8-K: Current report filing
Published on January 27, 2006
PRESS
RELEASE - FOR IMMEDIATE RELEASE
OMEGA
ANNOUNCES FOURTH QUARTER 2005 FINANCIAL RESULTS AND
ADJUSTED
FFO OF $0.27 PER SHARE FOR THE FOURTH QUARTER
TIMONIUM,
MARYLAND - January 27, 2006 - Omega
Healthcare Investors, Inc. (NYSE:OHI) today announced its results of operations
for the quarter and fiscal year ended December 31, 2005. The Company also
reported Funds From Operations (“FFO”) available to common stockholders for the
three and twelve months ended December 31, 2005 of $12.6 million or $0.23 per
common share and $40.9 million or $0.79 per common share, respectively. The
$12.6 million of FFO available to common stockholders for the quarter includes
the impact of $2.8 million of interest expense associated with the tender offer
and purchase of approximately 79.3% of the Company’s $100 million aggregate
principal amount of 6.95% notes due 2007 (the “2007 Notes”), $0.5 million
non-cash provision for impairment, $0.3 million of non-cash restricted stock
amortization expense and a one-time net cash inflow of $1.6 million associated
with a legal settlement. 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 refinancing interest expense, the non-cash provision for impairment, the
non-cash restricted stock amortization expense and the net cash received from
a
legal settlement, was $0.27 per common share for the three months ended December
31, 2005 and $1.06 for the twelve months ended December 31, 2005 when excluding
similar non-recurring or non-cash items. For more information regarding FFO,
see
“FFO Results” below.
GAAP
NET INCOME
For
the
three-month period ended December 31, 2005, the Company reported net income
of
$20.3 million, net income available to common stockholders of $17.8 million,
or
$0.33 per diluted common share and operating revenues of $27.3
million. This
compares to net income of $12.5 million, net income available to common
stockholders of $8.9 million, or $0.19 per diluted common share, and operating
revenues of $22.7 million for the same period in 2004.
For
the
twelve-month period ended December 31, 2005, the Company reported net income
of
$37.0 million, net income available to common stockholders of $23.6 million,
or
$0.45 per diluted common share and operating revenues of $105.8 million. This
compares to net income of $16.7 million, a net loss available to common
stockholders of ($40.1) million, or ($0.88) per diluted common share, and
operating revenues of $84.8 million for the same period in 2004.
The
$23.6
million net income available to common stockholders for the twelve months ended
December 31, 2005 includes the impact of $2.0 million of non-cash redemption
charges and $2.8 million of interest expense associated with refinancing-related
activities during 2005.
The
($40.1) million net loss available to common stockholders for the twelve months
ended December 31, 2004 includes the impact of $53.8 million of non-cash
redemption and refinancing charges and $6.4 million of exit fees associated
with
refinancing-related activities during 2004.
FOURTH
QUARTER 2005 HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
· Completed
a 5.175 million share common stock offering.
· Issued
$50 million aggregate principal amount of 7% senior unsecured notes due
2014.
· Closed
on
approximately $190 million of new investments yielding 10%.
· Sold
one
skilled nursing facility (“SNF”) and six assisted living facilities (“ALFs”) for
$34.6 million
of net cash proceeds.
· Issued
$175 million aggregate principal amount of 7% senior unsecured notes due
2016.
· Tendered
for and redeemed $100 million aggregate principal amount of 6.95% notes due
2007.
· Moody’s
raised the Company’s senior debt rating to Ba3 from B1.
· Increased
the common dividend per share from $0.22 to $0.23.
FOURTH
QUARTER 2005 RESULTS
Operating
Revenues and Expenses
-
Operating revenues for the three months ended December 31, 2005 were $27.3
million. Operating expenses for the three months ended December 31, 2005 totaled
$8.8 million, comprised of $6.2 million of depreciation and amortization
expense, $1.8 million of general and administrative expenses, a non-cash
provision for impairment of $0.5 million and $0.3 million of restricted stock
amortization. The $0.5 million provision for impairment charge was recorded
to
reduce the carrying value of one facility, currently under contract to be sold
in the first quarter of 2006.
Other
Income and Expense
- Other
income and expense for the three months ended December 31, 2005 was $10.0
million and was primarily comprised of $8.5 million of interest expense, $0.6
million of non-cash interest expense, $2.8 million of refinancing interest
expense (see “Financing Activities” section below) and $1.6 million of net cash
proceeds from a legal settlement. The $1.6 million of net cash proceeds was
associated with a settlement of a lawsuit the Company filed against a former
tenant, seeking damages based on claims of breach of contract.
Funds
From Operations
- For
the three months ended December 31, 2005, reportable FFO available to common
stockholders was $12.6 million, or $0.23 per common share, compared to $10.6
million, or $0.22 per common share, for the same period in 2004. The $12.6
million of FFO for the quarter includes the impact of: i) $2.8 million of
interest expense associated with the tender offer and purchase of approximately
79.3% of the Company’s $100 million aggregate principal amount of 2007 Notes;
ii) $0.5 million non-cash provision for impairment charge; iii) $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 iv) $1.6 million
of net cash proceeds received from a legal settlement.
When
excluding the aforementioned items in 2005, as well as, certain similar
non-recurring or non-cash expense items in 2004, adjusted FFO was $14.5 million,
or $0.27 per common share in 2005, compared to $11.5 million, or $0.24 per
common share, for the same period in 2004. For further information, see the
attached “Funds From Operations” schedule and notes.
Asset
Sales
- On
December 1, 2005, AHC Properties, Inc., a subsidiary of Alterra Healthcare
Corporation (“Alterra”) exercised its option to purchase six ALFs. The Company
received cash proceeds of approximately $20.5 million, resulting in an
accounting gain of approximately $5.6 million. The ALFs were leased to Alterra
in a master lease with annual revenue of approximately $1.7 million.
On
November 3, 2005, the Company sold a SNF in Florida for net cash proceeds of
approximately $14.1 million, resulting in an accounting gain of approximately
$5.8 million.
YEAR
END 2005 RESULTS
Operating
Revenues and Expenses
-
Operating revenues for the twelve months ended December 31, 2005 were $105.8
million. Operating expenses for the twelve months ended December 31, 2005
totaled $43.2 million, comprised of $24.2 million of depreciation and
amortization expense, $7.4 million of general and administrative expense,
non-cash provision for impairment charges of $9.6 million, $1.1 million of
restricted stock amortization and a $0.8 million lease expiration accrual that
relates to disputed capital improvement requirements associated with a lease
that expired on June 30, 2005.
Other
Income and Expense
- Other
income and expense for the twelve months ended December 31, 2005 was $36.3
million and was comprised of $29.9 million of interest expense and $2.1 million
of non-cash interest expense. In addition, in accordance with FASB Statement
No.
115, ‘‘Accounting for Certain Investments in Debt and Equity Securities,” during
the second quarter the Company 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. In the fourth quarter, the Company
recorded $2.8 million of refinancing interest expense (see “Financing
Activities” section below) and $1.6 million of net cash proceeds from a legal
settlement (see above).
Funds
From Operations
- For
the twelve months ended December 31, 2005, reportable FFO available to common
stockholders was $40.9 million, or $0.79 per common share, compared to a deficit
of ($21.9) million, or a deficit of ($0.48) per common share, for the same
period in 2004. The $40.9 million of FFO for the year includes the impact of:
i)
a $9.6 million non-cash provision for impairment charges recorded throughout
the
year; ii) $2.8 million of interest expense associated with the tender offer
and
purchase of approximately 79.3% of the Company’s $100 million aggregate
principal amount of 2007 Notes; iii) $3.4 million non-cash provision for
impairment on an equity security investment; iv) $2.0 million of non-cash
preferred stock redemption charges; v) $1.1 million of non-cash restricted
stock
amortization associated with the Company’s issuance of restricted stock grants
to executive officers during 2004; vi) a $0.8 million lease expiration accrual;
vii) a $0.1 million non-cash provision for uncollectible notes receivable;
viii)
$1.6 million of net cash proceeds received from a legal settlement; and ix)
$4.1
million of one-time interest revenue associated with a payoff of a mortgage.
When
excluding the aforementioned items in 2005, as well as certain similar
non-recurring or non-cash expense items in 2004, adjusted FFO was $55.0 million,
or $1.06 per common share, compared to $42.1 million, or $0.91 per common share,
for the same period in 2004. For further information, see the attached “Funds
From Operations” schedule and notes.
Asset
Sales
- During
2005, in various unrelated transactions, the Company sold eight SNFs, six ALFs
and 50.4 acres of undeveloped land for combined cash proceeds of approximately
$55.1 million, net of closing costs and other expenses, resulting in a combined
accounting gain of approximately $8.0 million.
FINANCING
ACTIVITIES
$100
Million Aggregate Principal Amount of 6.95% Unsecured Notes Tender and
Redemption
- On
December 16, 2005, the Company initiated a tender offer and consent solicitation
for all of its outstanding 2007 Notes. On December 30, 2005, the Company
accepted for purchase 79.3% of the aggregate principal amount of the 2007 Notes
outstanding that were tendered. On December 30, 2005, the Company’s Board of
Directors also authorized the redemption of all outstanding 2007 Notes that
were
not otherwise tendered. On December 30, 2005, upon the Company’s irrevocable
funding of the redemption price for the 2007 Notes and certain other acts
required by the Indenture governing the 2007 Notes, the Trustee certified in
writing to the Company (the “Certificate of Satisfaction and Discharge”) that
the Indenture was satisfied and discharged as of December 30, 2005, except
for
certain provisions. In accordance with FASB Statement No. 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities,” the
Company removed 79.3% of the aggregate principal amount of the 2007 Notes and
the corresponding portion of the funds held in trust by the Trustee to pay
the
tender price from its balance sheet and recognized $2.8 million of interest
expense associated with the tender offer. On January 18, 2006, the Company
completed the redemption of the remaining 2007 Notes not otherwise tendered.
In
connection with the redemption and in accordance with FASB No. 140, the Company
will recognize $0.8 million of interest expense in the first quarter of 2006.
As
of January 18, 2006, none of the 2007 Notes remained outstanding.
$175
Million Aggregate Principal Amount of 7% Unsecured Notes
Issuance
- On
December 30, 2005, the Company closed on a private offering of $175 million
of
7% senior unsecured notes due 2016 at an issue price of 99.109% of the principal
amount of the notes (equal to a per annum yield to maturity of approximately
7.125%), resulting in gross proceeds to the Company of approximately $173.4
million. The notes are unsecured senior obligations of the Company, which have
been guaranteed by the Company’s subsidiaries. The notes were issued in a
private placement to qualified institutional buyers under Rule 144A under the
Securities Act of 1933 (the “Securities Act”).
$50
Million Aggregate Principal Amount of 7% Unsecured Notes
Issuance
- On
December 2, 2005, the Company completed a privately placed offering of an
additional $50 million aggregate principal amount of 7% senior notes due 2014
at
an issue price of 100.25% of the principal amount of the notes (equal to a
per
annum yield to maturity of approximately 6.95%), resulting in gross proceeds
to
the Company of approximately $50.1 million. The terms of the notes offered
were
substantially identical to the Company’s existing $200 million aggregate
principal amount of 7% senior notes due 2014 issued in March 2004. The notes
were issued through a private placement to
qualified institutional buyers under Rule 144A under the Securities
Act.
After
giving effect to the issuance of the $50 million aggregate principal amount
of
this offering, the Company had outstanding $310 million aggregate principal
amount of 7% senior notes due 2014.
5.175
Million Common Stock Offering
- On
November 21, 2005, the Company
closed
an
underwritten public offering of 5,175,000 shares of Omega common stock at $11.80
per share, less underwriting discounts.
The
sale
included 675,000 shares sold in connection with the exercise of an
over-allotment option granted to the underwriters. The Company received
approximately $58 million in net proceeds from the sale of the shares, after
deducting underwriting discounts and before estimated offering
expenses.
8.625%
Series B Preferred Redemption
- On
May 2,
2005, the Company fully redeemed its 8.625% Series B Cumulative Preferred Stock
(NYSE:OHI PrB) (“Series B Preferred Stock”). 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 Preferred Stock
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 Preferred Stock.
Rating
Agency Upgrade
- On
January 20, 2006, Moody’s Investors Services raised the
rating
of the Company’s senior unsecured debt to Ba3 from B1 and preferred stock to B2
from B3. As stated in Moody’s press release, “this rating action reflects
Omega’s increased size and improvement in asset quality and performance.” The
press release also stated; “Moody’s is encouraged by the significant progress
that Omega continues to make in executing its strategic plan, solidifying its
financial flexibility, and repositioning its healthcare
properties.”
PORTFOLIO
DEVELOPMENTS
Investment
Activity
CommuniCare
Health Services, Inc.
- On
December 16, 2005, the Company purchased ten SNFs and one ALF located in Ohio
totaling 1,610 beds for a total investment of $115.3 million. The facilities
were consolidated into a new ten year master lease and leased to affiliates
of
an existing operator, CommuniCare Health Services, Inc. (“CommuniCare”), with
annualized rent increasing by approximately $11.6 million, subject to annual
escalators, and two ten year renewal options.
On
June
28, 2005, the Company purchased five SNFs located in Ohio (3) and Pennsylvania
(2), totaling 911 beds for a total investment, excluding working capital, of
approximately $50 million. The SNFs were purchased from an unrelated third
party
and are now operated by affiliates of CommuniCare, with the five facilities
being consolidated into an existing master lease.
Haven
Eldercare, LLC
- On
November 9, 2005, the Company closed on a first mortgage loan in the amount
of
$61.75 million on six SNFs and one ALF, totaling 878 beds. Four of the
facilities are located in Rhode Island, two in New Hampshire and one in
Massachusetts. The mortgagor of the facilities is an affiliate of Haven
Eldercare, LLC (“Haven”), an existing operator for the Company. The term of the
mortgage is seven years. The interest rate is 10%, with annual escalators.
At
the end of the mortgage term, the Company will have the option to purchase
the
facilities for $61.75 million less the outstanding mortgage principal
balance.
Nexion
Health, Inc.
- On
November 1, 2005, the Company purchased three SNFs in two separate transactions
for a total investment of approximately $12.75 million. All three facilities,
totaling 400 beds, are located in Texas. The facilities were consolidated into
a
master lease with a subsidiary of an existing operator, Nexion Health, Inc.
The
term of the existing master lease was extended to ten years and runs through
October 31, 2015, followed by four renewal options of five years
each.
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.
Essex
Healthcare Corporation- On
January 13, 2005, the Company closed on approximately $58 million of net new
investments as a result of the exercise by American Health Care Centers
(“American”) of a put agreement with the Company for the purchase of 13 SNFs.
The gross purchase price of approximately $79 million was offset by a purchase
option of approximately $7 million and approximately $14 million in mortgage
loans the Company had outstanding with American and its affiliates.
The
13
properties, all located in Ohio, will continue to be leased by Essex Healthcare
Corporation. The master lease and related agreements run through October 31,
2010.
Mariner
Health Care, Inc.
- On
February 1, 2005, Mariner Health Care, Inc. (“Mariner”) exercised its right to
prepay in full the $59.7 million aggregate principal amount owed to the Company
under a promissory note secured by a mortgage with an interest rate of 11.57%,
together with the required prepayment premium of 3% of the outstanding principal
balance and all accrued and unpaid interest. In addition, pursuant to certain
provisions contained in the promissory note, Mariner paid the Company an
amendment fee owed for the period ending on February 1, 2005.
Re-leasing
Activities
Claremont
Health Care Holdings, Inc.
- Effective
January 1, 2005, the Company re-leased one SNF formerly leased to Claremont
Health Care Holdings, Inc., located in New Hampshire and representing 68 beds
to
affiliates of an existing operator, Haven. This facility was added to an
existing Master Lease, which expires on December 31, 2013, followed by two
10-year renewal options.
DIVIDENDS
Common
Dividends - On
January 17, 2006, the Company’s Board of Directors announced a common stock
dividend of $0.23 per share to be paid February 15, 2006 to common stockholders
of record on January 31, 2006. At the date of this release, the Company had
approximately 57 million outstanding common shares.
Series
D Preferred Dividends - On
January 17, 2006, the Company’s Board of Directors declared the regular
quarterly dividends for its 8.375% Series D Cumulative Redeemable Preferred
Stock (“Series D Preferred Stock”) to stockholders of record on January 31,
2006. The stockholders of record of the Series D Preferred Stock on January
31,
2006 will be paid dividends in the amount of $0.52344
per
preferred share on February 15, 2006. 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 November 1, 2005 through January 31, 2006.
2006
ADJUSTED FFO GUIDANCE
The
Company currently expects its 2006 adjusted FFO to be between $1.10 and $1.14
per diluted share. The
Company's adjusted FFO guidance (and related GAAP earnings projections) for
2006
excludes the future impacts of gains and losses from the sale 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.
TAX
TREATMENT FOR 2005 DIVIDENDS
Preferred
B and D Dividends -The
Company has determined that 100% of all dividends on Series B and Series D
Preferred Stock in 2005 should be treated for tax purposes as an ordinary
dividend.
Common
Dividends - On
February 15, 2005, May 16, 2005, August 15, 2005 and November 15, 2005, the
Company paid
dividends to its common stockholders
in the per share amounts of $0.20, $0.21, $0.22 and $0.22, for stockholders
of
record on January 31, 2005, May 2, 2005, July 29, 2005 and October 31, 2005,
respectively. The
Company has determined that 35.29% of the common dividends paid in 2005 should
be treated for tax purposes as a return of capital, with the balance of 64.71%
treated as an ordinary dividend.
CONFERENCE
CALL
The
Company will be conducting a conference call on Friday, January 27, 2006, at
10
a.m. EST to review the Company’s 2005 fourth quarter and year end 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 December 31, 2005, the Company owned or
held
mortgages on 227 SNFs and ALFs with approximately 24,476 beds located in 27
states and operated by 35 third-party healthcare operating
companies.
FOR
FURTHER INFORMATION, CONTACT
Bob
Stephenson, CFO at (410) 427-1700
________________________
This
announcement includes 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 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 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. 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. 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.
OMEGA
HEALTHCARE INVESTORS, INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands)
|
December
31,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
(Unaudited)
|
|||||||
|
ASSETS
|
|||||||
|
Real
estate properties
|
|||||||
|
Land
and buildings at cost
|
$
|
996,127
|
$
|
808,574
|
|||
|
Less
accumulated depreciation
|
(157,255
|
)
|
(153,379
|
)
|
|||
|
Real
estate properties - net
|
838,872
|
655,195
|
|||||
|
Mortgage
notes receivable - net
|
104,522
|
118,058
|
|||||
|
943,394
|
773,253
|
||||||
|
Other
investments - net
|
23,490
|
29,699
|
|||||
|
966,884
|
802,952
|
||||||
|
Assets
held for sale - net
|
1,243
|
—
|
|||||
|
Total
investments
|
968,127
|
802,952
|
|||||
|
Cash
and cash equivalents
|
3,948
|
12,083
|
|||||
|
Accounts
receivable - net
|
5,885
|
5,582
|
|||||
|
Other
assets
|
37,769
|
12,733
|
|||||
|
Operating
assets for owned properties
|
—
|
213
|
|||||
|
Total
assets
|
$
|
1,015,729
|
$
|
833,563
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Revolving
line of credit
|
$
|
58,000
|
$
|
15,000
|
|||
|
Unsecured
borrowings
|
505,682
|
360,000
|
|||||
|
(Discount)/premium
on unsecured borrowings - net
|
(253
|
)
|
1,338
|
||||
|
Other
long-term borrowings
|
2,800
|
3,170
|
|||||
|
Accrued
expenses and other liabilities
|
19,263
|
21,067
|
|||||
|
Operating
liabilities for owned properties
|
256
|
508
|
|||||
|
Total
liabilities
|
585,748
|
401,083
|
|||||
|
Stockholders’
equity:
|
|||||||
|
Preferred
stock issued and outstanding - 2,000 shares Class B with an aggregate
liquidation preference of $50,000
|
—
|
50,000
|
|||||
|
Preferred
stock issued and outstanding - 4,740 shares Class D with an aggregate
liquidation preference of $118,488
|
118,488
|
118,488
|
|||||
|
Common
stock $.10 par value authorized - 100,000 shares: Issued and outstanding
-
56,872 shares in 2005 and 50,824
shares in 2004
|
5,687
|
5,082
|
|||||
|
Additional
paid-in-capital
|
657,920
|
592,698
|
|||||
|
Cumulative
net earnings
|
228,001
|
191,013
|
|||||
|
Cumulative
dividends paid
|
(536,041
|
)
|
(480,292
|
)
|
|||
|
Cumulative
dividends - redemption
|
(43,067
|
)
|
(41,054
|
)
|
|||
|
Unamortized
restricted stock awards
|
(1,167
|
)
|
(2,231
|
)
|
|||
|
Accumulated
other comprehensive income (loss)
|
160
|
(1,224
|
)
|
||||
|
Total
stockholders’ equity
|
429,981
|
432,480
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
1,015,729
|
$
|
833,563
|
|||
OMEGA
HEALTHCARE INVESTORS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Unaudited
(in
thousands, except per share amounts)
|
Three
Months Ended
|
Year
Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Revenues
|
|||||||||||||
|
Rental
income
|
$
|
24,525
|
$
|
18,626
|
$
|
92,387
|
$
|
68,338
|
|||||
|
Mortgage
interest income
|
2,110
|
3,340
|
6,527
|
13,266
|
|||||||||
|
Other
investment income - net
|
661
|
562
|
2,439
|
2,319
|
|||||||||
|
Miscellaneous
|
6
|
208
|
4,459
|
831
|
|||||||||
|
Total
operating revenues
|
27,302
|
22,736
|
105,812
|
84,754
|
|||||||||
|
Expenses
|
|||||||||||||
|
Depreciation
and amortization
|
6,199
|
4,965
|
24,175
|
19,214
|
|||||||||
|
General
and administrative
|
1,832
|
1,992
|
7,446
|
7,726
|
|||||||||
|
Restricted
stock expense
|
285
|
837
|
1,141
|
1,115
|
|||||||||
|
Provisions
for impairment on real estate properties
|
463
|
-
|
9,617
|
-
|
|||||||||
|
Provisions
for uncollectible mortgages, notes and accounts receivable
|
-
|
-
|
83
|
-
|
|||||||||
|
Leasehold
expiration expense
|
-
|
-
|
750
|
-
|
|||||||||
|
Total
operating expenses
|
8,779
|
7,794
|
43,212
|
28,055
|
|||||||||
|
Income
before other income and expense
|
18,523
|
14,942
|
62,600
|
56,699
|
|||||||||
|
Other
income (expense):
|
|||||||||||||
|
Interest
and other investment income
|
130
|
19
|
220
|
122
|
|||||||||
|
Interest
|
(8,469
|
)
|
(6,732
|
)
|
(29,900
|
)
|
(23,050
|
)
|
|||||
|
Interest
- amortization of deferred financing costs
|
(551
|
)
|
(492
|
)
|
(2,121
|
)
|
(1,852
|
)
|
|||||
|
Interest
- refinancing costs
|
(2,750
|
)
|
-
|
(2,750
|
)
|
(19,106
|
)
|
||||||
|
Provisions
for impairment on equity securities
|
-
|
-
|
(3,360
|
)
|
-
|
||||||||
|
Litigation
settlement and professional liability claims
|
1,599
|
-
|
1,599
|
(3,000
|
)
|
||||||||
|
Adjustment
of derivatives to fair value
|
-
|
-
|
-
|
256
|
|||||||||
|
Total
other expense
|
(10,041
|
)
|
(7,205
|
)
|
(36,312
|
)
|
(46,630
|
)
|
|||||
|
Income
from continuing operations
|
8,482
|
7,737
|
26,288
|
10,069
|
|||||||||
|
Gain
from discontinued operations
|
11,825
|
4,720
|
10,700
|
6,669
|
|||||||||
|
Net
income
|
20,307
|
12,457
|
36,988
|
16,738
|
|||||||||
|
Preferred
stock dividends
|
(2,481
|
)
|
(3,559
|
)
|
(11,385
|
)
|
(15,807
|
)
|
|||||
|
Preferred
stock conversion and redemption charges
|
-
|
-
|
(2,013
|
)
|
(41,054
|
)
|
|||||||
|
Net
income (loss) available to common
|
$
|
17,826
|
$
|
8,898
|
$
|
23,590
|
$
|
(40,123
|
)
|
||||
|
Income
(loss) per common share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Income
(loss) from continuing operations
|
$
|
0.11
|
$
|
0.09
|
$
|
0.25
|
$
|
(1.03
|
)
|
||||
|
Net
income (loss)
|
$
|
0.33
|
$
|
0.19
|
$
|
0.46
|
$
|
(0.88
|
)
|
||||
|
Diluted:
|
|||||||||||||
|
Income
(loss) from continuing operations
|
$
|
0.11
|
$
|
0.09
|
$
|
0.25
|
$
|
(1.03
|
)
|
||||
|
Net
income (loss)
|
$
|
0.33
|
$
|
0.19
|
$
|
0.45
|
$
|
(0.88
|
)
|
||||
|
Dividends
declared and paid per common share
|
$
|
0.22
|
$
|
0.19
|
$
|
0.85
|
$
|
0.72
|
|||||
|
Weighted-average
shares outstanding, basic
|
53,780
|
47,478
|
51,738
|
45,472
|
|||||||||
|
Weighted-average
shares outstanding, diluted
|
54,055
|
48,011
|
52,059
|
45,472
|
|||||||||
|
Components
of other comprehensive income:
|
|||||||||||||
|
Net
income
|
$
|
20,307
|
$
|
12,457
|
$
|
36,988
|
$
|
16,738
|
|||||
|
Unrealized
(loss) gain on investments and hedging contracts
|
(570
|
)
|
1,216
|
160
|
3,231
|
||||||||
|
Total
comprehensive income
|
$
|
19,737
|
$
|
13,673
|
$
|
37,148
|
$
|
19,969
|
|||||
OMEGA
HEALTHCARE INVESTORS, INC.
FUNDS
FROM OPERATIONS
Unaudited
(In
thousands, except per share amounts)
|
Three
Months Ended
|
Year
Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
income (loss) available to common stockholders
|
$
|
17,826
|
$
|
8,898
|
$
|
23,590
|
$
|
(40,123
|
)
|
||||
|
Deduct
gain from real estate dispositions
|
(11,460
|
)
|
(3,798
|
)
|
(7,969
|
)
|
(3,310
|
)
|
|||||
|
Sub-total
|
6,366
|
5,100
|
15,621
|
(43,433
|
)
|
||||||||
|
Elimination
of non-cash items included in net income (loss):
|
|||||||||||||
|
Depreciation
and amortization
|
6,209
|
5,546
|
25,277
|
21,551
|
|||||||||
|
Funds
from operations available to common stockholders
|
$
|
12,575
|
$
|
10,646
|
$
|
40,898
|
$
|
(21,882
|
)
|
||||
|
Weighted-average
common shares outstanding, basic
|
53,780
|
47,478
|
51,738
|
45,472
|
|||||||||
|
Effect
of restricted stock awards
|
124
|
126
|
86
|
32
|
|||||||||
|
Assumed
exercise of stock options
|
151
|
407
|
235
|
651
|
|||||||||
|
Weighted-average
common shares outstanding, diluted
|
54,055
|
48,011
|
52,059
|
46,155
|
|||||||||
|
Funds
from operations per share available to common
stockholders
|
$
|
0.23
|
$
|
0.22
|
$
|
0.79
|
$
|
(0.48
|
)
|
||||
|
Adjusted
funds from operations:
|
|||||||||||||
|
Funds
from operations available to common stockholders
|
$
|
12,575
|
$
|
10,646
|
$
|
40,898
|
$
|
(21,882
|
)
|
||||
|
Deduct/add
legal settlements
|
(1,599
|
)
|
—
|
(1,599
|
)
|
3,000
|
|||||||
|
Deduct
adjustment of derivatives to fair value
|
—
|
—
|
—
|
(256
|
)
|
||||||||
|
Deduct
revenue from prepayment penalty/administration fee
|
—
|
—
|
(4,059
|
)
|
—
|
||||||||
|
Add
back one-time interest refinancing expense
|
2,750
|
—
|
2,750
|
19,106
|
|||||||||
|
Add
back restricted stock amortization expense
|
285
|
837
|
1,141
|
1,115
|
|||||||||
|
Add
back non-cash preferred stock conversion/redemption charges
|
—
|
—
|
2,013
|
41,054
|
|||||||||
|
Add
back leasehold expiration expense
|
—
|
—
|
750
|
—
|
|||||||||
|
Add
back non-cash provision for impairments on real estate
properties
|
463
|
—
|
9,617
|
—
|
|||||||||
|
Add
back non-cash provision for impairments on equity securities
|
—
|
—
|
3,360
|
—
|
|||||||||
|
Add
back provisions for uncollectible mortgages, notes and accounts
receivable
|
—
|
—
|
83
|
—
|
|||||||||
|
Adjusted
funds from operations available to common
stockholders
|
$
|
14,474
|
$
|
11,483
|
$
|
54,954
|
$
|
42,137
|
|||||
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 generally accepted accounting principles
in
the United States of America. Pursuant to the requirements of Regulation G,
the
Company has provided reconciliations of the non-GAAP financial measures to
the
most directly comparable GAAP financial measures.
The
Company calculates and reports 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. The
Company believes that FFO is an important supplemental measure of its 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
its 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 its financial statements
in
analyzing its 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. Investors 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, the Company has applied this interpretation
and
has not excluded asset impairment charges in calculating its FFO. As a result,
its 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 the Company’s 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 2006:
|
2006
Projected FFO
|
||||||||||
|
Per
diluted share:
|
||||||||||
|
Net
income available to common stockholders
|
$
|
0.62
|
−
|
$
|
0.64
|
|||||
|
Adjustments:
|
||||||||||
|
Depreciation
and amortization
|
0.45
|
−
|
0.47
|
|||||||
|
Funds
from operations available to common stockholders
|
$
|
1.07
|
−
|
$
|
1.11
|
|||||
|
Adjustments:
|
||||||||||
|
Interest
expense - refinancing
|
0.01
|
−
|
0.01
|
|||||||
|
Restricted
stock expense
|
0.02
|
−
|
0.02
|
|||||||
|
Adjusted
funds from operations available to common
stockholders
|
$
|
1.10
|
−
|
$
|
1.14
|
|||||
The
following table summarizes the results of operations of facilities sold or
held
for sale during the three and twelve months ended December 31, 2005 and 2004,
respectively.
|
Three
Months Ended
|
Twelve
Months Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
(In
thousands)
|
(In
thousands)
|
||||||||||||
|
Revenues
|
|||||||||||||
|
Rental
income
|
$
|
375
|
$
|
1,491
|
$
|
3,808
|
$
|
5,643
|
|||||
|
Other
income
|
—
|
12
|
24
|
53
|
|||||||||
|
Subtotal
revenues
|
375
|
1,503
|
3,832
|
5,696
|
|||||||||
|
Expenses
|
|||||||||||||
|
Depreciation
and amortization
|
10
|
581
|
1,101
|
2,337
|
|||||||||
|
Subtotal
expenses
|
10
|
581
|
1,101
|
2,337
|
|||||||||
|
Income
before gain on sale of assets
|
365
|
922
|
2,731
|
3,359
|
|||||||||
|
Gain
on assets sold - net
|
11,460
|
3,798
|
7,969
|
3,310
|
|||||||||
|
Gain
from discontinued operations
|
$
|
11,825
|
$
|
4,720
|
$
|
10,700
|
$
|
6,669
|
|||||
The
following tables present selected portfolio information, including operator
and
geographic concentrations and revenue maturities, for the period ending December
31, 2005.
|
Portfolio
Composition ($000's)
|
||||||||||||||||
|
Balance
Sheet Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
||||||||||||
|
Real
Property*
|
193
|
21,548
|
$
|
996,877
|
91
|
%
|
||||||||||
|
Loans
Receivable
|
32
|
2,761
|
104,522
|
9
|
%
|
|||||||||||
|
Total
Investments
|
225
|
24,309
|
$
|
1,101,399
|
100
|
%
|
||||||||||
|
*
excludes two closed, held for sale facilities
|
||||||||||||||||
|
Investment
Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
Investment
per Bed
|
|
||||||||||
|
Skilled
Nursing Facilities
|
215
|
23,717
|
$
|
1,053,842
|
96
|
%
|
$
|
44
|
||||||||
|
Assisted
Living Facilities
|
8
|
422
|
24,122
|
2
|
%
|
57
|
||||||||||
|
Rehab
Hospitals
|
2
|
170
|
23,435
|
2
|
%
|
138
|
||||||||||
|
225
|
24,309
|
$
|
1,101,399
|
100
|
%
|
$
|
45
|
|||||||||
|
Revenue
Composition ($000's)
|
|||||||||||||
|
Revenue
by Investment Type
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||
|
December
31, 2005
|
December
31, 2005
|
||||||||||||
|
Rental
Property
|
$
|
24,525
|
90
|
%
|
$
|
92,387
|
91
|
%
|
|||||
|
Mortgage
Notes
|
2,110
|
8
|
%
|
6,527
|
7
|
%
|
|||||||
|
Other
Investment Income
|
661
|
2
|
%
|
2,439
|
2
|
%
|
|||||||
|
$
|
27,296
|
100
|
%
|
$
|
101,353
|
100
|
%
|
||||||
|
Revenue
by Facility Type
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||
|
December
31, 2005
|
December
31, 2005
|
||||||||||||
|
Assisted
Living Facilities
|
$
|
613
|
2
|
%
|
$
|
2,888
|
3
|
%
|
|||||
|
Skilled
Nursing Facilities
|
26,022
|
95
|
%
|
96,026
|
95
|
%
|
|||||||
|
Other
|
661
|
3
|
%
|
2,439
|
2
|
%
|
|||||||
|
$
|
27,296
|
100
|
%
|
$
|
101,353
|
100
|
%
|
||||||
|
Operator
Concentration ($000's)
|
|||||||||||||
|
Concentration
by Investment
|
#
of Properties
|
Investment
|
%
Investment
|
||||||||||
|
CommuniCare
|
19
|
$
|
192,024
|
17
|
%
|
||||||||
|
Sun
Healthcare Group, Inc.
|
33
|
161,451
|
15
|
%
|
|||||||||
|
Haven
|
15
|
117,230
|
11
|
%
|
|||||||||
|
Advocat,
Inc.
|
33
|
104,895
|
9
|
%
|
|||||||||
|
Guardian
|
16
|
80,129
|
7
|
%
|
|||||||||
|
Essex
|
13
|
79,354
|
7
|
%
|
|||||||||
|
Remaining
Operators
|
96
|
366,316
|
34
|
%
|
|||||||||
|
225
|
$
|
1,101,399
|
100
|
%
|
|||||||||
|
Geographic
Concentration ($000's)
|
|||||||||||||
|
Concentration
by Region
|
#
of Properties
|
Investment
|
%
Investment
|
||||||||||
|
South
|
88
|
$
|
379,572
|
34
|
%
|
||||||||
|
Midwest
|
71
|
346,196
|
32
|
%
|
|||||||||
|
Northeast
|
36
|
249,961
|
23
|
%
|
|||||||||
|
West
|
30
|
125,670
|
11
|
%
|
|||||||||
|
225
|
$
|
1,101,399
|
100
|
%
|
|||||||||
|
Concentration
by State
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||
|
Ohio
|
38
|
$
|
278,036
|
25
|
%
|
|||||
|
Florida
|
18
|
111,598
|
10
|
%
|
||||||
|
Pennsylvania
|
16
|
101,038
|
9
|
%
|
||||||
|
Texas
|
19
|
71,516
|
7
|
%
|
||||||
|
California
|
17
|
62,715
|
6
|
%
|
||||||
|
Remaining
States
|
117
|
476,496
|
43
|
%
|
||||||
|
225
|
$
|
1,101,399
|
100
|
%
|
||||||
|
Revenue
Maturities ($000's)
|
||||||||||||||||
|
Operating
Lease Expirations & Loan Maturities
|
Year
|
Current
Lease Revenue(1
|
)
|
Current
Interest Revenue(1
|
)
|
Lease
and Interest Revenue
|
|
%
|
||||||||
|
2006
|
$
|
1,260
|
$
|
2,288
|
$
|
3,548
|
3.0
|
%
|
||||||||
|
2007
|
374
|
145
|
519
|
0.4
|
%
|
|||||||||||
|
2008
|
1,024
|
-
|
1,024
|
0.9
|
%
|
|||||||||||
|
2009
|
199
|
-
|
199
|
0.2
|
%
|
|||||||||||
|
2010
|
23,735
|
1,498
|
25,233
|
21.1
|
%
|
|||||||||||
|
Thereafter
|
81,044
|
7,623
|
88,666
|
74.4
|
%
|
|||||||||||
|
$
|
107,636
|
$
|
11,554
|
$
|
119,189
|
100.0
|
%
|
|||||||||
|
Note:
(1) Based on '05 contractual rents & interest (no annual
escalators)
|
||||||||||||||||
|
Selected
Facility Data
|
||||||||||||||||
|
TTM
ending 9/30/05
|
Coverage
Data
|
|||||||||||||||
|
%
Payor Mix
|
Before
|
|
|
After
|
|
|||||||||||
|
|
|
|
Census
|
|
|
Private
|
|
|
Medicare
|
|
|
Mgmt.
Fees
|
|
|
Mgmt.
Fees
|
|
|
All
Healthcare Facilities
|
81.9
|
%
|
12.2
|
%
|
13.4
|
%
|
1.9
x
|
1.5
x
|
||||||||
The
following tables present selected financial information, including leverage
and
interest coverage ratios, as well as a debt maturity schedule for the period
ending December 31, 2005.
|
Current
Capitalization ($000's)
|
|||||||
|
Outstanding
Balance*
|
%
|
||||||
|
Borrowings
Under Bank Lines
|
$
|
58,000
|
6
|
%
|
|||
|
Long-Term
Debt Obligations
|
487,800
|
50
|
%
|
||||
|
Stockholder's
Equity
|
429,144
|
44
|
%
|
||||
|
Total
Book Capitalization
|
$
|
974,944
|
100
|
%
|
|||
|
Leverage
& Performance Ratios *
|
|||||||
|
Debt
/ Total Book Cap
|
56
|
%
|
|||||
|
Debt
/ Total Market Cap
|
40
|
%
|
|||||
|
Interest
Coverage:
|
|||||||
|
Fourth
quarter 2005
|
3.19
x
|
||||||
|
*
Excludes premiums/discounts from bond offerings, and reflects completed
tender/redemption of 6.95% 2007 bonds in December 2005.
|
|||||||
|
Debt
Maturities ($000's)
|
Secured
Debt
|
|||||||||||||||
|
Year
|
Lines
of Credit(1
|
)
|
Other
|
Senior
Notes *
|
Total
|
|||||||||||
|
2006
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
|
2007
|
-
|
-
|
-
|
-
|
||||||||||||
|
2008
|
-
|
-
|
-
|
-
|
||||||||||||
|
2009
|
200,000
|
-
|
-
|
200,000
|
||||||||||||
|
Thereafter
|
-
|
2,800
|
485,000
|
487,800
|
||||||||||||
|
$
|
200,000
|
$
|
2,800
|
$
|
485,000
|
$
|
687,800
|
|||||||||
|
Note:
(1) Reflected at 100% capacity.
|
||||||||||||||||
|
*Excludes
premiums/discounts from bond offerings, and reflects completed
tender/redemption of 6.95% 2007 bonds in December
2005.
|
||||||||||||||||
The
following table
presents investment activity for the three- and twelve-month periods ending
December 31, 2005.
|
Investment
Activity ($000's)
|
|||||||||||||
|
Three
Months Ended
|
Twelve
Months Ended
|
||||||||||||
|
December
31, 2005
|
December
31, 2005
|
||||||||||||
|
$
Amount
|
%
|
$
Amount
|
%
|
||||||||||
|
Funding
by Investment Type:
|
|||||||||||||
|
Real
Property
|
$
|
128,250
|
68
|
%
|
$
|
245,550
|
80
|
%
|
|||||
|
Mortgages
|
61,750
|
32
|
%
|
61,750
|
20
|
%
|
|||||||
|
Other
|
-
|
-
|
-
|
-
|
|||||||||
|
Total
|
$
|
190,000
|
100
|
%
|
$
|
307,300
|
100
|
%
|
|||||