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EX-10.4 - EX-10.4 - WELLTOWER INC.Ex-10.4.htm
EX-10.1 - EX-10.1 - WELLTOWER INC.Ex-10.1.htm
EX-31.1 - EX-31.1 - WELLTOWER INC.Ex-31.1.htm
EX-10.3 - EX-10.3 - WELLTOWER INC.Ex-10.3.htm
EX-32.1 - EX-32.1 - WELLTOWER INC.Ex-32.1.htm
EX-10.2 - EX-10.2 - WELLTOWER INC.Ex-10.2.htm

 

 

 

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 June 30, 2015

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 July 28, 2015, the registrant had 351,884,894 shares of common stock outstanding.  

 

 


TABLE OF CONTENTS

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets — June 30, 2015 and December 31, 2014

3

 

 

Consolidated Statements of Comprehensive Income — Three and six months ended June 30, 2015 and 2014

4

 

 

Consolidated Statements of Equity — Six months ended June 30, 2015 and 2014

6

 

 

Consolidated Statements of Cash Flows — Six months ended June 30, 2015 and 2014

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

56

 

 

Item 4. Controls and Procedures

58

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

Item 1A. Risk Factors

58

 

58

 

 

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

58

 

 

Item 5. Other Information

59

 

 

Item 6. Exhibits

59

 

 

Signatures

60

 

  

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

  

(Unaudited)

 

(Note)

Assets:  

 

 

 

 

 

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

2,244,048

 

$

2,046,541

 

 

Buildings and improvements  

 

24,097,963

 

 

21,799,313

 

 

Acquired lease intangibles  

 

1,214,628

 

 

1,135,936

 

 

Real property held for sale, net of accumulated depreciation  

 

352,113

 

 

323,818

 

 

Construction in progress  

 

159,352

 

 

186,327

 

 

 

Gross real property owned  

 

28,068,104

 

 

25,491,935

 

 

Less accumulated depreciation and amortization  

 

(3,363,834)

 

 

(3,020,908)

 

 

 

Net real property owned  

 

24,704,270

 

 

22,471,027

 

Real estate loans receivable  

 

760,543

 

 

380,169

 

Net real estate investments  

 

25,464,813

 

 

22,851,196

Other assets:  

 

 

 

 

 

 

 

Investments in unconsolidated entities  

 

569,621

 

 

744,151

 

 

Goodwill  

 

68,321

 

 

68,321

 

 

Deferred loan expenses  

 

65,727

 

 

69,282

 

 

Cash and cash equivalents  

 

217,942

 

 

473,726

 

 

Restricted cash  

 

72,706

 

 

79,697

 

 

Straight-line rent receivable

 

336,853

 

 

279,806

 

 

Receivables and other assets  

 

611,499

 

 

448,117

 

 

 

Total other assets  

 

1,942,669

 

 

2,163,100

Total assets  

$

27,407,482

 

$

25,014,296

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under primary unsecured credit facility  

$

350,000

 

$

-

 

 

Senior unsecured notes  

 

8,060,493

 

 

7,766,251

 

 

Secured debt  

 

3,066,633

 

 

2,977,713

 

 

Capital lease obligations  

 

75,240

 

 

84,049

 

 

Accrued expenses and other liabilities  

 

650,437

 

 

626,825

Total liabilities  

 

12,202,803

 

 

11,454,838

Redeemable noncontrolling interests  

 

159,400

  

  

86,409

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

1,006,250

 

 

1,006,250

 

 

Common stock  

 

351,651

 

 

328,835

 

 

Capital in excess of par value  

 

16,300,841

 

 

14,740,712

 

 

Treasury stock  

 

(41,693)

 

 

(35,241)

 

 

Cumulative net income  

 

3,378,096

 

 

2,842,022

 

 

Cumulative dividends  

 

(6,230,540)

 

 

(5,635,923)

 

 

Accumulated other comprehensive income (loss)  

 

(81,670)

 

 

(77,009)

 

 

Other equity  

 

4,238

 

 

5,507

 

 

 

Total Health Care REIT, Inc. stockholders’ equity  

 

14,687,173

 

 

13,175,153

 

 

Noncontrolling interests  

 

358,106

 

 

297,896

Total equity  

 

15,045,279

 

 

13,473,049

Total liabilities and equity  

$

27,407,482

 

$

25,014,296

 

NOTE: The consolidated balance sheet at December 31, 2014 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

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental income  

$

396,626

 

$

347,847

 

$

776,213

 

$

684,303

 

Resident fees and services

 

535,553

 

 

467,639

 

 

1,028,063

 

 

923,904

 

Interest income

 

20,576

 

 

8,933

 

 

37,570

 

 

17,527

 

Other income

 

4,414

 

 

2,027

 

 

9,500

 

 

2,520

 

 

Total revenues

 

957,169

 

 

826,446

 

 

1,851,346

 

 

1,628,254

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

118,861

 

 

121,065

 

 

239,942

 

 

241,898

 

Property operating expenses

 

398,354

 

 

343,754

 

 

774,815

 

 

685,185

 

Depreciation and amortization

 

208,802

 

 

214,449

 

 

397,631

 

 

447,766

 

General and administrative

 

38,474

 

 

51,660

 

 

73,612

 

 

84,524

 

Transaction costs

 

12,491

 

 

7,040

 

 

61,045

 

 

7,993

 

Loss (gain) on derivatives, net

 

-

 

 

351

 

 

(58,427)

 

 

351

 

Loss (gain) on extinguishment of debt, net

 

18,887

 

 

531

 

 

34,288

 

 

383

 

Impairment of assets

 

-

 

 

-

 

 

2,220

 

 

-

 

Other expenses

 

10,583

 

 

-

 

 

10,583

 

 

-

 

 

Total expenses

 

806,452

 

 

738,850

 

 

1,535,709

 

 

1,468,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and income from unconsolidated entities

 

150,717

 

 

87,596

 

 

315,637

 

 

160,154

Income tax (expense) benefit

 

(7,417)

 

 

(1,569)

 

 

(7,113)

 

 

(3,830)

Income (loss) from unconsolidated entities

 

(2,952)

 

 

(11,516)

 

 

(15,600)

 

 

(17,073)

Income (loss) from continuing operations

 

140,348

 

 

74,511

 

 

292,924

 

 

139,251

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sales of discontinued properties, net

 

-

 

 

6,411

 

 

-

 

 

6,411

 

Income (loss) from discontinued operations, net

 

-

 

 

264

 

 

-

 

 

724

 

 

Discontinued operations, net

 

-

 

 

6,675

 

 

-

 

 

7,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on real estate dispositions, net

 

190,111

 

 

6,668

 

 

246,956

 

 

6,668

Net income

 

330,459

 

 

87,854

 

 

539,880

 

 

153,054

Less:

Preferred stock dividends

 

16,352

 

 

16,352

 

 

32,703

 

 

32,705

Less:

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

 

1,534

 

 

(327)

 

 

3,804

 

 

(1,502)

Net income (loss) attributable to common stockholders

$

312,573

 

$

71,829

 

$

503,373

 

$

121,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

350,399

 

 

296,256

 

 

343,624

 

 

293,046

 

Diluted

 

351,366

 

 

297,995

 

 

344,623

 

 

294,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

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

$

0.89

 

$

0.22

 

$

1.46

 

$

0.39

 

Discontinued operations, net

 

-

 

 

0.02

 

 

-

 

 

0.02

 

Net income (loss) attributable to common stockholders*

$

0.89

 

$

0.24

 

$

1.46

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

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

$

0.89

 

$

0.22

 

$

1.46

 

$

0.39

 

Discontinued operations, net

 

-

 

 

0.02

 

 

-

 

 

0.02

 

Net income (loss) attributable to common stockholders*

$

0.89

 

$

0.24

 

$

1.46

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

0.825

 

$

0.795

 

$

1.65

 

$

1.59

* 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 June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

Net income

$

330,459

 

$

87,854

 

$

539,880

 

$

153,054

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain (loss) on equity investments

 

(3,413)

 

 

(160)

 

 

(15,100)

 

 

389

 

Unrealized gains (losses) on cash flow hedges

 

462

 

 

432

 

 

(1,697)

 

 

872

 

Foreign currency translation gain (loss)

 

32,384

 

 

13,109

 

 

3,187

 

 

3,220

Total other comprehensive income (loss)

 

29,433

 

 

13,381

 

 

(13,610)

 

 

4,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

359,892

 

 

101,235

 

 

526,270

 

 

157,535

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

 

5,140

 

 

6,277

 

 

(5,145)

 

 

(2,910)

Total comprehensive income (loss) attributable to common stockholders

$

354,752

 

$

94,958

 

$

531,415

 

$

160,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

 

 

Six Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

1,006,250

$

328,835

$

14,740,712

$

(35,241)

$

2,842,022

$

(5,635,923)

$

(77,009)

$

5,507

$

297,896

$

13,473,049

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

536,074

 

 

 

 

 

 

 

3,975

 

540,049

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,661)

 

 

 

(8,949)

 

(13,610)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

526,439

Net change in noncontrolling interests

 

 

 

  

 

(2,786)

 

 

 

 

 

 

 

 

 

 

 

65,184

 

62,398

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

 

 

 

2,189

 

154,463

 

(6,452)

 

 

 

 

 

 

 

(1,721)

 

 

 

148,479

Proceeds from issuance of common stock

 

 

 

19,550

 

1,403,714

 

 

 

 

 

 

 

 

 

 

 

 

 

1,423,264

Equity component of convertible debt

 

 

 

1,077

 

4,738

 

 

 

 

 

 

 

 

 

 

 

 

 

5,815

Option compensation expense

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

452

 

 

 

452

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(561,914)

 

 

 

 

 

 

 

(561,914)

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(32,703)

 

 

 

 

 

 

 

(32,703)

Balances at end of period

$

1,006,250

$

351,651

$

16,300,841

$

(41,693)

$

3,378,096

$

(6,230,540)

$

(81,670)

$

4,238

$

358,106

$

15,045,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 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)

 

 

 

 

 

 

 

 

 

154,556

 

 

 

 

 

 

 

(1,351)

 

153,205

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

5,889

 

 

 

(1,408)

 

4,481

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

157,686

Net change in noncontrolling interests

 

 

 

 

 

(4,680)

 

 

 

 

 

 

 

 

 

 

 

(6,868)

 

(11,548)

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

 

 

 

2,561

 

147,486

 

(11,026)

 

 

 

 

 

 

 

(320)

 

 

 

138,701

Proceeds from issuance of common stock

 

 

 

16,100

 

952,417

 

 

 

 

 

 

 

 

 

 

 

 

 

968,517

Conversion of preferred stock

 

(11,111)

 

233

 

10,878

 

 

 

 

 

 

 

 

 

 

 

 

 

-

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

459

 

 

 

459

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(462,551)

 

 

 

 

 

 

 

(462,551)

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(32,705)

 

 

 

 

 

 

 

(32,705)

Balances at end of period

$

1,006,250

$

308,355

$

13,524,621

$

(32,289)

$

2,484,425

$

(5,096,110)

$

(18,642)

$

6,159

$

332,121

$

12,514,890

 

See notes to unaudited consolidated financial statements

 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

Six Months Ended

 

 

 

  

June 30,

 

 

 

  

2015

 

2014

Operating activities:  

 

 

 

 

 

Net income  

$

539,880

 

$

153,054

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

397,631

 

 

447,766

 

 

Other amortization expenses  

 

2,458

 

 

3,065

 

 

Impairment of assets  

 

2,220

 

 

-

 

 

Stock-based compensation expense  

 

20,178

 

 

21,837

 

 

Loss (gain) on derivatives, net  

 

(58,427)

 

 

351

 

 

Loss (gain) on extinguishment of debt, net  

 

34,288

 

 

383

 

 

Loss (income) from unconsolidated entities

 

15,600

 

 

17,073

 

 

Rental income in excess of cash received  

 

(57,047)

 

 

(26,414)

 

 

Amortization related to above (below) market leases, net  

 

870

 

 

365

 

 

Loss (gain) on sales of properties, net  

 

(246,956)

 

 

(13,079)

 

 

Distributions by unconsolidated entities

 

282

 

 

7,155

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

10,417

 

 

5,433

 

 

Decrease (increase) in receivables and other assets  

 

(42,048)

 

 

(21,455)

Net cash provided from (used in) operating activities  

 

619,346

 

 

595,534

 

 

 

  

 

 

 

 

 

Investing activities:  

 

 

 

 

 

 

Cash disbursed for acquisitions  

 

(2,153,970)

 

 

(488,066)

 

Cash disbursed for capital improvements to existing properties

 

(67,086)

 

 

(54,688)

 

Cash disbursed for construction in progress

 

(114,478)

 

 

(95,201)

 

Capitalized interest  

 

(4,446)

 

 

(3,305)

 

Investment in real estate loans receivable  

 

(416,588)

 

 

(54,877)

 

Other investments, net of payments  

 

(110,531)

 

 

(47,858)

 

Principal collected on real estate loans receivable  

 

37,342

 

 

20,941

 

Contributions to unconsolidated entities  

 

(117,047)

 

 

(246,794)

 

Distributions by unconsolidated entities  

 

116,288

 

 

22,925

 

Proceeds from (payments on) derivatives  

 

72,477

 

 

-

 

Decrease in restricted cash  

 

12,422

 

 

7,682

 

Proceeds from sales of real property  

 

523,175

 

 

140,819

Net cash provided from (used in) investing activities  

 

(2,222,442)

 

 

(798,422)

 

 

 

  

 

 

 

 

 

Financing activities:  

 

 

 

 

 

 

Net increase (decrease) under unsecured credit facilities  

 

350,000

 

 

(130,000)

 

Proceeds from issuance of senior unsecured notes  

 

743,407

 

 

-

 

Payments to extinguish senior unsecured notes  

 

(477,550)

 

 

(1)

 

Net proceeds from the issuance of secured debt  

 

136,801

 

 

10,690

 

Payments on secured debt  

 

(323,950)

 

 

(219,980)

 

Net proceeds from the issuance of common stock  

 

1,562,350

 

 

1,101,969

 

Decrease (increase) in deferred loan expenses  

 

(5,285)

 

 

(3,395)

 

Contributions by noncontrolling interests(1)

 

4,926

 

 

4,485

 

Distributions to noncontrolling interests(1)

 

(19,371)

 

 

(14,208)

 

Acquisitions of noncontrolling interests

 

(4,741)

 

 

(1,175)

 

Cash distributions to stockholders  

 

(594,617)

 

 

(495,256)

 

Other financing activities

 

(27,253)

 

 

(608)

Net cash provided from (used in) financing activities  

 

1,344,717

 

 

252,521

Effect of foreign currency translation on cash and cash equivalents

 

2,595

 

 

(1,059)

Increase (decrease) in cash and cash equivalents  

 

(255,784)

 

 

48,574

Cash and cash equivalents at beginning of period  

 

473,726

 

 

158,780

Cash and cash equivalents at end of period  

$

217,942

 

$

207,354

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

208,885

 

$

224,544

 

Income taxes paid

 

10,140

 

 

11,955

 

 

 

 

 

 

 

 

 

(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 June 30, 2015, our diversified portfolio consisted of 1,411 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 six months ended June 30, 2015 are not necessarily an indication of the results that may be expected for the year ending December 31, 2015. 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, 2014.

     New Accounting Standards     

     In May 2014, the Financial Accounting Standards Board (“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, 2017, and early adoption is permitted beginning after December 15, 2016.  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.

     In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination.  ASU 2015-02 is effective beginning January 1, 2016.  We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.

     In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.  The recognition and measurement guidance for debt issuance costs are not affected.  Upon adoption, we will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance.  The guidance is effective beginning January 1, 2016.  We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.

  

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.  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, 2014 for information regarding our foreign currency policies.

  

 

 

8


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

    Triple-net Activity

 

 

Six Months Ended

 

(In thousands)

June 30, 2015(1)

June 30, 2014

 

Land and land improvements

 

$

92,287

 

$

18,530

 

Buildings and improvements

 

 

744,515

 

 

230,126

 

Acquired lease intangibles

 

 

2,817

 

 

-

 

Restricted cash

 

 

6

 

 

-

 

Receivables and other assets

 

 

60

 

 

-

 

 

Total assets acquired

 

 

839,685

 

 

248,656

 

Accrued expenses and other liabilities  

 

 

(1,845)

 

 

-

 

 

Total liabilities assumed

 

 

(1,845)

 

 

-

 

Non-cash acquisition related activity

 

 

(936)

 

 

(1,839)

 

 

Cash disbursed for acquisitions

 

 

836,904

 

 

246,817

 

Construction in progress additions

 

 

74,694

 

 

55,535

 

Less:

Capitalized interest

 

 

(3,303)

 

 

(2,332)

 

 

Foreign currency translation

 

 

240

 

 

(116)

 

Cash disbursed for construction in progress

 

 

71,631

 

  

53,087

 

Capital improvements to existing properties

 

 

19,029

 

 

10,381

 

 

Total cash invested in real property, net of cash acquired

 

$

927,564

 

$

310,285

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $688,288,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

 

 

 

 

 

 

 

 

      Seniors Housing Operating Activity

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

(In thousands)

June 30, 2015(1)

June 30, 2014

 

Land and land improvements

 

$

94,294

 

$

3,546

 

Building and improvements

 

 

1,174,465

 

 

37,274

 

Acquired lease intangibles

 

 

71,089

 

 

5,569

 

Restricted cash

 

 

5,425

 

 

-

 

Receivables and other assets

 

 

23,645

 

 

33

 

  

Total assets acquired(2)

 

 

1,368,918

 

 

46,422

 

Secured debt

 

 

(208,960)

 

 

(12,846)

 

Accrued expenses and other liabilities  

 

 

(19,011)

 

 

(853)

 

 

Total liabilities assumed

 

 

(227,971)

 

 

(13,699)

 

Noncontrolling interests

 

 

(86,842)

 

 

-

 

 

Cash disbursed for acquisitions

 

 

1,054,105

 

 

32,723

 

Construction in progress additions

 

 

19,926

 

 

2,348

 

Less:

Capitalized interest

 

 

(715)

 

 

(75)

 

 

Foreign currency translation

 

 

(40)

 

 

-

 

Cash disbursed for construction in progress

 

 

19,171

 

  

2,273

 

Capital improvements to existing properties

 

 

32,766

 

 

32,171

 

 

Total cash invested in real property, net of cash acquired

 

$

1,106,042

 

$

67,167

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $1,344,831,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

(2) Excludes $3,390,000 and $245,000 of cash acquired during the six months ended June 30, 2015 and 2014, respectively.