07.05.2008 21:39:00
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Health Care REIT, Inc. Reports First Quarter Results
Health Care REIT, Inc. (NYSE:HCN) today announced operating
results for the company’s first quarter ended
March 31, 2008.
"We are off to an excellent start in 2008 and expect even greater
success on the investment front than was originally anticipated,”
commented George L. Chapman, chief executive officer of Health Care
REIT, Inc. "We also expect a higher amount of
selective asset sales during 2008, which should allow us to recycle
capital and leave us less reliant on the capital markets to fund our
growth. We believe that this capital redeployment strategy will continue
to enhance the quality of real estate in our portfolio and has enabled
us to increase our projected FFO growth this year to a range of 6 to 8
percent per share.” Recent Highlights.
Reported 1Q08 normalized FFO growth of 7% per share
Reported 1Q08 normalized FAD growth of 9% per share
Completed 1Q08 net new investments totaling $181.3 million
Increased 2008 common dividend 3% to $2.72 per share
Increasing 2008 gross investment guidance by $200 million to a range
of $1.1 to $1.4 billion
Increasing 2008 normalized FFO guidance to a range of $3.30 to $3.38
from $3.27 to $3.37 per share
Increasing 2008 normalized FAD guidance to a range of $3.04 to $3.12
from $3.01 to $3.11 per share
Key Performance Indicators.
1Q08
1Q07
Change
Net income available to common
stockholders (NICS) per diluted share
$0.35
$0.32
9%
Normalized FFO per diluted share
$0.81
$0.76
7%
Normalized FAD per diluted share
$0.76
$0.70
9%
Dividends per common share(1)
$0.66
$0.64
3%
Normalized FFO Payout Ratio
81%
84%
Normalized FAD Payout Ratio
87%
91%
(1)
The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been included in 2007.
1Q08 Earnings. The
following table summarizes certain items impacting NICS, FFO and FAD:
NICS
FFO
FAD
1Q08
1Q07
Change
1Q08
1Q07
Change
1Q08
1Q07
Change
Per diluted share
$0.35
$0.32
9%
$0.81
$0.76
7%
$0.79
$0.73
8%
Includes impact of:
Gain (loss) on sales of real property(1)
$0.00
$0.01
Non-recurring income tax expense(2)
($0.02)
($0.02)
Debt extinguishment gain(3)
$0.02
$0.02
Prepaid/straight-line rent cash receipts(4)
$0.03
$0.03
Per diluted share - normalized(a)
$0.81
$0.76
7%
$0.76
$0.70
9%
(a) Amounts may not sum due to rounding
(1) $26,000 and $977,000 of gains in 1Q08 and 1Q07, respectively.
(2) $1,325,000 of non-recurring income tax expense in 1Q08.
(3) $1,326,000 of debt extinguishment gains in 1Q08.
(4) $2,975,000 and $2,078,000 of receipts in 1Q08 and 1Q07,
respectively.
Dividends for First Quarter 2008.
As previously announced, the Board of Directors declared a dividend for
the quarter ended March 31, 2008 of $0.68 per share, as compared to
$0.66 per share for the same period in 2007. The dividend will be paid
on May 20, 2008 and will be the company’s 148th
consecutive quarterly dividend payment.
Outlook for 2008.
The company is increasing its investment guidance for 2008 to a range of
$1.1 billion to $1.4 billion from $900 million to $1.2 billion.
Acquisition guidance has been increased to a range of $700 to $900
million from $500 to $700 million of acquisitions, while development
funding remains unchanged within a range of $400 to $500 million.
Disposition guidance has also been increased to a range of $300 to $400
million from $100 to $200 million. Net investment guidance remains
unchanged at a range of $700 million to $1.1 billion.
The company is revising its 2008 earnings guidance. Normalized FFO has
been increased to a range of $3.30 to $3.38 per diluted share from $3.27
to $3.37 per diluted share. Normalized FAD has been increased to a range
of $3.04 to $3.12 per diluted share from $3.01 to $3.11 per diluted
share. Due to an increase in projected depreciation and amortization
arising from the increased acquisition guidance, net income available to
common stockholders has been revised to a range of $1.50 to $1.58 per
diluted share from $1.55 to $1.65 per diluted share.
The company’s guidance excludes any
impairments, unanticipated additions to the loan loss reserve or other
additional one-time items, including any additional cash payments other
than normal monthly rental payments. Please see the exhibits for a
reconciliation of the outlook for net income available to common
stockholders to FFO and FAD.
New Supplemental Information Report
Available. The company’s
quarterly supplemental information is now located in a separate report
under the News & Events heading of the company’s
website. The report can be accessed at www.hcreit.com/supplement.
Conference Call Information.
The company has scheduled a conference call on Thursday, May 8, 2008 at
9:00 a.m. Eastern Time to discuss its first quarter 2008 results,
industry trends, portfolio performance and outlook for 2008. Telephone
access will be available by dialing 888-686-9703 or 913-312-0975
(international). For those unable to listen to the call live, a taped
rebroadcast will be available beginning two hours after completion of
the call through May 22, 2008. To access the rebroadcast, dial
888-203-1112 or 719-457-0820 (international). The conference ID number
is 5309542. To participate in the webcast, log on to www.hcreit.com
or www.earnings.com 15
minutes before the call to download the necessary software. Replays will
be available for 90 days through the same websites. This earnings
release is posted on the company’s website
under the heading News & Events.
Supplemental Reporting Measures.
The company believes that net income available to common stockholders
(NICS), as defined by U.S. generally accepted accounting principles
(U.S. GAAP), is the most appropriate earnings measurement. However, the
company considers funds from operations (FFO) and funds available for
distribution (FAD) to be useful supplemental measures of its operating
performance. Historical cost accounting for real estate assets in
accordance with U.S. GAAP implicitly assumes that the value of real
estate assets diminishes predictably over time as evidenced by the
provision for depreciation. However, since real estate values have
historically risen or fallen with market conditions, many industry
investors and analysts have considered presentations of operating
results for real estate companies that use historical cost accounting to
be insufficient. In response, the National Association of Real Estate
Investment Trusts (NAREIT) created FFO as a supplemental measure of
operating performance for REITs that excludes historical cost
depreciation from net income. FFO, as defined by NAREIT, means net
income, computed in accordance with U.S. GAAP, excluding gains (or
losses) from sales of real estate, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and
joint ventures. Normalized FFO represents FFO adjusted for unusual and
non-recurring items. FAD represents FFO excluding net straight-line
rental adjustments, rental income related to above/below market leases
and amortization of deferred loan expenses and less cash used to fund
capital expenditures, tenant improvements and lease commissions.
Normalized FAD represents FAD excluding prepaid/straight-line rent cash
receipts and adjusted for unusual and non-recurring items.
The company’s supplemental reporting measures
are financial measures that are widely used by investors, equity and
debt analysts and rating agencies in the valuation, comparison, rating
and investment recommendations of companies. The company’s
management uses these financial measures to facilitate internal and
external comparisons to historical operating results and in making
operating decisions. Additionally, they are utilized by the Board of
Directors to evaluate management. The supplemental reporting measures do
not represent net income or cash flow provided from operating activities
as determined in accordance with U.S. GAAP and should not be considered
as alternative measures of profitability or liquidity. Finally, the
supplemental reporting measures, as defined by the company, may not be
comparable to similarly entitled items reported by other real estate
investment trusts or other companies. Please see the exhibits for
reconciliations of the supplemental reporting measures.
About Health Care REIT.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is an equity
real estate investment trust that invests across the full spectrum of
senior housing and health care real estate, including independent
living/continuing care retirement communities, assisted living
facilities, skilled nursing facilities, hospitals, long-term acute care
hospitals and medical office buildings. Founded in 1970, the company was
the first real estate investment trust to invest exclusively in health
care facilities. The company also offers a full array of property
management and development services. As of March 31, 2008, the company’s
broadly diversified portfolio consisted of 646 properties in 38 states.
More information is available on the Internet at www.hcreit.com.
This document may contain "forward-looking”
statements as defined in the Private Securities Litigation Reform Act of
1995. These forward-looking statements concern and are based upon, among
other things, the possible expansion of the company’s
portfolio; the sale of properties; the performance of its operators and
properties; its occupancy rates; its ability to acquire or develop
properties; its ability to manage properties; its ability to enter into
agreements with new viable tenants for vacant space or for properties
that the company takes back from financially troubled tenants, if any;
its ability to make distributions; its policies and plans regarding
investments, financings and other matters; its tax status as a real
estate investment trust; its ability to appropriately balance the use of
debt and equity; its ability to access capital markets or other sources
of funds; its critical accounting policies; and its ability to meet its
earnings guidance. When the company uses words such as "may,” "will,” "intend,” "should,” "believe,” "expect,” "anticipate,” "project,” "estimate”
or similar expressions, it is making forward-looking statements.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. The company’s
expected results may not be achieved, and actual results may differ
materially from expectations. This may be a result of various factors,
including, but not limited to: the status of the economy; the status of
capital markets, including prevailing interest rates; issues facing the
health care industry, including compliance with, and changes to,
regulations and payment policies, responding to government
investigations and punitive settlements and operators’/tenants’
difficulty in cost-effectively obtaining and maintaining adequate
liability and other insurance; changes in financing terms; competition
within the health care and senior housing industries; negative
developments in the operating results or financial condition of
operators/tenants, including, but not limited to, their ability to pay
rent and repay loans; the company’s ability
to transition or sell facilities with profitable results; the failure to
make new investments as and when anticipated; the failure of closings to
occur as and when anticipated; acts of God affecting the company’s
properties; the company's ability to re-lease space at similar rates as
vacancies occur; the company’s ability to
timely reinvest sale proceeds at similar rates to assets sold;
operator/tenant bankruptcies or insolvencies; government regulations
affecting Medicare and Medicaid reimbursement rates and operational
requirements; liability or contract claims by or against
operators/tenants; unanticipated difficulties and/or expenditures
relating to future acquisitions; environmental laws affecting the company’s
properties; changes in rules or practices governing the company’s
financial reporting; and legal and operational matters, including real
estate investment trust qualification and key management personnel
recruitment and retention. Finally, the company assumes no obligation to
update or revise any forward-looking statements or to update the reasons
why actual results could differ from those projected in any
forward-looking statements.
HEALTH CARE REIT, INC. Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands) March 31, 2008
2007
Assets
Real estate investments:
Real property owned
Land and land improvements
$ 454,474
$
394,002
Buildings and improvements
4,329,405
3,783,163
Acquired lease intangibles
134,388
85,110
Real property held for sale, net of accumulated depreciation
2,150
4,236
Construction in progress
369,582
169,782
5,289,999
4,436,293
Less accumulated depreciation and intangible amortization
(517,487 )
(381,448
)
Total real property owned
4,772,512
4,054,845
Loans receivable
388,250
256,945
Less allowance for losses on loans receivable
(7,406 )
(7,406
)
380,844
249,539
Net real estate investments
5,153,356
4,304,384
Other assets:
Equity investments
1,168
4,700
Deferred loan expenses
28,817
19,767
Cash and cash equivalents
32,282
31,293
Receivables and other assets
171,833
98,510
234,100
154,270
Total assets $ 5,387,456
$
4,458,654
Liabilities and stockholders’ equity
Liabilities:
Borrowings under unsecured lines of credit arrangements
$ 432,500
$
381,000
Senior unsecured notes
1,847,709
1,542,103
Secured debt
478,228
377,013
Liability to subsidiary trust issuing preferred securities
0
52,205
Accrued expenses and other liabilities
110,715
95,595
Total liabilities
2,869,152
2,447,916
Minority interests
9,697
2,354
Stockholders’ equity:
Preferred stock
327,897
338,993
Common stock
88,992
73,931
Capital in excess of par value
2,510,260
1,902,186
Treasury stock
(3,986 )
(3,941
)
Cumulative net income
1,110,854
962,526
Cumulative dividends
(1,510,296 )
(1,267,462
)
Accumulated other comprehensive income
(18,474 )
(135
)
Other equity
3,360
2,286
Total stockholders’ equity
2,508,607
2,008,384
Total liabilities and stockholders’
equity $ 5,387,456
$
4,458,654
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended March 31, 2008
2007
Revenues:
Rental income
$ 125,044
$
103,496
Interest income
9,092
5,149
Other income
1,716
1,592
Gross revenues
135,852
110,237
Expenses:
Interest expense
34,329
31,330
Property operating expenses
11,367
7,168
Depreciation and amortization
39,555
32,682
General and administrative expenses
12,328
9,782
Loan expense
1,772
1,267
Loss (gain) on extinguishment of debt
(1,326 )
0
Total expenses
98,025
82,229
Income from continuing operations before income taxes and
minority interests
37,827
28,008
Income tax (expense) benefit
(1,279 )
(11
)
Income from continuing operations before minority interests
36,548
27,997
Minority interests
(62 )
(126
)
Income from continuing operations
36,486
27,871
Discontinued operations:
Gain (loss) on sales of properties
26
977
Income (loss) from discontinued operations, net
87
825
113
1,802
Net income
36,599
29,673
Preferred dividends
6,147
6,317
Net income available to common stockholders
$ 30,452
$
23,356
Average number of common shares outstanding:
Basic
86,100
73,224
Diluted
86,610
73,791
Net income available to common stockholders per share:
Basic
$ 0.35
$
0.32
Diluted
0.35
0.32
Common dividends per share
$ 0.66
$
0.2991
Funds From Operations
Reconciliation (Amounts in 000's except per share data)
Three Months Ended
March 31,
2008
2007
Net income available to common stockholders
$
30,452
$
23,356
Depreciation and amortization (1)
39,574
33,860
Loss (gain) on sales of properties
(26
)
(977
)
Minority interests
(87
)
(32
)
Funds from operations
69,913
56,207
Loss (gain) on extinguishment of debt
(1,326
)
0
Non-recurring income tax expense
1,325
0
Funds from operations - normalized
$
69,912
$
56,207
Average common shares outstanding:
Basic
86,100
73,224
Diluted
86,610
73,791
Per share data:
Net income available to common stockholders
Basic
$
0.35
$
0.32
Diluted
0.35
0.32
Funds from operations
Basic
$
0.81
$
0.77
Diluted
0.81
0.76
Funds from operations - normalized
Basic
$
0.81
$
0.77
Diluted
0.81
0.76
FFO Payout Ratio
Dividends per common share (2)
$
0.66
$
0.64
FFO per diluted share
$
0.81
$
0.76
FFO payout ratio
81
%
84
%
FFO Payout Ratio - Normalized
Dividends per share (2)
$
0.66
$
0.64
FFO per diluted share - normalized
$
0.81
$
0.76
FFO payout ratio - normalized
81
%
84
%
Notes:
(1)
Depreciation and amortization includes depreciation and
amortization from discontinued operations. (2) The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been included in 2007. Funds Available For Distribution
Reconciliation (Amounts in 000's except per share data)
Three Months Ended
March 31,
2008
2007
Net income available to common stockholders
$
30,452
$
23,356
Depreciation and amortization (1)
39,574
33,860
Loss (gain) on sales of properties
(26
)
(977
)
Minority interests
(8
)
(5
)
Gross straight-line rental income
(5,336
)
(4,231
)
Prepaid/straight-line rent receipts
2,975
2,078
Amortization related to above (below) market leases, net
(263
)
(460
)
Amortization of deferred loan expenses
1,772
1,267
Cap Ex, tenant improvements, lease commissions
(765
)
(1,063
)
Funds available for distribution
68,375
53,825
Loss (gain) on extinguishment of debt
(1,326
)
0
Non-recurring income tax expense
1,325
0
Prepaid/straight-line rent receipts
(2,975
)
(2,078
)
Funds available for distribution - normalized
$
65,399
$
51,747
Average common shares outstanding:
Basic
86,100
73,224
Diluted
86,610
73,791
Per share data:
Net income available to common stockholders
Basic
$
0.35
$
0.32
Diluted
0.35
0.32
Funds available for distribution
Basic
$
0.79
$
0.74
Diluted
0.79
0.73
Funds available for distribution - normalized
Basic
$
0.76
$
0.71
Diluted
0.76
0.70
FAD Payout Ratio
Dividends per common share (2)
$
0.66
$
0.64
FAD per diluted share
$
0.79
$
0.73
FAD payout ratio
84
%
88
%
FAD Payout Ratio - Normalized
Dividends per common share (2)
$
0.66
$
0.64
FAD per diluted share - normalized
$
0.76
$
0.70
FAD payout ratio - normalized
87
%
91
%
Notes:
(1)
Depreciation and amortization includes depreciation and
amortization from discontinued operations. (2) The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been included in 2007. Outlook Reconciliations (Amounts in 000's except per share data)
Previous Outlook
Current Outlook
Year Ended
Year Ended
December 31, 2008
December 31, 2008
Low
High
Low
High
FFO Reconciliation:
Net income available to common stockholders
$
143,000
$
152,000
$
135,677
$
142,927
Loss (gain) on sales of properties
0
(26
)
(26
)
Depreciation and amortization (1)
158,000
158,000
163,000
163,000
Funds from operations
301,000
310,000
298,651
305,901
Loss (gain) on extinguishment of debt
(1,326
)
(1,326
)
Non-recurring income tax expense
1,325
1,325
Funds from operations - normalized
$
301,000
$
310,000
$
298,650
$
305,900
Average common shares outstanding (diluted)
92,000
92,000
90,500
90,500
Per share data (diluted):
Net income available to common stockholders
$
1.55
$
1.65
$
1.50
$
1.58
Funds from operations
3.27
3.37
3.30
3.38
Funds from operations - normalized
3.27
3.37
3.30
3.38
FAD Reconciliation:
Net income available to common stockholders
$
143,000
$
152,000
$
135,677
$
142,927
Loss (gain) on sales of properties
(26
)
(26
)
Depreciation and amortization (1)
158,000
158,000
163,000
163,000
Gross straight-line rental income
(22,500
)
(22,500
)
(22,500
)
(22,500
)
Prepaid/straight-line rent receipts
2,975
2,975
Amortization related to above/below market leases
(1,000
)
(1,000
)
(1,000
)
(1,000
)
Amortization of deferred loan expenses
7,250
7,250
7,250
7,250
Cap Ex, tenant improvements, lease commissions
(7,500
)
(7,500
)
(7,500
)
(7,500
)
Funds available for distribution
277,250
286,250
277,876
285,126
Loss (gain) on extinguishment of debt
(1,326
)
(1,326
)
Non-recurring income tax expense
1,325
1,325
Prepaid/straight-line rent receipts
(2,975
)
(2,975
)
Funds available for distribution - normalized
$
277,250
$
286,250
$
274,900
$
282,150
Average common shares outstanding (diluted)
92,000
92,000
90,500
90,500
Per share data (diluted):
Net income available to common stockholders
$
1.55
$
1.65
$
1.50
$
1.58
Funds available for distribution
3.01
3.11
3.07
3.15
Funds available for distribution - normalized
3.01
3.11
3.04
3.12
Notes:
(1)
Depreciation and amortization includes depreciation and
amortization from discontinued operations.
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