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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

or

 

 

 

o

 

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

 incorporation or organization)

 

(I.R.S. Employer

 Identification No.)

 

 

 

4500 Dorr Street, Toledo, Ohio

 

43615

 

 

 

(Address of principal executive offices)

 

(Zip Code)

(419) 247-2800

(Registrant’s telephone number, including area code)  

Not Applicable  

(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  ☑  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer  

 

Accelerated filer o  

 

Non-accelerated filer   o

 (Do not check if a smaller reporting company)

 

Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  ☑

As of October 31, 2014, the registrant had 327,674,096 shares of common stock outstanding.  

 

 


TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets — September 30, 2014 and December 31, 2013

3

 

 

Consolidated Statements of Comprehensive Income — Three and nine months ended September 30, 2014 and 2013

4

 

 

Consolidated Statements of Equity — Nine months ended September 30, 2014 and 2013

6

 

 

Consolidated Statements of Cash Flows — Nine months ended September 30, 2014 and 2013

7

 

 

Notes to Unaudited Consolidated Financial Statements

8

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

58

 

 

Item 4. Controls and Procedures

59

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

Item 1A. Risk Factors

59

 

59

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

59

 

 

Item 5. Other Information

60

 

 

Item 6. Exhibits

61

 

 

Signatures

62

 

 

  

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

 

September 30, 2014

 

December 31, 2013

 

 

 

 

  

(Unaudited)

 

(Note)

Assets:  

 

 

 

 

 

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

 1,971,513  

 

$

 1,878,877  

 

 

Buildings and improvements  

 

 21,310,165  

 

 

 20,625,515  

 

 

Acquired lease intangibles  

 

 1,092,367  

 

 

 1,070,754  

 

 

Real property held for sale, net of accumulated depreciation  

 

 47,463  

 

 

 18,502  

 

 

Construction in progress  

 

 179,356  

 

 

 141,085  

 

 

 

Gross real property owned  

 

 24,600,864  

 

 

 23,734,733  

 

 

Less accumulated depreciation and amortization  

 

 (2,959,813) 

 

 

 (2,386,658) 

 

 

 

Net real property owned  

 

 21,641,051  

 

 

 21,348,075  

 

Real estate loans receivable  

 

 318,221  

 

 

 332,146  

 

Net real estate investments  

 

 21,959,272  

 

 

 21,680,221  

Other assets:  

 

 

 

 

 

 

 

Investments in unconsolidated entities  

 

 656,213  

 

 

 479,629  

 

 

Goodwill  

 

 68,321  

 

 

 68,321  

 

 

Deferred loan expenses  

 

 72,083  

 

 

 70,875  

 

 

Cash and cash equivalents  

 

 998,678  

 

 

 158,780  

 

 

Restricted cash  

 

 118,167  

 

 

 72,821  

 

 

Receivables and other assets  

 

 668,988  

 

 

 553,310  

 

 

 

Total other assets  

 

 2,582,450  

 

 

 1,403,736  

Total assets  

$

 24,541,722  

 

$

 23,083,957  

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under primary unsecured credit facility  

$

 -    

 

$

 130,000  

 

 

Senior unsecured notes  

 

 7,305,414  

 

 

 7,379,308  

 

 

Secured debt  

 

 2,893,814  

 

 

 3,058,248  

 

 

Capital lease obligations  

 

 83,614  

 

 

 84,458  

 

 

Accrued expenses and other liabilities  

 

 677,042  

 

 

 640,573  

Total liabilities  

 

 10,959,884  

 

 

 11,292,587  

Redeemable noncontrolling interests  

 

 76,416  

  

  

 35,039  

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

 1,006,250  

 

 

 1,017,361  

 

 

Common stock  

 

 327,433  

 

 

 289,461  

 

 

Capital in excess of par value  

 

 14,665,449  

 

 

 12,418,520  

 

 

Treasury stock  

 

 (35,241) 

 

 

 (21,263) 

 

 

Cumulative net income  

 

 2,637,033  

 

 

 2,329,869  

 

 

Cumulative dividends  

 

 (5,358,834) 

 

 

 (4,600,854) 

 

 

Accumulated other comprehensive income (loss)  

 

 (52,704) 

 

 

 (24,531) 

 

 

Other equity  

 

 6,223  

 

 

 6,020  

 

 

 

Total Health Care REIT, Inc. stockholders’ equity  

 

 13,195,609  

 

 

 11,414,583  

 

 

Noncontrolling interests  

 

 309,813  

 

 

 341,748  

Total equity  

 

 13,505,422  

 

 

 11,756,331  

Total liabilities and equity  

$

 24,541,722  

 

$

 23,083,957  

 

NOTE: The consolidated balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

See notes to unaudited consolidated financial statements

 

3


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2014

 

2013

 

2014

 

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental income  

$

 354,148  

 

$

 308,512  

 

$

 1,038,451  

 

$

 900,028  

 

Resident fees and services

 

 482,412  

 

 

 466,127  

 

 

 1,406,316  

 

 

 1,164,446  

 

Interest income

 

 9,344  

 

 

 7,629  

 

 

 26,871  

 

 

 24,325  

 

Other income

 

 1,619  

 

 

 1,443  

 

 

 4,139  

 

 

 3,168  

 

 

Total revenues

 

 847,523  

 

 

 783,711  

 

 

 2,475,777  

 

 

 2,091,967  

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 118,435  

 

 

 116,020  

 

 

 360,334  

 

 

 334,321  

 

Property operating expenses

 

 355,157  

 

 

 341,921  

 

 

 1,040,342  

 

 

 872,701  

 

Depreciation and amortization

 

 200,970  

 

 

 241,027  

 

 

 648,737  

 

 

 623,777  

 

General and administrative

 

 30,803  

 

 

 28,718  

 

 

 115,327  

 

 

 79,799  

 

Transaction costs

 

 13,554  

 

 

 23,591  

 

 

 21,546  

 

 

 117,707  

 

Loss (gain) on derivatives, net

 

 49  

 

 

 4,872  

 

 

 400  

 

 

 4,465  

 

Loss (gain) on extinguishment of debt, net

 

 2,692  

 

 

 (4,068) 

 

 

 3,075  

 

 

 (4,376) 

 

Other expenses

 

 10,262  

 

 

 -    

 

 

 10,262  

 

 

 -    

 

 

Total expenses

 

 731,922  

 

 

 752,081  

 

 

 2,200,023  

 

 

 2,028,394  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and income from unconsolidated entities

 

 115,601  

 

 

 31,630  

 

 

 275,754  

 

 

 63,573  

Income tax (expense) benefit

 

 10,198  

 

 

 (3,077) 

 

 

 6,369  

 

 

 (7,055) 

Income (loss) from unconsolidated entities

 

 (2,632) 

 

 

 (331) 

 

 

 (19,705) 

 

 

 (3,529) 

Income (loss) from continuing operations

 

 123,167  

 

 

 28,222  

 

 

 262,418  

 

 

 52,989  

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sales of discontinued properties, net

 

 -    

 

 

 4,707  

 

 

 6,411  

 

 

 57,202  

 

Income (loss) from discontinued operations, net

 

 -    

 

 

 676  

 

 

 724  

 

 

 2,397  

 

 

Discontinued operations, net

 

 -    

 

 

 5,383  

 

 

 7,135  

 

 

 59,599  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on real estate dispositions, net

 

 29,604  

 

 

 -    

 

 

 36,272  

 

 

 -    

Net income

 

 152,771  

 

 

 33,605  

 

 

 305,825  

 

 

 112,588  

Less:

Preferred stock dividends

 

 16,352  

 

 

 16,602  

 

 

 49,057  

 

 

 49,805  

Less:

Net income (loss) attributable to noncontrolling interests(1)

 

 164  

 

 

 (3,688) 

 

 

 (1,339) 

 

 

 (4,462) 

Net income (loss) attributable to common stockholders

$

 136,255  

 

$

 20,691  

 

$

 258,107  

 

$

 67,245  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 311,117  

 

 

 286,020  

 

 

 299,137  

 

 

 273,148  

 

Diluted

 

 312,812  

 

 

 288,029  

 

 

 300,645  

 

 

 275,247  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

 0.44  

 

$

 0.05  

 

$

 0.84  

 

$

 0.03  

 

Discontinued operations, net

 

 -    

 

 

 0.02  

 

 

 0.02  

 

 

 0.22  

 

Net income (loss) attributable to common stockholders*

$

 0.44  

 

$

 0.07  

 

$

 0.86  

 

$

 0.25  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

 0.44  

 

$

 0.05  

 

$

 0.83  

 

$

 0.03  

 

Discontinued operations, net

 

 -    

 

 

 0.02  

 

 

 0.02  

 

 

 0.22  

 

Net income (loss) attributable to common stockholders*

$

 0.44  

 

$

 0.07  

 

$

 0.86  

 

$

 0.24  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

 0.795  

 

$

 0.765  

 

$

 2.385  

 

$

 2.295  

* Amounts may not sum due to rounding

(1) Includes amounts attributable to redeemable noncontrolling interests.

See notes to unaudited consolidated financial statements

 

4


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2014

 

2013

 

2014

 

2013

Net income

$

 152,771  

 

$

 33,605  

 

$

 305,825  

 

$

 112,588  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain (loss) on equity investments

 

 -    

 

 

 (260) 

 

 

 389  

 

 

 (346) 

 

Unrealized gains (losses) on cash flow hedges

 

 455  

 

 

 473  

 

 

 1,327  

 

 

 1,416  

 

Foreign currency translation gain (loss)

 

 (42,664) 

 

 

 25,693  

 

 

 (39,444) 

 

 

 (18,164) 

Total other comprehensive income (loss)

 

 (42,209) 

 

 

 25,906  

 

 

 (37,728) 

 

 

 (17,094) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 110,562  

 

 

 59,511  

 

 

 268,097  

 

 

 95,494  

Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)

 

 (7,984) 

 

 

 (3,881) 

 

 

 (10,894) 

 

 

 (9,109) 

Total comprehensive income (loss) attributable to common stockholders

$

 118,546  

 

$

 63,392  

 

$

 278,991  

 

$

 104,603  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements

 

5


CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

 1,017,361  

$

 289,461  

$

 12,418,520  

$

 (21,263) 

$

 2,329,869  

$

 (4,600,854) 

$

 (24,531) 

$

 6,020  

$

 341,748  

$

 11,756,331  

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 307,164  

 

 

 

 

 

 

 

 (1,318) 

 

 305,846  

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 (28,173) 

 

 

 

 (9,555) 

 

 (37,728) 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 268,118  

Net change in noncontrolling interests

 

 

 

  

 

 (7,818) 

 

 

 

 

 

 

 

 

 

 

 

 (21,062) 

 

 (28,880) 

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

 3,614  

 

 212,718  

 

 (13,978) 

 

 

 

 

 

 

 

 (486) 

 

 

 

 201,868  

Proceeds from issuance of common stock

 

 

 

 33,925  

 

 2,030,476  

 

 

 

 

 

 

 

 

 

 

 

 

 

 2,064,401  

Equity component of convertible debt

 

 

 

 200  

 

 675  

 

 

 

 

 

 

 

 

 

 

 

 

 

 875  

 Conversion of preferred stock

 

 (11,111) 

 

 233  

 

 10,878  

 

 

 

  

 

 

 

 

 

 

 

 

 

 -    

Option compensation expense

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 689  

 

 

 

 689  

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (708,923) 

 

 

 

 

 

 

 

 (708,923) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (49,057) 

 

 

 

 

 

 

 

 (49,057) 

Balances at end of period

$

 1,006,250  

$

 327,433  

$

 14,665,449  

$

 (35,241) 

$

 2,637,033  

$

 (5,358,834) 

$

 (52,704) 

$

 6,223  

$

 309,813  

$

 13,505,422  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

 1,022,917  

$

 260,396  

$

 10,543,690  

$

 (17,875) 

$

 2,184,819  

$

 (3,694,579) 

$

 (11,028) 

$

 6,461  

$

 225,718  

$

 10,520,519  

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 117,050  

 

 

 

 

 

 

 

 (2,345) 

 

 114,705  

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 (12,447) 

 

 

 

 (4,647) 

 

 (17,094) 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 97,611  

Net change in noncontrolling interests

 

 

 

 1,109  

 

 23,410  

 

 

 

 

 

 

 

 

 

 

 

 135,230  

 

 159,749  

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

 2,756  

 

 176,840  

 

 (3,388) 

 

 

 

 

 

 

 

 (1,448) 

 

 

 

 174,760  

Proceeds from issuance of common stock

 

 

 

 23,000  

 

 1,607,281  

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,630,281  

Equity component of convertible debt

 

 

 

 988  

 

 (1,543) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (555) 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 851  

 

 

 

 851  

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (618,992) 

 

 

 

 

 

 

 

 (618,992) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (49,805) 

 

 

 

 

 

 

 

 (49,805) 

Balances at end of period

$

 1,022,917  

$

 288,249  

$

 12,349,678  

$

 (21,263) 

$

 2,301,869  

$

 (4,363,376) 

$

 (23,475) 

$

 5,864  

$

 353,956  

$

 11,914,419  

 

See notes to unaudited consolidated financial statements

 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

Nine Months Ended

 

 

 

  

September 30,

 

 

 

  

2014

 

2013

Operating activities:  

 

 

 

 

 

Net income  

$

 305,825  

 

$

 112,588  

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

 648,737  

 

 

 630,579  

 

 

Other amortization expenses  

 

 5,626  

 

 

 6,662  

 

 

Stock-based compensation expense  

 

 26,108  

 

 

 16,650  

 

 

Loss (gain) on derivatives, net  

 

 400  

 

 

 4,465  

 

 

Loss (gain) on extinguishment of debt, net  

 

 3,075  

 

 

 (4,376) 

 

 

Loss (income) from unconsolidated entities

 

 19,705  

 

 

 3,529  

 

 

Rental income in excess of cash received  

 

 (51,017) 

 

 

 (31,226) 

 

 

Amortization related to above (below) market leases, net  

 

 503  

 

 

 313  

 

 

Loss (gain) on sales of properties, net  

 

 (42,683) 

 

 

 (57,202) 

 

 

Distributions by unconsolidated entities

 

 8,883  

 

 

 -    

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

 (19,259) 

 

 

 9,646  

 

 

Decrease (increase) in receivables and other assets  

 

 (51,734) 

 

 

 (65,721) 

Net cash provided from (used in) operating activities  

 

 854,169  

 

 

 625,907  

 

 

 

  

 

 

 

 

 

Investing activities:  

 

 

 

 

 

 

Cash disbursed for acquisitions  

 

 (991,315) 

 

 

 (3,093,347) 

 

Cash disbursed for capital improvements to existing properties

 

 (86,324) 

 

 

 (82,519) 

 

Cash disbursed for construction in progress

 

 (140,829) 

 

 

 (178,850) 

 

Capitalized interest  

 

 (5,084) 

 

 

 (4,698) 

 

Investment in real estate loans receivable  

 

 (79,264) 

 

 

 (77,336) 

 

Other investments, net of payments  

 

 (39,202) 

 

 

 (16,589) 

 

Principal collected on real estate loans receivable  

 

 46,268  

 

 

 85,555  

 

Contributions to unconsolidated entities  

 

 (246,794) 

 

 

 (381,667) 

 

Distributions by unconsolidated entities  

 

 38,261  

 

 

 31,699  

 

Proceeds from (payments on) derivatives  

 

 -    

 

 

 60,909  

 

Decrease (increase) in restricted cash  

 

 (45,346) 

 

 

 68,796  

 

Proceeds from sales of real property  

 

 442,733  

 

 

 385,493  

Net cash provided from (used in) investing activities  

 

 (1,106,896) 

 

 

 (3,202,554) 

 

 

 

  

 

 

 

 

 

Financing activities:  

 

 

 

 

 

 

Net increase (decrease) under unsecured lines of credit arrangements  

 

 (130,000) 

 

 

 834,050  

 

Proceeds from issuance of senior unsecured notes  

 

 -    

 

 

 497,862  

 

Payments to extinguish senior unsecured notes  

 

 (47,591) 

 

 

 (217,615) 

 

Net proceeds from the issuance of secured debt  

 

 98,100  

 

 

 85,140  

 

Payments on secured debt  

 

 (286,162) 

 

 

 (575,373) 

 

Net proceeds from the issuance of common stock  

 

 2,260,908  

 

 

 1,792,552  

 

Decrease (increase) in deferred loan expenses  

 

 (17,429) 

 

 

 (12,398) 

 

Contributions by noncontrolling interests(1)

 

 5,572  

 

 

 5,350  

 

Distributions to noncontrolling interests(1)

 

 (30,909) 

 

 

 (22,502) 

 

Acquisitions of noncontrolling interests

 

 (1,175) 

 

 

 (23,247) 

 

Cash distributions to stockholders  

 

 (757,980) 

 

 

 (668,797) 

 

Other financing activities

 

 (844) 

 

 

 (1,710) 

Net cash provided from (used in) financing activities  

 

 1,092,490  

 

 

 1,693,312  

Effect of foreign currency translation on cash and cash equivalents

 

 135  

 

 

 14,409  

Increase (decrease) in cash and cash equivalents  

 

 839,898  

 

 

 (868,926) 

Cash and cash equivalents at beginning of period  

 

 158,780  

 

 

 1,033,764  

Cash and cash equivalents at end of period  

$

 998,678  

 

$

 164,838  

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

 365,738  

 

$

 342,739  

 

Income taxes paid

 

 16,672  

 

 

 5,146  

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

See notes to unaudited consolidated financial statements

 

7


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. Business

 

     Health Care REIT, Inc., an S&P 500 company with headquarters in Toledo, Ohio, is an equity real estate investment trust (“REIT”) that invests in seniors housing and health care real estate. Our full service platform offers property management and development services to our customers. As of September 30, 2014, our diversified portfolio consisted of 1,246  properties in 46 states, the United Kingdom, and Canada.  Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities.

  

2. Accounting Policies and Related Matters

     Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2014 are not necessarily an indication of the results that may be expected for the year ending December 31, 2014. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.

     New Accounting Standards     

     In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”), which amends U.S. GAAP to require reporting of discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This pronouncement will be effective for the first annual reporting period beginning after December 15, 2014 with early adoption permitted. We adopted ASU 2014-08 on January 1, 2014 on a prospective basis.  The adoption of this guidance did not have a material impact on our consolidated financial position or results of operations.

     In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.

  

3. Real Property Acquisitions and Development

 

     The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their respective fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments.  Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs.

 

 

 

8


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

     Seniors Housing Triple-net Activity

 

 

Nine Months Ended

 

(In thousands)

September 30, 2014(1)

September 30, 2013

 

Land and land improvements

 

$

 36,427  

 

$

 56,665  

 

Buildings and improvements

 

 

 303,273  

 

 

 211,903  

 

 

Total assets acquired

 

 

 339,700  

 

 

 268,568  

 

Non-cash acquisition related activity

 

 

 (1,937) 

 

 

 -    

 

 

Cash disbursed for acquisitions

 

 

 337,763  

 

 

 268,568  

 

Construction in progress additions

 

 

 79,668  

 

 

 103,951  

 

Less:

Capitalized interest

 

 

 (3,258) 

 

 

 (3,337) 

 

 

Foreign currency translation

 

 

 116  

 

 

 -    

 

Cash disbursed for construction in progress

 

 

 76,526  

 

  

 100,614  

 

Capital improvements to existing properties

 

 

 13,481  

 

 

 27,819  

 

 

Total cash invested in real property, net of cash acquired

 

$

 427,770  

 

$

 397,001  

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $83,615,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

 

 

 

 

 

 

 

 

     Seniors Housing Operating Activity

     Acquisitions of seniors housing operating properties are structured under RIDEA, which is described in Note 18.  This structure results in the inclusion of all resident revenues and related property operating expenses from the operation of these qualified health care properties in our Consolidated Statements of Comprehensive Income.  Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for information regarding our foreign currency policies.

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

(In thousands)

September 30, 2014(1)

September 30, 2013

 

Land and land improvements

 

$

 40,764  

 

$

 437,046  

 

Building and improvements

 

 

 224,936  

 

 

 4,214,254  

 

Acquired lease intangibles

 

 

 10,021  

 

 

 377,929  

 

Construction in progress

 

 

 27,957  

 

 

 -    

 

Restricted cash

 

 

 -    

 

 

 41,524  

 

Receivables and other assets

 

 

 5,679  

 

 

 81,546  

 

  

Total assets acquired(2)

 

 

 309,357  

 

 

 5,152,299  

 

Secured debt

 

 

 (12,846) 

 

 

 (1,261,093) 

 

Accrued expenses and other liabilities  

 

 

 (17,011) 

 

 

 (86,412) 

 

 

Total liabilities assumed

 

 

 (29,857) 

 

 

 (1,347,505) 

 

Noncontrolling interests

 

 

 -    

 

 

 (230,441) 

 

Non-cash acquisition related activity(3)

 

 

 -    

 

 

 (856,103) 

 

 

Cash disbursed for acquisitions

 

 

 279,500  

 

 

 2,718,250  

 

Construction in progress additions

 

 

 6,984  

 

 

 1,521  

 

Less:

Capitalized interest

 

 

 (293) 

 

 

 (18) 

 

 

Foreign currency translation

 

 

 (810) 

 

 

 -    

 

Cash disbursed for construction in progress

 

 

 5,881  

 

  

 1,503  

 

Capital improvements to existing properties

 

 

 52,177  

 

 

 36,813  

 

 

Total cash invested in real property, net of cash acquired

 

$

 337,558  

 

$

 2,756,566  

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $262,935,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

(2) Excludes $8,476,000 and $87,406,000 of cash acquired during the nine months ended September 30, 2014 and 2013, respectively.

(3) Represents Sunrise loan and noncontrolling interests acquisitions.

 

 

 

 

 

 

 

 

 

 

9


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS