Item 6. Selected Financial Data

The following selected financial data for the five years ended December 31, 2018 are derived from our audited consolidated financial statements (in thousands, except per share data):

		Year Ended December 31,
		2014				2015				2016				2017				2018
Operating Data
Total revenues		$	3,343,546			$	3,859,826			$	4,281,160			$	4,316,641			$	4,700,499
Total expenses		2,959,333				3,223,709				3,571,907				4,017,025				4,277,009
Income from continuing operations before income taxes and other items		384,213				636,117				709,253				299,616				423,490
Income tax (expense) benefit		1,267				(6,451		)		19,128				(20,128		)		(8,674		)
Income (loss) from unconsolidated entities		(27,426		)		(21,504		)		(10,357		)		(83,125		)		(641		)
Gain (loss) on real estate dispositions, net		147,111				280,387				364,046				344,250				415,575
Income from continuing operations		505,165				888,549				1,082,070				540,613				829,750
Income from discontinued operations, net		7,135				—				—				—				—
Net income		512,300				888,549				1,082,070				540,613				829,750
Preferred stock dividends		65,408				65,406				65,406				49,410				46,704
Preferred stock redemption charge		—				—				—				9,769				—
Net income (loss) attributable to noncontrolling interests		147				4,799				4,267				17,839				24,796
Net income attributable to common stockholders		$	446,745			$	818,344			$	1,012,397			$	463,595			$	758,250
Other Data
Average number of common shares outstanding:
Basic		306,272				348,240				358,275				367,237				373,620
Diluted		307,747				349,424				360,227				369,001				375,250
Per Share Data
Basic:
Income from continuing operations		$	1.65			$	2.55			$	3.02			$	1.47			$	2.22
Discontinued operations, net		$	0.02			$	—			$	—			$	—			$	—
Net income attributable to common stockholders		$	1.46			$	2.35			$	2.83			$	1.26			$	2.03
Diluted:
Income from continuing operations		$	1.64			$	2.54			$	3.00			$	1.47			$	2.21
Discontinued operations, net		$	0.02			$	—			$	—			$	—			$	—
Net income attributable to common stockholders		$	1.45			$	2.34			$	2.81			$	1.26			$	2.02
Cash distributions per common share		$	3.18			$	3.30			$	3.44			$	3.48			$	3.48
		December 31,
Balance Sheet Data		2014				2015				2016				2017				2018
Net real estate investments		$	22,851,196			$	26,888,685			$	26,563,629			$	26,171,077			$	28,420,769
Total assets		24,962,923				29,023,845				28,865,184				27,944,445				30,342,072
Total long-term obligations		10,776,640				12,967,686				12,358,245				11,731,936				13,297,144
Total liabilities		11,403,465				13,664,877				13,185,279				12,643,799				14,331,427
Total preferred stock		1,006,250				1,006,250				1,006,250				718,503				718,498
Total equity		13,473,049				15,175,885				15,281,472				14,925,452				15,586,599

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE SUMMARY
Company Overview	40
Business Strategy	40
Key Transactions	41
Key Performance Indicators, Trends and Uncertainties	42
Corporate Governance	43
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash	43
Off-Balance Sheet Arrangements	44
Contractual Obligations	44
Capital Structure	45
RESULTS OF OPERATIONS
Summary	46
Seniors Housing Operating	47
Triple-net	48
Outpatient Medical	50
Non-Segment/Corporate	52
OTHER
Non-GAAP Financial Measures	53
Critical Accounting Policies	57

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based primarily on the consolidated financial statements of Welltower Inc. presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” above.

Executive Summary

Company Overview

Welltower Inc. (NYSE:WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets.

The following table summarizes our consolidated portfolio for the year ended December 31, 2018 (dollars in thousands):

						Percentage of			Number of
Type of Property		NOI(1)				NOI			Properties
Seniors Housing Operating		$	985,022			43.5	%		500
Triple-net		900,049				39.7	%		726
Outpatient Medical		380,136				16.8	%		284
Totals		$	2,265,207			100.0	%		1,510

(1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

Business Strategy

Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.

Substantially all of our revenues are derived from operating lease rentals, resident fees/services, and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our obligors/partners experience operating difficulties and become unable to generate sufficient cash to make payments or operating distributions to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division manages and monitors the outpatient medical portfolio with a comprehensive process including review of tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things. We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we generally aim to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.

In addition to our asset management and research efforts, we also aim to structure our relevant investments to mitigate payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.

For the year ended December 31, 2018, resident fees/services and rental income represented 69% and 29%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan, and any interest rate adjustments.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our primary sources of cash include resident fees/services, rent and interest receipts, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, our commercial paper program, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from net operating income. Permanent financing for future investments, which replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also likely that investment dispositions may occur in the future. To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any investment dispositions in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our primary unsecured credit facility. At December 31, 2018, we had $215,376,000 of cash and cash equivalents, $100,753,000 of restricted cash and $1,853,000,000 of available borrowing capacity under our primary unsecured credit facility.

Key Transactions

Capital The following summarizes key capital transactions that occurred and supported new investments made during the year ended December 31, 2018:

•	In April 2018, we issued $550,000,000 of 4.25% senior unsecured notes due 2028 for net proceeds of approximately $545,074,000.

•	In connection with the QCP acquisition, in July 2018, we drew on a $1,000,000,000 term loan facility to fund a portion of the cash consideration and other expenses.

•

In August 2018, we issued $200,000,000 of 4.25% senior unsecured notes due 2028, $600,000,000 of 3.95% senior unsecured notes due 2023 and $500,000,000 of 4.95% senior unsecured notes due 2048 for aggregate net proceeds of approximately $1,283,226,000. Proceeds from these issuances were used to repay advances under the $1,000,000,000 term loan facility drawn on in July 2018 and the primary unsecured credit facility.

•

In July 2018, we closed on a new $3,700,000,000 unsecured credit facility with improved pricing across both our line of credit and term loan facility and terminated the existing unsecured credit facility. The credit facility includes a $3,000,000,000 revolving credit facility at a borrowing rate of 0.825% over LIBOR, a $500,000,000 USD unsecured term credit facility at a borrowing rate of 0.90% over LIBOR and a $250,000,000 CAD unsecured term credit facility at 0.90% over CDOR.

•	We extinguished $306,553,000 of secured debt at a blended average interest rate of 5.36%.

•	We repaid our $450,000,000 of 2.25% senior unsecured notes at par upon maturity on March 15, 2018.

•	We raised $794,649,000 through our dividend reinvestment program and our Equity Shelf Program (as defined below).

Investments The following summarizes our property acquisitions and joint venture investments made during the year ended December 31, 2018 (dollars in thousands):

		Properties			Investment Amount(1)				Capitalization Rates(2)		Book Amount(3)
Seniors Housing Operating		12			$	673,374			6.7%		$	742,675
Triple-net		246			2,438,899				6.9%		3,062,427
Outpatient Medical		30			605,866				5.8%		628,824
Totals		288			$	3,718,139			6.7%		$	4,433,926

(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.

(2) Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts.

(3) Represents amounts recorded in real property including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our consolidated financial statements for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Dispositions The following summarizes property dispositions made during the year ended December 31, 2018 (dollars in thousands):

		Properties			Proceeds(1)				Capitalization Rates(2)		Book Amount(3)
Seniors Housing Operating		4			$	40,073			7.5%		$	36,627
Triple-net		107			1,050,290				5.3%		835,093
Outpatient Medical		21			464,843				6.2%		253,397
Totals		132			$	1,555,206			5.6%		$	1,125,117

(1) Represents pro rata proceeds received upon disposition.

(2) Represents annualized contractual net operating income that was being received in cash at date of disposition divided by disposition proceeds.

(3) Represents carrying value of assets at time of disposition. See Note 5 to our consolidated financial statements for additional information.

Dividends Our Board of Directors announced the 2019 annual cash dividend of $3.48 per common share ($0.87 per share quarterly), consistent with 2018, beginning in February 2019. The dividend declared for the quarter ended December 31, 2018 represents the 191st consecutive quarterly dividend payment.

Key Performance Indicators, Trends and Uncertainties

We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, credit strength and concentration risk. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions, and for budget planning purposes.

Operating Performance We believe that net income and net income attributable to common stockholders (“NICS”) per the Statement of Comprehensive Income are the most appropriate earnings measures. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”), consolidated net operating income (“NOI”) and same store NOI (“SSNOI”); however, these supplemental measures are not defined by U.S. GAAP. Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations. These earnings measures are widely used by investors and analysts in the valuation, comparison, and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands):

		Year Ended December 31,
		2016				2017				2018
Net income		$	1,082,070			$	540,613			$	829,750
Net income attributable to common stockholders		1,012,397				463,595				758,250
Funds from operations attributable to common stockholders		1,582,940				1,165,576				1,392,183
Consolidated net operating income		2,404,177				2,232,716				2,267,482
Same store net operating income		1,528,340				1,544,462				1,551,424

Credit Strength We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and Internal Revenue Code (“IRC”) section 1031 deposits. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The coverage ratios are based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliation of these measures. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations, and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:

		Year Ended December 31,
		2016		2017		2018
Net debt to book capitalization ratio		42.9%		42.9%		45.0%
Net debt to undepreciated book capitalization ratio		37.4%		36.3%		37.8%
Net debt to market capitalization ratio		31.1%		31.2%		31.3%
Adjusted interest coverage ratio		4.21x		4.36x		4.11x
Adjusted fixed charge coverage ratio		3.34x		3.54x		3.44x

Concentration Risk We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns. Property mix measures the portion of our NOI that relates to our various property types. Relationship mix measures the portion of our NOI that relates to our top five relationships. Geographic mix measures the portion of our NOI that

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

relates to our top five states (or international equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the years indicated below:

			December 31,(1)
			2016		2017		2018
Property mix:
	Seniors Housing Operating		34%		40%		43%
	Triple-net		50%		43%		40%
	Outpatient Medical		16%		17%		17%
Relationship mix:
	Sunrise Senior Living(2)		13%		14%		15%
	Revera(2)		6%		7%		7%
	Brookdale Senior Living		6%		7%		6%
	Genesis HealthCare		16%		9%		6%
	Benchmark Senior Living		4%		4%		4%
	Remaining		55%		59%		62%
Geographic mix:
	California		10%		13%		14%
	United Kingdom		8%		9%		9%
	Canada		7%		8%		8%
	Texas		7%		7%		8%
	New Jersey		8%		8%		7%
	Remaining		60%		55%		54%

(1) Excludes our share of investments in unconsolidated entities and non-segment/corporate NOI. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.

(2) Revera owns a controlling interest in Sunrise Senior Living.

We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in “Item 1 — Business — Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A — Risk Factors” and other sections of this Annual Report on Form 10-K. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to “Item 1 — Business,” “Item 1A — Risk Factors” in this Annual Report on Form 10-K for further discussion of these risk factors.

Corporate Governance

Maintaining investor confidence and trust is important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.welltower.com/investors/governance. The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash include resident fees/services, rent and interest receipts, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

		Year Ended								One Year Change							Year Ended				One Year Change							Two Year Change
		December 31,				December 31,											December 31,
		2016				2017				$				%			2018				$				%			$				%
Beginning cash, cash equivalents and restricted cash		$	422,690			$	607,220			$	184,530			44	%		$	309,303			$	(297,917	)		-49	%		$	(113,387	)		-27	%
Net cash provided from (used in):
Operating activities		1,639,064				1,434,177				(204,887		)		-13	%		1,583,944				149,767				10	%		(55,120		)		-3	%
Investing activities		(183,443		)		154,581				338,024				n/a			(2,386,471		)		(2,541,052		)		n/a			(2,203,028		)		1,201	%
Financing activities		(1,250,817		)		(1,913,527		)		(662,710		)		53	%		818,368				2,731,895				n/a			2,069,185				n/a
Effect of foreign currency translation		(20,274		)		26,852				47,126				n/a			(9,015		)		(35,867		)		n/a			11,259				-56	%
Ending cash, cash equivalents and restricted cash		$	607,220			$	309,303			$	(297,917	)		-49	%		$	316,129			$	6,826			2	%		$	(291,091	)		-48	%

Operating Activities The change in net cash provided from operating activities is attributable to changes in NOI, which is primarily due to acquisitions and annual rent increasers, partially offset to dispostions. Please see “Results of Operations” below for further discussion. For the years ended December 31, 2016, 2017 and 2018, cash flows from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash used in investing activities are primarily attributable to net changes in real property investments, real estate loans receivable, and investments in unconsolidated entities which are summarized above in “Key Transactions.” Please refer to Notes 3, 6, and 7 of our consolidated financial statements for additional information. The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands):

		Year Ended								One Year Change							Year Ended				One Year Change							Two Year Change
		December 31,				December 31,											December 31,
		2016				2017				$				%			2018				$				%			$				%
New development		$	403,131			$	232,715			$	(170,416	)		-42	%		$	160,706			$	(72,009	)		-31	%		$	(242,425	)		-60	%
Recurring capital expenditures, tenant improvements and lease commissions		66,332				67,797				1,465				2	%		90,190				22,393				33	%		23,858				36	%
Renovations, redevelopments and other capital improvements		152,814				182,479				29,665				19	%		175,993				(6,486		)		-4	%		23,179				15	%
Total		$	622,277			$	482,991			$	(139,286	)		-22	%		$	426,889			$	(56,102	)		-12	%		$	(195,388	)		-31	%

The change in new development is primarily due to the number and size of construction projects on-going during the relevant periods. Renovations, redevelopments and other capital improvements include expenditures to maximize property value, increase net operating income, maintain a market-competitive position, and/or achieve property stabilization. Generally, these expenditures have increased as a result of acquisitions, primarily in our Seniors Housing Operating segment.

Financing Activities The changes in net cash provided from financing activities are primarily attributable to changes related to our long-term debt arrangements, the issuance/redemptions of common and preferred stock and dividend payments which are summarized above in “Key Transactions.” Please refer to Notes 9, 10 and 13 of our consolidated financial statements for additional information.

Off-Balance Sheet Arrangements

At December 31, 2018, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 50%. We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. At December 31, 2018, we had fourteen outstanding letter of credit obligations. Please see Notes 7, 11 and 12 to our consolidated financial statements for additional information.

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of December 31, 2018 (in thousands):

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

		Payments Due by Period
Contractual Obligations		Total				2019				2020-2021				2022-2023				Thereafter
Unsecured revolving credit facility(1)		$	1,147,000			$	—			$	—			$	1,147,000			$	—
Senior unsecured notes and term credit facilities:(2)
U.S. Dollar senior unsecured notes		7,450,000				600,000				900,000				1,700,000				4,250,000
Canadian Dollar senior unsecured notes(3)		219,989				—				219,989				—				—
Pounds Sterling senior unsecured notes(3)		1,339,170				—				—				—				1,339,170
U.S. Dollar term credit facility		507,500				—				7,500				500,000				—
Canadian Dollar term credit facility(3)		183,325				—				—				183,325				—
Secured debt:(2,3)
Consolidated		2,485,711				508,899				507,412				605,789				863,611
Unconsolidated		790,643				51,614				88,024				39,495				611,510
Contractual interest obligations:(4)
Unsecured revolving credit facility		171,910				38,202				76,405				57,303				—
Senior unsecured notes and term loans(3)		3,930,812				424,529				758,541				638,183				2,109,559
Consolidated secured debt(3)		478,922				90,861				144,026				96,873				147,162
Unconsolidated secured debt(3)		211,077				30,919				51,892				47,904				80,362
Capital lease obligations(5)		84,265				4,173				8,346				71,746				—
Operating lease obligations(5)		1,138,046				18,242				35,392				33,965				1,050,447
Purchase obligations(5)		1,704,293				1,599,477				104,816				—				—
Other long-term liabilities(6)		1,229				1,229				—				—				—
Total contractual obligations		$	21,843,892			$	3,368,145			$	2,902,343			$	5,121,583			$	10,451,821

(1) Relates to our unsecured revolving credit facility with an aggregate commitment of $3,000,000,000. See Note 9 to our consolidated financial statements.

(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.

(3) Based on foreign currency exchange rates in effect as of balance sheet date.

(4) Based on variable interest rates in effect as of December 31, 2018.

(5) See Note 12 to our consolidated financial statements for additional information.

(6) Primarily relates to payments to be made under a supplemental executive retirement plan for one former executive officer.

Capital Structure

Please refer to “Credit Strength” above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2018, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged. We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On May 17, 2018, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan (“DRIP”) under which we may issue up to 15,000,000 shares of common stock. As of February 13, 2019, 8,526,222 shares of common stock remained available for issuance under the DRIP registration statement. On August 3, 2018, we entered into separate amended and restated equity distribution agreements with each of Morgan Stanley & Co. LLC; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Goldman Sachs & Co. LLC; UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to $784,083,001 aggregate amount of our common stock (“Equity Shelf Program”). The Equity Shelf Program also allows us to enter into forward sale agreements. We expect that, if entered into, we will physically settle each forward sale agreement on one or more dates on or prior to the maturity date of that particular forward sale agreement, in which case we will expect to receive per share cash proceeds at settlement equal to the forward sale price under the relevant forward sale agreement. However, we may elect to cash settle or net share settle a forward sale agreement. As of February 13, 2019, we had $227,958,000 of remaining capacity under the Equity Shelf Program and there were no outstanding forward sales agreements. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our primary unsecured credit facility.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Summary

Our primary sources of revenue include resident fees/services,rent and interest income. Our primary expenses include interest expense, depreciation and amortization, property operating expenses, other expenses and general and administrative expenses. We evaluate our business and make resource allocations on our three business segments: Seniors Housing Operating, Triple-net and Outpatient Medical. The primary performance measures for our properties are NOI and SSNOI and other supplemental measures include FFO and Adjusted EBITDA, which are further discussed below. Please see Non-GAAP Financial Measures for additional information and reconciliations. The following is a summary of our results of operations for the periods presented (dollars in thousands, except per share amounts):

		Year Ended								One Year Change							Year Ended				One Year Change							Two Year Change
		December 31,				December 31,											December 31,
		2016				2017				Amount				%			2018				Amount				%			Amount				%
Net income		$	1,082,070			$	540,613			$	(541,457	)		-50	%		$	829,750			$	289,137			53	%		$	(252,320	)		-23	%
NICS		1,012,397				463,595				(548,802		)		-54	%		758,250				294,655				64	%		(254,147		)		-25	%
FFO		1,582,940				1,165,576				(417,364		)		-26	%		1,392,183				226,607				19	%		(190,757		)		-12	%
Adjusted EBITDA		2,256,864				2,128,429				(128,435		)		-6	%		2,153,005				24,576				1	%		(103,859		)		-5	%
Consolidated NOI		2,404,177				2,232,716				(171,461		)		-7	%		2,267,482				34,766				2	%		(136,695		)		-6	%
Same store NOI		1,528,340				1,544,462				16,122				1	%		1,551,424				6,962				—	%		23,084				2	%
Per share data (fully diluted):
Net income attributable to common stockholders		$	2.81			$	1.26			$	(1.55	)		-55	%		$	2.02			$	0.76			60	%		$	(0.79	)		-28	%
Funds from operations attributable to common stockholders		4.39				3.16				(1.23		)		-28	%		3.71				0.55				17	%		(0.68		)		-15	%
Adjusted interest coverage ratio		4.21x				4.36x				0.15x				4	%		4.11x				-0.25x				-6	%		0.15x				4	%
Adjusted fixed charge coverage ratio		3.34x				3.54x				0.20x				6	%		3.44x				-0.10x				-3	%		0.20x				6	%

The following table represents the changes in outstanding common stock for the period from January 1, 2016 to December 31, 2018 (in thousands):

		Year Ended
		December 31, 2016			December 31, 2017			December 31, 2018			Totals
Beginning balance		354,778			362,602			371,732			354,778
Dividend reinvestment plan issuances		4,145			5,640			6,529			16,314
Preferred stock conversions		—			4			—			4
Redemption of equity membership units		—			91			—			91
Option exercises		141			253			57			451
Equity Shelf Program issuances		3,135			2,987			5,241			11,363
Other, net		403			155			116			674
Ending balance		362,602			371,732			383,675			383,675
Average number of shares outstanding:
Basic		358,275			367,237			373,620
Diluted		360,227			369,001			375,250

During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, a portion of our earnings are derived primarily from long-term investments with predictable rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes, secured debt and borrowings under our primary unsecured credit facility. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.