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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2001
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: 1-11852
------------------------
HEALTHCARE REALTY TRUST INCORPORATED
(Exact name of Registrant as specified in its charter)
MARYLAND 62 - 1507028
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3310 WEST END AVENUE
SUITE 700
NASHVILLE, TENNESSEE 37203
(Address of principal executive offices)
(615) 269-8175
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
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 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 August 1, 2001, 40,747,627 shares of the Registrant's
Common Stock and 3,000,000 shares of the Registrant's Series
A Voting Cumulative Preferred Stock were outstanding.
2
HEALTHCARE REALTY TRUST
INCORPORATED
FORM 10-Q
JUNE 30, 2001
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Part II - Other Information
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Signature 24
3
ITEM 1.
HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
ASSETS
Real estate properties:
Land $ 150,837 $ 152,254
Buildings and improvements 1,316,079 1,290,395
Personal property 6,613 5,785
Construction in progress 20,157 30,914
----------- -----------
1,493,686 1,479,348
Less accumulated depreciation (139,874) (120,522)
----------- -----------
Total real estate properties, net 1,353,812 1,358,826
Cash and cash equivalents 41,337 1,788
Restricted cash 668 577
Mortgage notes receivable 153,253 170,906
Other assets, net 69,801 54,979
----------- -----------
Total assets $ 1,618,871 $ 1,587,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and bonds payable 575,805 536,781
Accounts payable and accrued liabilities 19,982 22,714
Other liabilities 22,910 19,544
----------- -----------
Total liabilities 618,697 579,039
----------- -----------
Commitments 0 0
Stockholders' equity:
Preferred stock, $.01 par value; 50,000,000 shares authorized;
issued and outstanding, 2001 and 2000 - 3,000,000 30 30
Common stock, $.01 par value; 150,000,000 shares authorized;
issued and outstanding, 2001 - 40,595,511; 2000 - 40,314,399 405 403
Additional paid-in capital 1,067,180 1,061,190
Deferred compensation (13,837) (9,730)
Cumulative net income 335,191 295,174
Cumulative dividends (388,795) (339,030)
----------- -----------
Total stockholders' equity 1,000,174 1,008,037
----------- -----------
Total liabilities and stockholders' equity $ 1,618,871 $ 1,587,076
=========== ===========
The accompanying notes, together with the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, are an integral part of these financial statements.
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HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
(Dollars in thousands, except per share data)
2001 2000
----------- -----------
REVENUES:
Master lease rental income $ 25,025 $ 24,091
Property operating income 17,590 15,626
Straight line rent 1,443 2,998
Mortgage interest income 4,507 6,139
Management fees 381 738
Interest and other income 549 258
----------- -----------
49,495 49,850
----------- -----------
EXPENSES:
General and administrative 2,758 1,845
Property operating expenses 6,672 5,759
Interest 10,414 10,983
Depreciation 10,168 9,649
Amortization 74 116
----------- -----------
30,086 28,352
----------- -----------
NET INCOME BEFORE NET GAIN (LOSS) ON SALE OF REAL ESTATE
PROPERTIES 19,409 21,498
NET GAIN (LOSS) ON SALE OF REAL ESTATE PROPERTIES (36) (311)
----------- -----------
NET INCOME $ 19,373 $ 21,187
=========== ===========
NET INCOME PER COMMON SHARE - BASIC $ 0.45 $ 0.49
=========== ===========
NET INCOME PER COMMON SHARE - DILUTED $ 0.44 $ 0.49
=========== ===========
COMMON SHARES OUTSTANDING - BASIC 39,721,416 39,526,317
=========== ===========
COMMON SHARES OUTSTANDING - DILUTED 40,566,400 40,168,158
=========== ===========
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD $ 0.575 $ 0.555
=========== ===========
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, are an integral part of these
financial statements.
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5
HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
(Dollars in thousands, except per share data)
2001 2000
----------- -----------
REVENUES:
Master lease rental income $ 50,112 $ 48,108
Property operating income 34,040 30,804
Straight line rent 3,191 4,468
Mortgage interest income 9,046 12,492
Management fees 723 1,470
Interest and other income 612 767
----------- -----------
97,724 98,109
----------- -----------
EXPENSES:
General and administrative 4,793 3,999
Property operating expenses 12,863 11,223
Interest 20,199 21,509
Depreciation 20,280 19,194
Amortization 154 233
----------- -----------
58,289 56,158
----------- -----------
NET INCOME BEFORE NET GAIN (LOSS) ON SALE OF REAL ESTATE PROPERTIES 39,435 41,951
NET GAIN (LOSS) ON SALE OF REAL ESTATE PROPERTIES 582 (311)
----------- -----------
NET INCOME $ 40,017 $ 41,640
=========== ===========
NET INCOME PER COMMON SHARE - BASIC $ 0.92 $ 0.97
=========== ===========
NET INCOME PER COMMON SHARE - DILUTED $ 0.91 $ 0.95
=========== ===========
COMMON SHARES OUTSTANDING - BASIC 39,675,562 39,484,644
=========== ===========
COMMON SHARES OUTSTANDING - DILUTED 40,543,038 40,132,228
=========== ===========
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD $ 1.145 $ 1.105
=========== ===========
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, are an integral part of these
financial statements.
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HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
(Dollars in thousands)
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,017 $ 41,640
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 21,407 20,449
Deferred compensation amortization 905 669
Increase in other liabilities 370 2,477
Increase in other assets (12,713) (4,745)
Increase (decrease) in accounts payable and accrued liabilities (2,732) 1,878
Increase in straight line rent (3,191) (2,998)
(Gain) loss on sale of real estate (582) 311
---------- ----------
Net cash provided by operating activities 43,481 59,681
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition and development of real estate properties (20,426) (46,492)
Funding of mortgages 0 (7,677)
Proceeds from sale of real estate 6,058 5,187
Proceeds from mortgage payments/sales 17,084 41,966
---------- ----------
Net cash provided by (used in) investing activities 2,716 (7,016)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes and bonds payable 358,452 111,500
Repayments on notes and bonds payable (316,315) (118,482)
Dividends paid (49,765) (47,656)
Proceeds from issuance of common stock 980 500
---------- ----------
Net cash used in financing activities (6,648) (54,138)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 39,549 (1,473)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,788 3,396
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 41,337 $ 1,923
========== ==========
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, are an integral part of these
financial statements.
