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 March 31, 1996.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ..... to .......
Commission file number 1-8895
- ----------------------------------------------------------------------------
HEALTH CARE PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
- ----------------------------------------------------------------------------
Maryland 33-0091377
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
10990 Wilshire Boulevard, Suite 1200
Los Angeles, California 90024
(Address of principal executive offices)
(310) 473-1990
(Registrant's telephone number, including area code)
___________________
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[ ]
As of May 10, 1996 there were 28,665,214 shares of $1.00 par value
common stock outstanding.
- ----------------------------------------------------------------------------
HEALTH CARE PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Signatures
Health Care Property Investors, Inc.
Consolidated Balance Sheets
(unaudited)
(Dollar amounts in thousands)
March 31, December 31,
1996 1995
--------- ------------
Assets
Real Estate Properties
Buildings and Improvements $ 653,700 $ 581,152
Accumulated Depreciation (128,467) (121,983)
--------- ---------
525,233 459,169
Construction in Progress 6,553 7,508
Land 65,006 61,317
--------- ---------
596,792 527,994
Loans Receivable 116,515 120,959
Investments in and Advances to Partnerships 9,097 9,248
Other Assets 9,257 7,630
Cash and Cash Equivalents 24,116 2,000
--------- ---------
Total Assets $ 755,777 $ 667,831
========= =========
Liabilities and Stockholders' Equity
Bank Notes Payable $ --- $ 31,700
Senior Notes Due 1998-2015 267,344 153,994
Convertible Subordinated Notes Due 2000 100,000 100,000
Mortgage Notes Payable 13,041 13,390
Accounts Payable and Accrued Expenses 16,498 10,568
Minority Interests in Partnerships 18,734 18,719
Commitments
Stockholders' Equity:
Common Stock 28,655 28,574
Additional Paid-In Capital 355,205 353,166
Cumulative Net Income 333,930 319,329
Cumulative Dividends (377,630) (361,609)
--------- ---------
Total Stockholders' Equity 340,160 339,460
--------- ---------
Total Liabilities and Stockholders' Equity $ 755,777 $ 667,831
========= =========
See accompanying Notes to Consolidated Condensed Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Health Care Property Investors, Inc.
Consolidated Statements of Income
(unaudited)
(Amounts in thousands, except per share amounts)
Three Months
Ended March 31,
-----------------
1996 1995
------- ------
Revenue
Base Rental Income $ 20,184 $ 17,152
Additional Rental and Interest Income 4,782 4,864
Interest and Other Income 3,977 3,971
Facility Operating Revenue --- 741
-------- --------
28,943 26,728
-------- --------
Expense
Interest Expense 6,293 5,346
Depreciation/Noncash Charges 5,253 4,507
Other Expenses 1,752 1,417
Facility Operating Expense --- 720
-------- --------
13,298 11,990
-------- --------
Income From Operations 15,645 14,738
Minority Interests (1,044) (982)
-------- --------
Net Income $ 14,601 $ 13,756
======== ========
Net Income Per Share $ 0.51 $ 0.50
======== ========
Weighted Average Shares Outstanding 28,607 27,751
======== ========
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Health Care Property Investors, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(Dollar Amounts in Thousands)
Three Months
Ended March 31,
----------------
1996 1995
--------- --------
Cash Flows from Operating Activities
Net Income $ 14,601 $ 13,756
Real Estate Depreciation 4,700 3,994
Partnership Adjustments (96) (158)
--------- ---------
Funds From Operations 19,205 17,592
Change in Other Assets/Liabilities 7,221 (640)
--------- ---------
26,426 16,952
--------- ---------
Cash Flows from Investing Activities
Acquisition of Real Estate Properties, Net (75,282) (3,977)
Advances Repaid by Partnerships --- 24
Other Investments and Loans 4,882 (450)
--------- ---------
(70,400) (4,403)
--------- ---------
Cash Flows from Financing Activities
Net Change in Bank Notes Payable (31,700) 1,800
Repayment of Senior Notes --- (75,000)
Issuance of Senior Notes due 1998-2015 113,329 26,840
Cash Proceeds from issuing Common Stock 877 47,109
Increase in Minority Interests --- 64
Final Payments on Mortgages --- (280)
Periodic Payments on Mortgages (329) (327)
Dividends Paid (16,021) (13,926)
Other Financing Activities (66) 306
-------- --------
66,090 (13,414)
-------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents $ 22,116 $ (865)
======== ========
See accompanying notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
The unaudited financial information furnished herein, in the opinion of
management, reflects all adjustments that are necessary to state fairly the
Company's financial position, the results of its operations, and its cash
flows. The Company presumes that users of the interim financial information
herein have read or have access to the audited financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the preceding fiscal year ended December 31, 1995 and that
the adequacy of additional disclosures needed for a fair presentation,
except in regard to material contingencies, may be determined in that
context. Accordingly, footnotes and other disclosures that would
substantially duplicate the disclosures contained in the Company's most
recent annual report to security holders have been omitted. The interim
financial information contained herein is not necessarily representative of
a full year's operations for various reasons including acquisitions, changes
in rents, interest rates and the timing of debt and equity financings. These
same considerations apply to all year-to-year comparisons.
Net Income Per Share
Net income per share is calculated by dividing net income by the weighted
average common shares outstanding during the period. There were 28,655,214
shares outstanding as of March 31, 1996.
Funds From Operations
Effective January 1, 1996, the Company adopted the new definition of Funds
From Operations prescribed by the National Association of Real Estate
Investment Trusts. Funds From Operations is now defined as net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property,
plus real estate depreciation, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures are calculated to reflect Funds From Operations on the
same basis. Funds From Operations does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles, is not necessarily indicative of cash available to fund cash
needs and should not be considered as an alternative to net income. Funds
From Operations for the quarter ended March 31, 1995 have been restated for
comparative purposes.
(2) MAJOR OPERATORS
Listed below are the Company's major operators and the percentage
of current revenue from these operators.
Percentage of
Operators Revenue Total Revenue
- ------------ ----------- -------------
Vencor, Inc. ("Vencor") $6,106,000 21%
Horizon/CMS Health Corporation 2,510,000 9
Beverly Enterprises, Inc. 2,475,000 9
Tenet Healthcare Corporation ("Tenet") 2,299,000 8
Columbia/HCA Healthcare Corp. 2,077,000 7
Emeritus Corporation 1,749,000 6
HealthSouth Corporation ("HealthSouth") 1,672,000 6
All of the leases with subsidiaries of Tenet, Vencor, and certain leases
with HealthSouth are unconditionally guaranteed by Tenet. The guaranteed
leases represent 34% of the Company's total revenue for the three months
ended March 31, 1996.
(3) STOCKHOLDERS' EQUITY
The following tabulation is a summary of the activity for the Stockholders'
Equity account for the three months ended March 31, 1996 (amounts in
thousands):
Common Stock
-------------
Par Additional Total
Number of Value Paid In Cumulative Cumulative Stockholders'
Shares Amount Capital Net Income Dividends Equity
- ------------------------------------------------------------------------------------------------------
Balance, December 31,1995 28,574 $28,574 $353,166 $319,329 $(361,609) $339,460
Issuance of Stock, Net 33 33 1,134 1,167
Exercise of Stock Options 48 48 905 953
Net Income 14,601 14,601
Dividends Paid (16,021) (16,021)
- ------------------------------------------------------------------------------------------------------
Balance, March 31,1996 28,655 $28,655 $355,205 $333,930 $(377,630) $340,160
=======================================================================================================
(4) COMMITMENTS
The Company has outstanding commitments to fund construction costs of
approximately $90,000,000 and acquire health care facilities valued at
approximately $30,000,000. The Company expects that most of these
commitments totaling approximately $120,000,000 will be funded but that
some, due to various reasons including utilization of other financing
sources or inability to obtain required internal or governmental approvals,
will not be funded.
(5) SUBSEQUENT EVENTS
On April 25, 1996 the Board of Directors declared a quarterly dividend
of $0.57 per share payable on May 20, 1996, to stockholders of record on the
close of business on May 3,1996.
HEALTH CARE PROPERTY INVESTORS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is in the business of acquiring health care facilities that it
leases on a long term basis to health care providers. On a more limited
basis, the Company has provided mortgage financing on health care
facilities. As of March 31, 1996, the Company's portfolio of properties,
including equity investments, consisted of 206 facilities located in 37
states. These facilities are comprised of 137 long term care facilities, 42
congregate care and assisted living facilities, 12 medical office buildings,
six acute care hospitals, six rehabilitation facilities, two physician group
practice clinics and one psychiatric care facility. The gross acquisition
price of the properties, which includes partnership acquisitions, was
approximately $873,578,000 at March 31, 1996.
During the quarter ended March 31, 1996, the Company expended approximately
$68,000,000 on investments in health care facilities. As of March 31, 1996,
the Company had commitments to purchase and construct health care facilities
totaling approximately $120,000,000 for funding during 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed acquisitions through the sale of common stock, the
issuance of long term debt, the assumption of mortgage debt, the use of
short-term bank lines and through internally generated cash flow.
Facilities under construction are generally financed by means of cash on
hand or short term borrowings under the Company's existing bank lines. In
the future, the Company may use its Medium- Term Note ("MTN") program to
finance a portion of the costs of construction. At the completion of
construction and commencement of the lease, short term borrowings used in
the construction phase are generally refinanced with new long term debt or
equity offerings.
On February 15, 1996, the Company issued $115,000,000 in Unsecured Senior
Notes due 2006 bearing a coupon of 6.5%. The majority of the proceeds from
this debt issuance was used to fund acquisitions made during the second half
of 1995 and for the first quarter of 1996 with the balance invested
temporarily in short term investments pending deployment in long term asset
acquisitions. At March 31,1996, stockholders' equity in the Company totaled
$340,160,000 and the debt to equity ratio was 1.12 to 1. For the three
months ended March 31, 1996, Funds From Operations covered interest expense
4.1 to 1.
At March 31, 1996, the Company had approximately $50,975,000 available under
its Medium Term Note Program registered pursuant to a shelf registration
statement for future issuance of MTNs from time to time based on Company
needs and then existing market conditions. In September, 1995, the Company
registered $200,000,000 of debt and equity securities under a shelf
registration statement filed with the Securities and Exchange Commission of
which $85,000,000 in debt or equity securities remains available to be
offered by the Company. As of March 31, 1996, the Company had $100,000,000
available on its revolving line of credit. This line of credit with a group
of seven domestic and international banks expires on March 31, 1999. The
Company's Senior and Convertible Subordinated Notes have been rated
investment grade by debt rating agencies since 1986.
Current ratings are as follows:
Moody's Standard & Poor's Duff & Phelps
---------- -------------------- -------------
- -
Senior Notes Baa1 BBB+ A-
Convertible
Subordinated Notes Baa2 BBB BBB+
Since inception in May 1985, the Company has recorded approximately
$449,459,000 in cumulative Funds From Operations. Of this amount, a total
of $377,630,000 has been distributed to stockholders as dividends. The
balance of $71,829,000 has been retained, and is an additional source of
capital for the Company.
At March 31, 1996, the Company had approximately $30,700,000 in irrevocable
letters of credit from commercial banks to secure the obligations of many
lessees' lease and borrowers' loan obligations. The Company may draw upon
the letters of credit if there are any defaults under the leases and/or
loans. Amounts available under letters of credit change from time to time;
such changes may be material.
The first quarter 1996 dividend of $0.56 per share or $16,021,000 in the
aggregate was paid on February 20, 1996. Total dividends paid during the
three months ended March 31,1996 as a percentage of Funds From Operations
for the corresponding period was 83%. The Company declared a second quarter
dividend of $0.57 per share or $16,300,000 in the aggregate, to be paid on
May 20, 1996.
Management believes that the Company's liquidity and sources of capital are
adequate to finance its operations as well as its future investments in
additional facilities.
RESULTS OF OPERATIONS
Net Income for the three months ended March 31, 1996 totaled $14,601,000 or
$0.51 per share, on revenues of $28,943,000 compared to Net Income of
$13,756,000 or $0.50 per share, on revenues of $26,728,000 for the
corresponding quarter in 1995. Funds From Operations for the three months
ended March 31, 1996, increased to $19,205,000, compared with $17,592,000
for the corresponding period in the prior year.
Earnings and Funds From Operations were significantly higher than a year ago
due to increases in base rents and lower relative financing costs. Base
rents for the three months ended March 31, 1996, increased by $3,032,000
over the corresponding period in 1995 from $17,152,000 to $20,184,000. The
majority of the increase in base rents came from new long term investments
made in 1995 and the first quarter of 1996 of $102,000,000 and $68,000,000,
respectively. Interest expense was higher due to the increase in average
borrowings as a result of the issuance of Senior Notes as mentioned above.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
EX-27 Financial Data Schedule
EX-10.40 Amended and Restated Director Deferred
Compensation Plan
EX-10.41 Letter from The Bank of New York and banks that are
signatories to Revolving Credit Agreement extending
commitment.
b) Reports on Form 8-K:
A report on Form 8-K was filed on February 20, 1996, relating
to the Company's 6.5% Senior Notes due February 15,2006.
SIGNATURES
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.
Date: May 10, 1996 HEALTH CARE PROPERTY INVESTORS, INC.
(REGISTRANT)
/s/ James G. Reynolds
----------------------------------
James G. Reynolds
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Devasis Ghose
----------------------------------
Devasis Ghose
Senior Vice President-Finance
and Treasurer
(Principal Accounting Officer)