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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 June 30, 1999
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 1-9381
American Health Properties, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4084878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 SOUTH FIDDLER'S GREEN CIRCLE 80111
SUITE 1800 (Zip Code)
ENGLEWOOD, CO
(Address of principal executive offices)
(303) 796-9793
(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 ____
SHARES OF REGISTRANT'S COMMON STOCK, $.01 PAR VALUE PER SHARE,
OUTSTANDING AT AUGUST 6, 1999 -- 24,984,422
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AMERICAN HEALTH PROPERTIES, INC.
JUNE 30, 1999
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Consolidated Condensed Financial Statements:
Balance sheets as of June 30, 1999 and December 31, 1998......................................... 2
Statements of operations for the three and six months ended June 30, 1999 and 1998............... 3
Statements of cash flows for the six months ended June 30, 1999 and 1998......................... 4
Notes to financial statements.................................................................... 5
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations.................................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................... 13
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 16
Item 5. Other Information................................................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................................................. 16
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
June 30, December 31,
1999 1998
---------- ------------
ASSETS (Unaudited)
Real estate investments
Real property and mortgage note $ 784,245 $ 841,618
Construction in progress 21,656 14,247
Accumulated depreciation (113,044) (121,726)
---------- ----------
692,857 734,139
Other notes receivable and direct financing leases 3,940 3,638
Other assets 12,950 12,248
Cash and short-term investments 3,509 3,817
Funds held by intermediary for 1031 exchange 70,576 --
---------- ----------
$ 783,832 $ 753,842
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans payable $ 51,000 $ 69,000
Mortgage notes payable 24,484 20,772
Notes and bonds payable 219,219 219,164
Accounts payable and accrued liabilities 15,163 15,278
Dividends payable 14,833 15,031
Deferred income 3,330 3,732
---------- ----------
328,029 342,977
---------- ----------
Commitments and contingencies
Stockholders' equity
Preferred stock $.01 par value; 1,000 shares authorized;
8.60% Cumulative Redeemable Preferred Stock,
Series B; $2,500 liquidation value;
40 shares issued and outstanding 100,000 100,000
Psychiatric Group Preferred Stock;
0 and 208 shares issued and outstanding -- 2
Common stock $.01 par value; 100,000 shares authorized;
24,984 shares issued and outstanding 250 250
Additional paid-in capital 515,952 519,738
Cumulative net income 411,374 329,918
Cumulative dividends (571,773) (539,043)
---------- ----------
455,803 410,865
---------- ----------
$ 783,832 $ 753,842
========== ==========
The accompanying notes are an integral part of these financial statements.
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
REVENUES
Rental income $ 22,397 $ 22,484 $ 46,585 $ 43,842
Mortgage interest income 116 1,655 233 3,308
Additional rental and interest income 3,028 3,400 6,367 6,820
Other property income 735 384 1,435 719
Other interest income 824 220 971 461
---------- ---------- ---------- ----------
27,100 28,143 55,591 55,150
---------- ---------- ---------- ----------
EXPENSES
Depreciation and amortization 5,301 5,159 10,918 10,033
Property operating 1,634 1,352 3,244 2,567
Interest expense 5,155 5,308 10,675 10,250
General and administrative 2,113 2,322 4,337 4,428
Impairment loss on notes receivable -- 2,730 -- 2,730
---------- ---------- ---------- ----------
14,203 16,871 29,174 30,008
---------- ---------- ---------- ----------
Minority interest 46 47 94 94
---------- ---------- ---------- ----------
INCOME BEFORE GAIN ON SALE OF PROPERTIES 12,851 11,225 26,323 25,048
GAIN ON SALE OF PROPERTIES 53,850 -- 55,133 --
---------- ---------- ---------- ----------
NET INCOME $ 66,701 $ 11,225 $ 81,456 $ 25,048
---------- ---------- ---------- ----------
SERIES B PREFERRED DIVIDEND REQUIREMENT $ (2,150) $ (2,150) $ (4,300) $ (4,300)
---------- ---------- ---------- ----------
ATTRIBUTABLE TO COMMON STOCK (NOTE 5) -
Income before gain on sale of property $ 10,716 $ 10,559 $ 21,928 $ 20,993
Gain on sale of property $ 53,850 $ -- $ 53,850 $ --
Net income $ 64,566 $ 10,559 $ 75,778 $ 20,993
Basic per share amounts -
Income before gain on sale of property $ 0.43 $ 0.44 $ 0.88 $ 0.88
Gain on sale of property $ 2.15 $ -- $ 2.15 $ --
Net income $ 2.58 $ 0.44 $ 3.03 $ 0.88
Weighted average common shares 24,988 24,055 24,988 23,887
Diluted per share amounts -
Income before gain on sale of property $ 0.43 $ 0.43 $ 0.87 $ 0.87
Gain on sale of property $ 2.13 $ -- $ 2.14 $ --
Net income $ 2.56 $ 0.43 $ 3.01 $ 0.87
Weighted average common shares and
dilutive potential common shares 25,193 24,314 25,180 24,154
Dividends declared per common share $ 0.565 $ 0.545 $ 1.130 $ 1.090
The accompanying notes are an integral part of these financial statements.
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AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended June 30,
--------------------------
1999 1998
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 81,456 $ 25,048
Depreciation, amortization and other non-cash items 12,178 11,319
Deferred income (296) 481
Gain on sale of properties (55,133) --
Impairment loss on notes receivable -- 2,730
Change in other assets (1,136) (388)
Change in accounts payable and accrued liabilities (221) 616
---------- ----------
36,848 39,806
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition and construction of real estate properties (16,227) (114,105)
Net proceeds from sale of properties 75,825 --
Net increase in funds held by intermediary for 1031 exchange (70,576) --
Mortgage note receivable fundings -- (179)
Principal payments on mortgage notes receivable -- 39
Other notes receivable (885) (1,236)
Direct financing leases 583 525
Administrative capital expenditures (20) (61)
---------- ----------
(11,300) (115,017)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank loans payable 12,000 75,000
Principal payments on mortgage notes payable (309) (229)
Financing costs paid (53) (7)
Redemption of Psychiatric Group Stock (4,566) --
Proceeds from sale of common stock -- 9,475
Proceeds from exercise of stock options -- 2,653
Cash dividends paid (32,928) (32,880)
---------- ----------
(25,856) 54,012
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INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (308) (21,199)
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 3,817 23,053
---------- ----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 3,509 $ 1,854
========== ==========
The accompanying notes are an integral part of these financial statements.
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
American Health Properties, Inc., a Delaware corporation (the Company,
which term refers to the Company and its subsidiaries unless the context
otherwise requires), is a self-administered real estate investment trust (REIT)
that commenced operations in 1987. The Company has investments in health care
properties, including acute care, rehabilitation, long-term acute care and
psychiatric hospitals, skilled nursing, assisted living, Alzheimer's care and
medical office/clinic facilities.
Basis of Presentation The consolidated condensed financial statements
of the Company included herein have been prepared by the Company without audit
and include all normal, recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations
pursuant to the rules and regulations of the Securities and Exchange Commission.
These financial statements should be read in conjunction with those included in
the Company's annual report on Form 10-K for the year ended December 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Standards Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of SFAS No. 133 - an
Amendment of SFAS No. 133", defers the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. The required
adoption of this statement is not expected to have a material impact on the
Company's financial statements.
Interest Paid Interest paid by the Company, net of interest
capitalized, was $10,157,000 and $9,311,000 for the six months ended June 30,
1999 and 1998, respectively. The Company had $761,000 and $294,000 of
capitalized interest for the six months ended June 30, 1999 and 1998,
respectively.
2. KENDALL DISPOSITION
On April 16, 1999, the Company completed the sale of Kendall Regional
Medical Center (Kendall) to an affiliate of Columbia/HCA Healthcare Corporation
(Columbia) for a gross purchase price of $105 million. As a result of the
Kendall sale, the Company recognized a gain for book purposes of $53,850,000 in
the second quarter of 1999. Kendall had been leased to a subsidiary of Columbia
and generated aggregate revenues of approximately $10.3 million in 1998, or 9%
of the Company's total revenues. The Kendall sale resulted from Columbia's
exercise of its option to purchase Kendall at fair market value pursuant to the
terms of the lease. To complete the Kendall sale, the purchaser paid $75 million
in cash, and assumed and paid $30 million of borrowings outstanding under the
Company's bank credit facility. Since the Company currently intends to effect a
"deferred like-kind" 1031 exchange for tax purposes, the net cash proceeds of
$73.65 million were delivered to a third-party intermediary, which is using such
proceeds to purchase and convey to the Company like-kind replacement property
selected by the Company. Pursuant to the requirements of
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Section 1031 of the Internal Revenue Code, the Company identified approximately
$200 million of potential exchange properties prior to the close of business on
May 28, 1999. The Company must acquire all identified replacement properties it
will acquire as part of the 1031 exchange by October 13, 1999. As of August 6,
1999, approximately $48 million of like-kind replacement properties have been
acquired as part of the 1031 exchange. The Company also has approximately $35
million of additional properties under contract as of August 6, 1999 that will
likely be acquired as part of the 1031 exchange. If the Company is successful in
acquiring a sufficient amount of like-kind replacement properties within the
required time limits, the Company should not recognize current taxable gain and,
accordingly, should incur no tax liability as a result of the transaction.
Furthermore, in that event, there should be no impact on the Company's REIT
distribution requirements. If the Company does not complete the transaction as a
1031 exchange, the tax liability incurred and recognized by the Company for book
purposes, as well as the impact on the Company's REIT distribution requirements,
will depend on the tax position of the Company as a whole. Although the Company
believes that it has developed a sufficiently large pool of replacement
properties to allow the Company to complete the 1031 exchange, the Company
cannot be assured that total revenues generated by replacement properties
acquired to effect the 1031 exchange will equal annual revenues previously
generated by the Kendall investment, nor can the Company be certain that the
1031 exchange will be completed.
3. OTHER COMMITMENTS
As of June 30, 1999, the Company had funded $8,559,000 of a $9.5
million commitment to develop a skilled nursing facility in Las Vegas, Nevada to
be operated by an experienced operator of skilled nursing facilities. The
Company acquired the completed facility in July 1999, whereupon the lease
commenced. As of June 30, 1999, the Company had funded $8,500,000 of a $13.8
million commitment to develop two assisted living facilities to be managed by an
experienced operator of assisted living facilities. The Company has a $22.5
million forward funding commitment to develop up to nine Alzheimer's care
facilities to be operated by the same operator that currently operates two
existing Alzheimer's care facilities owned by the Company. As of June 30, 1999,
$2,650,000 was funded under this commitment for the development of two
facilities having a total development cost of approximately $5.6 million. The
Company has also funded $1,947,000 as of June 30, 1999 toward completion of a
$5.7 million medical office/clinic facility under development in Roseburg,
Oregon that is master-leased to the operator of the adjacent hospital.
4. STOCKHOLDERS' EQUITY
Stock Incentive Plans During the six months ended June 30, 1999,
options to purchase 358,000 shares of common stock at a weighted average
exercise price of $20.27 per share were issued pursuant to the Company's stock
incentive plans. Options to purchase 10,000 shares of common stock at a weighted
average exercise price of $23.18 per share and options to purchase 45,444
Psychiatric Group Depositary Shares at a weighted average exercise price of
$22.16 per share expired during the six months ended June 30, 1999. During the
six months ended June 30, 1999, 63,172 Psychiatric Group Depositary Shares were
issued for vested accumulated DERs.
Redemption of Psychiatric Group Stock On May 21, 1999, the Company
redeemed all outstanding Psychiatric Group Depositary Shares and the underlying
Psychiatric Group Preferred Stock represented thereby (collectively the
"Psychiatric Group Stock") at a redemption price of $2.08 per depositary share.
The total cost of redemption was $4,566,000.
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AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. INCOME ATTRIBUTABLE TO COMMON STOCK AND EARNINGS PER SHARE
The following is a reconciliation of the income and share amounts used
in the basic and diluted per share computations of income before gain on sale of
property attributable to common stock:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------- ----------------------------------------------
1999 1998 1999 1998
--------------------- -------------------- --------------------- ---------------------
(In thousands) Income Shares Income Shares Income Shares Income Shares
-------- -------- -------- -------- -------- -------- -------- --------
Income before gain on sale of
properties $ 12,851 -- $ 11,225 -- $ 26,323 -- $ 25,048 --
Less Series B preferred
dividend requirement (2,150) -- (2,150) -- (4,300) -- (4,300) --
Loss (income) attributed to
Psychiatric Group Stock 15 -- 1,484 -- (95) -- 245 --
Outstanding common shares -- 24,984 -- 24,054 -- 24,984 -- 23,886
Deferred common shares -- 4 -- 1 -- 4 -- 1
-------- -------- -------- -------- -------- -------- -------- --------
Basic EPS components 10,716 24,988 10,559 24,055 21,928 24,988 20,993 23,887
Effect of dilutive potential
common shares -
Stock options -- 10 -- 116 -- 7 -- 130
DERs -- 195 -- 143 -- 185 -- 137
Subordinated convertible
bonds payable -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Diluted EPS components $ 10,716 25,193 $ 10,559 24,314 $ 21,928 25,180 $ 20,993 24,154
======== ======== ======== ======== ======== ======== ======== ========
Prior to redemption of the Psychiatric Group Stock on May 21, 1999, a
portion of the Company's income (loss) was attributable to the Psychiatric Group
Stock. The income (loss) before gain on sale of properties attributable to the
Psychiatric Group Stock is shown in the table above. The gain on sale of
properties attributable to the Psychiatric Group Stock for the six months ended
June 30, 1999 was $1,283,000. There was no such gain on sale of properties
attributable to the Psychiatric Group Stock for the three months ended June 30,
1999 and 1998 or the six months ended June 30, 1998.
6. SUBSEQUENT EVENT - MERGER AGREEMENT
On August 4, 1999, the Company entered into a definitive agreement and
plan of merger with Health Care Property Investors, Inc. (HCPI) in which the
Company will merge with and into HCPI in a stock-for-stock transaction, with
HCPI being the surviving corporation. The common shareholders of the Company
will receive a fixed exchange ratio of 0.78 of a share of HCPI common stock for
each share of the Company's common stock. In addition, holders of the Company's
preferred stock will receive one share of substantially similar HCPI preferred
stock in exchange for each share of the Company's preferred stock. The
transaction is subject to, among other things, the approval of the shareholders
of both companies and the registration of the shares to be issued in connection
with the transaction. The transaction will be treated as a purchase for
financial accounting purposes, will be tax-free to the Company's shareholders
and is expected to close by the end of 1999.
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a discussion of the consolidated financial condition and
results of operations of the Company, which should be read in conjunction with
the consolidated financial statements and accompanying notes of the Company.
Factors Regarding Future Results and Forward-Looking Statements This
report includes and incorporates by reference statements that are not purely
historical and are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
statements other than historical fact contained in this report, including
without limitation statements regarding rent or interest to be received from the
Company's operators and tenants, plans with respect to individual facilities,
expectations with respect to the specific terms of leases or sales of the
Company's facilities, the Company's anticipated dividends, the Company's
liquidity position, projected expenses associated with operating or maintaining
individual properties, the Company's ability to realize the recorded amounts of
its investments, the Company's ability to close on future investments, the
impact of market risk on the Company's financial instruments and financing
strategy, the potential effect of new or existing regulations on the operations
conducted at the Company's facilities and the completion of a merger with Health
Care Property Investors, Inc., are forward-looking statements. All
forward-looking statements included or incorporated by reference in this report
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update such forward-looking statements.
Although the Company believes that the assumptions and expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct or that the Company will take
any actions that may presently be planned.
Certain factors that could cause actual results to differ materially
from those expected include, among others: the financial success of the
operations conducted at the Company's facilities and the financial strength of
the operators and tenants of such facilities, the continuing ability of
operators and tenants to meet their obligations to the Company, changes in
operators or ownership of operators, the ability of operators and tenants to
access short and long-term capital at acceptable rates, the viability of
alternative uses for the Company's properties when necessary, changes in federal
and state government policies relating to the health care industry including
reductions in reimbursement levels under the Medicare and Medicaid programs,
operators' and tenants' continued eligibility to participate in the Medicare or
Medicaid programs, reductions in reimbursement by other third-party payors, the
impact of managed care pricing pressures, the requirement to provide care on a
fixed-price basis, lower occupancy levels at the Company's facilities, the
Company's ability to complete a successful 1031 exchange in connection with the
sale of Kendall Regional Medical Center (Kendall) in which the Company acquires
replacement properties providing a comparable rate of return, a downturn in
market lease rates for medical office space, disruptions caused by the failure
of the Company or its vendors, operators, lessees or borrowers, or the payors or
other third parties upon which they are dependent, to resolve any Year 2000
Issues affecting their respective operations, higher than expected costs
associated with the maintenance and operation of the Company's medical
office/clinic facilities, higher than expected turnover at the Company's medical
office/clinic facilities, a reduction in demand for the services provided at the
Company's facilities, the strength and financial resources of the Company's
competitors, the availability and cost of capital to the Company, the Company's
ability to make additional real estate investments at attractive yields, the
adoption of new accounting standards, changes in tax laws and regulations
affecting real estate investment trusts and the failure to complete a merger
with Health Care Property Investors, Inc. For a further discussion of such
factors, see "- Future Operating Results" herein.
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter and Year to Date 1999 Compared With 1998
For the second quarter of 1999, the Company reported income before gain
on sale of property attributable to common stock of $10,716,000, or $.43 per
share on a diluted basis, compared with $10,559,000, or $.43 per share on a
diluted basis, for the second quarter of 1998. For the second quarter of 1999,
the Company reported net income attributable to common stock of $64,566,000, or
$2.56 per share on a diluted basis, which included a gain on sale of property of
$53,850,000, or $2.13 per share on a diluted basis, compared with $10,559,000
for the second quarter of 1998, or $.43 per share on a diluted basis. For the
six months ended June 30, 1999, the Company reported income before gain on sale
of property attributable to common stock of $21,928,000, or $.87 per share on a
diluted basis, compared with $20,993,000, or $.87 per share on a diluted basis,
for the six months ended June 30, 1998. For the six months ended June 30, 1999,
the Company reported net income attributable to common stock of $75,778,000, or
$3.01 per share on a diluted basis, which included a gain on sale of property of
$53,850,000, or $2.13 per share on a diluted basis, compared with $20,993,000,
or $.87 per share on a diluted basis, for the six months ended June 30, 1998.
Rental income was $22,397,000 for the second quarter of 1999, a
decrease of $87,000 from $22,484,000 for the second quarter of 1998. This
decrease was primarily attributable to the sale of Kendall during the second
quarter of 1999. This decrease was partially offset by an increase in rental
income from new properties acquired subsequent to the first quarter of 1998.
Rental income was $46,585,000 for the six months ended June 30, 1999, an
increase of $2,743,000 or 6% from $43,842,000 for the six months ended June 30,
1998. This increase was primarily attributable to an increase in rental income
from new properties acquired subsequent to the first quarter of 1998, partially
offset by the sale of the Kendall facility during the second quarter of 1999.
The property additions subsequent to the first quarter of 1998, partially offset
by the sale of Kendall, also resulted in a net increase in depreciation and
amortization of $142,000 or 3% to $5,301,000 for the second quarter of 1999
compared with $5,159,000 for the second quarter of 1998 and a net increase of
$885,000 or 9% to $10,918,000 for the six months ended June 30, 1999 compared to
$10,033,000 for the six months ended June 30, 1998.
Mortgage interest income was $116,000 for the second quarter of 1999, a
decrease of $1,539,000 or 93% from $1,655,000 for the second quarter of 1998.
Mortgage interest income was $233,000 for the six months ended June 30, 1999, a
decrease of $3,075,000 or 93% from $3,308,000 for the six months ended June 30,
1998. On July 1, 1998, the Company received $35 million as payment in full of
two psychiatric mortgage loans resulting in a decrease in mortgage interest
income during the second quarter and first six months of 1999.
Additional rental and interest income was $3,028,000 for the second
quarter of 1999, a decrease of $372,000 or 11% from $3,400,000 for the second
quarter of 1998. Additional rental and interest income was $6,367,000 for the
six months ended June 30, 1999, a decrease of $453,000 or 7% from $6,820,000 for
the six months ended June 30, 1998. The decrease in additional rental and
interest income for the second quarter of 1999 was attributable to decreases in
additional rent/interest of $269,000 from psychiatric investments, $32,000 from
rehabilitation properties and $161,000 from acute care properties, partially
offset by an increase in additional rent of $90,000 from long-term care
properties. The decrease in additional rental and interest income for the six
months ended June 30, 1999 was attributable to decreases in additional
rent/interest of $534,000 from psychiatric properties and $108,000 from
rehabilitation properties, partially offset by increases in additional
rent/interest of $118,000 from long-term care properties and $71,000 from acute
care properties. The decrease in additional rent/interest from psychiatric
investments for the second quarter and first half of 1999 is due to the
disposition of three psychiatric investments since June 1998. The sale of the
Kendall
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AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
facility in April 1999 had a negative impact on the amount of additional rent
from acute care properties during the second quarter and first half of 1999.
Other property income was $735,000 for the second quarter of 1999, an
increase of $351,000 or 91% from $384,000 for the second quarter of 1998. Other
property income was $1,435,000 for the six months ended June 30, 1999, an
increase of $716,000 or 100% from $719,000 for the six months ended June 30,
1998. The second quarter and first six months of 1999 included other property
income for nine multi-tenant facilities, one of which was acquired during the
second quarter, compared to the second quarter and first six months of 1998
which included other property income for six multi-tenant facilities, three of
which were acquired during the first quarter of 1998.
Other interest income increased $604,000 to $824,000 for the second
quarter of 1999 from $220,000 for the second quarter of 1998. Other interest
income increased $510,000 to $971,000 for the six months ended June 30, 1999
from $461,000 for the six months ended June 30, 1998. This increase was due to
additional investable cash balances as a result of proceeds received from the
sale of the Kendall facility during the second quarter of 1999 and interest
income from a subordinated note receivable from the operator of the Company's
Alzheimer's care facilities, which was funded subsequent to the first quarter of
1998. This increase is partially offset by a lower average balance of direct
financing leases during 1999 compared to 1998. In addition, interest income
decreased as a result of the write-off, at the end of 1998, of the outstanding
borrowings under a revolving credit agreement provided to a psychiatric hospital
operator.
Property operating expense was $1,634,000 for the second quarter of
1999, an increase of $282,000 or 21% from $1,352,000 for the second quarter of
1998. Property operating expense was $3,244,000 for the six months ended June
30, 1999, an increase of $677,000 or 26% from $2,567,000 for the six months
ended June 30, 1998. The second quarter and first six months of 1999 included
other property operating expense for nine multi-tenant facilities, one of which
was acquired during the second quarter, compared to the second quarter and first
six months of 1998 which included property operating expense for six
multi-tenant facilities, three of which were acquired during the first quarter
of 1998. The increase in multi-tenant property operating expense for the second
quarter and first half of 1999 is partially offset by a reduction in psychiatric
property operating expenses during the same periods.
Interest expense was $5,155,000 for the second quarter of 1999, a
decrease of $153,000 or 3% from $5,308,000 for the second quarter of 1998. This
decrease is primarily attributable to a higher level of capitalized interest in
1999 compared to 1998 and a reduction in interest expense as a result of the
redemption of the Company's Convertible Dual Currency Subordinated Bonds on
December 30, 1998. This decrease was partially offset by a higher average
balance of bank credit facility borrowings and the assumption of a mortgage loan
in connection with the acquisition of a medical office/clinic facility
subsequent to the first quarter of 1998. Interest expense was $10,675,000 for
the six months ended June 30, 1999, an increase of $425,000 or 4% from
$10,250,000 for the six months ended June 30, 1998. This increase was primarily
attributable to a higher average balance of bank credit facility borrowings and
the assumption of a mortgage loan in connection with the acquisition of a
medical office/clinic facility subsequent to the first quarter of 1998. This
increase is partially offset by a higher level of capitalized interest in 1999
compared to 1998 and a reduction in interest expense as a result of the
redemption of the Company's Convertible Dual Currency Subordinated Bonds on
December 30, 1998.
General and administrative expenses were $2,113,000 for the second
quarter of 1999, a decrease of $209,000 or 9% from $2,322,000 for the second
quarter of 1998. General and administrative expenses were $4,337,000 for the six
months ended June 30, 1999, a decrease of $91,000 or 2% from $4,428,000 for the
six
10
12
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
months ended June 30, 1998. This variation was primarily attributable to
reductions in consulting and travel expenses, partially offset by increases in
compensation and benefits expense and other fees and license costs.
Future Operating Results
The operators and tenants of most of the Company's facilities derive a
substantial percentage of their total revenues from federal and state health
care programs such as Medicare and Medicaid and from other third-party payors
such as private insurance companies, self-insured employers and health
maintenance organizations. Such operators and tenants also are subject to
extensive federal, state and local government regulation relating to their
operations, and most of the Company's facilities are subject to periodic
inspection by governmental and other authorities to assure continued compliance
with mandated procedures, licensure requirements under state law and
certification standards under the Medicare and Medicaid programs. A reduction in
reimbursement levels under the Medicare or Medicaid programs, a reduction in
reimbursement by other third-party payors or an operator's or tenant's failure
to maintain its certification under Medicare or Medicaid programs could
adversely affect revenues of the Company's operators and tenants.
The nature of health care delivery in the United States continues to
undergo change and further review at both the national and state levels.
Generally accepted goals of reform continue to include controlling costs and
improving access to medical care. Various plans to decrease the growth in
Medicare spending have been proposed and passed by both Houses of Congress.
These plans generally include revisions to and limits on Medicare and federal
programs providing Medicaid reimbursement to state health care programs and have
had and potentially would have an adverse impact on the level of funds available
in the future to health care facilities. The Balanced Budget Act of 1997
contains extensive changes to the Medicare and Medicaid programs intended to
significantly reduce the projected amount of increase in Medicare spending. In
addition, the Budget Act repealed certain limits on states' ability to reduce
their Medicaid reimbursement levels. The Budget Act has the potential to
significantly reduce federal spending on health care services provided at each
of the Company's facilities and provided by the physician tenants of the
Company's medical office/clinic facilities, and to affect revenues of the
Company's operators and tenants adversely. In particular, the Budget Act's
limitations on reimbursable costs and reductions in payment incentives and
capital related payments, as well as the change toward a prospective payment
system, may have a material adverse effect on operator revenues at the Company's
rehabilitation, long-term acute care, and psychiatric hospitals. The Budget
Act's freeze on acute care hospital reimbursement rates may also have an adverse
effect on the operator revenues at the Company's acute care hospitals. In
addition, the prospective payment system imposed by the Budget Act is having a
material adverse effect on some operators in the skilled nursing industry and
may have a material adverse effect on the operators of the Company's skilled
nursing facilities if the operators are unable to effectively respond to the
financial incentives provided by the prospective payment system. The Company
cannot be assured that the changes effected by the Budget Act will not have a
material adverse effect on the Company's financial condition or results of
operation.
The Company's Board and management are monitoring the effect of the
Budget Act and other regulatory activities on the Company's facilities and
potential changes to reimbursement programs closely. The Company believes that
the changes effected by the Budget Act and changes proposed at the federal and
state level may pose risks for certain institutions and physician groups that
are unwilling or unable to respond. At the same time, the Company believes that
this changing health care environment will provide it with new opportunities for
investment.
The ongoing changes in the health care industry include trends toward
shorter lengths of hospital stay, increased use of outpatient services,
increased federal, state and third-party oversight of health care company
operations and business practices, and increased demand for discounted or
capitated health care services
11
13
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(delivery of services at a fixed price per capita basis to a defined group of
covered parties). Furthermore, federal, state and third-party payors continue to
propose and adopt various cost containment measures that restrict the scope of
reimbursable health care services and limit increases in reimbursement rates for
such services. Payors also are continuing to enforce compliance with program
requirements aggressively and to pursue providers that they believe have not
complied with such requirements. Outpatient business is expected to increase as
advances in medical technologies allow more procedures to be performed on an
outpatient basis and as payors continue to direct more patients from inpatient
care to outpatient care. In addition, the entrance of insurance companies into
managed care programs is accelerating the introduction of managed care in new
localities, and states and insurance companies continue to negotiate actively
the amounts they will pay for services. Moreover, the percentage of health care
services that are reimbursed under the Medicare and Medicaid programs continues
to increase as the population ages. States are also expanding their Medicaid
programs. Continued eligibility to participate in these programs is crucial to a
provider's financial strength. As a result of the foregoing, revenues and
margins of the Company's operators and tenants may decrease.
Notwithstanding the potential for increasing government regulation, the
Company believes that health care will continue to be delivered on a local and
regional basis and that well-managed, high-quality, cost-controlled facilities
will continue to be an integral part of local and regional health care delivery
systems. The Company also believes that certain acute care hospitals will need
to reconfigure or expand existing facilities or to affiliate themselves with
other providers so as to become part of comprehensive and cost-effective health
care systems. Such systems likely will include lower cost treatment settings,
such as ambulatory care clinics, outpatient surgery centers, long-term acute
care hospitals, skilled nursing facilities, assisted living and Alzheimer's care
facilities and medical office/clinic facilities. In general, the Company's
facilities are part of local or regional health care delivery systems or are in
the process of becoming integrated into such systems.
The Company's future operating results could be affected by the
operating performance of the Company's lessees and borrowers. In addition, new
Alzheimer's care and assisted living facilities are subject to, among other
things, fill-up and working capital risks. The rental and interest obligations
of the Company's facility operators are primarily supported by the
facility-specific operating cash flow. Real estate investments in the Company's
portfolio are generally further supported by one or more credit enhancements
that take the form of cross-default provisions, letters of credit, corporate and
personal guarantees, security interests in cash reserve funds, accounts
receivable or other personal property and requirements to maintain specified
financial ratios.
On April 16, 1999, the Company completed the sale of Kendall Regional
Medical Center to an affiliate of Columbia/HCA Healthcare Corporation (Columbia)
for a gross purchase price of $105 million. As a result of the Kendall sale, the
Company recognized a gain for book purposes of $53,850,000 in the second quarter
of 1999. Kendall had been leased to a subsidiary of Columbia and generated
aggregate revenues of approximately $10.3 million in 1998, or 9% of the
Company's total revenues. The Kendall sale resulted from Columbia's exercise of
its option to purchase Kendall at fair market value pursuant to the terms of the
lease. To complete the Kendall sale, the purchaser paid $75 million in cash, and
assumed and paid $30 million of borrowings outstanding under the Company's bank
credit facility. Since the Company currently intends to effect a "deferred
like-kind" 1031 exchange for tax purposes, the net cash proceeds of $73.65
million were delivered to a third-party intermediary, which is using such
proceeds to purchase and convey to the Company like-kind replacement property
selected by the Company. Pursuant to the requirements of Section 1031 of the
Internal Revenue Code, the Company identified approximately $200 million of
potential exchange properties prior to the close of business on May 28, 1999.
The Company must acquire all identified replacement properties it will acquire
as part of the 1031 exchange by October 13, 1999. As of August 6, 1999,
approximately $48 million of like-kind replacement properties have been acquired
as part of the 1031 exchange. The Company also has approximately $35 million of
additional properties under contract as of
12
14
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
August 6, 1999 that will likely be acquired as part of the 1031 exchange. If the
Company is successful in acquiring a sufficient amount of like-kind replacement
properties within the required time limits, the Company should not recognize
current taxable gain and, accordingly, should incur no tax liability as a result
of the transaction. Furthermore, in that event, there should be no impact on the
Company's REIT distribution requirements. If the Company does not complete the
transaction as a 1031 exchange, the tax liability incurred and recognized by the
Company for book purposes, as well as the impact on the Company's REIT
distribution requirements, will depend on the tax position of the Company as a
whole. Although the Company believes that it has developed a sufficiently large
pool of replacement properties to allow the Company to complete the 1031
exchange, the Company cannot be assured that total revenues generated by
replacement properties acquired to effect the 1031 exchange will equal annual
revenues previously generated by the Kendall investment, nor can the Company be
certain that the 1031 exchange will be completed.
Quantitative and Qualitative Disclosures About Market Risk The future
operating results of the Company will be affected by additional factors
including the amount, timing and yield of additional real estate investments and
the competition for such investments. Operating results also will be affected by
the availability and terms of the Company's future equity and debt financing.
The Company's financing strategy to facilitate future growth includes
initiatives intended to reduce its cost of capital over time and enhance its
liquidity and financial flexibility. The Company's future earnings, cash flows
and fair values relevant to financial instruments are dependent upon prevailing
market rates. Market risk is the risk of loss from adverse changes in market
prices and interest rates. The Company manages its market risk by matching
projected cash inflows from operating properties, financing activities and
investing activities with projected cash outflows to fund debt payments,
acquisitions, capital expenditures, distributions and other cash requirements.
Although in the past the Company has occasionally utilized derivative financial
instruments for hedging purposes, and may do so in the future in certain
circumstances, generally the Company does not utilize derivative financial
instruments for hedging purposes and does not use such instruments for trading
purposes. The Company utilizes debt and equity financing primarily for the
purpose of making additional investments in health care facilities.
Historically, the Company has used short-term variable rate borrowings under its
unsecured revolving credit agreement to initially fund its acquisitions until
market conditions were appropriate, based on management's judgement, to issue
equity or fixed rate debt to provide long-term financing. Changes in interest
rates on fixed rate debt generally affect fair market value, but not earnings or
cash flows. The Company's ability to prepay fixed rate debt prior to maturity is
generally limited, therefore, interest rate risk and changes in fair market
value should not have a significant impact on the fixed rate debt until the
maturity of such debt. The Company's earnings and cash flows are affected by
changes in interest rates affecting its variable rate borrowings under its bank
credit facility. At June 30, 1999, the Company had $51 million of such variable
rate borrowings outstanding at a weighted average interest rate of 5.6%.
Assuming this balance were to remain constant, each one percentage point
increase or decrease in the weighted average interest rate on such variable rate
borrowings would result in a corresponding increase or decrease in annual
interest expense of approximately $510,000.
The following table provides information about the Company's material
financial instruments that are sensitive to changes in interest rates. The table
presents the principal cash flows and related weighted average interest rates
for such financial instruments by expected maturity date. The duration of
borrowings under the Company's unsecured revolving credit agreement is generally
less than 90 days at variable pricing indicative of current short-term borrowing
rates. Accordingly, the carrying amount of Company's bank loans payable is a
reasonable estimate of fair value. The fair value of the Company's senior notes
payable is based on the quoted market price of the notes as traded
over-the-counter. The carrying amount of the mortgage notes payable is a
reasonable estimate of fair value, as the pricing and terms of the notes are
indicative of current rates and credit terms.
13
15
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Maturity
----------------------------------------------------------------------------------------
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total Fair Value
-------- -------- -------- -------- -------- ---------- -------- ----------
Variable rate debt:
Bank loans payable $ -- $51,000 $ -- $ -- $ -- $ -- $ 51,000 $ 51,000
Weighted average interest rate 5.60% 5.60%
Fixed rate debt:
Senior notes payable $ -- $ -- $ -- $100,000 $ -- $120,000 $220,000 $203,000
Weighted average interest rate 7.34% 7.74% 7.56%
Mortgage notes payable $ 3,488 $ 606 $ 656 $ 712 $ 773 $ 18,249 $ 24,484 $ 24,500
Weighted average interest rate 7.10% 8.18% 8.18% 8.18% 8.18% 8.17% 8.02%
Year 2000 Readiness Disclosure. Many existing information systems
currently record years in a two-digit format and will be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
(the Year 2000 Issue). The Company has a four-phase program to assess the impact
upon the Company of the Year 2000 Issue and to remediate those Year 2000 Issues
that may be discovered. The Company monitors its progress in achieving the
target completion dates established for each phase of the program. The first
phase, a comprehensive inventory of the Company's internal information systems,
office equipment and the embedded building control systems in the Company's
multi-tenant properties, has been completed. The second phase, assessing the
impact of the Year 2000 Issue with respect to the Company's internal information
systems, office equipment and the embedded building control systems in the
Company's multi-tenant properties, is essentially complete. The third phase,
remediation of Year 2000 Issues identified, is expected to be completed during
the third quarter of 1999. The fourth and final phase, development of
contingency plans to address Year 2000 Issues that cannot be remediated, will be
accomplished in the fourth quarter of 1999 if such a plan is deemed necessary.
The Company does not expect the costs to remediate its internal Year 2000 Issues
to be material and does not expect the Company's internal Year 2000 Issues to
have a material impact on the Company's future operations or financial results.
Vendors that provide payroll, banking, communications and property
management services to the Company and the Company's operators, lessees and
borrowers will also likely be affected by the Year 2000 Issue. The future
operations of the Company could be disrupted and/or its financial results could
be negatively impacted by the Year 2000 Issue if the Company's vendors or its
operators, lessees or borrowers do not adequately address their Year 2000
Issues. As health care providers, the Company's operators, lessees and borrowers
generally rely extensively on information systems, including systems for
capturing patient and cost information and for billing and collecting
reimbursement for health care services provided. In addition, the delivery of
patient care by providers requires utilization of critical clinical systems,
medical devices and equipment that could be impacted by the Year 2000 Issue.
Furthermore, the Company's operators, lessees and borrowers likewise are
dependent on a variety of third parties, including but not limited to, insurance
companies, HMO's and other private payors, governmental agencies, fiscal
intermediaries that process claims and make payments for the Medicare and
Medicaid programs, utilities that provide electricity, water, natural gas and
communications services and vendors of medical supplies, pharmaceuticals,
clinical systems, medical devices and equipment used in patient care, all of
whom must also adequately address the Year 2000 Issue. The Company is reviewing
publicly filed information of, sending questionnaires to and/or contacting its
vendors, operators, lessees and borrowers regarding their state of readiness
with respect to identifying and remediating their Year 2000 Issues. However, it
is not possible for the Company to determine or be assured that adequate
remediation of the Year 2000 Issue will be accomplished by such vendors,
operators, lessees and borrowers. Furthermore, it is not possible for the
Company to determine or be assured that third parties upon
14
16
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
which the Company's vendors, operators, lessees and borrowers are dependent will
accomplish adequate remediation of their Year 2000 Issues. If the Company's
operators, lessees and borrowers fail to adequately address their Year 2000
Issues, including Year 2000 Issues relating to third-party payors, they may
experience cash flow difficulties that could impact their ability to meet their
obligations to the Company.
Although the Company believes that the impact of the Year 2000 Issue,
as it relates to its internal information systems, office equipment and the
embedded building control systems in its multi-tenant properties, will not be
material, the Company cannot be assured that the Year 2000 Issues of its vendors
or its operators, lessees and borrowers and the third parties upon which they
are dependent will not have a material impact on the future operations and/or
financial results of the Company.
Merger Agreement On August 4, 1999, the Company entered into a
definitive agreement and plan of merger with Health Care Property Investors,
Inc. (HCPI) in which the Company will merge with and into HCPI in a
stock-for-stock transaction, with HCPI being the surviving corporation. The
common shareholders of the Company will receive a fixed exchange ratio of 0.78
of a share of HCPI common stock for each share of the Company's common stock. In
addition, holders of the Company's preferred stock will receive one share of
substantially similar HCPI preferred stock in exchange for each share of the
Company's preferred stock. The transaction is subject, among other things, to
the approval of the shareholders of both companies and the registration of the
shares to be issued in connection with the transaction. The transaction will be
treated as a purchase for financial accounting purposes, will be tax-free to the
Company's shareholders and is expected to close by the end of 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of August 6, 1999, the Company's remaining commitment to fund the
development of two assisted living facilities was approximately $4.3 million.
The Company has a $22.5 million forward funding commitment to develop up to nine
Alzheimer's care facilities to be operated by the same operator that currently
operates two existing Alzheimer's care facilities owned by the Company. As of
August 6, 1999, $3.0 million was funded under this commitment for the
development of two facilities having total development costs of approximately
$5.6 million. The Company's expected future funding to complete development of a
medical office/clinic facility was $3.2 million as of August 6, 1999. The
Company also has approximately $35 million of properties under contract as of
August 6, 1999 that will likely be acquired as part of the 1031 exchange.
Acquisition of these properties will include the assumption of approximately $11
million of existing mortgage indebtedness.
As of August 6, 1999, the Company had $40.5 million of outstanding
borrowings under its $250 million bank credit facility and had $50.3 million in
cash and short-term investments, including funds held by an intermediary to
complete a 1031 exchange. The Company's total indebtedness as of August 6, 1999
was $299.2 million. The Company expects to utilize its bank credit facility to
fund future property acquisitions and other commitments. Subject to the terms of
the merger agreement, the Company may incur additional indebtedness or refinance
existing indebtedness if the Company determines that opportunities to pursue
such transactions would be attractive. The Company currently believes it has
sufficient capital to meet its commitments and that its cash flow and liquidity
will continue to be sufficient to fund current operations and to provide for the
payment of dividends to stockholders in compliance with the applicable sections
of the Internal Revenue Code governing real estate investment trusts.
15
17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of American Health Properties, Inc. was
held on June 11, 1999 ("Annual Meeting").
(b) Not applicable.
(c) (i) At the Annual Meeting, Sheldon S. King, John P. Mamana and Louis T.
Rosso were elected as Class III directors to serve for a three-year term
until the 2002 Annual Meeting of Shareholders. Voting results for these
directors are summarized as follows:
Sheldon S. King Votes For--23,229,024; Votes Withheld--204,545
John P. Mamana Votes For--23,225,176; Votes Withheld--208,393
Louis T. Rosso Votes For--23,243,546; Votes Withheld--190,023
Class I directors whose term of office continues until the 2000 Annual
Meeting of Shareholders include James L. Fishel and James D. Harper, Jr..
Class II directors whose term of office continues until the 2001 Annual
Meeting of Shareholders include Peter K. Kompaniez and Joseph P. Sullivan.
(ii) At the Annual Meeting, shareholders approved the appointment of the
accounting firm of Arthur Andersen LLP as the auditors and as independent
public accountants for the Company for the fiscal year ending December 31,
1999. Votes For--23,004,208; Votes Against--81,487; Votes
Abstained--347,874.
(iii) At the Annual Meeting, shareholders approved the Company's 1999
Equity Incentive Plan. Votes For--6,746,255; Votes Against--4,992,373;
Votes Abstained--537,976; Broker Non-Votes--11,156,965.
(d) Not Applicable.
ITEM 5. OTHER INFORMATION
On July 16, 1999, the Company entered into amended and restated executive
employment agreements with Joseph P. Sullivan, Michael J. McGee, C. Gregory
Schonert and Steven A. Roseman. These employment agreements were each
amended by the first amendment thereto on August 4, 1999. See Exhibits
10.3, 10.4, 10.5, and 10.6. On July 16, 1999, the Company executed a
supplemental executive retirement plan for Joseph P. Sullivan. See Exhibit
10.10. On June 12, 1999, the Company's 1999 Equity Incentive Plan became
effective. See Exhibit 10.11.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.3 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Joseph P. Sullivan and First Amendment
thereto.
10.4 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Michael J. McGee and First Amendment
thereto.
10.5 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and C. Gregory Schonert and First Amendment
thereto.
16
18
(a) Exhibits (continued)
10.6 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Steven A. Roseman and First Amendment
thereto.
10.10 Supplemental Executive Retirement Plan for Joseph P. Sullivan.
10.11 American Health Properties, Inc. 1999 Equity Incentive Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August 4, 1999
reporting the signing of a definitive merger agreement between Health Care
Property Investors, Inc. and the Company.
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: August 6, 1999
AMERICAN HEALTH PROPERTIES, INC.
By: /s/ JOSEPH P. SULLIVAN By: /s/ MICHAEL J. MCGEE
-------------------------------- ----------------------------------
Joseph P. Sullivan Michael J. McGee
Chairman of the Board, President & Senior Vice President &
Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
19
EXHIBIT
NO. DESCRIPTION
------- -----------
10.3 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Joseph P. Sullivan and
First Amendment thereto.
10.4 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Michael J. McGee and
First Amendment thereto.
10.5 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and C. Gregory Schonert and
First Amendment thereto.
10.6 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Steven A. Roseman and
First Amendment thereto.
10.10 Supplemental Executive Retirement Plan for Joseph P. Sullivan.
10.11 American Health Properties, Inc. 1999 Equity Incentive Plan
27 Financial Data Schedule