8-K: Current report filing
Published on October 24, 2003
PRESS RELEASE - FOR IMMEDIATE RELEASE
OMEGA ANNOUNCES THIRD QUARTER 2003 FINANCIAL RESULTS
TIMONIUM, MARYLAND - OCTOBER 24, 2003 - Omega Healthcare Investors, Inc.
(NYSE:OHI) today announced its results of operations for the quarter ended
September 30, 2003. The Company reported net income available to common
stockholders for the three-month period ended September 30, 2003 of $4 thousand
or $0.00 per fully diluted common share on revenues of $20.9 million. This
compares to a net loss of ($12.9) million or ($0.35) 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
September 30, 2003 of $10.8 million or $0.20 per common share. The $10.8 million
of FFO excludes the impact of a $4.3 million non-cash impairment charge in
accordance with the guidelines for the calculation and reporting of FFO issued
by the National Association of Real Estate Investment Trusts ("NAREIT").
Revenues for the three-month period ended September 30, 2003 totaled $20.9
million, a decrease of $10.0 million from the same period in 2002. When
excluding nursing home revenues of owned and operated assets, revenues decreased
$3.2 million versus the three-month period ended September 30, 2002. The
decrease was primarily the result of operator restructurings.
Expenses for the three-month period ended September 30, 2003 totaled $17.3
million, a decrease of $23.6 million from the same period in 2002. When
excluding nursing home expenses of owned and operated assets, expenses were
$17.3 million for the three-month period ended September 30, 2003 versus $21.2
million for the same period in 2002. The $3.9 million decrease primarily
resulted from a $4.3 million provision for impairment recorded during the third
quarter of 2003, compared to a provision for impairment of $2.4 million and a
provision for uncollectible mortgages, notes and accounts receivable of $5.2
million, both taken in the third quarter of 2002. In addition, interest expense
decreased approximately $0.9 million from $6.4 million for the third quarter of
2002 to $5.5 million for the three-month period ended September 30, 2003.
Nursing home expenses, net of nursing home revenues, for owned and operated
assets for the three-month period ended September 30, 2003 were $19 thousand, a
decrease of $12.9 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 eight at September 30, 2002 to one at September 30, 2003.
A provision for impairment of $4.3 million was recorded for the three-month
period ended September 30, 2003. The provision reduced the carrying value of a
facility in the process of being closed to its estimated fair value less costs
to dispose. The building is being actively marketed for sale; however, there can
be no assurance if, or when, such sale will be completed or whether such sale
will be completed on terms that allow the Company to realize the carrying value
of the asset.
During the three-month period ended September 30, 2003, the Company sold
seven closed facilities in seven separate transactions. The Company realized
proceeds of approximately $4.0 million, net of closing costs and other expenses,
resulting in a gain of approximately $1.4 million.
Funds from operations for the three-month period ended September 30, 2003,
on a fully diluted basis, were $10.8 million or $0.20 per common share, an
increase of $16.0 million, as compared to a deficit of ($5.1) million or ($0.21)
per common share for the same period in 2002 due to the factors mentioned above.
The $10.8 million of FFO excludes the impact of a $4.3 million non-cash
impairment charge in accordance with the guidelines for the calculation and
reporting of FFO issued by NAREIT. For further information, see 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.
Claremont Healthcare Holdings, Inc. ("Claremont"). Claremont failed to pay
base rent due on October 1, 2003 in the amount of $0.5 million. On October 10,
2003, the Company applied a security deposit in the amount of $0.5 million to
pay Claremont's October rent payment and demanded that Claremont restore the
$0.5 million security deposit. As of the date of this filing, the Company has
additional security deposits in the form of cash in the amount of $0.5 million
associated with Claremont. The Company continues to recognize revenue from
Claremont on a cash-basis as it is received.
Sun Healthcare Group, Inc. ("Sun"). 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 has 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 has 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 requires an initial
annual lease rate of $400,000. Aggregate monthly contractual lease payments,
under all three transactions, total approximately $208,000 and commenced July 1,
2003.
On October 1, 2003, the Company re-leased three SNFs formerly leased by
Sun. Specifically, the Company re-leased the three former Sun SNFs, located in
California and representing 271 beds, to a new operator under a Master Lease
which has a 15-year term and has an initial annual lease rate of $1.24 million.
As a result of the October transitions mentioned above, Sun's contractual
monthly rent, starting in October, was reduced approximately $0.1 million from
approximately $2.0 million to approximately $1.9 million. For the month of
October, Sun remitted approximately $1.51 million in lease payments (or $18.1
million annually) similar to what was paid on a monthly basis during the third
quarter of 2003. Revenue from Sun continues to be recognized on a cash-basis as
it is received. Rent received in October from the eight former Sun facilities
mentioned above totaled approximately $0.31 million or $3.74 million annually.
Separately, the Company continues its ongoing restructuring discussions
with Sun. At the time of this filing, the Company cannot determine the timing or
outcome of these discussions. There can be no assurance that Sun will continue
to pay rent at any level, although, the Company believes that alternative
operators would be available to lease or buy the remaining Sun facilities if an
appropriate agreement is not completed with Sun.
DIVIDENDS
As announced on September 23, 2003, the Company's Board of Directors
declared its regular quarterly dividends for all classes of preferred stock to
be paid November 17, 2003 to preferred stockholders of record on October 31,
2003. In addition, the Board declared the reinstatement of its common dividend
to be paid November 17, 2003 to common shareholders of record on October 31,
2003.
Series A and Series B preferred stockholders of record on October 31, 2003
will be paid dividends in the amount of approximately $0.5781 and $0.5390, per
preferred share, respectively, on November 17, 2003. The Company's Series C
preferred stockholder will be paid dividends of $2.50 per Series C preferred
share on November 17, 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. Regular quarterly dividends represent dividends for the period
August 1, 2003 through October 31, 2003. Total dividend payments for all classes
of preferred stock are approximately $5.0 million.
Common stockholders of record on October 31, 2003 will be paid dividends in
the amount of $0.15 per share on November 17, 2003. At the date of this release,
the Company had approximately 37.2 million outstanding common shares.
CONFERENCE CALL
The Company will be conducting a conference call on Friday, October 24,
2003, at 10 a.m. EDT to review the Company's 2003 third 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 September 30, 2003, the Company
owned or held mortgages on 216 skilled nursing and assisted living facilities
with approximately 21,800 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 calculates and reports FFO in accordance with the definition and
interpretive guidelines issued by the National Association of Real Estate
Investment Trust ("NAREIT"). 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.
NAREIT's implementation guidance provides that impairment write-downs associated
with previously depreciable operators' property should be added back to GAAP net
income to calculate FFO. FFO herein is not necessarily comparable to FFO of
other REITs that do not use the same definition or implementation guidelines or
interpret the standards differently from the Company. 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 one-time revenue 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 or dividends. 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 Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
(Unaudited) (Unaudited)
(In thousands) (In thousands)
Nursing home revenues (1)
Medicaid............................. $ 604 $ 3,908 $ 2,073 $24,899
Medicare............................. 193 1,591 645 8,662
Private & other...................... 280 1,299 943 7,195
------------------ ------------------
Total nursing home revenues (2).... 1,077 6,798 3,661 40,756
------------------ ------------------
Nursing home expenses
Patient care expenses................ 597 7,854 2,020 30,964
Administration....................... 351 3,170 1,952 12,213
Property & related................... 67 1,070 327 3,545
Leasehold buyout expense............. - 1,670 582 1,670
Management fees...................... 81 414 209 2,292
Rent................................. - 480 28 1,957
Provision for uncollectible accounts. - 5,019 - 4,221
------------------ ------------------
Total nursing home expenses (2).... 1,096 19,677 5,118 56,862
------------------ ------------------
Nursing home revenues and expenses of
owned and operated assets - net (2).. $ (19) $ - $(1,457) $ -
================== ==================
(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 nine-months ended September 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
nine-months ended September 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 nine-month periods ended September 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 nine-month periods ended September 30, 2002.
Since nursing home revenues are not included in reported revenues for the three-
and nine-month periods ended September 30, 2003, no adjustment is necessary to
exclude nursing home revenues.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
(Unaudited) (Unaudited)
(In thousands) (In thousands)
Total revenues......................... $20,926 $30,882 $66,279 $109,210
Nursing home revenues of owned and
operated assets...................... - 6,798 - 40,756
------------------ ------------------
Revenues excluding nursing home
revenues of owned and operated
assets............................. $20,926 $24,084 $66,279 $ 68,454
================== ==================
Total expenses......................... $17,333 $40,901 $51,210 $111,855
Nursing home expenses of owned and
operated assets...................... - 19,677 - 56,862
Nursing home revenues and expenses of
owned and operated assets - net...... 19 - 1,457 -
------------------ ------------------
Expenses excluding nursing home
expenses of owned and operated
assets............................. $17,314 $21,224 $49,753 $ 54,993
================== ==================
The assets and liabilities in our consolidated financial statements which
relate to our owned and operated assets are as follows:
(Unaudited)
September 30, December 31,
2003 2002
-----------------------------
(In thousands)
ASSETS
Cash ......................................... $ 331 $ 838
Accounts receivable-net....................... 1,997 7,491
Other current assets ......................... 294 1,207
-----------------------------
Total current assets (1)................... 2,622 9,536
-----------------------------
Investment in leasehold-net (1)............... - 185
Land and buildings............................ 5,295 5,571
Less accumulated depreciation................. (643) (675)
-----------------------------
Land and buildings-net........................ 4,652 4,896
-----------------------------
Assets held for sale-net...................... 2,091 2,324
-----------------------------
Total assets................................ $ 9,365 $16,941
=============================
LIABILITIES
Accounts payable.............................. $ 65 $ 389
Other current liabilities..................... 3,514 4,223
-----------------------------
Total current liabilities.................. 3,579 4,612
-----------------------------
Total liabilities (1)......................... $ 3,579 $ 4,612
=============================
Operating assets and liabilities for owned
properties-net (1)......................... $ (957) $ -
=============================
(1) Operating assets and liabilities for owned properties as of September 30,
2003 are shown on a net basis on the face of our 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 September 30, 2003: