| UNITED STATES |
| SECURITIES AND
EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| |
|
|
FORM 10-Q |
| |
|
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF |
| THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the quarterly period ended March 31, 2005 |
Commission file number 001-10822 |
| |
|
|
NATIONAL HEALTH INVESTORS, INC.
|
|
(Exact name of registrant as specified in its Charter) |
| |
|
| |
|
| Maryland |
| (State or other jurisdiction of incorporation
or organization) |
| |
|
| 62-1470956 |
| (I.R.S. Employer Identification No.) |
| |
|
| 100 Vine Street |
| Murfreesboro, TN |
| 37130 |
| (Address of principal executive offices) |
| (Zip Code) |
| |
|
|
(615) 890-9100 |
|
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 |
| |
|
| Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). |
| Yes x No |
|
| |
| There were 27,662,068 shares of common stock outstanding as
of March 28, 2005. |
| PART I.
FINANCIAL INFORMATION |
| |
|
|
| Item 1. Financial Statements. |
|
|
| |
|
|
| NATIONAL HEALTH
INVESTORS, INC. |
| INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS |
| (in
thousands, except share and per share amounts) |
| |
|
|
| |
March 31, |
December 31, |
| |
2005 |
2004 |
| |
(unaudited) |
|
| ASSETS |
|
|
| Real estate properties: |
|
|
| Land |
$ 31,194 |
$ 33,505 |
| Buildings and improvements |
360,158 |
368,366 |
| Construction in progress |
562 |
196 |
| |
391,914 |
402,067 |
| Less accumulated depreciation |
(124,460) |
(123,897) |
| Real estate properties, net |
267,454 |
278,170 |
| Mortgage and other notes receivable,
net |
130,732 |
112,072 |
| Investment in preferred stock |
38,132 |
38,132 |
| Cash and cash equivalents |
126,053 |
161,215 |
| Marketable securities |
16,632 |
29,098 |
| Accounts receivable |
7,336 |
6,384 |
| Deferred costs and other assets |
8,631 |
6,300 |
| Total Assets |
$594,970 |
$631,371 |
| |
|
|
| LIABILITIES |
|
|
| Unsecured public notes |
$100,000 |
$100,000 |
| Debt |
19,962 |
54,432 |
| Convertible subordinated debentures |
1,048 |
1,116 |
| Accounts payable and other accrued
expenses |
36,194 |
27,769 |
| Accrued interest |
1,564 |
3,392 |
| Dividends payable |
12,448 |
15,838 |
| Deferred income |
3,313 |
3,285 |
| Total Liabilities |
174,529 |
205,832 |
| |
|
|
| Commitments and guarantees |
|
|
| |
|
|
| STOCKHOLDERS' EQUITY |
|
|
| Common stock, $.01 par value;
40,000,000 shares authorized; 27,661,354 |
|
|
| and 27,545,018 shares,
respectively, issued and outstanding |
277 |
275 |
| Capital in excess of par value of
common stock |
462,902 |
461,119 |
| Cumulative net income |
575,594 |
558,800 |
| Cumulative dividends |
(627,233) |
(614,785) |
| Unrealized gains on marketable
securities, net |
8,901 |
20,130 |
| Total Stockholders' Equity |
420,441 |
425,539 |
| Total Liabilities and
Stockholders' Equity |
$594,970 |
$631,371 |
The accompanying notes to interim
condensed consolidated financial statements are an integral part of these
financial statements. The interim condensed balance sheet at December 31, 2004
is taken from the audited financial statements at that date.
|
NATIONAL HEALTH INVESTORS, INC.
|
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
(Unaudited)
|
| |
| |
Three Months Ended |
| March 31 |
| |
2005
|
2004 |
| REVENUES: |
(in thousands, except share amounts)
|
| Mortgage interest income |
$ 3,907 |
$ 4,851 |
| Rental income |
11,538 |
12,120 |
| Facility operating revenue |
22,629 |
20,400 |
| |
38,074 |
37,371 |
| EXPENSES: |
|
|
| Interest |
2,470 |
3,120 |
| Depreciation |
3,149 |
3,441 |
| Amortization of loan costs |
72 |
37 |
| Legal expense |
147 |
149 |
| Franchise and excise tax |
67 |
70 |
| General and administrative |
1,103 |
856 |
| Loan, realty and security losses
(recoveries), net |
(472) |
(1,989) |
| Facility operating expense |
21,365 |
20,202 |
| |
27,901 |
25,886 |
| |
|
|
| INCOME BEFORE NON-OPERATING INCOME |
10,173 |
11,485 |
| Non-operating income (investment
interest and other) |
5,954 |
2,133 |
| INCOME FROM CONTINUING OPERATIONS |
16,127 |
13,618 |
| |
|
|
| Discontinued Operations |
|
|
| Operating loss - discontinued |
(81) |
(183) |
| Net gain on sale of real estate |
748 |
-- |
| |
667 |
(183) |
| |
|
|
| NET INCOME |
16,794 |
13,435 |
| |
|
|
| DIVIDENDS TO PREFERRED STOCKHOLDERS |
-- |
397 |
| |
|
|
| NET INCOME APPLICABLE TO COMMON STOCK |
$16,794 |
$13,038 |
| |
|
|
| INCOME FROM CONTINUING
OPERATIONS PER COMMON SHARE: |
|
| Basic |
$ .58 |
$ .49 |
| Diluted |
$ .58 |
$ .49 |
| |
|
|
| DISCONTINUED OPERATIONS PER COMMON SHARE: |
|
|
| Basic |
$ .03 |
$ -- |
| Diluted |
$ .03 |
$ (.01) |
| |
|
|
| NET INCOME PER COMMON SHARE: |
|
|
| Basic |
$ .61 |
$ .49 |
| Diluted |
$ .61 |
$ .48 |
| WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: |
|
| Basic |
27,580,665 |
26,782,468 |
| Diluted |
27,774,954 |
27,071,585 |
| |
|
|
| Common dividends per share declared |
$ .450 |
$ .425 |
The accompanying notes to interim condensed
consolidated financial statements are an integral part of these financial
statements.
| NATIONAL HEALTH
INVESTORS, INC. |
| |
| INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| |
|
| |
Three Months
Ended |
| |
March 31
|
| |
2005 |
2004 |
| |
(in thousands) |
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
| Net income |
$ 16,794 |
$ 13,435 |
| Depreciation |
3,212 |
3,567 |
| Loan, realty and security losses
(recoveries), net |
(472) |
(1,989) |
| Net gain on sale of real estate |
(748) |
-- |
| Amortization of loan costs |
72 |
37 |
| Realized gain on sale of marketable
securities |
(4,050) |
(668) |
| Amortization of discount on held to
maturity securities and |
|
|
| real estate mortgage investment conduit |
-- |
(717) |
| Deferred income |
75 |
-- |
| Amortization of deferred income |
(47) |
(70) |
| Increase in accounts receivable |
(952) |
(253) |
| Increase in deferred costs and other
assets |
(2,398) |
(2,628) |
| Increase in accounts payable and other
accrued expenses |
8,425 |
1,854 |
| Decrease in accrued interest payable |
(1,828) |
(1,844) |
| NET CASH PROVIDED BY OPERATING
ACTIVITIES |
18,083 |
10,724 |
| |
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
| Investment in mortgage and other notes
receivable |
(21,791) |
-- |
| Collection of mortgage and other notes
receivable |
1,131 |
5,888 |
| Sale of mortgage notes receivable |
-- |
1,750 |
| Collection of real estate mortgage
investment conduits |
-- |
345 |
| Acquisition of property and equipment |
(5,757) |
(265) |
| Disposition of property and equipment |
11,457 |
-- |
| Sale of marketable securities |
10,308 |
8,661 |
| NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES |
(4,652) |
16,379 |
| |
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
| Principal payments on debt |
(34,470) |
(4,796) |
| Sale of common stock |
1,715 |
-- |
| Dividends paid to stockholders |
(15,838) |
(13,782) |
| NET CASH USED IN FINANCING
ACTIVITIES |
(48,593) |
(18,578) |
| |
|
|
| INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
(35,162) |
8,525 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD |
161,215 |
93,687 |
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$126,053 |
$102,212 |
| |
|
|
(continued)
|
NATIONAL HEALTH INVESTORS,
INC. |
| |
| INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (unaudited) |
| |
|
| |
|
| |
Three Months
Ended |
| |
March 31
|
| |
2005 |
2004 |
| |
(in
thousands) |
| |
|
|
| Supplemental Information: |
|
|
| Cash payments for interest expense |
$ 3,702 |
$ 3,779 |
| |
|
|
| During the three months ended March 31,
2005 and 2004, $68,000 and |
|
|
| $141,000 of Senior Subordinated
Convertible Debentures were con- |
| verted into 9,711 and 20,140 shares of NHI's common stock: |
|
|
| Senior subordinated
convertible debentures |
$ (68) |
$ (141) |
| Capital in excess of par |
68 |
141 |
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
The accompanying notes to interim condensed
consolidated financial statements are an integral part of these financial
statements.
|
NATIONAL HEALTH
INVESTORS, INC. |
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
| FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 |
|
(in thousands, except share and per share amounts) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Cumulative
Convertible |
|
|
|
|
Unrealized |
Total |
| |
Preferred Stock |
|
Capital in |
|
|
Gains |
Stock- |
| |
Shares |
Amount |
Common Stock |
Excess of |
Cumulative |
Cumulative |
(Losses) on |
holders' |
| |
at
$25 per Share |
Shares |
Amount |
Par Value |
Net Income |
Dividends |
Securities |
Equity |
| |
|
|
|
|
|
|
|
|
|
| BALANCE AT 12/31/04 |
-- |
$ -- |
27,545,018
|
$275 |
$461,119
|
$558,800
|
$(614,785) |
$ 20,130
|
$425,539
|
| Net income |
-- |
-- |
-- |
-- |
-- |
16,794 |
-- |
-- |
16,794 |
| Unrealized losses on securities |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
(11,229) |
(11,229) |
| Total Comprehensive Income |
|
|
|
|
|
|
|
|
5,565 |
| Stock options exercised |
-- |
-- |
106,625
|
2 |
1,714 |
-- |
-- |
-- |
1,716 |
| Shares issued in conversion of
convertible |
|
|
|
|
|
|
|
|
|
| debentures to common stock |
-- |
-- |
9,711 |
-- |
69 |
-- |
-- |
-- |
69 |
| Dividends to common stockholders |
--
|
-- |
--
|
--
|
--
|
--
|
(12,448) |
--
|
(12,448) |
| BALANCE AT 3/31/05 |
-- |
$ -- |
27,661,354
|
$277 |
$462,902 |
$575,594
|
$(627,233) |
$ 8,901
|
$420,441
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| BALANCE AT 12/31/03 |
747,994 |
$18,700 |
26,770,123 |
$267 |
$441,178 |
$502,421 |
$(563,681) |
$ 10,759
|
$409,644
|
| Net income |
-- |
-- |
-- |
-- |
-- |
13,435 |
-- |
-- |
13,435 |
| Unrealized gains on securities |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
3,074 |
3,074
|
| Total Comprehensive Income |
|
|
|
|
|
|
|
|
16,509 |
| Shares issued in conversion of
convertible |
|
|
|
|
|
|
|
|
|
| debentures to common stock |
-- |
-- |
20,140 |
-- |
141 |
-- |
-- |
-- |
141 |
| Dividends to common stockholders |
-- |
-- |
-- |
-- |
-- |
-- |
(11,386) |
-- |
(11,386) |
| Dividends to preferred
stockholders |
--
|
-- |
--
|
-- |
--
|
--
|
(397) |
--
|
(397) |
| BALANCE AT 3/31/04 |
747,994 |
$18,700 |
26,790,263 |
$267 |
$441,319 |
$515,856 |
$(575,464) |
$ 13,833
|
$414,511
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes to interim
condensed consolidated financial statements are an integral part of these
financial statements.
Note 1. SIGNIFICANT ACCOUNTING POLICIES:
We, the management of National Health Investors,
Inc., believe that the unaudited financial statements to which these notes are
attached include all adjustments which are necessary to fairly present the
financial position, results of operations and cash flows of National Health
Investors, Inc. ("NHI" or the "Company"). We assume that users of these interim
financial statements have read or have access to the audited December 31, 2004
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations and that the adequacy of additional
disclosure needed for a fair presentation, except in regard to material
contingencies, may be determined in that context. Accordingly, footnotes and
other disclosures which would substantially duplicate the disclosure contained
in our most recent annual report to stockholders have been omitted. This interim
financial information is not necessarily indicative of the results that may be
expected for a full year for a variety of reasons including, but not limited to,
acquisitions and dispositions, changes in interest rates, rents and the timing
of debt and equity financings. Our audited December 31, 2004 financial
statements are available at our web site: www.nhinvestors.com.
Note 2. NEW ACCOUNTING PRONOUNCEMENTS:
In May 2003 the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards
for classifying and measuring as liabilities certain financial instruments that
embody obligations of the issuer and have characteristics of both liabilities
and equity. SFAS 150 is generally effective for NHI July 1, 2003. The adoption
of SFAS 150 has not had a material effect on NHI's financial statements.
In December 2003 the FASB issued FASB Interpretation No. 46R,
Consolidation of Variable Interest entities (Revised December 2003) ("FIN
46R"). FIN 46R provides guidance related to identifying variable interest
entities (previously known generally as special purpose entities or SPEs) and
determining whether such entities should be consolidated. Key to the
consolidation determination is whether such entities disperse risks among the
parties involved. If those risks are not dispersed, and therefore an enterprise
bears the majority of the risks or rewards related to the variable interest
entity, it would consolidate that variable interest entity. This Interpretation
also provides guidance related to the initial and subsequent measurement of
assets, liabilities, and non-controlling interests of newly consolidated
variable interest entities and requires disclosures for both the primary
beneficiary of a variable interest entity and other beneficiaries of the entity.
This interpretation replaces in its entirety FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, that was issued by the FASB in
January 2003. The implementation of FIN 46R was required during the Company's
first quarter of 2004. The implementation had no effect on the Company's
financial statements.
In December of 2004, the FASB issued FASB Statement No. 153, Exchanges of
Nonmonetary Assets-An Amendment of APB Opinion No. 29 ("Statement 153").
Statement 153 amends APB Opinion No. 29, Accounting for Non-monetary
Transactions, that was issued in 1973. The amendments made by Statement 153
are based on the principle that exchanges of non-monetary assets should be
measured based on the fair value of the assets exchanged. Further, the
amendments eliminate the narrow exception for non-monetary exchanges of similar
productive assets and replace it with a broader exception for exchanges of
non-monetary assets that do not have "commercial substance". Previously, Opinion
29 required that the accounting for an exchange of a productive asset for a
similar productive asset or an equivalent interest in the same or similar
productive asset should be based on the recorded amount of the asset
relinquished. The provisions in Statement 153 are effective for non-monetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early
application is permitted and companies must apply the standard prospectively.
The Company plans to adopt Statement 153 beginning July 1, 2005. The future
effect of Statement 153 on the Company's financial statements will depend on
whether the Company enters into certain non-monetary transactions. The Company,
however, does not expect the adoption of Statement 153 to have a significant
impact on its financial statements.
In December 2004, the FASB has issued FASB
Statement No. 123 (Revised 2004), Share-Based Payment ("Statement
123R"). The new FASB rule requires that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That
cost will be measured based on the fair value of the equity or liability
instruments issued. The Company will be required to apply Statement 123R
beginning January 1, 2006. The scope of Statement 123R includes a wide range of
share-based compensation arrangements including share options, restricted share
plans, performance-based awards, share appreciation rights, and employee share
purchase plans. The Company does not expect the adoption of Statements 123R to
have a significant impact on its financial statements.
Note 3. STOCK OPTION PLAN
NHI has stock option plans that provide for the
granting of options to key employees and directors of NHI to purchase shares of
common stock at a price no less than the market value of the stock on the date
the option is granted. Options to purchase 135,000 shares vested immediately
upon grant and may be exercised at any time prior to expiration. Options to
purchase 15,104 shares vest approximately six years after grant and may be
exercised at any time prior to expiration, (formerly during a 30 day vesting
period prior to expiration). The term of the options is five years (135,000
shares) or six years (15,104 shares). The following table summarizes option
activity:
| |
Number of |
Weighted Average |
| |
|