarter of 2003 to
reduce net income available to common stockholders.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2003, our net real estate investments totaled approximately
$1.96 billion and included 217 assisted living facilities, 96 skilled nursing
facilities and eight specialty care facilities. Depending upon the availability
and cost of external capital, we anticipate making additional investments in
health care related facilities. New investments are funded from temporary
borrowings under our unsecured lines of credit arrangements, internally
generated cash and the proceeds derived from asset sales. Permanent financing
for future investments, which replaces funds drawn under the unsecured lines of
credit arrangements, is expected to be provided through a combination of public
and private offerings of debt and equity securities and the incurrence of
secured debt. We believe our liquidity and various sources of available capital
are sufficient to fund operations, meet debt service and dividend requirements
and finance future investments.
In March 2003, we sold $100,000,000 of 8.0% senior unsecured notes, maturing in
September 2012, at an effective yield of 7.40%. These notes were an add-on to
the $150,000,000 senior unsecured notes sold in September 2002. The aggregate
principal amount of outstanding notes of this series is now $250,000,000.
On July 9, 2003, we closed on a public offering of 4,000,000 shares of 7.875%
Series D Cumulative Redeemable Preferred Stock, which generated net proceeds of
approximately $96,850,000. The shares have a liquidation value of $25 per share.
The preferred stock, which has no stated maturity, may be redeemed by us at par
on or after July 9, 2008. A portion of the proceeds from this offering were used
to redeem all 3,000,000 shares of our 8.875% Series B Cumulative Redeemable
Preferred Stock on July 15, 2003, at a redemption price of $25 per share plus
accrued and unpaid dividends.
In July 2003, we issued 1,583,100 shares of common stock, $1 par value, at a
price of $30.32 per share, which generated net proceeds of approximately
$47,950,000.
In July 2003, we issued 594,000 shares of common stock, $1 par value, under our
dividend reinvestment and stock purchase plan's waiver program, which generated
net proceeds of approximately $17,900,000.
In September 2003, we issued 3,200,000 shares of common stock, $1 par value, at
a price of $30.25 per share, which generated net proceeds of approximately
$91,583,000. In October 2003, we issued an additional 480,000 shares of common
stock pursuant to the over-allotment exercise, which generated net proceeds of
approximately $13,795,000.
On September 29, 2003, we issued 1,060,000 shares of 6% Series E Cumulative
Convertible and Redeemable Preferred Stock as partial consideration for an
acquisition of assets by the Company, with the shares valued at $26,500,000 for
such purposes. The shares were issued to Southern Assisted Living, Inc. and
certain of its shareholders without registration in reliance upon the federal
statutory exemption of Section 4(2) of the Securities Act of 1933, as amended.
The shares have a liquidation value of $25 per share. The preferred stock, which
has no stated maturity, may be redeemed by us at par on or after August 15,
2008. The preferred shares are convertible into common stock at a conversion
price of $32.66 per share at any time.
The holder of our Series C Cumulative Convertible Preferred Stock converted
1,354,000 shares into 1,321,000 shares of common stock during the nine months
ended September 30, 2003, and 376,000 shares into 367,000 shares of common stock
in October 2003.
As of September 30, 2003, we had stockholders' equity of $1,121,124,000 and a
total outstanding debt balance of $903,164,000, which represents a debt to total
book capitalization ratio of 0.45 to 1.0.
In October 2003, we sold our investment in Atlantic Healthcare Finance L.P.
generating a net gain of approximately $800,000 which will be recognized in the
fourth quarter.
In May 2003, we announced the amendment and extension of our primary unsecured
revolving line of credit. The line of credit was expanded to $225,000,000,
expires in May 2006 (with the ability to extend for one year at our discretion
if we are in compliance with all covenants) and currently bears interest at the
lender's prime rate or LIBOR plus 1.3% at our option. In August 2003, we further
amended the line of credit to modify certain financial covenants that will
enhance our financial flexibility and align our covenant package with other
investment grade REITs. Also in May 2003, we repaid our $4,000,000 secured note
and terminated this agreement. At the same time, we increased our $25,000,000
unsecured line of credit to $30,000,000. This line of credit bears interest at
the lender's prime rate and expires in May 2004. Also, at September 30, 2003, we
had a secured line of credit in the amount of $60,000,000 bearing interest at
the lender's prime rate or LIBOR plus 2.0%, at our option, with a floor of 7.0%
and which expires in April 2004. At September 30, 2003, we had $143,000,000 in
borrowings outstanding under the unsecured lines of credit arrangements.
13
As of October 23, 2003, we had an effective shelf registration on file with the
Securities and Exchange Commission under which we may issue up to $831,794,619
of securities including debt securities, common and preferred stock, depositary
shares, warrants and units. Depending upon market conditions, we anticipate
issuing securities under our shelf registration to invest in additional health
care facilities and to repay borrowings under our unsecured lines of credit
arrangements.
On July 23, 2003, Moody's Investor Services upgraded its rating on our senior
unsecured notes from Ba1 to Baa3. The credit strengths noted by Moody's included
moderate financial leverage, negligible secured debt, strong portfolio
management and underwriting skills and improved portfolio fundamentals in our
skilled nursing and assisted living facilities.
In August and September 2003, we solicited the consents of registered holders of
our senior unsecured notes to the adoption of certain amendments to the
Indenture, dated as of April 17, 1997 (as amended and supplemented) (the "1997
Indenture"), with Fifth Third Bank, as trustee (the "Trustee"), and the
Indenture, dated as of September 6, 2002 (as amended and supplemented) (the
"2002 Indenture"), with the Trustee. After receiving the requisite number of
consents, we entered into Supplemental Indenture No. 5 to the 1997 Indenture
with the Trustee and Supplemental Indenture No. 2 to the 2002 Indenture with the
Trustee. As amended, the supplemental indentures modify the indentures to
require us to (a) limit the use of secured debt to 40% of undepreciated assets,
(b) limit total debt to 60% of undepreciated total assets, and (c) maintain
total unencumbered assets at 150% of total secured debt. These amendments to all
of our $615,000,000 of senior unsecured notes are intended to modernize the
covenant package and make it consistent with other investment-grade REITs.
RESULTS OF OPERATIONS
Revenues were comprised of the following:
Three months ended Change Year to date through Change
---------------------- ----------------------- ----------------------- -----------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2003 2002 $ % 2003 2002 $ %
---- ---- - - ---- ---- - -
(in thousands)
Rental income $ 43,306 $ 32,182 $ 11,124 35% $121,798 $ 88,423 $ 33,375 38%
Interest income 5,797 7,127 (1,330) -19% 15,927 21,022 (5,095) -24%
Commitment fees
and other income 872 839 33 4% 2,108 2,144 (36) -2%
-------- -------- -------- -- -------- -------- -------- --
Totals $ 49,975 $ 40,148 $ 9,827 24% $139,833 $111,589 $ 28,244 25%
======== ======== ======== == ======== ======== ======== ==
For the three and nine months ended September 30, 2003, we generated increased
rental income as a result of the acquisition of properties for which we receive
rent. This offset a reduction in interest income due to the repayment of
mortgage loans and non-recognition of interest income related to our mortgage
loan with Doctors Community Health Care Corporation.
Expenses were comprised of the following:
Three months ended Change Year to date through Change
--------------------- --------------------- --------------------- ---------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2003 2002 $ % 2003 2002 $ %
---- ---- - - ---- ---- - -
(in thousands)
Interest expense $ 13,093 $ 9,556 $ 3,537 37% $ 37,093 $ 28,234 $ 8,859 31%
Provision for
depreciation 12,945 9,222 3,723 40% 35,004 25,328 9,676 38%
General and
administrative 2,995 2,496 499 20% 8,452 7,040 1,412 20%
Loan expense 717 599 118 20% 2,032 1,756 276 16%
Impairment of assets 550 (550) n/a
Loss on extinguishment
of debt 403 (403) n/a
Provision for
loan losses 250 250 0 0% 750 750 0 0%
-------- -------- -------- -- -------- -------- -------- --
Totals $ 30,000 $ 22,123 $ 7,877 36% $ 83,331 $ 64,061 $ 19,270 30%
======== ======== ======== == ======== ======== ======== ==
The increase in interest expense from 2002 to 2003 was primarily due to higher
average borrowings in 2003. This was partially offset by lower average interest
rates and an increase in the amount of capitalized interest offsetting interest
expense.
We capitalize certain interest costs associated with funds used to finance the
construction of properties owned directly by us. The amount capitalized is based
upon the borrowings outstanding during the construction period using the rate of
interest that approximates our cost of financing. Our interest expense is
reduced by the amount capitalized. Capitalized interest for the three and nine
months ended September 30, 2003 totaled $490,000 and $1,128,000, respectively,
as compared with none for the same periods in 2002.
The provision for depreciation increased primarily as a result of additional
investments in properties owned directly by us.
General and administrative expenses as a percentage of revenues (including
revenues from discontinued operations) for the three and nine months ended
September 30, 2003 were 4.97% and 5.49%, respectively, as compared with 5.89%
and 5.96% for the same periods in 2002.
14
The increase in loan expense was primarily due to the additional amortization of
costs related to the unsecured lines of credit expansions and costs related to
obtaining consents to modify the covenant packages of our senior unsecured
notes.
During the nine months ended September 30, 2002, it was determined that the
projected undiscounted cash flows from a parcel of land did not exceed its
related net book value and an impairment charge of $550,000 was recorded to
reduce the property to its estimated fair market value. The estimated fair
market value of the property was determined by an offer to purchase received
from a third party.
In April 2002, we purchased $35,000,000 of our outstanding unsecured senior
notes that were due in 2003 and recorded a charge of $403,000 in connection with
this early extinguishment. Effective January 1, 2003, in accordance with FASB
Statement No. 145, we reclassified the loss on extinguishment of debt in 2002 to
income from continuing operations rather than as an extraordinary item as
previously required under FASB Statement No. 4.
Other items: Three months ended Change Year to date through Change
- ------------ -------------------- ------------------ -------------------- -----------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2003 2002 $ % 2003 2002 $ %
---- ---- - - ---- ---- - -
(in thousands)
Gain (loss) on sales
of properties $ 4,278 $ 439 $ 3,839 874% $ 4,312 $ 584 $ 3,728 638%
Discontinued
operations, net 1,048 1,299 (251) -19% 2,846 4,372 (1,526) -35%
Preferred dividends (1,910) (2,878) 968 -34% (7,074) (9,596) 2,522 -26%
Preferred stock
redemption charge (2,790) (2,790) n/a (2,790) (2,790) n/a
------- ------- ------- --- ------- ------- ------- --
Totals $ 626 $(1,140) $ 1,766 -155% $(2,706) $(4,640) $ 1,934 -42%
======= ======= ======= === ======= ======= ======= ===
During the nine months ended September 30, 2003, we sold fourteen assisted
living facilities, two skilled nursing facilities and one parcel of land with
carrying values of $60,848,000 for a net gain of $4,312,000. These properties
generated a net gain of $2,846,000 after deducting depreciation and interest
expense from rental income for the nine months ended September 30, 2003. All
properties sold from January 1, 2002 through September 30, 2003 generated
$4,372,000 of income after deducting depreciation and interest expense from
rental income for the nine months ended September 30, 2002.
During the nine months ended September 30, 2003, the holder of our Series C
Cumulative Convertible Preferred Stock converted 1,354,000 shares into 1,321,000
shares of common stock, leaving 746,000 shares outstanding at September 30, 2003
as compared to 2,100,000 at September 30, 2002. The decrease in preferred
dividends is due to the reduction in outstanding preferred shares.
On July 15, 2003, we redeemed all three million shares of our 8.875% Series B
Cumulative Redeemable Preferred Stock. In accordance with EITF Topic D-42, the
costs to issue these securities were recorded as a non-cash, non-recurring
charge of $2.79 million, or $0.06 per diluted share, in the third quarter of
2003 to reduce net income available to common stockholders.
As a result of the various factors mentioned above, net income available to
common stockholders for the three and nine months ended September 30, 2003 was
$20,601,000, or $0.46 per diluted share, and $53,796,000, or $1.28 per diluted
share, respectively, as compared with $16,885,000, or $0.43 per diluted share,
and $42,888,000, or $1.18 per diluted share, for the same periods in 2002.
15
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This report on Form 10-Q of the Company may contain "forward-looking" statements
as defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements concern the possible expansion of our portfolio; the
performance of our operators and properties; our ability to enter into
agreements with new viable tenants for properties which we take back from
financially troubled tenants, if any; our ability to make distributions; our
policies and plans regarding investments, financings and other matters; our tax
status as a real estate investment trust; our ability to appropriately balance
the use of debt and equity; and our ability to access capital markets or other
sources of funds. When we use words such as "believe," "expect," "anticipate,"
or similar expressions, we are making forward-looking statements.
Forward-looking statements are not guarantees of future performance and involve
risks and uncertainties. Our expected results may not be achieved, and actual
results may differ materially from our expectations. This may be a result of
various factors, including, but not limited to: the status of the economy; the
status of capital markets, including prevailing interest rates; compliance with
and changes to regulations and payment policies within the health care industry;
changes in financing terms; competition within the health care and senior
housing industries; and changes in federal, state and local legislation. Other
important factors are identified in our Annual Report on Form 10-K for the year
ended December 31, 2002, including factors identified under the headings
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Finally, we assume no obligation to update or revise any
forward-looking statements or to update the reasons why actual results could
differ from those projected in any forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including the potential loss arising
from adverse changes in interest rates. We seek to mitigate the effects of
fluctuations in interest rates by matching the terms of new investments with new
long-term fixed rate borrowings to the extent possible. The following section is
presented to provide a discussion of the risks associated with potential
fluctuations in interest rates.
We historically borrow on our unsecured and secured lines of credit arrangements
to make acquisitions of, loans to or to construct health care facilities. Then,
as market conditions dictate, we will issue equity or long-term fixed rate debt
to repay the borrowings under the unsecured and secured lines of credit
arrangements.
A change in interest rates will not affect the interest expense associated with
our fixed rate debt. Interest rate changes, however, will affect the fair value
of our fixed rate debt. A 1% increase in interest rates would result in a
decrease in fair value of our senior unsecured notes by approximately $14
million at September 30, 2003 ($15 million at September 30, 2002). Changes in
the interest rate environment upon maturity of this fixed rate debt could have
an effect on our future cash flows and earnings, depending on whether the debt
is replaced with other fixed rate debt, variable rate debt, or equity or repaid
by the sale of assets.
Our variable rate debt, including our unsecured and secured lines of credit
arrangements, is reflected at fair value. At September 30, 2003, a 1% increase
in interest rates related to this variable rate debt (assuming no changes in
outstanding balances) would result in increased annual interest expense of
$1,430,000 ($726,000 at September 30, 2002).
We are subject to risks associated with debt financing, including the risk that
existing indebtedness may not be refinanced or that the terms of refinancing may
not be as favorable as the terms of current indebtedness. The majority of our
borrowings were completed under indentures or contractual agreements that limit
the amount of indebtedness we may incur. Accordingly, in the event that we are
unable to raise additional equity or borrow money because of these limitations,
our ability to acquire additional properties may be limited.
We may or may not elect to use financial derivative instruments to hedge
variable interest rate exposure. These decisions are principally based on our
policy to match our variable rate investments with comparable borrowings, but
are also based on the general trend in interest rates at the applicable dates
and our perception of the future volatility of interest rates.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended).
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective as
of the end of the period covered by this report. No change in our internal
control over financial reporting (as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934, as amended) occurred during the period covered by this
report that materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
16
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
See the discussion of the issuance of our 6% Series E Cumulative Convertible and
Redeemable Preferred Stock set forth in Part I, Item 1 Notes to Unaudited
Consolidated Financial Statements, Note J - Significant Changes and Events and
Part I, Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See the discussion of the consent solicitation and amendments to our indentures
set forth in Part I, Item 1 Notes to Unaudited Consolidated Financial
Statements, Note J - Significant Changes and Events and Part I, Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
32.1 Certification pursuant to 18 U.S.C. Section 1350 by Chief
Executive Officer.
32.2 Certification pursuant to 18 U.S.C. Section 1350 by Chief
Financial Officer.
(b) Reports on Form 8-K
Date of Report Item Description
-------------- ---- -----------
July 8, 2003 5 The Company announced that it had filed
the Certificate of Designation for its
7 7/8% Series D Cumulative Redeemable
Preferred Stock.
July 8, 2003 5 The Company reported the following: (1) it
issued a press release announcing
investments for the quarter ended June 30,
2003; (2) Arnold & Porter issued a tax
opinion to the Company in connection with
the Company's sale of 4,000,000 shares of
its 7 7/8% Series D Cumulative Redeemable
Preferred Stock; and (3) the Company had
signed a purchase agreement for the
purchase and sale of 1,583,100 shares of
common stock.
July 15, 2003 12 The Company issued a press release
announcing earnings results for the
quarter ended June 30, 2003.
August 26, 2003 5 The Company reported the following: (1) it
had amended existing credit facilities;
(2) it had entered into an underwriting
agreement for the sale and purchase of
3,200,000 shares of $1 par value common
stock; and (3) it issued a press release
announcing it had changed net income
guidance to reflect EITF Topic D-42.
September 29, 2003 5 The Company announced that it had filed
the Certificate of Designation for its 6%
Series E Cumulative Convertible and
Redeemable Preferred Stock.
October 22, 2003 12 The Company issued a press release
announcing earnings results for the
quarter ended September 30, 2003.
17
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH CARE REIT, INC.
Date: October 24, 2003 By: /s/ GEORGE L. CHAPMAN
-------------------------- ------------------------------------
George L. Chapman,
Chairman and Chief Executive Officer
Date: October 24, 2003 By: /s/ RAYMOND W. BRAUN
-------------------------- ------------------------------------
Raymond W. Braun,
President and Chief Financial Officer
Date: October 24, 2003 By: /s/ MICHAEL A. CRABTREE
-------------------------- ------------------------------------
Michael A. Crabtree,
Chief Accounting Officer
18