8-K: Current report filing
Published on February 6, 2007
PRESS
RELEASE - FOR IMMEDIATE RELEASE
OMEGA
ANNOUNCES FOURTH QUARTER 2006 FINANCIAL RESULTS AND
ADJUSTED
FFO OF $0.32
PER SHARE FOR THE FOURTH QUARTER
TIMONIUM,
MARYLAND - February 6, 2007 -
Omega
Healthcare Investors, Inc. (NYSE:OHI) today announced its results of operations
for the quarter and fiscal year ended December 31, 2006. The Company also
reported Funds From Operations (“FFO”) available to common stockholders for the
three and twelve months ended December 31, 2006 of $19.2 million or $0.32 per
common share and $76.7 million or $1.31 per common share, respectively. The
$19.2 million of FFO available to common stockholders for the fourth quarter
includes a
$3.6
million non-cash gain on preferred stock and subordinated note investments,
$1.2
million of restatement related expenses,
a
non-cash $0.8 million provision for uncollectible accounts receivable, a $0.6
million non-cash decrease in the fair value of a derivative, a $0.6 million
provision for income taxes, a $0.4 million non-cash provision for impairment,
$0.3 million of non-cash restricted stock expense and $0.1 million in non-cash
accretion investment income. 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 was $0.32 per common
share for the three months ended December 31, 2006 and $1.24 for the twelve
months ended December 31, 2006. Adjusted FFO is a non-GAAP financial measure,
which excludes the impact for certain non-cash items, including: restricted
stock expense, changes in derivative fair values, gains on preferred stock
and
subordinated note investments, accretion investment income, a provision for
uncollectible accounts receivable, as well as, restatement related expenses
and
provision for income taxes. For more information regarding FFO and adjusted
FFO,
see “Funds From Operations” section below.
GAAP
NET INCOME
For
the
three-month period ended December 31, 2006, the Company reported net income
of
$13.4 million, net income available to common stockholders of $10.9 million,
or
$0.18 per diluted common share and operating revenues of $36.2 million. This
compares to net income of $21.0 million, net income available to common
stockholders of $18.5 million, or $0.34 per diluted common share, and operating
revenues of $28.4 million for the same period in 2005.
For
the
twelve-month period ended December 31, 2006, the Company reported net income
of
$55.7 million, net income available to common stockholders of $45.8 million,
or
$0.78 per diluted common share and operating revenues of $135.7 million. This
compares to net income of $38.8 million, net income available to common
stockholders of $25.4 million, or $0.49 per diluted common share, and operating
revenues of $109.6 million for the same period in 2005.
2006
HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
· On
August
1, 2006, the Company closed on $171 million of new investments yielding
10%.
| · |
In
August, the Company sold its common stock investment in Sun Healthcare
Group (“Sun”) for $7.6 million of cash
proceeds.
|
· On
September 1, 2006, the Company closed on $25.0 million of investments yielding
over 10%.
| · |
On
October 20, 2006, the Company restructured its relationship with
Advocat
that includes a rent increase of $0.7 million annually and a term
extension to September 30, 2018.
|
| · |
In
January 2007, the Company increased the quarterly common dividend
per
share by $0.01 to $0.26 per share.
|
FOURTH
QUARTER 2006 RESULTS
Operating
Revenues and Expenses
-
Operating revenues for the three months ended December 31, 2006 were $36.2
million. Operating expenses for the three months ended December 31, 2006 totaled
$13.0 million, comprised of $8.8 million of depreciation and amortization
expense, $3.1 million of general and administrative expenses, a non-cash
provision for uncollectible accounts receivable of $0.8 million and $0.3 million
of restricted stock expense.
General
and administrative expenses of $3.1 million include approximately $1.2 million
of professional fees related to the amendments filed on December 14, 2006 to
restate the Company’s Annual Report on Form 10-K for the year ended December 31,
2005 and its Quarterly Reports on Form 10-Q for the three-month periods ended
March 31, 2006 and June 30, 2006 (collectively, “Restatement”). For more
information regarding the Restatement, see the Company’s website, www.omegahealthcare.com,
and
click the “News Releases” or “SEC Filings” icon on the Company’s home
page.
Other
Income and Expense
- Other
income and expense for the three months ended December 31, 2006 was a net
expense of $9.4 million and was primarily comprised of $11.9 million of interest
expense, $0.4 million of non-cash interest expense, a $3.6 million gain
associated with investments in a preferred stock and subordinated note and
$0.6
million decrease in the fair value of a derivative.
Funds
From Operations
- For
the three months ended December 31, 2006, reportable FFO available to common
stockholders was $19.2 million, or $0.32 per common share, compared to $13.2
million, or $0.24 per common share, for the same period in 2005. The $19.2
million of FFO for the quarter includes a $3.6 million non-cash gain on
preferred stock and subordinated note investments, $1.2 million of restatement
related expenses, a non-cash $0.8 million provision for uncollectible accounts
receivable, a $0.6 million non-cash decrease in the fair value of a derivative,
a $0.6 million provision for income taxes, a $0.4 million non-cash provision
for
impairment, $0.3 million of non-cash restricted stock expense and $0.1 million
in non-cash accretion investment income.
The
$13.2
million of FFO for the three months ended December 31, 2005, includes $2.8
million of interest expense associated with the tender offer and purchase of
approximately 79.3% of the Company’s then $100 million aggregate principal
amount of notes due 2007 (“2007 Notes”), a $0.6 million provision for income
taxes, a $0.5 million non-cash provision for impairment charge, a $0.4 million
non-cash increase in the fair value of a derivative, $0.4 million in non-cash
accretion investment income, $0.3 million of non-cash restricted stock
amortization, a $0.3 million lease expiration accrual and $1.6 million of net
cash proceeds received from a legal settlement
When
excluding the above mentioned non-cash or non-recurring items in 2006 and 2005,
adjusted FFO was $19.4 million, or $0.32 per common share for the three months
ended December 31, 2006, compared to $15.2 million, or $0.28 per common share,
for the same period in 2005. For further information, see the attached “Funds
From Operations” schedule and notes.
2006
ANNUAL RESULTS
Operating
Revenues and Expenses
-
Operating revenues for the twelve months ended December 31, 2006 were $135.7
million. Operating expenses for the twelve months ended December 31, 2006
totaled $46.6 million, comprised of $32.1 million of depreciation and
amortization expense, $9.2 million of general and administrative expenses (which
includes $1.2 million of restatement related expenses), a non-cash provision
for
uncollectible accounts receivable of $0.8 million and $4.5 million of restricted
stock expense.
Other
Income and Expense
- Other
income and expense for the twelve months ended December 31, 2006 was a net
expense of $31.8 million and was primarily comprised of $42.2 million of
interest expense, $5.4 million of non-cash interest expense, a $2.7 million
gain
on the sale of Sun common stock, a $3.6 million gain associated with investments
in a preferred stock and subordinated note and a $9.1 million increase in the
fair value of a derivative.
Funds
From Operations
- For
the twelve months ended December 31, 2006, reportable FFO available to common
stockholders was $76.7 million, or $1.31 per common share, compared to $42.7
million, or $0.82 per common share, for the same period in 2005. The $76.7
million of FFO for the year includes $4.5 million of non-cash restricted stock
expense associated with the Company’s issuance of restricted stock and unit
grants to executive officers during 2004, $2.7 million of non-cash interest
expense relating to the write-off of deferred financing costs
associated with the termination of an old credit facility, $0.8
million of non-cash interest expense associated with the tender offer and
purchase of approximately 20.7% of the Company’s then remaining $100 million
aggregate principal amount of 2007 Notes, a $2.7 million accounting gain on
the
sale of an equity security, a $3.6 million non-cash gain on preferred stock
and
subordinated note investments, a $9.1 million non-cash increase in the fair
value of a derivative, $1.3 million of non-cash accretion investment income,
a
$2.3
million provision for income taxes, $1.2
million of restatement related expenses, a $0.5 million non-cash provision
for
impairment and a non-cash $0.9 million provision for uncollectible accounts
receivable.
The
$42.7
million of FFO for the twelve months ended December 31, 2005, includes a $9.6
million non-cash provision for impairment charges recorded throughout 2005,
a
$3.4 million non-cash provision for impairment on an equity security investment,
$2.8 million of interest expense associated with the tender offer and purchase
of approximately 79.3% of the Company’s then $100 million aggregate principal
amount of 2007 Notes, a $2.4 million provision for income taxes, a $2.0 million
non-cash preferred stock redemption charges, $1.1 million of non-cash restricted
stock amortization expense, a $1.1 million lease expiration accrual, a $0.1
million non-cash provision for uncollectible notes receivable, $1.6 million
of
non-cash accretion investment income, $1.6 million of net cash proceeds received
from a legal settlement; and $4.1 million of one-time interest revenue
associated with a payoff of a mortgage.
When
excluding the above mentioned non-cash or non-recurring items in 2006 and 2005,
adjusted FFO was $73.1 million, or $1.24 per common share for the twelve months
ended December 31, 2006, compared to $57.8 million, or $1.11 per common share,
for the same period in 2005. For further information, see the attached “Funds
From Operations” schedule and notes.
PORTFOLIO
DEVELOPMENTS
Advocat
Inc.
- As
previously reported, the Company restructured its relationship with Advocat
on
October 20, 2006 (the “Second Advocat Restructuring”) by entering into a
Restructuring Stock Issuance and Subscription Agreement with Advocat (the “2006
Advocat Agreement”). Pursuant to the 2006 Advocat Agreement, the Company
exchanged the Advocat Series B preferred stock and subordinated note issued
to
the Company in November 2000 in connection with a restructuring because Advocat
was in default on its obligations to the Company (the “Initial Advocat
Restructuring”) for 5,000 shares of Advocat’s Series C non-convertible,
redeemable (at the Company’s option after September 30, 2010) preferred stock
with a face value of approximately $4.9 million and a dividend rate of 7%
payable quarterly, and a secured non-convertible subordinated note in the amount
of $2.5 million maturing September 30, 2007 and bearing interest at 7% per
annum. As part of the Second Advocat Restructuring, the Company also amended
its
Consolidated Amended and Restated Master Lease by and between one of its
subsidiaries, as lessor, and a subsidiary of Advocat, as lessee, to commence
a
new 12-year lease term through September 30, 2018 (with a renewal option for
an
additional 12 year term) and Advocat has agreed to increase the master lease
annual rent by approximately $687,000 to approximately $14 million commencing
on
January 1, 2007.
The
Second Advocat Restructuring has been accounted for as a new lease in accordance
with FASB Statement No. 13, Accounting
for Leases
(“FAS
No. 13”) and FASB Technical Bulletin No. 88-1, Issues
Relating to Accounting for Leases
(“FASB
TB No. 88-1”). The fair value of the assets exchanged in the restructuring
(i.e., the Series B non-voting redeemable convertible preferred stock and the
secured convertible subordinated note, with a fair value of $14.9 million and
$2.5 million, respectively, at October 20, 2006) in excess of the fair value
of
the assets received (the Advocat Series C non-convertible redeemable preferred
stock and the secured non-convertible subordinated note, with a fair value
of
$4.1 million and $2.5 million, respectively, at October 20, 2006) have been
recorded as a lease inducement asset of approximately $10.8 million in the
fourth quarter of 2006. The $10.8 million lease inducement asset will
be
amortized as a reduction to rental income on a straight-line basis over the
term
of the new master lease. The exchange of securities also resulted in a gain
in
the fourth quarter of 2006 of approximately $3.0 million representing: (i)
the
fair value of the secured convertible subordinated note of $2.5 million,
previously reserved; (ii) the realization of the gain on investments previously
classified as other comprehensive income of approximately $1.1 million relating
to the Series
B
non-voting redeemable convertible preferred stock; and (iii) a loss of
approximately $0.6 million resulting from the change in the fair value of the
embedded derivative from September 30, 2006 to October 20, 2006.
Guardian
LTC Management, Inc.
- On
September 1, 2006, the Company completed a $25.0 million investment with
subsidiaries of Guardian LTC Management, Inc. (“Guardian”), an existing operator
of the Company. The transaction involved the purchase and leaseback of a skilled
nursing facility (“SNF”) in Pennsylvania and the termination of a purchase
option on a combination SNF and rehabilitation hospital in West Virginia owned
by the Company. The facilities were included in an existing master lease with
Guardian with an increase in contractual annual rent of approximately $2.6
million in the first year and the master lease now includes 17 facilities.
In
addition, the master lease term was extended from October 2014 through August
2016.
In
accordance with FAS No. 13 and FAS TB No. 88-1, $19.2 million of the $25.0
million transaction amount will be accounted for as a lease inducement asset
and
is classified within accounts receivable - net on the Company’s consolidated
balance sheet. The lease inducement will be amortized as a reduction to rental
income on a straight-line basis over the term of the new master lease. The
remaining payment to Guardian of $5.8 million will be allocated to the purchase
of the Pennsylvania SNF.
Sun
Healthcare Group, Inc. Common Stock - On
August
28, 2006, the Company sold its remaining 760,000 shares of Sun’s common stock
for net cash proceeds of approximately $7.6 million. The sale resulted in an
accounting gain of approximately $2.7 million during the third quarter of
2006.
Litchfield
Investment Company, LLC - On
August
1, 2006, the Company completed a transaction with Litchfield Investment Company,
LLC and its affiliates (“Litchfield”) to purchase 30 SNFs and one independent
living center for a total investment of approximately $171 million. The
facilities total 3,847 beds and are located in the states of Colorado (5),
Florida (7), Idaho (1), Louisiana (13), and Texas (5). The facilities were
subject to master leases with three national healthcare providers, which are
existing tenants of the Company. The tenants are Home Quality Management, Inc.
(“HQM”), Nexion Health, Inc. (“Nexion”), and Peak Medical Corporation, which was
acquired by Sun in December of 2005.
Simultaneously
with the close of the purchase transaction, the seven HQM facilities were
combined into an Amended and Restated Master Lease containing 13 facilities
between the Company and HQM. In addition, the 18 Nexion facilities were combined
into an Amended and Restated Master Lease containing 22 facilities between
the
Company and Nexion.
The
Company entered into a Master Lease, Assignment and Assumption Agreement with
Litchfield relating to the six Sun facilities which expires on September 30,
2007.
Other
- As
previously reported, during the three months ended March 31, 2006, Haven
Eldercare, LLC (“Haven”), an existing operator for the Company, entered into a
$39 million first mortgage loan with General Electric Capital Corporation (“GE
Loan”). Haven used the $39 million of proceeds to partially repay on a $62
million mortgage it has with the Company. Simultaneously, the Company
subordinated the payment of its remaining $23 million mortgage to that of the
GE
Loan. In conjunction with the above transactions and the application of
Financial Accounting Standards Board Interpretation No. 46R, Consolidation
of Variable Interest Entities,
or FIN
46R, the Company consolidated the financial statements and related real estate
of the Haven entity into the Company’s financial statements. The consolidation
resulted in the following changes to the Company’s consolidated balance sheet as
of December 31, 2006: (1) an increase in total gross investments of $39.0
million; (2) an increase in accumulated depreciation of $1.6 million; (3) an
increase in other long-term borrowings of $39.0 million; and (4) a reduction
of
$1.5 million in cumulative net earnings for the twelve months ended December
31,
2006 due to increased depreciation expense. General Electric Capital Corporation
and Haven’s other creditors do not have recourse to the Company’s assets. The
Company’s results of operations reflect the effect of the consolidation of this
entity, which is accounted for similarly to the Company’s other
purchase-leaseback transactions.
DIVIDENDS
Common
Dividends - On
January 16, 2007, the Company’s Board of Directors announced a common stock
dividend of $0.26 per share, to be paid February 15, 2007 to common stockholders
of record on January 31, 2007. At the date of this release, the Company had
approximately 60 million outstanding common shares.
Series
D Preferred Dividends - On
January 16, 2007, the Company’s Board of Directors declared its regular
quarterly dividend for the Series D preferred stock, payable February 15, 2007
to preferred stockholders of record on January 31, 2007. Series D preferred
stockholders of record on January 31, 2007 will be paid dividends in the
approximate amount of $0.52344 per preferred share, on February 15, 2007. The
liquidation preference for the Company’s Series D preferred stock is $25.00 per
share. Regular quarterly preferred dividends represent dividends for the period
November 1, 2006 through January 31, 2007.
2007
ADJUSTED FFO GUIDANCE AFFIRMED
The
Company affirmed its 2007 adjusted FFO available to common stockholders guidance
of between $1.32 and $1.36 per diluted share, as previously announced on
December 14, 2006.
The
Company's adjusted FFO guidance for 2007 excludes the future impacts of
acquisitions, gains and losses from the sale of assets, additional divestitures,
certain one-time revenue and expense items, capital transactions and restricted
stock amortization expense. A 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
adjusted 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 its projected
results.
ANNUAL
MEETING
The
Company's 2007 Annual Meeting of Stockholders will be held on Thursday, May
24,
2007, at 10:00 a.m., local time, at
the
Holiday Inn Select, Baltimore-North, 2004 Greenspring Drive, Timonium,
Maryland.
Stockholders of record as of the close of business on April 20, 2007 will be
entitled to receive notice of and to participate at the 2007 Annual Meeting
of
Stockholders.
CONFERENCE
CALL
The
Company will be conducting a conference call on Tuesday, February 6, 2007,
at 10
a.m. EDT to review the Company’s 2006 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, 2006, the Company owned or
held
mortgages on 239 SNFs and assisted living facilities with approximately 27,302
beds located in 27 states and operated by 32 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) the Company’s ability to maintain its status as a real estate investment
trust and to reach a closing agreement with the Internal Revenue Service with
respect to the related party tenant issues described in our Form 10-K/A filed
with the Securities and Exchange Commission on December 14, 2006 (“Form
10-K/A”), (viii) the impact of the material weakness identified in the
management’s report on internal control over financial reporting included in our
Form 10-K/A, including expenses that may be incurred in efforts to remediate
such weakness and potential additional costs in preparing and finalizing
financial statements in view of such material weakness; and (ix) 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.
OMEGA
HEALTHCARE INVESTORS, INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands)
|
December
31,
|
December
31,
|
||||||
|
2006
|
2005
|
||||||
|
(Unaudited)
|
(Audited)
|
||||||
|
ASSETS
|
|||||||
|
Real
estate properties
|
|||||||
|
Land
and buildings at cost
|
$
|
1,237,165
|
$
|
990,492
|
|||
|
Less
accumulated depreciation
|
(188,188
|
)
|
(156,198
|
)
|
|||
|
Real
estate properties - net
|
1,048,977
|
834,294
|
|||||
|
Mortgage
notes receivable - net
|
31,886
|
104,522
|
|||||
|
1,080,863
|
938,816
|
||||||
|
Other
investments - net
|
22,078
|
28,918
|
|||||
|
1,102,941
|
967,734
|
||||||
|
Assets
held for sale - net
|
3,568
|
5,821
|
|||||
|
Total
investments
|
1,106,509
|
973,555
|
|||||
|
Cash
and cash equivalents
|
729
|
3,948
|
|||||
|
Restricted
cash
|
4,117
|
5,752
|
|||||
|
Accounts
receivable - net
|
51,194
|
15,018
|
|||||
|
Other
assets
|
12,821
|
37,769
|
|||||
|
Total
assets
|
$
|
1,175,370
|
$
|
1,036,042
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Revolving
line of credit
|
$
|
150,000
|
$
|
58,000
|
|||
|
Unsecured
borrowings
|
485,000
|
505,682
|
|||||
|
Discount
on unsecured borrowings - net
|
(269
|
)
|
(253
|
)
|
|||
|
Other
long-term borrowings
|
41,410
|
2,800
|
|||||
|
Accrued
expenses and other liabilities
|
28,037
|
25,315
|
|||||
|
Income
tax liabilities
|
5,646
|
3,299
|
|||||
|
Operating
liabilities for owned properties
|
92
|
256
|
|||||
|
Total
liabilities
|
709,916
|
595,099
|
|||||
|
Stockholders’
equity:
|
|||||||
|
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
-
59,703 shares in 2006 and 56,872 shares in 2005
|
5,970
|
5,687
|
|||||
|
Common
stock and additional paid-in-capital
|
694,207
|
656,753
|
|||||
|
Cumulative
net earnings
|
292,766
|
237,069
|
|||||
|
Cumulative
dividends paid
|
(602,910
|
)
|
(536,041
|
)
|
|||
|
Cumulative
dividends - redemption
|
(43,067
|
)
|
(43,067
|
)
|
|||
|
Accumulated
other comprehensive income
|
—
|
2,054
|
|||||
|
Total
stockholders’ equity
|
465,454
|
440,943
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
1,175,370
|
$
|
1,036,042
|
|||
OMEGA
HEALTHCARE INVESTORS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Unaudited
(in
thousands, except per share amounts)
|
Three
Months Ended
|
Year
Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
Revenues
|
|||||||||||||
|
Rental
income
|
$
|
34,293
|
$
|
25,380
|
$
|
127,072
|
$
|
95,439
|
|||||
|
Mortgage
interest income
|
1,010
|
2,110
|
4,402
|
6,527
|
|||||||||
|
Other
investment income - net
|
809
|
855
|
3,687
|
3,219
|
|||||||||
|
Miscellaneous
|
49
|
6
|
532
|
4,459
|
|||||||||
|
Total
operating revenues
|
36,161
|
28,351
|
135,693
|
109,644
|
|||||||||
|
Expenses
|
|||||||||||||
|
Depreciation
and amortization
|
8,792
|
6,157
|
32,113
|
23,856
|
|||||||||
|
General
and administrative
|
3,120
|
1,832
|
9,227
|
7,447
|
|||||||||
|
Restricted
stock expense
|
293
|
285
|
4,517
|
1,140
|
|||||||||
|
Provision
for uncollectible mortgages, notes and accounts receivable
|
765
|
-
|
792
|
83
|
|||||||||
|
Leasehold
expiration expense
|
-
|
300
|
-
|
1,050
|
|||||||||
|
Total
operating expenses
|
12,970
|
8,574
|
46,649
|
33,576
|
|||||||||
|
Income
before other income and expense
|
23,191
|
19,777
|
89,044
|
76,068
|
|||||||||
|
Other
income (expense):
|
|||||||||||||
|
Interest
and other investment income
|
42
|
130
|
413
|
220
|
|||||||||
|
Interest
|
(11,928
|
)
|
(8,469
|
)
|
(42,174
|
)
|
(29,900
|
)
|
|||||
|
Interest
- amortization of deferred financing costs
|
(439
|
)
|
(551
|
)
|
(1,952
|
)
|
(2,121
|
)
|
|||||
|
Interest
- refinancing costs
|
-
|
(2,750
|
)
|
(3,485
|
)
|
(2,750
|
)
|
||||||
|
Litigation
settlements
|
-
|
1,599
|
-
|
1,599
|
|||||||||
|
Provision
for impairment on equity securities
|
-
|
-
|
-
|
(3,360
|
)
|
||||||||
|
Gain
on sale of equity securities
|
-
|
-
|
2,709
|
-
|
|||||||||
|
Gain
on investment restructuring
|
3,567
|
-
|
3,567
|
-
|
|||||||||
|
Change
in fair value of derivatives
|
(593
|
)
|
411
|
9,079
|
(16
|
)
|
|||||||
|
Total
other expense
|
(9,351
|
)
|
(9,630
|
)
|
(31,843
|
)
|
(36,328
|
)
|
|||||
|
Income
before gain on assets sold
|
13,840
|
10,147
|
57,201
|
39,740
|
|||||||||
|
Gain
from assets sold - net
|
-
|
-
|
1,188
|
-
|
|||||||||
|
Income
from continuing operations before income taxes
|
13,840
|
10,147
|
58,389
|
39,740
|
|||||||||
|
Provision
for income taxes
|
(608
|
)
|
(609
|
)
|
(2,347
|
)
|
(2,385
|
)
|
|||||
|
Income
from continuing operations
|
13,232
|
9,538
|
56,042
|
37,355
|
|||||||||
|
Gain
(loss) from discontinued operations
|
177
|
11,434
|
(345
|
)
|
1,398
|
||||||||
|
Net
income
|
13,409
|
20,972
|
55,697
|
38,753
|
|||||||||
|
Preferred
stock dividends
|
(2,481
|
)
|
(2,481
|
)
|
(9,923
|
)
|
(11,385
|
)
|
|||||
|
Preferred
stock conversion and redemption charges
|
-
|
-
|
-
|
(2,013
|
)
|
||||||||
|
Net
income available to common
|
$
|
10,928
|
$
|
18,491
|
$
|
45,774
|
$
|
25,355
|
|||||
|
Income
per common share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Income
from continuing operations
|
$
|
0.18
|
$
|
0.13
|
$
|
0.79
|
$
|
0.46
|
|||||
|
Net
income
|
$
|
0.18
|
$
|
0.34
|
$
|
0.78
|
$
|
0.49
|
|||||
|
Diluted:
|
|||||||||||||
|
Income
from continuing operations
|
$
|
0.18
|
$
|
0.13
|
$
|
0.79
|
$
|
0.46
|
|||||
|
Net
income
|
$
|
0.18
|
$
|
0.34
|
$
|
0.78
|
$
|
0.49
|
|||||
|
Dividends
declared and paid per common share
|
$
|
0.25
|
$
|
0.22
|
$
|
0.96
|
$
|
0.85
|
|||||
|
Weighted-average
shares outstanding, basic
|
59,980
|
53,780
|
58,651
|
51,738
|
|||||||||
|
Weighted-average
shares outstanding, diluted
|
60,109
|
54,055
|
58,745
|
52,059
|
|||||||||
|
Components
of other comprehensive income:
|
|||||||||||||
|
Net
income
|
$
|
13,409
|
$
|
20,972
|
$
|
55,697
|
$
|
38,753
|
|||||
|
Unrealized
gain (loss) on common stock investment
|
-
|
(570
|
)
|
1,580
|
1,384
|
||||||||
|
Reclassification
adjustment for gains on common stock investment
|
-
|
-
|
(1,740
|
)
|
-
|
||||||||
|
Reclassification
adjustment for gains on preferred stock investment
|
(1,091
|
)
|
-
|
(1,091
|
)
|
-
|
|||||||
|
Unrealized
loss on preferred stock investment
|
(40
|
)
|
(299
|
)
|
(803
|
)
|
(1,258
|
)
|
|||||
|
Total
comprehensive income
|
$
|
12,278
|
$
|
20,103
|
$
|
53,643
|
$
|
38,879
|
|||||
OMEGA
HEALTHCARE INVESTORS, INC.
FUNDS
FROM OPERATIONS
Unaudited
(In
thousands, except per share amounts)
|
Three
Months Ended
|
Year
Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
Net
income available to common stockholders
|
$
|
10,928
|
$
|
18,491
|
$
|
45,774
|
$
|
25,355
|
|||||
|
Deduct
gain from real estate dispositions(1)
|
(547
|
)
|
(11,460
|
)
|
(1,354
|
)
|
(7,969
|
)
|
|||||
|
Sub-total
|
10,381
|
7,031
|
44,420
|
17,386
|
|||||||||
|
Elimination
of non-cash items included in net income:
|
|||||||||||||
|
Depreciation
and amortization(1)
|
8,831
|
6,209
|
32,263
|
25,277
|
|||||||||
|
Funds
from operations available to common stockholders
|
$
|
19,212
|
$
|
13,240
|
$
|
76,683
|
$
|
42,663
|
|||||
|
Weighted-average
common shares outstanding, basic
|
59,980
|
53,780
|
58,651
|
51,738
|
|||||||||
|
Effect
of restricted stock awards
|
106
|
124
|
74
|
86
|
|||||||||
|
Assumed
exercise of stock options
|
23
|
151
|
20
|
235
|
|||||||||
|
Weighted-average
common shares outstanding, diluted
|
60,109
|
54,055
|
58,745
|
52,059
|
|||||||||
|
Fund
from operations per share available to common
stockholders
|
$
|
0.32
|
$
|
0.24
|
$
|
1.31
|
$
|
0.82
|
|||||
|
Adjusted
funds from operations:
|
|||||||||||||
|
Funds
from operations available to common stockholders
|
$
|
19,212
|
$
|
13,240
|
$
|
76,683
|
$
|
42,663
|
|||||
|
Deduct/add
non-cash (increase) decrease in fair value of Advocat
derivative
|
593
|
(411
|
)
|
(9,079
|
)
|
16
|
|||||||
|
Deduct
Advocat non-cash gain on investment restructuring
|
(3,567
|
)
|
—
|
(3,567
|
)
|
—
|
|||||||
|
Deduct
Advocat non-cash accretion investment income
|
(125
|
)
|
(411
|
)
|
(1,280
|
)
|
(1,636
|
)
|
|||||
|
Deduct
gain from sale of Sun common stock
|
—
|
—
|
(2,709
|
)
|
—
|
||||||||
|
Deduct
legal settlements
|
—
|
(1,599
|
)
|
—
|
(1,599
|
)
|
|||||||
|
Deduct
prepayment penalty/administration fee
|
—
|
—
|
—
|
(4,059
|
)
|
||||||||
|
Add
back restatement related expenses
|
1,234
|
—
|
1,234
|
—
|
|||||||||
|
Add
back non-cash provisions for uncollectible mortgages, notes and accounts
receivable
|
765
|
—
|
944
|
83
|
|||||||||
|
Add
back non-cash provision for income taxes
|
608
|
609
|
2,347
|
2,385
|
|||||||||
|
Add
back non-cash provision for impairments on real estate
properties(1)
|
420
|
463
|
541
|
9,617
|
|||||||||
|
Add
back non-cash restricted stock expense
|
293
|
285
|
4,517
|
1,140
|
|||||||||
|
Add
back one-time non-cash interest refinancing expense
|
—
|
2,750
|
3,485
|
2,750
|
|||||||||
|
Add
back non-cash provision for impairments on equity securities
|
—
|
—
|
—
|
3,360
|
|||||||||
|
Add
back non-cash preferred stock conversion/redemption charges
|
—
|
—
|
—
|
2,013
|
|||||||||
|
Add
back leasehold expiration expense
|
—
|
300
|
—
|
1,050
|
|||||||||
|
Adjusted
funds from operations available to common
stockholders
|
$
|
19,433
|
$
|
15,226
|
$
|
73,116
|
$
|
57,783
|
|||||
(1)
Includes
amounts in discontinued operations
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 per share 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 the 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 reconciliation of our guidance regarding 2007 FFO
and
Adjusted FFO to net income available to common stockholders:
|
2007
Projected
|
||||||||||
|
Per
diluted share:
|
||||||||||
|
Net
income available to common stockholders
|
$
|
0.76
|
−
|
$
|
0.80
|
|||||
|
Adjustments:
|
||||||||||
|
Depreciation
and amortization
|
0.56
|
−
|
0.56
|
|||||||
|
Funds
from operations available to common stockholders
|
$
|
1.32
|
−
|
$
|
1.36
|
|||||
|
Adjustments:
|
||||||||||
|
Restricted stock expense
|
0.00
|
−
|
0.00
|
|||||||
|
Adjusted
funds from operations available to common
stockholders
|
$
|
1.32
|
−
|
$
|
1.36
|
|||||
The
following table summarizes the results of operations of assets held for sale
and
facilities sold during the three and twelve months ended December 31, 2006
and
2005, respectively.
|
Three
Months Ended
|
Twelve
Months Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
(In
thousands)
|
|||||||||||||
|
Revenues
|
|||||||||||||
|
Rental
income
|
$
|
95
|
$
|
489
|
$
|
372
|
$
|
4,443
|
|||||
|
Other
income
|
—
|
—
|
—
|
24
|
|||||||||
|
Subtotal
revenues
|
95
|
489
|
372
|
4,467
|
|||||||||
|
Expenses
|
|||||||||||||
|
Depreciation
and amortization
|
39
|
52
|
150
|
1,421
|
|||||||||
|
General
and administrative
|
6
|
—
|
40
|
—
|
|||||||||
|
Provision
for uncollectible accounts receivable
|
—
|
—
|
152
|
—
|
|||||||||
|
Provision
for impairment
|
420
|
463
|
541
|
9,617
|
|||||||||
|
Subtotal
expenses
|
465
|
515
|
883
|
11,038
|
|||||||||
|
Loss
before gain on sale of assets
|
(370
|
)
|
(26
|
)
|
(511
|
)
|
(6,571
|
)
|
|||||
|
Gain
on assets sold - net
|
547
|
11,460
|
166
|
7,969
|
|||||||||
|
Gain
(loss) from discontinued operations
|
$
|
177
|
$
|
11,434
|
$
|
(345
|
)
|
$
|
1,398
|
||||
The
following tables present selected portfolio information, including operator
and
geographic concentrations, and revenue maturities for the period ending December
31, 2006.
|
Portfolio
Composition ($000's)
|
||||||||||||||||
|
Balance
Sheet Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
||||||||||||
|
Real
Property(1)(2)
|
224
|
25,828
|
$
|
1,256,365
|
97
|
%
|
||||||||||
|
Loans
Receivable(3)
|
9
|
1,120
|
33,298
|
3
|
%
|
|||||||||||
|
Total
Investments
|
233
|
26,948
|
$
|
1,289,663
|
100
|
%
|
||||||||||
|
Investment
Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
Investment
per Bed
|
|||||||||||
|
Skilled
Nursing Facilities (1)(3)
|
225
|
26,362
|
$
|
1,235,852
|
96
|
%
|
$
|
47
|
||||||||
|
Assisted
Living Facilities
|
6
|
416
|
30,377
|
2
|
%
|
73
|
||||||||||
|
Rehab
Hospitals
|
2
|
170
|
23,434
|
2
|
%
|
138
|
||||||||||
|
233
|
26,948
|
$
|
1,289,663
|
100
|
%
|
$
|
48
|
|||||||||
|
(1)
Excludes six held for sale facilities and includes $19.2 million
for lease
inducement.
(2)
Includes 7 buildings worth $61.8 million resulting from FIN 46
Consolidation.
(3)
Includes $1.4 million of unamortized principal.
|
||||||||||||||||
|
Revenue
Composition ($000's)
|
|||||||||||||
|
Revenue
by Investment Type
|
Three
Months Ended
|
Year
Ended
|
|||||||||||
|
December
31, 2006
|
December
31, 2006
|
||||||||||||
|
Rental
Property (1)
|
$
|
34,293
|
95
|
%
|
$
|
127,072
|
94
|
%
|
|||||
|
Mortgage
Notes
|
1,010
|
3
|
%
|
4,402
|
3
|
%
|
|||||||
|
Other
Investment Income
|
809
|
2
|
%
|
3,687
|
3
|
%
|
|||||||
|
$
|
36,112
|
100
|
%
|
$
|
135,161
|
100
|
%
|
||||||
|
Revenue
by Facility Type
|
Three
Months Ended
|
Year
Ended
|
|||||||||||
|
|
December
31, 2006
|
December
31, 2006
|
|||||||||||
|
Assisted
Living Facilities
|
$
|
573
|
2
|
%
|
$
|
1,900
|
1
|
%
|
|||||
|
Skilled
Nursing Facilities (1)
|
34,730
|
96
|
%
|
129,574
|
96
|
%
|
|||||||
|
Other
|
809
|
2
|
%
|
3,687
|
3
|
%
|
|||||||
|
$
|
36,112
|
100
|
%
|
$
|
135,161
|
100
|
%
|
||||||
|
(1)
Revenue includes $0.7 million and $0.9 million reduction for lease
inducements for the three and twelve months,
respectively.
|
|||||||||||||
|
Operator
Concentration ($000's)
|
||||||||||
|
Concentration
by Investment
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||
|
Sun
Healthcare Group, Inc.
|
38
|
$
|
210,222
|
16
|
%
|
|||||
|
Communicare.
|
19
|
192,274
|
15
|
%
|
||||||
|
Haven
|
15
|
117,230
|
9
|
%
|
||||||
|
Advocat,
Inc.
|
32
|
107,019
|
8
|
%
|
||||||
|
Guardian
(1)
|
17
|
105,181
|
8
|
%
|
||||||
|
HQM
|
13
|
98,369
|
8
|
%
|
||||||
|
Remaining
Operators
|
99
|
459,368
|
36
|
%
|
||||||
|
233
|
$
|
1,289,663
|
100
|
%
|
||||||
|
(1)
Investment amount includes a $19.2 million lease
inducement.
|
||||||||||
|
Geographic
Concentration ($000's)
|
||||||||||
|
Concentration
by Region
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||
|
South
(1)
|
109
|
$
|
517,655
|
40
|
%
|
|||||
|
Midwest
|
53
|
336,119
|
26
|
%
|
||||||
|
Northeast
|
37
|
262,872
|
20
|
%
|
||||||
|
West
|
34
|
173,017
|
14
|
%
|
||||||
|
233
|
$
|
1,289,663
|
100
|
%
|
||||||
|
Concentration
by State
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||
|
Ohio
|
37
|
$
|
278,253
|
22
|
%
|
|||||
|
Florida
|
25
|
173,441
|
13
|
%
|
||||||
|
Pennsylvania
|
17
|
110,123
|
9
|
%
|
||||||
|
Texas
|
21
|
82,826
|
6
|
%
|
||||||
|
California
|
15
|
60,665
|
5
|
%
|
||||||
|
Remaining
States (1)
|
118
|
584,355
|
45
|
%
|
||||||
|
233
|
$
|
1,289,663
|
100
|
%
|
||||||
|
(1)
Investment amount includes $19.2 million for a lease
inducement.
|
||||||||||
|
Revenue
Maturities ($000's)
|
||||||||||||||||
|
Operating
Lease Expirations & Loan Maturities
|
Year
|
Current
Lease Revenue(1
|
)
|
Current
Interest Revenue(1
|
)
|
Lease
and Interest Revenue
|
|
%
|
||||||||
|
2007
|
3,510
|
-
|
3,510
|
3
|
%
|
|||||||||||
|
2008
|
1,071
|
-
|
1,071
|
1
|
%
|
|||||||||||
|
2009
|
-
|
-
|
-
|
0
|
%
|
|||||||||||
|
2010
|
11,210
|
1,445
|
12,654
|
9
|
%
|
|||||||||||
|
2011
|
11,500
|
218
|
11,718
|
8
|
%
|
|||||||||||
|
Thereafter
|
109,930
|
2,133
|
112,064
|
79
|
%
|
|||||||||||
|
$
|
137,220
|
$
|
3,796
|
$
|
141,057
|
100
|
%
|
|||||||||
|
Note:
(1) Based on 2006 contractual rents and interest (assumes no annual
escalators)
|
||||||||||||||||
|
Selected
Facility Data
|
||||||||||||||||
|
TTM
ending 9/30/06
|
Coverage
Data
|
|||||||||||||||
|
|
%
Payor Mix
|
Before
|
After
|
|||||||||||||
|
Census
|
Private
|
Medicare
|
Mgmt.
Fees
|
Mgmt.
Fees
|
||||||||||||
|
All
Healthcare Facilities
|
82.4
|
%
|
11.8
|
%
|
14.0
|
%
|
2.1
x
|
1.6
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, 2006.
|
Current
Capitalization ($000's)
|
||||||
|
Outstanding
Balance
|
%
|
|||||
|
Borrowings
Under Bank Lines
|
$ 150,000
|
13.1%
|
||||
|
Long-Term
Debt Obligations (1)
|
526,410
|
46.1%
|
||||
|
Stockholder's
Equity
|
465,454
|
40.8%
|
||||
|
Total
Book Capitalization
|
$ 1,141,864
|
100.0%
|
||||
|
(1)
Excludes net discount of $0.3 million on unsecured borrowings. Includes
$39.0 million of additional debt due to required consolidation of
Haven
real estate entity per FASB Interpretation No. 46R.
|
||||||
|
Leverage
& Performance Ratios
|
||||||
|
Debt
/ Total Book Cap
|
59.2%
|
|||||
|
Debt
/ Total Market Cap
|
36.3%
|
|||||
|
Interest
Coverage:
|
||||||
|
4th
quarter 2006
|
2.69
x
|
|||||
|
Debt
Maturities ($000's)
|
Secured
Debt
|
||||||||||||||||||
|
Year
|
Lines
of Credit (1)
|
Haven
FIN-46 Consolidation
|
Other
|
Senior
Notes
|
Total
|
||||||||||||||
|
2007
|
$
|
-
|
$
|
-
|
$
|
415
|
$
|
-
|
$
|
415
|
|||||||||
|
2008
|
-
|
-
|
435
|
-
|
435
|
||||||||||||||
|
2009
|
-
|
-
|
465
|
-
|
465
|
||||||||||||||
|
2010
|
200,000
|
-
|
495
|
-
|
200,495
|
||||||||||||||
|
Thereafter
|
-
|
39,000
|
600
|
485,000
|
524,600
|
||||||||||||||
|
$
|
200,000
|
$
|
39,000
|
$
|
2,410
|
$
|
485,000
|
$
|
726,410
|
||||||||||
|
Note:
(1) Reflected at 100% capacity.
|
|||||||||||||||||||
The
following table presents investment activity for the three- and twelve-month
periods ending December 31, 2006.
|
Investment
Activity ($000's)
|
||||||
|
Three
Months Ended
|
Year
Ended
|
|||||
|
December
31, 2006
|
December
31, 2006
|
|||||
|
$
Amount
|
%
|
$
Amount
|
%
|
|||
|
Funding
by Investment Type:
|
||||||
|
Real
Property (1)
|
$ -
|
0%
|
$ 196,000,000
|
100%
|
||
|
Mortgages
|
-
|
0%
|
-
|
0%
|
||
|
Other
|
-
|
0%
|
-
|
0%
|
||
|
Total
|
$ -
|
0%
|
$ 196,000,000
|
100%
|
||
|
(1)
Investment amount includes a $19.2 M lease
inducement.
|
||||||