HR Healthcare Realty Trust Incorporated

Healthcare Realty Trust Announces Third Quarter Results NASHVILLE, Tenn., Oct. 28 /PRNewswire-FirstCall/ -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the third quarter that ended September 30, 2004. Revenues for the third quarter totaled $61.8 million, compared with the prior year's $48.1 million. Net income for the period was $16.4 million, or $0.36 per diluted common share, versus $17.4 million, or $0.42 per diluted common share, for the third quarter of 2003. Funds from operations ("FFO"), calculated according to the definition of the National Association of Real Estate Investment Trusts and comprised primarily of net income and depreciation from real estate, totaled $31.2 million for the third quarter of 2004, compared with $28.2 million for the same period in 2003. FFO per diluted common share for the third quarter of 2004 totaled $0.69, compared with $0.68 for the third quarter of 2003. A reconciliation of FFO to net income follows. Revenues for the nine months ended September 30, 2004 totaled $170.6 million compared with the prior year's $142.1 million. Net income for the nine-month period was $49.8 million, or $1.15 per diluted common share, versus $53.7 million, or $1.29 per diluted common share, for the first nine months of 2003. Diluted FFO totaled $89.4 million for the nine months ended September 30, 2004, compared with $84.9 million for the same period in 2003. FFO per diluted common share for the first nine months of 2004 was $2.06, versus $2.04 for the same period in 2003. The decline in net income in the quarter ended September 30, 2004 is largely related to the application of Financial Accounting Standards Board ("FASB") Statement No. 141 in accounting for the acquisition of real estate operations. The Company has acquired approximately $299 million in real estate operations year-to-date. FASB Statement No. 141 requires that the purchase price of these real estate operations be allocated between the land, the physical building as if the building was vacant when acquired, and the lease intangible assets acquired. The purchase price allocated to the lease intangible assets is amortized over the remaining lease term, typically one to five years, compared to the estimated depreciable life of the building of 39 years. The majority of the lease intangible amortization is charged to amortization expense and, because it is accelerated, has reduced net income more significantly for the current year than prior years due to the increased volume of acquisitions. In addition, during the third quarter of 2004, the Company's independent auditors initiated a review of the Company's accounting treatment of the non-cash amortization of deferred compensation. Management believes the accounting treatment consistently followed since 1994 is correct. Resolution of the matter may result in an adjustment that would decrease a portion of the unamortized balance of deferred compensation. As of September 30, 2004, the unamortized deferred compensation balance was approximately $23.3 million. The matter remains under discussion; and, accordingly, the Company's financial statements may be subject to change. Healthcare Realty Trust is a real estate investment trust that integrates owning, managing and developing income-producing real estate properties associated with the delivery of healthcare services throughout the United States. As of September 30, 2004, the Company had investments of approximately $2.0 billion in 255 real estate properties or mortgages, totaling approximately 13.7 million square feet. The Company's portfolio was comprised of six major facility types, located in 31 states. The Company provided property management services to approximately 7.7 million square feet nationwide. The Company directs interested parties to its Internet page site, http://www.healthcarerealty.com/ , where material information is posted regarding this quarter's operations. Please contact the Company at (615) 269-8175 to request a printed copy of this information. In addition to the historical information contained within, the matters discussed in this press release may contain forward-looking statements that involve risks and uncertainties. These risks are discussed in a 10-K filed with the SEC by Healthcare Realty Trust for the year ended December 31, 2003. Forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims any obligation to update forward-looking material. HEALTHCARE REALTY TRUST INCORPORATED Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Revenues: Master lease rental income $23,385 $21,564 $69,106 $65,875 Property operating income 30,352 18,523 77,862 52,852 Straight line rent 354 811 844 2,001 Mortgage interest income 1,953 2,710 7,586 7,678 Other operating income 5,805 4,468 15,195 13,666 61,849 48,076 170,593 142,072 Expenses: General and administrative 3,066 2,701 9,306 8,235 Property operating expenses 15,556 8,757 38,980 25,054 Interest 11,715 8,627 32,470 25,637 Depreciation 12,359 10,549 35,018 31,169 Amortization 2,775 13 5,003 40 45,471 30,647 120,777 90,135 Income from continuing operations 16,378 17,429 49,816 51,937 Discontinued operations: Operating income from discontinued operations 0 481 0 2,383 Loss on sale of real estate properties 0 (461) 0 (668) 0 20 0 1,715 Net income $16,378 $17,449 $49,816 $53,652 Basic earnings per common share: Income from continuing operations per common share $0.37 $0.42 $1.17 $1.27 Discontinued operations per common share $0.00 $0.00 $0.00 $0.04 Net income per common share $0.37 $0.42 $1.17 $1.31 Diluted earnings per common share: Income from continuing operations per common share $0.36 $0.42 $1.15 $1.25 Discontinued operations per common share $0.00 $0.00 $0.00 $0.04 Net income per common share $0.36 $0.42 $1.15 $1.29 Weighted average common shares outstanding - Basic 44,784,456 41,087,329 42,751,434 40,939,067 Weighted average common shares outstanding - Diluted 45,499,021 41,732,935 43,463,096 41,636,126 HEALTHCARE REALTY TRUST INCORPORATED Reconciliation of Funds From Operations (1) (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Net income (2) $16,378 $17,449 $49,816 $53,652 Loss on sale of real estate properties 37 461 603 668 Real estate depreciation and amortization 14,829 10,308 39,010 30,628 Total adjustments 14,866 10,769 39,613 31,296 Funds from operations - Basic and Diluted $31,244 $28,218 $89,429 $84,948 Funds from operations per common share - Basic $0.70 $0.69 $2.09 $2.08 Funds from operations per common share - Diluted $0.69 $0.68 $2.06 $2.04 Weighted average common shares outstanding - Basic 44,784,456 41,087,329 42,751,434 40,939,067 Weighted average common shares outstanding - Diluted 45,499,021 41,732,935 43,463,096 41,636,126 (1) Funds from operations ("FFO") and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). NAREIT defines FFO as "the most commonly accepted and reported measure of REIT operating performance equal to a REIT's net income, excluding gains or losses from sales of property and adding back real estate depreciation." Management believes FFO and FFO per share to be important supplemental measures of a REIT's performance because they provide an understanding of the operating performance of the Company's properties without giving effect to significant non-cash items, primarily depreciation of real estate. Management uses FFO and FFO per share to compare its own operating results from period to period, and to monitor the operating results of the Company's peers in the REIT industry. The Company reports FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts in their notes and publications about REITs; and finally, because research analysts publish their earnings estimates and consensus estimates for healthcare REITs only in terms of fully-diluted FFO per share and not in terms of net income or earnings per share. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. However, FFO does not represent cash generated from operating activities determined in accordance with accounting principles generally accepted in the United States ("GAAP") and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered 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. (2) Net income includes non-cash deferred compensation of $850 thousand and $688 thousand, respectively, for the three months ended September 30, 2004 and 2003, and $2.5 million and $2.1 million, respectively, for the nine months ended September 30, 2004 and 2003. Healthcare Realty Trust maintains a website: http://www.healthcarerealty.com/ to provide general corporate, investor and financial information. DATASOURCE: Healthcare Realty Trust Incorporated CONTACT: Scott W. Holmes, Senior Vice President and Chief Financial Officer of Healthcare Realty Trust Incorporated, +1-615-269-8175 Web site: http://www.healthcarerealty.com/ Company News On-Call: http://www.prnewswire.com/comp/112435.html

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