8-K: Current report filing
Published on July 25, 2003
PRESS RELEASE - FOR IMMEDIATE RELEASE
OMEGA ANNOUNCES SECOND QUARTER 2003 FINANCIAL RESULTS
AND REINSTATEMENT OF PREFERRED DIVIDENDS
TIMONIUM, MARYLAND - JULY 25, 2003 - Omega Healthcare Investors, Inc.
(NYSE:OHI) today announced its results of operations for the quarter ended June
30, 2003. The Company reported net income available to common stockholders for
the three-month period ended June 30, 2003 of $1.8 million or $0.05 per fully
diluted common share on revenues of $20.8 million. This compares to a net loss
of ($5.6) million or ($0.15) per fully diluted common share for the same period
in the prior year. The Company also reported Funds From Operations ("FFO") on a
fully diluted basis for the three months ended June 30, 2003 of $8.5 million or
$0.15 per common share. The $8.5 million FFO included a non-cash interest
expense of $2.6 million (or $0.047 per fully diluted common share) related to
the termination of the Company's two previous credit facilities. (See Bank
Credit Agreements below).
Also, as announced on July 23, 2003, the Company's Board of Directors
declared a full catch-up of its cumulative, unpaid dividends for all classes of
preferred stock to be paid August 15, 2003 to preferred stockholders of record
on August 5, 2003. In addition, the Board declared the regular quarterly
dividend for all classes of preferred stock to be paid on August 15, 2003 to
preferred stockholders of record on August 5, 2003. (See Dividend Policy below).
Revenues for the three-month period ended June 30, 2003 totaled $20.8
million, a decrease of $13.6 million as compared to the same period in 2002.
When excluding nursing home revenues of owned and operated assets, revenues
decreased $1.4 million versus the three-month period ended June 30, 2002. The
decrease was primarily the result of operator restructurings.
Expenses for the three-month period ended June 30, 2003 totaled $15.3
million, a decrease of $19.3 million from the same period in 2002. Excluding
nursing home expenses of owned and operated assets, expenses were $15.2 million
for the three-month period ended June 30, 2003 versus $21.2 million for the same
period in 2002. The $6.0 million decrease primarily resulted from a provision
for impairment of $2.5 million and a provision for uncollectible mortgages,
notes and accounts receivable of $3.7 million, both taken in 2002.
Nursing home expenses, net of nursing home revenues, for owned and operated
assets for the three-month period ended June 30, 2003 were $0.1 million, a
decrease of $1.2 million from the same period in 2002. The decrease was
primarily a result of the decrease in the number of owned and operated
facilities from 13 at June 30, 2002 to one at June 30, 2003.
During the three-month period ended June 30, 2003, the Company sold its
investment in a Baltimore, Maryland asset, leased by the United States Postal
Service, for approximately $19.6 million. The purchaser paid the Company gross
proceeds of $1.95 million and assumed the first mortgage of approximately $17.6
million. As a result, the Company recorded a gain of $1.3 million, net of
closing costs and other expenses.
Funds from operations for the three-month period ended June 30, 2003, on a
fully diluted basis, was $8.5 million or $0.15 per common share, an increase of
$3.5 million, as compared to $5.0 million or $0.06 per common share for the same
period in 2002 due to the factors mentioned above. Additionally, the $8.5
million FFO included a non-cash interest expense of $2.6 million related to the
termination of the Company's two previous credit facilities. For further
information, see Bank Credit Agreements below and the attached Funds From
Operations schedule and notes.
The Company believes that presentation of the Company's revenues and
expenses, excluding nursing home owned and operated assets, provides a useful
measure of the operating performance of the Company's core portfolio as a Real
Estate Investment Trust ("REIT") in view of the disposition of all but one of
the Company's owned and operated assets. For 2003, nursing home revenues,
nursing home expenses, operating assets and operating liabilities for the
Company's owned and operated properties are shown on a net basis on the face of
the Company's consolidated financial statements. For 2002, nursing home
revenues, nursing home expenses, operating assets and operating liabilities for
the Company's owned and operated properties are shown separately on a gross
basis on the face of the Company's consolidated financial statements.
PORTFOLIO DEVELOPMENTS
Alterra Healthcare Corporation ("Alterra"). Alterra announced during the
first quarter of 2003, that, in order to facilitate and complete its on-going
restructuring initiatives, they had filed a voluntary petition with the U.S.
Bankruptcy Court for the District of Delaware to reorganize under Chapter 11 of
the U.S. Bankruptcy Code. At that time, the Company leased eight assisted living
facilities (325 units) located in seven states to subsidiaries of Alterra.
Effective July 7, 2003, the Company amended its Master Lease with a
subsidiary of Alterra whereby the number of leased facilities was reduced from
eight to five. The amended Master Lease has a remaining term of approximately
ten years with an annual rent requirement of approximately $1.5 million. This
compares to the 2002 annualized revenue of $2.6 million. The Company is in the
process of negotiating terms and conditions to re-lease the remaining three
properties. In the interim, Alterra will continue to operate the three
facilities. The Amended Master Lease has been approved by the U.S. Bankruptcy
Court in the District of Delaware.
Sun Healthcare Group, Inc. ("Sun"). During the second quarter of 2003, Sun
remitted rent of $5.2 million versus the contractual amount of $6.7 million. The
$5.2 million rent payment was made up of $3.8 million in cash and the remaining
security deposits of $1.4 million. All security deposits with Sun have been
used.
Effective July 1, 2003, the Company re-leased five former Sun skilled
nursing facilities ("SNFs") in the following three separate lease transactions:
(i) a Master Lease of two SNFs in Florida, representing 350 beds, which Master
Lease has a ten-year term and an initial annual lease rate of $1.3 million; (ii)
a Master Lease of two SNFs in Texas, representing 256 beds, which Master Lease
has a ten-year term and an initial annual lease rate of $800,000; and (iii) a
lease of one SNF in Louisiana, representing 131 beds, which lease has a ten-year
term and an initial annual lease rate of $400,000. Aggregate monthly contractual
lease payments under all three transactions, totals approximately $208,000.
The Company continues its ongoing restructuring discussions with Sun. At
the time of this release, the Company cannot comment on the timing or outcome of
these discussions. However, as a result of the above mentioned transitions of
the five former Sun SNFs, Sun's contractual monthly rent, starting in July, was
reduced $0.2 million from approximately $2.2 million to approximately $2.0
million.
Claremont Healthcare Holdings, Inc. ("Claremont"). Claremont failed to pay
base rent due on July 1, 2003 in the amount of $0.5 million. On July 21, 2003,
the Company drew on a letter of credit (posted by Claremont as a security
deposit) in the amount of $0.5 million to pay Claremont's July rent payment and
demanded that Claremont restore the $0.5 million letter of credit. As of the
date of this release, the Company has additional security deposits in the form
of cash and letters of credit in the amount of $2.0 million associated with
Claremont. The Company is recognizing revenue from Claremont on a cash-basis as
it is received.
Other Assets. In addition to the sale of the Baltimore, Maryland asset, the
Company sold one held for sale facility in Indiana for a gain of approximately
$0.1 million during the second quarter. During July, the Company sold three
additional closed facilities resulting in a gain of approximately $0.7 million.
BANK CREDIT AGREEMENTS
In June 2003, the Company completed a new $225 million Senior Secured
Credit Facility ("Credit Facility") arranged and syndicated by GE Healthcare
Financial Services. At the closing, the Company borrowed $187.1 million under
the new Credit Facility to repay borrowings under its two previous credit
facilities and replace letters of credit. In addition, proceeds from the loan
are permitted to be used to pay cumulative unpaid preferred dividends and for
general corporate purposes.
The new Credit Facility includes a $125 million term loan ("Term Loan") and
a $100 million revolving line of credit ("Revolver") fully secured by 121
facilities representing approximately half of the Company's invested assets.
Both the Term Loan and Revolver have a four-year maturity with a one-year
extension at the Company's option. The Term Loan amortizes on a 25-year basis
and is priced at London Interbank Offered Rate ("LIBOR") plus a spread of 3.75%,
with a floor of 6.00%. The Revolver is also priced at LIBOR plus a 3.75% spread,
with a 6.00% floor.
At June 30, 2003, the Company had $187.1 million of Credit Facility
borrowings outstanding and $12.5 million of letters of credit outstanding,
leaving availability of $25.4 million. In addition, on June 30, 2003, the
Company had approximately $45.5 million in invested cash.
DIVIDEND POLICY
As announced on July 23, 2003, the Company's Board of Directors declared a
full catch-up of its cumulative, unpaid dividends for all classes of preferred
stock to be paid August 15, 2003 to preferred stockholders of record on August
5, 2003. In addition, the Board declared the regular quarterly dividend for all
classes of preferred stock to be paid on August 15, 2003 to preferred
stockholders of record on August 5, 2003.
Series A and Series B preferred stockholders of record on August 5, 2003
will be paid dividends in the amount of approximately $6.36 and $5.93 per
preferred share, respectively, on August 15, 2003. The Company's Series C
preferred stockholder will be paid dividends of approximately $27.31 per Series
C preferred share on August 15, 2003. The liquidation preference for the
Company's Series A, B and C preferred stock is $25.00, $25.00 and $100.00 per
share, respectively, excluding cumulative unpaid dividends. Total dividend
payments for all classes of preferred stock are approximately $55.1 million.
The table below sets forth the per share dividends payable on August 15,
2003 to holders of record of preferred stock as of August 5, 2003. Cumulative
unpaid dividends represent unpaid dividends accrued for the period from November
1, 2000 through April 30, 2003. Regular quarterly dividends represent dividends
for the period May 1, 2003 through July 31, 2003.
The Board currently expects to consider the Company's common dividend
policy at its next regularly scheduled Board of Directors meeting. At this time,
the Company can give no assurance as to if, or when, dividends will be
reinstated on common stock, or the amount of the dividends if, and when, such
payments are recommenced.
CONFERENCE CALL
The Company will be conducting a conference call on Friday, July 25, 2003,
at 10 a.m. EDT to review the Company's 2003 second quarter results and current
developments. To listen to the conference call via webcast, log on to
www.omegahealthcare.com and click the "earnings call" icon on the Company's home
page. Listening via webcast will require you to have Microsoft Media Player
installed on your computer, which can be downloaded at no charge from the
Company's website. Please allow up to 30 minutes prior to the call to download
this software. Webcast replays of the call will be available on the Company's
website for two weeks following the call. Additionally, a copy of this press
release is available to investors on the "new releases" section of the Company's
website.
* * * * * *
Omega is a Real Estate Investment Trust investing in and providing
financing to the long-term care industry. At June 30, 2003, the Company owned or
held mortgages on 221 skilled nursing and assisted living facilities with
approximately 21,900 beds located in 28 states and operated by 34 third-party
healthcare operating companies.
FOR FURTHER INFORMATION, CONTACT
Bob Stephenson, CFO at (410) 427-1700
------------------------
This announcement includes forward-looking statements. All forward-looking
statements included herein are based on information available to the Company on
the date hereof. Such statements only speak as of the date hereof and the
Company assumes no obligation to update such forward-looking statements. Actual
results may differ materially from those reflected in such forward-looking
statements as a result of a variety of factors, including, among other things:
(i) uncertainties relating to the operation of the Company's owned and operated
assets, including those relating to reimbursement by third-party payors,
regulatory matters and occupancy levels; (ii) uncertainties relating to the
restructuring of Sun's remaining obligations and payment of contractual rents,
regulatory and other changes in the healthcare sector, including without
limitation, changes in Medicare reimbursement; (iii) changes in the financial
position of the Company's operators; (iv) the ability of operators in bankruptcy
to reject unexpired lease obligations, modify the terms of the Company's
mortgages, and impede the ability of the Company to collect unpaid rent or
interest during the pendency of a bankruptcy proceeding and retain security
deposits for the debtor's obligations; (v) the availability and cost of capital;
(vi) competition in the financing of healthcare facilities; and (vii) other
factors identified in the Company's filings with the Securities and Exchange
Commission.
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
NOTE - The balance sheet at December 31, 2002 has been derived from the audited
consolidated financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except per share amounts)
OMEGA HEALTHCARE INVESTORS, INC.
FUNDS FROM OPERATIONS
Unaudited
(In thousands, except per share amounts)
* Lower of basic or diluted FFO per share.
The Company believes that Funds From Operations ("FFO") is an important
supplemental measure of the Company's operating performance. Because the
historical cost accounting convention used for real estate assets requires
depreciation (except on land), such accounting presentation implies that the
value of real estate assets diminishes predictably over time, while real estate
values instead have historically risen or fallen with market conditions. The
term FFO was designed by the real estate industry to address this issue. The
Company generally uses the National Association of Real Estate Investment
Trusts' ("NAREIT") measure of FFO. The Company defines FFO as net income
available to common stockholders, adjusted for the effects of asset dispositions
and impairments and certain non-cash items, primarily depreciation and
amortization. FFO herein is not necessarily comparable to FFO presented by other
REITs due to the fact that not all REITs use the same definition. Diluted FFO is
adjusted for the assumed conversion of Series C preferred stock and the exercise
of in-the-money stock options.
Adjusted FFO is calculated as diluted FFO less revenues and expenses
related to nursing home operations and non-recurring revenue and expense items.
The Company believes that Adjusted FFO provides an enhanced measure of the
operating performance of the Company's core portfolio as a REIT in view of the
disposition of all but one of the Company's owned and operated assets.
Neither FFO nor Adjusted FFO represents cash generated from operating
activities in accordance with GAAP, and therefore, should not be considered
alternatives to net income as indications of operating performance or to net
cash flow from operating activities, as determined by GAAP, as a measure of
liquidity, and such measures are not necessarily indicative of cash available to
fund cash needs. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the Company,
FFO and Adjusted FFO should be examined in conjunction with net income as
presented elsewhere in this Press Release.
Nursing home revenues and nursing home expenses in the Company's
consolidated financial statements which relate to the Company's owned and
operated assets are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
(Unaudited) (Unaudited)
(In thousands) (In thousands)
Nursing home revenues (1)
Medicaid............................. $ 614 $ 7,488 $ 1,469 $20,991
Medicare............................. 180 2,814 452 7,071
Private & other...................... 251 1,908 663 5,896
------------------ ------------------
Total nursing home revenues (2).... 1,045 12,210 2,584 33,958
------------------ ------------------
Nursing home expenses
Patient care expenses................ 557 7,832 1,423 23,110
Administration....................... 490 3,743 1,601 8,245
Property & related................... 51 883 260 2,475
Leasehold buyout expense............. - - 582 -
Management fees...................... 52 678 128 1,878
Rent................................. - 349 28 1,477
------------------ ------------------
Total nursing home expenses (2).... 1,150 13,485 4,022 37,185
------------------ ------------------
Nursing home revenues and expenses of
owned and operated assets - net (2)..$ (105) $ - $(1,438) $ -
================== ==================
(1) Nursing home revenues from these owned and operated assets are recognized
as services are provided.
(2) Nursing home revenues and expenses of owned and operated assets for the
three- and six-months ended June 30, 2003 are shown on a net basis on the
face of the Company's Consolidated Statements of Operations and are shown
on a gross basis for the three- and six-months ended June 30, 2002.
The table below reconciles reported revenues and expenses to revenues and
expenses excluding nursing home revenues and expenses of owned and operated
assets. Nursing home revenues and expenses of owned and operated assets for the
three- and six-month periods ended June 30, 2003 are shown on a net basis on the
face of the Company's Consolidated Statements of Operations and are shown on a
gross basis for the three- and six-month periods ended June 30, 2002. Since
nursing home revenues are not included in reported revenues for the three- and
six-month periods ended June 30, 2003, no adjustment is necessary to exclude
nursing home revenues.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
(Unaudited) (Unaudited)
(In thousands) (In thousands)
Total revenues........................ $20,789 $34,404 $45,353 $78,328
Nursing home revenues of owned and
operated assets..................... - 12,210 - 33,958
------------------ ------------------
Revenues excluding nursing home
revenues of owned and operated
assets............................ $20,789 $22,194 $45,353 $44,370
================== ==================
Total expenses........................ $15,298 $34,642 $33,877 $74,109
Nursing home expenses of owned and
operated assets..................... - 13,485 - 37,185
Nursing home revenues and expenses of
owned and operated assets - net..... 105 - 1,438 -
------------------ ------------------
Expenses excluding nursing home
expenses of owned and operated
assets............................ $15,193 $21,157 $32,439 $36,924
================== ==================
The assets and liabilities in the Company's consolidated financial
statements which relate to the Company's owned and operated assets are as
follows:
(Unaudited)
June 30, December 31,
2003 2002
--------------------------
(In thousands)
ASSETS
Cash ......................................... $ 668 $ 838
Accounts receivable - net (1)................. 2,793 7,491
Other current assets (1)...................... 411 1,207
--------------------------
Total current assets....................... 3,872 9,536
--------------------------
Investment in leasehold - net (1)............. - 185
--------------------------
Land and buildings............................ 5,295 5,571
Less accumulated depreciation................. (605) (675)
--------------------------
Land and buildings - net...................... 4,690 4,896
--------------------------
Assets held for sale - net.................... 2,227 2,324
--------------------------
Total assets............................... $10,789 $16,941
==========================
LIABILITIES
Accounts payable.............................. $ 153 $ 389
Other current liabilities..................... 3,660 4,223
--------------------------
Total current liabilities.................. 3,813 4,612
--------------------------
Total liabilities (1)......................... $ 3,813 $ 4,612
==========================
Operating assets and liabilities for owned
properties - net (1)........................ $ (609) $ -
==========================
(1) Operating assets and liabilities for owned properties as of June 30, 2003
are shown on a net basis on the face of the Company's Consolidated Balance
Sheet and are shown on a gross basis as of December 31, 2002.
The table below summarizes the Company's number of properties and
investment by category for the quarter ended June 30, 2003: