Form: 8-K

Current report filing

July 29, 2005

8-K: Current report filing

Published on July 29, 2005





PRESS RELEASE - FOR IMMEDIATE RELEASE

OMEGA ANNOUNCES SECOND QUARTER 2005 FINANCIAL RESULTS AND
ADJUSTED FFO OF $0.26 PER SHARE FOR THE SECOND QUARTER


TIMONIUM, MARYLAND - July 29, 2005 - Omega Healthcare Investors, Inc. (NYSE:OHI) today announced its results of operations for the quarter ended June 30, 2005. The Company also reported Funds From Operations (“FFO”) available to common stockholders for the three months ended June 30, 2005 of $8.1 million or $0.16 per common share. The $8.1 million of FFO available to common stockholders for the quarter includes the impact of a $3.4 million non-cash provision for impairment on an equity security investment, $2.0 million non-cash preferred stock redemption charge, $0.8 million lease expiration accrual and $0.3 million of non-cash restricted stock amortization expense offset by one-time revenue of $1.0 million. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts (“NAREIT”). Adjusted FFO, which excludes the impact of the non-cash provision for impairment, non-cash redemption charge, the lease expiration accrual and the one-time revenue, was $0.26 per common share for the three months ended June 30, 2005. For more information regarding FFO, see “FFO Results” below.


GAAP NET INCOME

The Company reported net income of $2.3 million and $11.6 million for the three and six month periods ending June 30, 2005, respectively. The Company also reported a net loss available to common stockholders of $2.6 million, or a loss of $0.05 per diluted common share, and operating revenues of $25.8 million for the three months ended June 30, 2005. This compares to a net loss available to common stockholders of $0.4 million, or a loss of $0.01 per diluted common share, and operating revenues of $21.3 million for the same period in 2004.


SECOND QUARTER 2005 HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

·  Completed two separate acquisitions totaling $59 million of new investments yielding over 10%.
·  Sold four skilled nursing facilities (“SNFs”) for approximately $12 million of cash proceeds and a secured promissory note of $5.4 million.
·  Fully redeemed the Company's $50 million, 8.625% Series B preferred stock.
·  Increased the common dividend per share from $0.21 to $0.22.
·  Announced the potential sale of one SNF for $14.5 million in cash proceeds.


SECOND QUARTER 2005 RESULTS

Operating Revenues and Expenses - Operating revenues for the three months ended June 30, 2005 were $25.8 million. Operating expenses for the three months ended June 30, 2005 totaled $9.2 million, comprised of $6.2 million of depreciation and amortization expense, $1.8 million of general, administrative and legal expenses, $0.8 million lease expiration accrual, a provision for uncollectible accounts receivable of $0.1 million and $0.3 million of restricted stock amortization. The $0.8 million lease expiration accrual relates to disputed capital improvement requirements associated with a lease that expired June 30, 2005.

Other Expenses - Other expenses for the three months ended June 30, 2005 were $10.8 million and were comprised of a $3.4 million provision for impairment on an equity security investment, $6.9 million of interest expense and $0.5 million of non-cash interest expense.
In accordance with FASB Statement No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities,” the Company has recorded a $3.4 million provision for impairment to write-down its 760,000 share investment in Sun Healthcare Group, Inc. common stock to its current fair market value. “Sun Healthcare’s financial performance has been consistently strong with respect to Omega’s assets and on a consolidated basis. We are confident in Sun as an operator and we look forward to the combined financial results after Sun closes on their recently announced Peak Medical Corporation acquisition,” said C. Taylor Pickett, President and CEO of Omega.

Funds From Operations - For the three months ended June 30, 2005, reportable FFO available to common stockholders was $8.1 million, or $0.16 per common share, compared to $5.1 million, or $0.11 per common share, for the same period in 2004. The $8.1 million of FFO for the quarter includes the impact of: i) $3.4 million provision for impairment on an equity security investment; ii) $2.0 million of non-cash preferred stock redemption charges; iii) $0.8 million lease expiration accrual; iv) $0.1 million provision for uncollectible notes receivable; v) $0.3 million of non-cash restricted stock amortization associated with the Company’s issuance of restricted stock grants to executive officers during 2004; and vi) $1.0 million of one-time revenue associated with the finalization of a mortgage payoff that occurred during the first quarter of 2005. However, when excluding the provision for impairment, redemption charge, lease expiration accrual, provision for uncollectible notes receivable, restricted stock amortization expense and one-time revenue described above in 2005, as well as, certain other non-recurring expense items in 2004, adjusted FFO was $13.6 million, or $0.26 per common share, compared to $10.5 million, or $0.22 per common share, for the same period in 2004. For further information, see the attached “Funds From Operations” schedule and notes.

Asset Sales - On June 30, 2005, the Company sold four SNFs to subsidiaries of Alden Management Services, Inc., who previously leased the facilities from the Company. All four facilities are located in Illinois. The sales price totaled approximately $17 million. The Company received net cash proceeds of approximately $12 million plus a secured promissory note of approximately $5.4 million. The sale resulted in a non-cash accounting loss of approximately $4.2 million.

On June 23, 2005, a $1.0 million deposit related to an agreement to sell a SNF in Florida was received into escrow on the Company’s behalf. On July 26, 2005, an additional $0.5 million deposit was received into escrow. The purchase price of the facility is $14.5 million. The closing is scheduled on or before September 30, 2005. The due diligence period has expired and the deposits are not refundable unless the Company breaches its obligations under the purchase agreement. At June 30, 2005, the net book value of the facility was approximately $8.2 million.


INVESTMENT ACTIVITY

Senior Management Services, Inc. - Effective June 1, 2005, the Company purchased two SNFs for a total investment of approximately $9.5 million. Both facilities, totaling 440 beds, are located in Texas. The facilities were consolidated into a master lease with subsidiaries of an existing operator, Senior Management Services, Inc., with annualized rent increasing by approximately $1.1 million, with annual escalators. The term of the existing master lease was extended to ten years and runs through May 31, 2015, followed by two renewal options of ten years each.

CommuniCare Health Services, Inc. - On June 28, 2005, the Company purchased five SNFs located in Ohio (3) and Pennsylvania (2), totaling 911 beds. The investment, excluding working capital, totaled approximately $50 million. The SNFs were purchased from an unrelated third party and are now operated by subsidiaries of CommuniCare Health Services, Inc., a current Company lessee, with the five facilities being consolidated into an existing master lease. The term of the master lease was extended to ten years to June 30, 2015, with two nine year renewal options. The annualized increase in rent under the master lease totals $5.1 million and contains annual escalators.





FINANCING ACTIVITY

Series B Preferred Stock Redemption - On May 2, 2005, the Company fully redeemed its 8.625% Series B Cumulative Preferred Stock (NYSE:OHI PrB) (“Series B”). The Company redeemed the 2.0 million shares of Series B at a price of $25.55104, comprising the $25 liquidation value and accrued dividend. Under FASB-EITF Issue D-42, ‘‘The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,” the repurchase of the Series B resulted in a non-cash charge to net income available to common shareholders of approximately $2.0 million reflecting the write-off of the original issuance costs of the Series B.


DIVIDENDS

Common Dividends - On July 19, 2005, the Company’s Board of Directors announced a common stock dividend of $0.22 per share to be paid August 15, 2005 to common stockholders of record on July 29, 2005. At the date of this release, the Company had approximately 51 million outstanding common shares.

 
Series D Preferred Dividends - On July 19, 2005, the Company’s Board of Directors declared the regular quarterly dividends for its 8.375% Series D Cumulative Redeemable Preferred Stock to stockholders of record on July 29, 2005. The stockholders of record of the Series D Preferred Stock on July 29, 2005 will be paid dividends in the amount of $0.52344 per preferred share on August 15, 2005. The liquidation preference for the Company’s Series D Preferred Stock is $25.00 per share. Regular quarterly preferred dividends for the Series D Preferred Stock represent dividends for the period May 1, 2005 through July 30, 2005.
 


2005 ADJUSTED FFO GUIDANCE INCREASED

The Company increased its guidance for 2005 adjusted FFO available to common stockholders to a range of $1.03 to $1.04 per common share. The previous guidance was a range of $1.00 to $1.02 per common share.

The Company's adjusted FFO guidance (and related GAAP earnings projections) for 2005 excludes the future impacts of gains and losses on the sales of assets, additional divestitures, certain one-time revenue and expense items, capital transactions, and restricted stock amortization expense.

Reconciliation of the adjusted FFO guidance to the Company's projected GAAP earnings is provided on a schedule attached to this Press Release. The Company may, from time to time, update its publicly announced FFO guidance, but it is not obligated to do so.

The Company's adjusted FFO guidance is based on a number of assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.


CONFERENCE CALL

The Company will be conducting a conference call on Friday, July 29, 2005, at 10 a.m. EDT to review the Company’s 2005 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. Webcast replays of the call will be available on the Company’s website for two weeks following the call.

* * * * * *

The Company is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At June 30, 2005, the Company owned or held mortgages on 216 skilled nursing and assisted living facilities with approximately 22,407 beds located in 28 states and operated by 38 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 current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Statements regarding future events and developments and the Company’s future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, the Private Securities Litigation Reform Act of 1995 or in releases by the Securities and Exchange Commission, all of which may be amended from time to time. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such 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 business operations of the operators of the Company’s properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) regulatory and other changes in the healthcare sector, including without limitation, changes in Medicare reimbursement; (iii) changes in the financial position of Omega's operators; (iv) the ability of operators in bankruptcy to reject unexpired lease obligations, modify the terms of Omega’s mortgages, and impede the ability of Omega 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 Omega’s filings with the Securities and Exchange Commission.




OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
   
June 30,
 
December 31,
 
   
2005
 
2004
 
   
(Unaudited)
     
ASSETS
         
Real estate properties
             
Land and buildings at cost
 
$
893,785
 
$
808,574
 
Less accumulated depreciation
   
(150,190
)
 
(153,379
)
Real estate properties - net
   
743,595
   
655,195
 
Mortgage notes receivable - net
   
43,883
   
118,058
 
     
787,478
   
773,253
 
Other investments - net
   
24,750
   
29,699
 
     
812,228
   
802,952
 
Assets held for sale - net 
   
8,440
   
 
Total investments
   
820,668
   
802,952
 
               
Cash and cash equivalents
   
534
   
12,083
 
Accounts receivable - net
   
4,041
   
5,582
 
Other assets
   
28,202
   
12,733
 
Operating assets for owned properties
   
   
213
 
Total assets
 
$
853,445
 
$
833,563
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
             
Revolving line of credit 
 
$
101,500
 
$
15,000
 
Unsecured borrowings 
   
360,000
   
360,000
 
Premium on unsecured borrowings 
   
1,254
   
1,338
 
Other long-term borrowings 
   
3,170
   
3,170
 
Accrued expenses and other liabilities 
   
19,477
   
21,067
 
Operating liabilities for owned properties 
   
386
   
508
 
Total liabilities 
   
485,787
   
401,083
 
               
Stockholders’ equity:
             
Preferred stock 
   
118,488
   
168,488
 
Common stock and additional paid-in-capital 
   
599,827
   
597,780
 
Cumulative net earnings 
   
202,574
   
191,013
 
Cumulative dividends paid 
   
(508,426
)
 
(480,292
)
Cumulative dividends - redemption 
   
(43,067
)
 
(41,054
)
Unamortized restricted stock awards 
   
(1,738
)
 
(2,231
)
Accumulated other comprehensive loss 
   
   
(1,224
)
Total stockholders’ equity 
   
367,658
   
432,480
 
Total liabilities and stockholders’ equity 
 
$
853,445
 
$
833,563
 




OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share amounts)
                   
   
Three Months Ended
 
Six Months Ended
 
   
June 30,
 
June 30,
 
   
2005
 
2004
 
2005
 
2004
 
Revenues
                         
Rental income
 
$
22,770
 
$
17,112
 
$
44,772
 
$
33,176
 
Mortgage interest income
   
1,240
   
3,336
   
3,196
   
6,703
 
Other investment income - net
   
598
   
535
   
1,108
   
1,160
 
Miscellaneous
   
1,146
   
291
   
4,312
   
421
 
Total operating revenues 
   
25,754
   
21,274
   
53,388
   
41,460
 
                           
Expenses
                         
Depreciation and amortization
   
6,202
   
4,983
   
12,092
   
9,805
 
General and administrative
   
1,838
   
1,783
   
3,664
   
3,786
 
Restricted stock expense 
   
285
   
-
   
571
   
-
 
Provisions for impairment on real estate properties
   
-
   
-
   
3,700
   
-
 
Provisions for uncollectible mortgages, notes and accounts receivable 
   
83
   
-
   
83
   
-
 
Leasehold expiration expense
   
750
   
-
   
750
   
-
 
Total operating expenses 
   
9,158
   
6,766
   
20,860
   
13,591
 
                           
Income before other income and expense 
   
16,596
   
14,508
   
32,528
   
27,869
 
Other income (expense):
                         
Interest and other investment income
   
24
   
77
   
65
   
96
 
Interest
   
(6,948
)
 
(5,753
)
 
(13,722
)
 
(10,446
)
Interest - amortization of deferred financing costs
   
(525
)
 
(427
)
 
(1,031
)
 
(881
)
Interest - refinancing costs
   
-
   
-
   
-
   
(19,106
)
Provisions for impairment on equity securities
   
(3,360
)
 
-
   
(3,360
)
 
-
 
Owned and operated professional liability claims
   
-
   
(3,000
)
 
-
   
(3,000
)
Adjustment of derivatives to fair value
   
-
   
-
   
-
   
256
 
Total other expense 
   
(10,809
)
 
(9,103
)
 
(18,048
)
 
(33,081
)
                           
Income (loss) from continuing operations 
   
5,787
   
5,405
   
14,480
   
(5,212
)
(Loss) gain from discontinued operations 
   
(3,530
)
 
532
   
(2,919
)
 
852
 
Net income (loss)  
   
2,257
   
5,937
   
11,561
   
(4,360
)
Preferred stock dividends 
   
(2,864
)
 
(4,002
)
 
(6,423
)
 
(8,689
)
Preferred stock conversion and redemption charges 
   
(2,013
)
 
(2,311
)
 
(2,013
)
 
(41,054
)
Net (loss) income available to common 
 
$
(2,620
)
$
(376
)
$
3,125
 
$
(54,103
)
                           
Income (loss) per common share:
                         
Basic:
                         
Income (loss) from continuing operations
 
$
0.02
 
$
(0.02
)
$
0.12
 
$
(1.25
)
Net income (loss)
 
$
(0.05
)
$
(0.01
)
$
0.06
 
$
(1.23
)
Diluted:
                         
Income (loss) from continuing operations
 
$
0.02
 
$
(0.02
)
$
0.12
 
$
(1.25
)
Net income (loss)
 
$
(0.05
)
$
(0.01
)
$
0.06
 
$
(1.23
)
                           
Dividends declared and paid per common share 
 
$
0.21
 
$
0.18
 
$
0.41
 
$
0.35
 
                           
Weighted-average shares outstanding, basic 
   
51,031
   
46,365
   
50,980
   
43,912
 
Weighted-average shares outstanding, diluted  
   
51,365
   
46,365
   
51,339
   
43,912
 
                           
Components of other comprehensive income:
                         
Net income (loss) 
 
$
2,257
 
$
5,937
 
$
11,561
 
$
(4,360
)
Unrealized (loss) gain on investments and hedging contracts
   
-
   
(1,733
)
 
-
   
2,722
 
Total comprehensive income (loss) 
 
$
2,257
 
$
4,204
 
$
11,561
 
$
(1,638
)




OMEGA HEALTHCARE INVESTORS, INC.
FUNDS FROM OPERATIONS
Unaudited
(In thousands, except per share amounts)

   
Three Months Ended
 
Six Months Ended
 
   
June 30,
 
June 30,
 
   
2005
 
2004
 
2005
 
2004
 
                   
Net (loss) income available to common stockholders 
 
$
(2,620
)
$
(376
)
$
3,125
 
$
(54,103
)
Add back loss from real estate dispositions
   
4,165
   
137
   
4,202
   
488
 
Sub-total 
   
1,545
   
(239
)
 
7,327
   
(53,615
)
Elimination of non-cash items included in net income (loss):
                         
Depreciation and amortization 
   
6,540
   
5,385
   
12,793
   
10,611
 
Funds from operations available to common stockholders
 
$
8,085
 
$
5,146
 
$
20,120
 
$
(43,004
)
                           
Weighted-average common shares outstanding, basic 
   
51,031
   
46,365
   
50,980
   
43,912
 
Effect of restricted stock awards 
   
71
   
   
55
   
 
Assumed exercise of stock options 
   
263
   
777
   
304
   
809
 
Weighted-average common shares outstanding, diluted 
   
51,365
   
47,142
   
51,339
   
44,721
 
                           
Fund from operations per share available to common stockholders
 
$
0.16
 
$
0.11
 
$
0.39
 
$
(0.96
)
                           
Adjusted funds from operations:
                         
Funds from operations available to common stockholders 
 
$
8,085
 
$
5,146
 
$
20,120
 
$
(43,004
)
Deduct/add legal settlements 
   
   
3,000
   
   
3,000
 
Deduct adjustment of derivatives to fair value 
   
   
   
   
(256
)
Deduct prepayment penalty/administration fee 
   
(1,003
)
 
   
(4,059
)
 
 
Add back restricted stock amortization expense 
   
285
   
   
571
   
 
Add back non-cash preferred stock conversion/redemption charges 
   
2,013
   
2,311
   
2,013
   
41,054
 
Add back credit facility exit fee 
   
   
   
   
6,378
 
Add back leasehold expiration expense 
   
750
   
   
750
   
 
Add back non-cash provision for impairments on real estate properties 
   
   
   
3,700
   
 
Add back non-cash provision for impairments on equity securities 
   
3,360
   
   
3,360
   
 
Add back provisions for uncollectible mortgages, notes and accounts receivable 
   
83
   
   
83
   
 
Add back write-off of deferred financing charges 
   
   
   
   
12,728
 
Adjusted funds from operations available to common stockholders
 
$
13,573
 
$
10,457
 
$
26,538
 
$
19,900
 


This press release includes Funds From Operations, or FFO, which is a non-GAAP financial measure. For purposes of the Securities and Exchange Commission’s (“SEC”) Regulation G, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows (or equivalent statements) of the company, or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented. As used in this press release, GAAP refers to general accepted accounting principles in the United States of America. Pursuant to the requirements of Regulation G, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

We calculate and report FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts ("NAREIT"), and consequently, FFO is defined as net income available to common stockholders, adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization. FFO available to common stockholders is further adjusted for the effect of restricted stock awards and the exercise of in-the-money stock options. We believe that FFO is an important supplemental measure of our 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. FFO herein is not necessarily comparable to FFO of other real estate investment trusts, or REITs, that do not use the same definition or implementation guidelines or interpret the standards differently from the Company.

Adjusted FFO is calculated as FFO available to common stockholders less one-time 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. The Company's computation of adjusted FFO is not comparable to the NAREIT definition of FFO or to similar measures reported by other REITs, but the Company believes it is an appropriate measure for this Company.

The Company uses FFO as one of several criteria to measure operating performance of our business. The Company further believes that by excluding the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and between other REITs.  The Company offers this measure to assist the users of our financial statements in analyzing our performance; however, this is not a measure of financial performance under GAAP and should not be considered a measure of liquidity, an alternative to net income or an indicator of any other performance measure determined in accordance with GAAP. Investor and potential investors in the Company’s securities should not rely on this measure as a substitute for any GAAP measure, including net income.

In February 2004, NAREIT informed its member companies that it was adopting the position of the SEC with respect to asset impairment charges and would no longer recommend that impairment write-downs be excluded from FFO. In the tables included in this press release, we have applied this interpretation and have not excluded asset impairment charges in calculating our FFO. As a result, our FFO may not be comparable to similar measures reported in previous disclosures. According to NAREIT, there is inconsistency among NAREIT member companies as to the adoption of this interpretation of FFO. Therefore, a comparison of our FFO results to another company's FFO results may not be meaningful.




The following table presents a range of the Company’s projected FFO per common share for 2005:

   
2005 Projected FFO
 
Per diluted share:
                   
Net income available to common stockholders 
 
$
0.43
   
 
$
0.44
 
Adjustments:
                   
Depreciation and amortization 
   
0.48
   
   
0.48
 
Funds from operations available to common stockholders
 
$
0.91
   
 
$
0.92
 
                     
Adjustments:
                   
Provision for impairment on real estate properties 
   
0.07
   
   
0.07
 
Provision for impairment on equity securities 
   
0.06
   
   
0.06
 
Lease expiration expense accrual 
   
0.01
   
   
0.01
 
Provision for uncollectible notes receivable 
   
0.00
   
   
0.00
 
One-time revenue items 
   
(0.08
)
 
   
(0.08
)
Restricted stock expense 
   
0.02
   
   
0.02
 
Series B preferred stock redemption 
   
0.04
   
   
0.04
 
Adjusted funds from operations available to common stockholders
 
$
1.03
   
 
$
1.04
 


The following table summarizes the results of operations of facilities sold during the three and six months ended June 30, 2005 and 2004, respectively.

   
Three Months Ended
 
Six Months Ended
 
   
June 30,
 
June 30,
 
   
2005
 
2004
 
2005
 
2004
 
   
(In thousands)
 
(In thousands)
 
Revenues
                 
Rental income
 
$
961
 
$
1,058
 
$
1,960
 
$
2,117
 
Other income
   
12
   
13
   
24
   
29
 
Subtotal revenues
   
973
   
1,071
   
1,984
   
2,146
 
Expenses
                         
Depreciation and amortization
   
338
   
402
   
701
   
806
 
Subtotal expenses
   
338
   
402
   
701
   
806
 
                           
Income before loss on sale of assets 
   
635
   
669
   
1,283
   
1,340
 
Loss on assets sold - net 
   
(4,165
)
 
(137
)
 
(4,202
)
 
(488
)
(Loss) gain from discontinued operations 
 
$
(3,530
)
$
532
 
$
(2,919
)
$
852
 




The following tables present selected portfolio information, including operator and geographic concentrations, and revenue maturities for the period ending June 30, 2005.

Portfolio Composition ($000's)
                     
                       
Balance Sheet Data
 
# of Properties
 
# Beds
 
Investment
 
% Investment
     
Real Property (1)
   
188
   
20,172
 
$
902,225
   
95
%
     
Loans Receivable
   
28
   
2,235
   
43,883
   
5
%
     
Total Investments
   
216
   
22,407
 
$
946,108
   
100
%
     
                                 
Investment Data
   
# of Properties
   
# Beds
   
Investment
   
% Investment
   
Investment per Bed
 
Skilled Nursing Facilities (1)
   
202
   
21,686
 
$
881,520
   
93
%
$
41
 
Assisted Living Facilities
   
12
   
551
   
41,153
   
4
%
 
75
 
Rehab and LTAC Hospitals
   
2
   
170
   
23,435
   
3
%
 
138
 
     
216
   
22,407
 
$
946,108
   
100
%
$
42
 
                                 
 
1) Excludes three (3) closed facilities. We intend to sell the facilities as soon as practicable; however, there can be no assurance if, or when, these sales will be completed on terms that allow us to realize the carrying value of the assets.

Revenue Composition ($000's)
                 
                   
Revenue by Investment Type
 
Three Months Ended
 
Six Months Ended
 
   
June 30, 2005
 
June 30, 2005
 
Rental Property
 
$
22,770
   
93
%
$
44,772
   
91
%
Mortgage Notes
   
1,240
   
5
%
 
3,196
   
7
%
Other Investment Income
   
598
   
2
%
 
1,108
   
2
%
   
$
24,608
   
100
%
$
49,076
   
100
%
                           
Revenue by Facility Type
 
Three Months Ended
Six Months Ended
 
June 30, 2005 
June 30, 2005
Assisted Living Facilities
 
$
785
   
3
%
$
1,570
   
3
%
Skilled Nursing Facilities
   
23,225
   
94
%
 
46,398
   
95
%
Other
   
598
   
3
%
 
1,108
   
2
%
   
$
24,608
   
100
%
$
49,076
   
100
%
                           
Operator Concentration ($000's)
                         
                           
Concentration by Investment
   
# of Properties
   
Investment
   
% Investment
       
Sun Healthcare Group, Inc.
   
30
 
$
150,169
   
16
%
     
Advocat, Inc.
   
33
   
104,224
   
11
%
     
Guardian
   
16
   
80,200
   
8
%
     
Essex
   
13
   
79,352
   
8
%
     
CommuniCare
   
8
   
76,459
   
8
%
     
Remaining Operators
   
116
   
455,704
   
49
%
     
     
216
 
$
946,108
   
100
%
     
                           
Geographic Concentration ($000's)
                         
                           
Concentration by Region
   
# of Properties
   
Investment
   
% Investment
       
South
   
90
 
$
382,040
   
40
%
     
Midwest
   
65
   
247,082
   
26
%
     
Northeast
   
29
   
188,047
   
20
%
     
West
   
32
   
128,939
   
14
%
     
     
216
 
$
946,108
   
100
%
     
                           






Concentration by State
 
# of Properties
Investment
% Investment
   
Ohio
 
27
$ 165,753
17%
 
 
Florida
 
19
    119,810
13%
 
 
Pennsylvania
 
16
   101,052
11%
 
 
California
 
18
     63,531
7%
 
 
Texas
 
18
     59,060
6%
 
 
Remaining States
 
118
   436,902
46%
   
   
216
$ 946,108
100%
   
             

Revenue Maturities ($000's)
                     
                       
Operating Lease Expirations & Loan Maturities
 
Year
 
Current Lease Revenue (1)
 
Current Interest Revenue (1)
 
Lease and Interest Revenue
 
 %
 
     
2005
 
$
1,260
 
$
-
 
$
1,260
   
1.3
%
 
   
2006
   
423
   
3,051
   
3,474
   
3.6
%
 
   
2007
   
363
   
145
   
508
   
0.5
%
 
   
2008
   
877
   
-
   
877
   
0.9
%
 
   
2009
   
445
   
-
   
445
   
0.4
%
   
Thereafter 
   
88,191
   
2,898
   
91,089
   
93.3
%
 
   
 
$
91,559
 
$
6,093
 
$
97,652
   
100
%
                                 
Note: (1) Based on '05 contractual rents & interest (no annual escalators)
   
                                 
Selected Facility Data
                               
TTM ending 3/31/05
                   
Coverage Data
       
% Payor Mix 
 
Before
   
After
 
   
Census 
   
Private
 
 
Medicare
   
Mgmt. Fees
   
Mgmt. Fees(1
)
All Healthcare Facilities
   
81.9
%
 
11.7
%
 
12.8
%
 
1.8 x
   
1.4 x
 
                                 
                                 
Note: (1) Implied management fee of 4%.

The following tables present selected financial information, including leverage and interest coverage ratios, as well as a debt maturity schedule for the period ending June 30, 2005.

           
Current Capitalization ($000's)
         
   
Outstanding Balance*
 
 %
 
Borrowings Under Bank Lines
 
$
101,500
   
12
%
Long-Term Debt Obligations
   
363,170
   
44
%
Stockholder's Equity
   
367,658
   
44
%
Total Book Capitalization
 
$
832,328
   
100
%
 
*Excludes $1.3 million premium associated with $60 million Bond Offering.
     
               
Leverage & Performance Ratios
             
               
Debt / Total Book Cap
   
56
%
     
Debt / Total Market Cap
   
37
%
     
Interest / EBITDA Coverage:
             
Second quarter 2005
   
3.4x
       
               
               
               

Debt Maturities ($000's)
     
Secured Debt
             
   
Year
 
Lines of Credit (1)
 
Other
 
Senior Notes
 
Total
 
     
2005
 
$
-
 
$
-
 
$
-
 
$
-
 
     
2006
   
-
   
-
   
-
   
-
 
     
2007
   
-
   
-
   
100,000
   
100,000
 
     
2008
   
200,000
   
-
   
-
   
200,000
 
   
Thereafter 
   
-
   
3,170
   
260,000
   
263,170
 
         
$
200,000
 
$
3,170
 
$
360,000
 
$
563,170
 
                                 
Note: (1) Reflected at 100% capacity.
               


The following table presents investment activity for the three- and six-month periods ending June 30, 2005.
                   
Investment Activity ($000's)
                 
   
Three Months Ended
 
Six Months Ended
 
   
June 30, 2005
 
June 30, 2005
 
   
$ Amount
 
 %
 
$ Amount
 
 
Funding by Investment Type:
                         
Real Property
 
$
59,100
   
100
%
$
117,200
   
100
%
Mortgages
   
-
   
0
%
 
-
   
0
%
Other
   
-
   
0
%
 
-
   
0
%
Total
 
$
59,100
   
100
%
$
117,200
   
100
%