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HEALTHCARE REALTY TRUST
INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Healthcare Realty Trust Incorporated (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements which are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.
The results of operations for the three-month and six-month periods
ending June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
NOTE 2. ORGANIZATION
The Company invests in healthcare-related properties and mortgages
located throughout the United States. The Company provides management, leasing
and build-to-suit development, and capital for the construction of new
facilities as well as for the acquisition of existing properties. These
activities constitute a single business segment as defined by the Financial
Accounting Standards Board Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information." As of June 30, 2001, the Company had
invested in 257 properties and mortgages (the "Properties") located in 32
states, affiliated with 64 healthcare-related entities. The Properties include:
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NUMBER OF (IN THOUSANDS)
PROPERTIES INVESTMENT
---------- --------------
Ancillary hospital facilities 59 $ 485,873
Physician clinics 33 167,033
Skilled nursing facilities 47 237,133
Comprehensive ambulatory care centers 13 144,351
Assisted living facilities 69 314,440
Inpatient rehabilitation facilities 9 154,589
Medical office buildings 10 48,157
Other outpatient facilities 12 42,640
Other inpatient facilities 5 52,723
---- ----------
257 $1,646,939
==== ==========
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133") and later amended FAS 133 with Statement No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities" (FAS
138"). The Company became a party to two derivative instruments and adopted FAS
133 and FAS 138 effective in June 2001.
NOTE 4. FUNDS FROM OPERATIONS
The National Association of Real Estate Investment Trusts, Inc.
("NAREIT") revised its definition of funds from operations as described in the
NAREIT White Paper issued October 1999. The adoption of this revised definition
became effective January 1, 2000. Funds from operations, as defined by the
NAREIT 1999 White Paper, means net income before net gains on sales of real
estate properties (computed in accordance with generally accepted accounting
principles) plus depreciation from real estate assets. The Company calculates
its funds from operations ("FFO") using a modified version of the NAREIT's
October 1999 definition of funds from operations. The Company eliminates
straight-line rental revenue in computing FFO although NAREIT's definition of
FFO requires the inclusion of straight-line rental revenue in FFO.
The Company considers FFO to be an informative measure of the
performance of an equity real estate investment trust ("REIT") and consistent
with measures used by analysts to evaluate equity REITs. FFO 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 as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity.
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9
FUNDS FROM OPERATIONS(1)
(Dollars in thousands, except per share data)
Three Months Ended June 30,
----------------------------
2001 2000
---------- ----------
Net Income before net gain (loss) on sale of real estate
properties $ 19,409 $ 21,498
Elimination of rental revenues
recognized on a straight line basis(2) (1,443) (2,998)
Preferred Stock Dividend (1,664) (1,664)
Real Estate Depreciation 9,989 9,500
---------- ----------
Total Adjustments 6,882 4,838
---------- ----------
Funds From Operations-Basic $ 26,291 $ 26,336
========== ==========
Convertible Subordinated Debenture Interest 4 0
---------- ----------
Funds From Operations - Diluted $ 26,295 $ 26,336
========== ==========
Funds From Operations Per Common Share - Basic $ 0.66 $ 0.67
========== ==========
Funds From Operations Per Common Share - Diluted $ 0.65 $ 0.66
========== ==========
Common Shares Outstanding - Basic 39,721,416 39,526,317
========== ==========
Common Shares Outstanding - Diluted 40,566,400 40,168,158
========== ==========
(1) FFO 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 as an indicator of
the Company's operating performance or as an alternative to cash flow
as a measure of liquidity.
Management believes the Company's FFO is not directly comparable to
other healthcare REIT's, which own a portfolio of triple net leased
properties or mortgages, as the Company develops projects through a
development and lease-up phase before they reach their targeted cash
flow returns. Furthermore, the Company eliminates, in consolidation,
fee income for developing, leasing and managing owned properties and
expenses or capitalizes, as the case may be, related internal costs.
(2) The Company calculates its FFO using a modified version of the National
Association of Real Estate Investment Trust's ("NAREIT") October 1999
definition of funds from operations. The Company eliminates
straight-line rental revenue in computing FFO although NAREIT's
definition of funds from operations requires the inclusion of
straight-line rental revenue. If the Company had followed the NAREIT
definition of funds from operations, as other healthcare REITs do, FFO
on a diluted basis would have been $0.68 per common share for the three
months ended June 30, 2001.
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10
FUNDS FROM OPERATIONS(1)
(Dollars in thousands, except per share data)
Six Months Ended June 30,
--------------------------------
2001 2000
------------ ------------
Net Income before net gain (loss) on sale of real estate
properties $ 39,435 $ 41,951
Elimination of rental revenues
recognized on a straight line basis(2) (3,191) (4,468)
Preferred Stock Dividend (3,328) (3,328)
Real Estate Depreciation 19,941 18,905
------------ ------------
Total Adjustments 13,422 11,109
------------ ------------
Funds From Operations-Basic $ 52,857 $ 53,060
============ ============
Convertible Subordinated Debenture Interest 74 0
------------ ------------
Funds From Operations - Diluted $ 52,931 $ 53,060
============ ============
Funds From Operations Per Common Share - Basic $ 1.33 $ 1.34
============ ============
Funds From Operations Per Common Share - Diluted $ 1.31 $ 1.32
============ ============
Common Shares Outstanding - Basic 39,675,562 39,484,644
============ ============
Common Shares Outstanding - Diluted 40,543,038 40,132,228
============ ============
(1) FFO 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 as an indicator of
the Company's operating performance or as an alternative to cash flow
as a measure of liquidity.
Management believes the Company's FFO is not directly comparable to
other healthcare REIT's, which own a portfolio of triple net leased
properties or mortgages, as the Company develops projects through a
development and lease-up phase before they reach their targeted cash
flow returns. Furthermore, the Company eliminates, in consolidation,
fee income for developing, leasing and managing owned properties and
expenses or capitalizes, as the case may be, related internal costs.
(2) The Company calculates its FFO using a modified version of the National
Association of Real Estate Investment Trust's ("NAREIT") October 1999
definition of funds from operations. The Company eliminates
straight-line rental revenue in computing FFO although NAREIT's
definition of funds from operations requires the inclusion of
straight-line rental revenue. If the Company had followed the NAREIT
definition of funds from operations, as other healthcare REITs do, FFO
on a diluted basis would have been $1.38 per common share for the six
months ended June 30, 2001.
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NOTE 5. NOTES AND BONDS PAYABLE
Notes and bonds payable at June 30, 2001 consisted of the following (in
thousands):
Unsecured Credit Facility $ 0
Term Loan Facility 0
Senior Notes due 2002 36,000
Senior Notes due 2006 70,000
Senior Notes due 2011 295,560
6.55% Convertible Subordinated Debentures, net 74,737
10.5% Convertible Subordinated Debentures, net 2,894
Mortgage notes payable 91,364
Other note payable 5,250
--------
$575,805
========
Unsecured Credit Facilities
In 1998, the Company entered into a $265.0 million (amended in 2000 to
$300.0 million) unsecured credit facility (the "Unsecured Credit Facility"). The
Unsecured Credit Facility was fully retired in May 2001 with proceeds from the
sale of $300.0 million Senior Notes due 2011. In July 2001, the Company replaced
the Unsecured Credit Facility with a new $150 million credit facility (the
"Unsecured Credit Facility due 2004"). The Unsecured Credit Facility due 2004
bears interest at LIBOR rates plus 1.15%, payable quarterly, and matures in July
2004. In addition, the Company pays a facility fee of 0.2% on the commitment.
The Unsecured Credit Facility due 2004 contains certain representations,
warranties, and financial and other covenants customary in such loan agreements.
At July 31, 2001, the Company had additional borrowing capacity of $120 million
under the Unsecured Credit Facility due 2004.
Term Loan Facility
In 1998, the Company entered into a $200.0 million term loan facility
(the "Term Loan Facility"). The Term Loan Facility was fully repaid in April
2001.
Senior Notes due 2002
In 1995, the Company privately placed $90.0 million of unsecured senior
notes (the "Senior Notes due 2002") with 16 institutions. The Senior Notes due
2002 bear interest at 7.41%, payable semi-annually, and mature on September 1,
2002. The remaining balance of $36.0 million must be repaid in two equal
installments on September 1, 2001 and 2002. The note agreements pursuant to
which the Senior Notes due 2002 were purchased contain certain representations,
warranties and financial and other covenants customary in such loan agreements.
9
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Senior Notes due 2006
In April 2000, the Company privately placed $70.0 million of unsecured
senior notes (the "Senior Notes due 2006") with multiple purchasers affiliated
with two institutions. The Senior Notes due 2006 bear interest at 9.49%, payable
semi-annually, and mature on April 1, 2006. On April 1, 2004 and 2005, the
Company must repay $20.3 million of the principal with the remaining principal
balance of $29.4 million payable upon maturity. The note agreements pursuant to
which the Senior Notes due 2006 were purchased contain certain representations,
warranties and financial and other covenants customary in such loan agreements.
Senior Notes due 2011
In May 2001, the Company publicly issued $300.0 million unsecured
senior notes due 2011 (the "Senior Notes due 2011"). The Senior Notes due 2011
bear interest at 8.125%, payable semi-annually on May 1 and November 1,
beginning November 1, 2001, and are due on May 1, 2011, unless redeemed earlier
by the Company. The notes were issued at a discount of approximately $1.5
million, yielding a 8.202% interest rate per annum. Net proceeds from the
issuance of the Senior Notes due 2011 were used to fully retire the Unsecured
Credit Facility and to partially redeem the 6.55% and 10.5% Convertible
Subordinated Debentures in July 2001.
Upon repayment of the Term Loan Facility in April 2001 and the
repayment of the Unsecured Credit Facility in May 2001, the Company's
outstanding debt was primarily fixed rate. The Company's practice and objective
has been to protect itself against changes in fair value due to changes in
market interest rates by maintaining a mix of variable and fixed rate debt. In
order to accomplish this objective, in June 2001, the Company entered into
interest rate swap agreements with two lending institutions for notional amounts
totaling $125 million which are expected to offset changes in the fair value of
$125 million of the Senior Notes due 2011. In both interest rate swaps, the
Company receives a 8.125% fixed rate and pays a variable rate of LIBOR plus
1.99%, set in arrears, with semi-annual settlement dates each May 1 and November
1. The swaps are callable, at fair value, by either party if and only if the
other party is downgraded below investment grade by two or more rating agencies.
These derivative instruments meet all requirements of a fair value hedge and are
accounted for using the "shortcut method" as set forth in FAS 133. As such,
changes in fair value will have no impact on the income statement. At June 30,
2001, the fair value of the hedge is reported in other liabilities with an
offsetting decrease to the Senior Notes due 2011 included in notes and bonds
payable on the Company's balance sheet.
Convertible Subordinated Debentures
In 1998, the Company assumed in an acquisition and recorded at fair
value $74.7 million aggregate face amount of 6.55% Convertible Subordinated
Debentures (the "6.55% Debentures") and $3.8 million aggregate face amount of
10.5% Convertible Subordinated Debentures (the "10.5% Debentures"). During the
second quarter, the Company notified the holders of the 6.55% Debentures and
10.5% Debentures that it was exercising its call option. During the call period,
holders converted $3.3 million principal amount of these debentures into 169,686
shares of the Company's common stock. On July 11, 2001, the Company redeemed the
6.55% Debentures for a total redemption price, including unpaid interest, of
$1,015 per $1,000
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principal amount and redeemed the 10.5% Debentures for a total redemption price,
including unpaid interest, of $1,044 per $1,000 principal amount.
These redemptions of the 6.55% Debentures and 10.5% Debentures, which
totaled approximately $74.7 million, were funded from proceeds of the $300
million Senior Notes due 2011 and the $150 million Unsecured Credit Facility due
2004.
Mortgage Notes Payable
At June 30, 2001, the Company had assumed or entered into 17
nonrecourse mortgage notes payable, with related collateral, as follows (dollars
in millions):
Original
Investment Contractual
Original Contractual Of Collateral at Balance at
Mortgagor Balance Interest Rate Collateral June 30, 2001 June 30, 2001
--------- -------- ------------- ------------------------------ ---------------- -------------
Life Insurance Co. $ 23.3 8.500% Ancillary hospital facility $ 43.6 $ 22.2
Life Insurance Co. 4.7 7.625% Ancillary hospital facility 10.7 4.2
Life Insurance Co. 17.1 8.125% Two ambulatory surgery 37.2 16.2
centers & one ancillary
hospital facility
Commercial Bank 14.2 7.750% Two physician clinics, one 16.9 14.2
ambulatory surgery center &
one medical office building
Commercial Bank 35.0 7.220% Nine ancillary hospital 78.2 34.6
facilities & one physician
clinic
------ ------ ------
$ 94.3 $186.6 $ 91.4
====== ====== ======
The $23.3 million note is payable in monthly installments of principal
and interest based on a 30-year amortization with the final payment due in July
2026. The $4.7 million note is payable in monthly installments of principal and
interest based on a 20-year amortization with the final payment due in January
2017. The three notes totaling $17.1 million are payable in monthly installments
of principal and interest based on a 25-year amortization with a balloon payment
of the unpaid balance due in September 2004. The four notes totaling $14.2
million are payable in monthly installments of interest only with the final
payment due in December 2003. The six notes totaling $35.0 million and the
related collateral are held by special purpose entities whose sole members are
solely owned subsidiaries of the Company. These six fully amortizing notes are
payable in monthly installments of principal and interest and mature in May
2011.
Other Note Payable
In July 1999, the Company entered into a $7.0 million note with a
commercial bank. The note bears interest at 7.53%, is payable in equal
semi-annual installments of principal and interest and fully amortizes in July
2005.
NOTE 6. COMMITMENTS
As of June 30, 2001, the Company had a net investment of approximately
$20.2 million in five build-to-suit developments in progress, which have a total
remaining funding commitment of approximately $28.5 million.
As part of the merger with Capstone Capital Corporation ("Capstone") in
1998, agreements were entered into with three individuals affiliated with
Capstone that restrict
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competitive practices and which the Company believes will protect and enhance
the value of the real estate properties acquired from Capstone. These agreements
provide for the issuance of 150,000 shares of common stock of the Company to the
individuals on October 15 of the years 1999, 2000, 2001 and 2002, provided all
terms of the agreements are met. The Company issued 150,000 shares during 2000
and 1999 pursuant to these agreements.
NOTE 7. ASSET ACQUISITIONS/DISPOSITIONS
During the first quarter of 2001, the Company acquired a 16,984 square
foot medical office building in Cheyenne, Wyoming for a net purchase price of
$2.2 million. The Company constructed an ancillary hospital facility on the same
campus as this medical office building and is providing property management
services for both buildings.
During the first quarter of 2001, the Company sold a 10,855 square foot
ambulatory surgery center in Dallas, Texas for $2.2 million in net proceeds
resulting in a net gain of $0.6 million.
During the second quarter of 2001, the Company sold a 25,660 square
foot physician clinic in Framingham, Massachusetts for $3.9 million in net
proceeds resulting in a net loss of approximately $0.04 million.
NOTE 8. CONTINGENCIES
On March 22, 1999, HR Acquisition I Corporation, formerly known as
Capstone Capital Corporation ("HRT"), a wholly-owned subsidiary of the Company,
filed suit against Medistar Corporation and its affiliate, Medix Construction
Company in United States District Court for the Northern District of Alabama,
Southern Division. HRT is seeking damages in excess of $4.0 million arising out
of the development and construction of four real estate projects located in
different parts of the United States. Medistar and Medix served as the developer
and contractor, respectively, for the projects. HRT has asserted claims for
damages relating to, among others, alleged breaches of the development and
contracting obligations, failure to perform in accordance with contract terms
and specifications, and other deficiencies in performance by Medistar and Medix.
On June 10, 1999, Medistar and Medix filed its answer and counterclaim asserting
a variety of alleged legal theories, claims for damages for alleged deficiencies
by HRT and the Company in the performance of alleged obligations, and for damage
to their business reputation. Attempts at mediation have not resulted in a
settlement of the disputes. The Company's prosecution of its claims and defense
of the counterclaims will continue to be vigorous. While the Company cannot
predict the range of possible recovery or loss, the Company believes that, even
though the asserted cross claims seek substantial monetary damages, the
allegations made by Medistar and Medix are not factually or legally meritorious,
are subject to sustainable defenses and are, to a significant extent, covered by
liability insurance.
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NOTE 9. NET INCOME PER SHARE
The table below sets forth the computation of basic and diluted
earnings per share as required by FASB Statement No. 128 for the three and six
months ended June 30, 2001 and 2000 (dollars in thousands, except per share
data).
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
BASIC EPS
Weighted Average Common 40,559,591 40,130,531 40,513,737 40,088,858
Shares Outstanding
Actual Restricted Stock Shares (838,175) (604,214) (838,175) (604,214)
------------ ------------ ------------ ------------
Denominator - Basic 39,721,416 39,526,317 39,675,562 39,484,644
============ ============ ============ ============
Net Income $ 19,373 $ 21,187 $ 40,017 $ 41,640
Preferred Stock Dividend (1,664) (1,664) (3,328) (3,328)
------------ ------------ ------------ ------------
Numerator - Basic $ 17,709 $ 19,523 $ 36,689 $ 38,312
============ ============ ============ ============
Per Share Amount $ 0.45 $ 0.49 $ 0.92 $ 0.97
============ ============ ============ ============
DILUTED EPS
Weighted Average Common 40,559,591 40,130,531 40,513,737 40,088,858
Shares Outstanding
Actual Restricted Stock Shares (838,175) (604,214) (838,175) (604,214)
Restricted Shares - Treasury 555,268 601,914 584,591 612,190
Dilution for Convertible
Debentures 173,688 0 175,167 0
Dilution for Employee Stock
Purchase Plan 116,028 39,927 107,718 35,394
------------ ------------ ------------ ------------
Denominator - Diluted 40,566,400 40,168,158 40,543,038 40,132,228
============ ============ ============ ============
Numerator - Basic $ 17,709 $ 19,523 $ 36,689 $ 38,312
Convertible Subordinated
Debenture Interest 4 0 74 0
------------ ------------ ------------ ------------
Numerator - Diluted $ 17,713 $ 19,523 $ 36,763 $ 38,312
============ ============ ============ ============
Per Share Amount $ 0.44 $ 0.49 $ 0.91 $ 0.95
============ ============ ============ ============
NOTE 10. SUBSEQUENT EVENTS
In July 2001, the Company replaced its Unsecured Credit Facility with a
new $150 million Unsecured Credit Facility due 2004. Also, the Company redeemed
its 6.55% Debentures and its 10.5% Debentures. (See Note 5 for further
discussion.)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter 2001 Compared to Second Quarter 2000
For the three months ended June 30, 2001, net income was $19.4 million,
or $0.45 per basic common share ($0.44 per diluted common share), on total
revenues of $49.5 million compared to net income of $21.2 million, or $0.49 per
basic and diluted common share, on total revenues of $49.9 million, for the
three months ended June 30, 2000. Funds from operations ("FFO") was $26.3
million, or $0.66 per basic common share ($0.65 per diluted common share), for
the three months ended June 30, 2001 compared to $26.3 million, or $0.67 per
basic common share ($0.66 per diluted common share), for the same period in
2000.
Total revenues for the three months ended June 30, 2001 compared to the
three months ended June 30, 2000, decreased approximately $0.4 million due to
fluctuations in certain line items as discussed below:
- Master lease rental and property operating income increased
$2.9 million or 7.3%. During 2000 and 2001, the Company acquired 15
revenue-producing properties, and three properties under construction were
completed and began operations.
- Straight line rent decreased $1.6 million or 51.9% for the
three months ended June 30, 2001 compared to the same period in 2000. This
decrease is primarily attributable to the identification during the second
quarter of 2000 of additional leases acquired in 1998 for which straight line
rent should have been recognized.
- Mortgage interest income decreased $1.6 million or 26.6% for
2001 compared to 2000 due mainly to the repayment of 30 mortgages during 2000
and 2001.
- Management fees decreased $0.4 million or 48.4% for 2001
compared to 2000 due mostly to the loss of 3.7 million square feet in property
and asset managed properties effective in 2001.
- Interest and other income increased $0.3 million or 112.8%
for 2001 compared to 2000 due to many factors including interest earned on
excess cash remaining from the May 2001 sale of the Senior Notes due 2011, fees
earned in 2001 from consulting engagements, and fees earned due to the
prepayment of mortgage notes receivable. Also during the third quarter of 2000,
the Company sold a participating interest in a note receivable decreasing the
Company's interest income thereafter.
Total expenses for the three months ended June 30, 2001 were $30.1
million compared to $28.4 million for the same period in 2000, an increase of
$1.7 million or 6.1% for reasons discussed below:
- General and administrative expenses increased $0.9 million or
49.5% for the three months ended June 30, 2001 compared to 2000 due mainly to an
increase in the number of
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employees and related compensation for property management, development, and
other service-based activities.
- Property operating expenses and depreciation expense for the
three months ended June 30, 2001 compared to 2000 increased $0.9 million or
15.9% and $0.5 million or 5.4%, respectively. During 2000 and 2001, the Company
acquired 15 revenue-producing properties, and three properties under
construction were completed and began operations.
- Interest expense for the three months ended June 30, 2001,
compared to the same period in 2000, decreased $0.6 million, or 5.2%. Interest
expense on the Senior Notes due 2002 decreased $0.3 million due to annual
principal payments of $18.0 million. Further, one mortgage note payable assumed
in 1998 was defeased, by the Company, at maturity in June 2000 which resulted in
a decrease of approximately $0.3 million in interest expense from 2000 to 2001.
Interest expense resulting from issuances of new debt in 2001, as discussed in
more detail in Note 5, was primarily offset by a decrease in interest expense on
the Unsecured Credit Facility and Term Loan Facility which were both repaid in
2001.
Six Months ended June 30, 2001 Compared to Six Months Ended June 30, 2000
For the six months ended June 30, 2001, net income was $40.0 million,
or $0.92 per basic common share ($0.91 per diluted common share), on total
revenues of $97.7 million compared to net income of $41.6 million, or $0.97 per
basic common share ($0.95 per diluted common share), on total revenues of $98.1
million, for the six months ended June 30, 2000. Funds from operations ("FFO")
was $52.9 million, or $1.33 per basic common share ($1.31 per diluted common
share), for the six months ended June 30, 2001 compared to $53.1 million, or
$1.34 per basic common share ($1.32 per diluted common share), for the same
period in 2000.
Total revenues for the six months ended June 30, 2001 compared to the
six months ended June 30, 2000, decreased approximately $0.4 million due to
fluctuations in certain line items as discussed below:
- Master lease rental and property operating income increased
$5.2 million or 6.6%. During 2000 and 2001, the Company acquired 15
revenue-producing properties, and three properties under construction were
completed and began operations.
- Straight line rent decreased $1.3 million or 28.6% for the
six months ended June 30, 2001 compared to the same period in 2000. This
decrease is primarily attributable to the identification during the second
quarter of 2000 of additional leases acquired in 1998 for which straight line
rent should have been recognized.
- Mortgage interest income decreased $3.4 million or 27.6% for
2001 compared to 2000 due mainly to the repayment of 30 mortgages during 2000
and 2001.
- Management fees decreased $0.7 million or 50.8% for 2001
compared to 2000 due mainly to the loss of 3.7 million square feet in property
and asset managed properties effective in 2001.
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Total expenses for the six months ended June 30, 2001 were $58.3
million compared to $56.2 million for the same period in 2000, an increase of
$2.1 million or 3.8% for reasons discussed below:
- General and administrative expenses increased $0.8 million or
19.9% for the six months ended June 20, 2001 compared to 2000 due mainly to an
increase in the number of employees and related compensation for property
management, development, and other service-based activities.
- Property operating expense and depreciation expense for the
six months ended June 30, 2001 compared to 2000 increased $1.6 million or 14.6%
and $1.1 million or 5.7%, respectively. During 2000 and 2001, the Company
acquired 15 revenue-producing properties, and three properties under
construction were completed and began operations.
- Interest expense for the six months ended June 30, 2001,
compared to the same period in 2000, decreased $1.3 million or 6.1%. Interest
expense on the Senior Notes due 2002 decreased $0.7 million due to annual
principal payments of $18.0 million. Further, one mortgage note payable assumed
in 1998 was defeased, by the Company, at maturity in June 2000 which resulted in
a decrease of approximately $0.7 million in interest expense from 2000 to 2001.
Interest expense resulting from issuances of new debt in 2001, as discussed in
more detail in Note 5, was primarily offset by a decrease in interest on the
Unsecured Credit Facility and Term Loan Facility which were both repaid in 2001.
LIQUIDITY AND CAPITAL RESOURCES
As discussed in more detail in Note 5, the Company has various
commitments to pay interest and outstanding principal balances on its notes and
bonds payable as follows (dollars in millions):
CONTRACTUAL
BALANCE AT MATURITY INTEREST INTEREST
JUNE 30, 2001 DATE RATE PAYMENTS PRINCIPAL PAYMENTS
------------- --------- ------------ -------- ------------------
Unsecured Credit Facility due
2004 $ 0.0 7/04 LIBOR +1.15% Quarterly At maturity
Senior Notes due 2002 36.0 9/02 7.41% Semi-Annual $18 million annually
$20.3 million in 2004,
Senior Notes due 2006 70.0 4/06 9.49% Semi-Annual 2005 and $29.4 million
in 2006
Senior Notes due 2011 295.6 5/11 8.20% Semi-Annual At maturity
10.5% Convertible Subordinated Redeemed
Debentures, net 2.9 in 7/01 10.5% Semi-Annual At maturity
6.55% Convertible Subordinated Redeemed
Debentures, net 74.7 in 7/01 6.55% Semi-Annual At maturity
Mortgage notes payable 91.4 9/04-7/26 7.22%-8.13% Monthly Monthly or at maturity
Other note payable 5.2 7/05 7.53% Semi-Annual Semi-Annual
------
$575.8
During 2001, the Company has focused on reorganizing its debt structure
and repaying or replacing debt instruments with shorter maturities with debt
instruments with longer maturities, effectively strengthening its balance sheet
(see Note 5 for more detail):
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- During 2001, the Company sold a 10,855 square foot ambulatory
surgery center and a 25,660 square foot physician clinic for net proceeds
totaling $6.1 million. These proceeds were used to partially repay the Term Loan
Facility and Unsecured Credit Facility both due in 2001. (See Note 7 for further
details).
- In April 2001, the Company entered into six mortgage notes due
2011 totaling $35 million. The net proceeds from this transaction were used to
fully repay the Term Loan Facility due 2001 and partially repay the Unsecured
Credit Facility due 2001.
- In May 2001, the Company publicly issued $300.0 million of
Senior Notes due 2011 and used the net proceeds to fully repay the Unsecured
Credit Facility due 2001 and partially redeem the 6.55% Debentures and 10.5%
Debentures, both due in 2002.
- In July 2001, the Company replaced its $300.0 million
Unsecured Credit Facility due 2001 with a new $150 million Unsecured Credit
Facility due 2004. The Unsecured Credit Facility due 2004 bears interest at
LIBOR rates plus 1.15%, payable quarterly, and matures in July 2004. In
addition, the Company pays a facility fee of 0.2% on the commitment. Also, the
Company redeemed its 6.55% Debentures and 10.5% Debentures from proceeds
remaining from the $300 million Senior Notes due 2011 and from the new Unsecured
Credit Facility due 2004. After these redemptions, the Company had $30 million
outstanding under its Unsecured Credit Facility due 2004.
Though the Company may continue to focus on reorganizing its debt
structure, currently the Company has lengthened its debt maturities in such a
manner that approximately 71.0% of its current debt balance is due after 2005.
Upon repayment of the Term Loan Facility in April 2001 and the
repayment of the Unsecured Credit Facility in May 2001, the Company's
outstanding debt was primarily fixed rate. The Company's practice and objective
has been to protect itself against changes in fair value due to changes in
market interest rates by maintaining a mix of variable and fixed rate debt. In
order to accomplish this objective, in June 2001, the Company entered into
interest rate swap agreements with two lending institutions for notional amounts
totaling $125 million which are expected to offset changes in the fair value of
$125 million of the Senior Notes due 2011. In both interest rate swaps, the
Company receives a 8.125% fixed rate and pays a variable rate of LIBOR plus
1.99%, set in arrears, with semi-annual settlement dates each May 1 and November
1. The swaps are callable, at fair value, by either party if and only if the
other party is downgraded below investment grade by two or more rating agencies.
These derivative instruments meet all requirements of a fair value hedge and are
accounted for using the "shortcut method" as set forth in FAS 133. As such,
changes in fair value will have no impact on the income statement. At June 30,
2001, the fair value of the hedge is reported in other liabilities with an
offsetting decrease to the Senior Notes due 2011 included in notes and bonds
payable on the Company's balance sheet.
As of June 30, 2001, the Company can issue an aggregate of $200.0
million of securities remaining under its currently effective registration
statement. Depending on market conditions, the Company may issue securities
under its registration statement from time to time. The Company may, under
certain circumstances, borrow additional amounts in connection with the
renovation or expansion of its properties, the acquisition or development of
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additional properties or, as necessary, to meet distribution requirements for
REITs under the Internal Revenue Code. The Company may raise additional capital
or make investments by issuing, in public or private transactions, its equity
and debt securities, but the availability and terms of any such issuance will
depend upon market and other conditions.
As of June 30, 2001, the Company had a net investment of approximately
$20.2 million in five build-to-suit developments in progress, which have a total
remaining funding commitment of approximately $28.5 million. The Company intends
to fund these commitments with internally generated cash flows, proceeds from
the sale of additional assets, proceeds from additional repayments of mortgage
notes receivable, proceeds from the new Unsecured Credit Facility due 2004, or
from additional capital market financings.
At June 30, 2001, the Company had stockholders' equity in excess of
$1.0 billion. The debt to total capitalization ratio was approximately .37 to 1
at June 30, 2001.
On April 24, 2001, the Company declared an increase in its quarterly
common stock dividend from $0.570 per share ($2.28 annualized) to $0.575 per
share ($2.30 annualized) payable to stockholders of record on May 15, 2001. This
dividend was paid on June 7, 2001. In July 2001, the Company announced payment
of a common stock dividend of $0.580 per share ($2.32 annualized) payable to
stockholders of record as of August 15, 2001. This dividend is payable on
September 6, 2001 and relates to the period April 1, 2001 through June 30, 2001.
While the Company has no present plans to change its quarterly common stock
dividend policy, the dividend policy is reviewed each quarter by its board of
directors. Should access to new capital not be available, the Company is
uncertain of its ability to increase its quarterly common stock dividend in the
future.
During 2001, the Company expects to pay quarterly dividends on its 8
7/8% Series A Voting Cumulative Preferred Stock in the annualized amount of
$2.22 per share.
Under the terms of the leases and other financial support agreements
relating to most of the properties, tenants or healthcare providers are
generally responsible for operating expenses and taxes relating to the
properties. As a result of these arrangements, with limited exceptions not
material to the performance of the Company, the Company does not believe that
any increases in the property operating expenses or taxes would significantly
impact the operating results of the Company during the respective terms of the
agreements. The Company anticipates entering into similar arrangements with
respect to additional properties it acquires or develops. After the term of the
lease or financial support agreement, or in the event the financial obligations
required by the agreement are not met, the Company anticipates that any
expenditures it might become responsible for in maintaining the properties will
be funded by cash from operations and, in the case of major expenditures,
possibly by borrowings. To the extent that unanticipated expenditures or
significant borrowings are required, the Company's cash available for
distribution and liquidity may be adversely affected.
The Company plans to continue to meet its liquidity needs, including
funding additional investments in 2001, paying its quarterly dividends and
funding its debt service from its cash flows, the proceeds of mortgage loan
repayments, sales of real estate investments, payments of mortgage notes
receivable, and capital market financings. The Company believes that its
liquidity and sources of capital are adequate to satisfy its cash requirements.
The Company,
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however, cannot be certain that these sources of funds will be available at a
time and upon terms acceptable to the Company in sufficient amounts to meet its
liquidity needs.
Impact of Inflation
Inflation has not significantly affected the earnings of the Company
because of the moderate inflation rate and the fact that most of the Company's
leases and financial support arrangements require tenants and sponsors to pay
all or some portion of the increases in operating expenses, thereby reducing the
risk of any adverse effects of inflation to the Company. In addition, inflation
will have the effect of increasing the gross revenue the Company is to receive
under the terms of the leases and financial support arrangements. Leases and
financial support arrangements vary in the remaining terms of obligations from
one to 23 years, further reducing the risk of any adverse effects of inflation
to the Company. Interest payable under the interest rate swaps and Unsecured
Credit Facility due 2004 bears interest at a variable rate; therefore, interest
payable under the swaps and this debt will be influenced by changes in
short-term rates, which tend to be sensitive to inflation. Generally, changes in
inflation and interest rates tend to move in the same direction. During periods
where interest rate increases outpace inflation; the Company's operating results
will be negatively impacted. Likewise, when increases in inflation outpace
increases in interest rates, the Company's operating results will be positively
impacted.
Market Risk
The Company is exposed to market risks, in the form of changing
interest rates, on its debt and mortgage notes receivable. The Company has no
market risk with respect to foreign currency fluctuations. Management uses daily
monitoring of market conditions and analytical techniques to manage this risk.
During 2001, the Company significantly changed its debt structure. The Company
repaid its variable rate Term Loan Facility, redeemed its 6.55% Debentures and
its 10.5% Debentures, retired its variable rate Unsecured Credit Facility and
replaced it with a new variable rate Unsecured Credit Facility due 2004. The
Company also entered into six fixed rate mortgages and publicly issued $300
million of fixed rate Senior Notes due 2011. Further, the Company entered into
two, receive fixed, pay variable interest rate swaps for notional amounts
totaling $125 million which are expected to offset changes in the fair value of
$125 million of the Senior Notes due 2011. See Liquidity and Capital Resources
in this Form 10-Q for further discussion. Also, see page 8 of Exhibit 13 "Annual
Report to Shareholders" of the Company's Form 10-K for the fiscal year ended
December 31, 2000.
Cautionary Language Regarding Forward Looking Statements
This Form 10-Q and other materials the Company has filed or may file
with the Securities and Exchange Commission, as well as information included in
oral statements or other written statements made, or to be made, by senior
management of the Company, contain, or will contain, disclosures which are
"forward-looking statements." Forward-looking statements include all statements
that do not relate solely to historical or current facts and can be identified
by the use of words such as "may," "will," "expect," "believe," "intend,"
"plan," " estimate," "project," "continue," "should" and other comparable terms.
These forward-looking statements are based on the current plans and expectations
of management and are subject to a number of risks and uncertainties that could
significantly affect the Company's current plans and expectations and future
financial condition and results. The Company undertakes no
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obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Shareholders and
investors are cautioned not to unduly rely on such forward-looking statements
when evaluating the information presented in the Company's filings and reports.
For a detailed discussion of the risk factors associated with the Company,
please refer to the Company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended December
31, 2000.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 22, 1999, HR Acquisition I Corporation, formerly known as
Capstone Capital Corporation ("HRT"), a wholly-owned subsidiary of the Company,
filed suit against Medistar Corporation and its affiliate, Medix Construction
Company in United States District Court for the Northern District of Alabama,
Southern Division. HRT is seeking damages in excess of $4.0 million arising out
of the development and construction of four real estate projects located in
different parts of the United States. Medistar and Medix served as the developer
and contractor, respectively, for the projects. HRT has asserted claims for
damages relating to, among others, alleged breaches of the development and
contracting obligations, failure to perform in accordance with contract terms
and specifications, and other deficiencies in performance by Medistar and Medix.
On June 10, 1999, Medistar and Medix filed its answer and counterclaim asserting
a variety of alleged legal theories, claims for damages for alleged deficiencies
by HRT and the Company in the performance of alleged obligations, and for damage
to their business reputation. Attempts at mediation have not resulted in a
settlement of the disputes. The Company's prosecution of its claims and defense
of the counterclaims will continue to be vigorous. While the Company cannot
predict the range of possible recovery or loss, the Company believes that, even
though the asserted cross claims seek substantial monetary damages, the
allegations made by Medistar and Medix are not factually or legally meritorious,
are subject to sustainable defenses and are, to a significant extent, covered by
liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on May 15, 2001.
At this meeting, the following matters were voted upon by the Company's
shareholders.
(a) Election of Class 2 Directors
Marliese E. Mooney, Edwin B. Morris, III, and John Knox Singleton were
elected to serve as Class 2 directors of the Company until the annual meeting of
shareholders in 2004 or until their respective successors are elected and
qualified. The vote was as follows:
Votes Cast Votes Cast Against Abstentions/
In Favor or Withheld Non Votes
----------------------- ---------------------- ---------------------
Common Preferred Common Preferred Common Preferred
---------- --------- --------- --------- --------- ---------
Marliese E. Mooney 31,663,711 2,760,641 2,069,927 36,998 6,814,247 202,361
Edwin B. Morris, III 33,596,379 2,763,390 137,259 34,249 6,814,247 202,361
John Knox Singleton 31,312,159 2,766,540 2,421,479 31,099 6,814,247 202,361
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The following directors continued in office following the meeting:
Name Term Expires
---- ------------
David R. Emery 2002
Batey M. Gresham, Jr. 2002
Charles Raymond Fernandez, M.D. 2003
Errol L. Biggs, Ph.D. 2003
(a) Selection of Auditors
The shareholders of the Company ratified the appointment of Ernst &
Young, LLP as the Company's independent auditors for the fiscal year ended
December 31, 2001, by the following vote:
Votes Cast Votes Cast Against Abstentions/
In Favor or Withheld Non Votes
------------------------- ------------------- ---------------------
Common Preferred Common Preferred Common Preferred
---------- --------- ------ --------- --------- ---------
33,548,464 2,774,174 81,151 13,655 6,918,270 212,171
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 4.1 Indenture, dated as of May 15, 2001, by the Company
to First Union National Bank, as Trustee (filed as an
exhibit to the Company's Form 8-K filed May 17, 2001
and hereby incorporated by reference).
Exhibit 4.2 First Supplemental Indenture, dated as of May 15,
2001, by the Company to First Union National Bank, as
Trustee (filed as an exhibit to the Company's Form
8-K filed May 17, 2001 and hereby incorporated by
reference).
Exhibit 4.3 Form of 8.125% Senior Note Due 2011 (filed as an
exhibit to the Company's Form 8-K filed May 17, 2001
and hereby incorporated by reference).
Exhibit 10.1 Amended and Restated Credit Agreement among the
Company; Bank of America, N.A.; First Union National
Bank; UBS AG, Stamford Branch; and Banc of America
Securities LLC dated July 2, 2001.
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(b) Reports on Form 8-K
The Company filed two reports on Form 8-K during the second quarter of
2001.
DATE OF EARLIEST
EVENT REPORTED DATE FILED ITEMS REPORTED
- -------------- ---------- --------------
Item 5. Other Events
May 11, 2001 May 14, 2001 Item 7. Financial Statements, Pro Forma Financial
Statements and Exhibits
Item 5. Other Events
May 11, 2001 May 17, 2001 Items 7. Financial Statements, Pro Forma Financial
Statements and Exhibits
Further, the Company furnished in accordance with Regulation FD the
following report on Form 8-K during the second quarter of 2001:
DATE OF EARLIEST
EVENT REPORTED DATE FILED ITEMS REPORTED
- -------------- ---------- --------------
April 26, 2001 April 26, 2001 Item 7. Financial Statements and Exhibits
Item 9. Regulation FD Disclosure
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SIGNATURE
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.
HEALTHCARE REALTY TRUST INCORPORATED
By: /s/ Timothy G. Wallace
----------------------------------------
Timothy G. Wallace
Executive Vice President
and Chief Financial Officer
Date: August 14, 2001
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