8-K: Current report filing
Published on August 7, 2008
PRESS
RELEASE – FOR IMMEDIATE RELEASE
OMEGA
ANNOUNCES SECOND QUARTER 2008 FINANCIAL RESULTS AND SECOND QUARTER ADJUSTED FFO
OF $0.38 PER SHARE
TIMONIUM, MARYLAND – August 7, 2008
– Omega Healthcare Investors, Inc. (NYSE:OHI) today announced its results
of operations for the quarter ended June 30, 2008. The Company also
reported Funds From Operations (“FFO”) available to common stockholders for the
three months ended June 30, 2008 of $24.4 million or $0.33 per common
share. The $24.4 million of FFO available to common stockholders for
the second quarter includes a $4.3 million expense for uncollectible accounts
receivable, $0.7 million of miscellaneous cash revenue, $0.5 million of one-time
net cash inflow associated with a legal settlement, $0.5 million of non-cash
restricted stock expense and $45 thousand of non-cash consolidation adjustments
due to Financial Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest
Entities (“FIN 46R”). 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 $0.38 per common share for the three months ended June 30,
2008. Adjusted FFO is a non-GAAP financial measure, which excludes
the impact of certain non-cash items and certain items of revenue or expenses,
including: a non-cash provision for impairment, settlement of prior operator’s
past due obligation, FIN 46R consolidation adjustments and restricted stock
expense. For more information regarding FFO and adjusted FFO, see the
“Funds From Operations” section below.
GAAP NET
INCOME
For the
three-month period ended June 30, 2008, the Company reported net income of $17.1
million, net income available to common stockholders of $14.6 million, or $0.20
per diluted common share and operating revenues of $43.7
million. This compares to net income of $16.1 million, net income
available to common stockholders of $13.6 million, or $0.20 per diluted common
share, and operating revenues of $38.1 million for the same period in
2007.
For the
six-month period ended June 30, 2008, the Company reported net income of $34.4
million, net income available to common stockholders of $29.4 million, or $0.41
per diluted common share and operating revenues of $84.6
million. This compares to net income of $36.7 million, net income
available to common stockholders of $31.7 million, or $0.50 per diluted common
share, and operating revenues of $80.7 million for the same period in
2007.
The
decreases in net income and net income available to common stockholders for the
six-month period ended June 30, 2008 compared to the prior year were primarily
due to the impact of a $4.3 million expense for uncollectible accounts
receivable and a $1.5 million provision for impairment charge both recorded in
2008, and the impact of an allowance adjustment of $5.0 million with respect to
straight-line rent recognition recorded in the first quarter of 2007; the impact
was partially offset by revenue associated with $168 million of new investments
completed since the second quarter of 2007.
SECOND QUARTER 2008
HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
|
·
|
On
August 6, 2008, the Company entered into an agreement with affiliates of
Formation Capital to lease 15 facilities formerly leased to Haven
Eldercare (“Haven”). The Company had taken ownership and/or
possession of these facilities as of July 7,
2008.
|
|
·
|
On
July 16, 2008, the Company declared the quarterly common dividend of $0.30
per share.
|
|
·
|
On
July 1, 2008, the Company sold two rehabilitation hospitals generating
cash proceeds of approximately $29.0
million.
|
|
·
|
On
June 25, 2008, a federal jury awarded damages to Omega of approximately $6
million for a former tenant's breach of a lease. Post trial motions and
appeals are expected.
|
|
·
|
On
May 6, 2008, the Company completed a 5.9 million common share direct
placement generating net cash proceeds of approximately $99
million.
|
|
·
|
In
April 2008, the Company closed on $123 million of new investments yielding
approximately 10.5% annually.
|
SECOND QUARTER 2008
RESULTS
Operating
Revenues and Expenses – Operating revenues for the three months ended
June 30, 2008 were $43.7 million. The $43.7 million included
collection of approximately $0.7 million associated with late fees and default
interest from Haven. Operating expenses for the three months ended
June 30, 2008 totaled $17.0 million, comprised of $9.7 million of depreciation
and amortization expense, $2.4 million of general and administrative expenses, a
$4.3 million expense for uncollectible accounts receivable and $0.5 million of
restricted stock expense.
The $4.3
million expense for uncollectible accounts receivable was associated with
Haven. The expense consisted of $3.3 million associated with
straight-line receivables and $1.0 million in pre-petition contractual
receivables.
Other Income and
Expense – Other income and expense for the three months ended June 30,
2008 was a net expense of $9.7 million; comprised primarily of $9.7 million of
interest expense, $0.5 million of amortization of deferred financing costs
offset by $0.5 million of net cash proceeds received from a legal
settlement.
Funds From
Operations – For the three months ended June 30, 2008, reportable FFO
available to common stockholders was $24.4 million, or $0.33 per common share,
compared to $22.4 million, or $0.33 per common share, for the same period in
2007. The $24.4 million of FFO for the quarter includes the impact
of: i) a $4.3 million non-cash expense for uncollectible accounts receivable;
ii) $0.7 million one-time cash revenue; iii) $0.5 million of net cash proceeds
received from a legal settlement; iv) $0.5 million of non-cash restricted stock
expense; and v) $45,000 of non-cash FIN 46R consolidation
adjustments.
The $22.4
million of FFO for the three months ended June 30, 2007, includes i) $0.3
million of non-cash restricted stock expense, and ii) $0.1 million of non-cash
FIN 46R consolidation adjustments.
When
excluding the above mentioned items in 2008 and 2007, adjusted FFO was $27.9
million, or $0.38 per common share, for the three months ended June 30, 2008,
compared to $22.6 million, or $0.34 per common share, for the same period in
2007. For further information, see the attached “Funds From
Operations” schedule and notes.
FINANCING
ACTIVITIES
5.9 Million
Common Share Offering –
On May 6, 2008, the Company issued 5,906,674 shares of its common stock
in a registered direct offering at a purchase price of $16.93 per share with
certain institutional investors. The Company’s total net proceeds
from the offering were approximately $98.8 million, after deducting the
placement agent’s fee and other offering expenses. The Company used
all of the proceeds to repay indebtedness outstanding under its senior credit
facility.
PORTFOLIO
DEVELOPMENTS
Acquisition and
Transition of Former Haven Operating Assets – Since November 2007,
affiliates of Haven have operated under Chapter 11 bankruptcy
protection. Commencing in February 2008, the assets of Haven were
marketed for sale via an auction process conducted through proceedings
established by the bankruptcy court. The auction process failed to
produce a qualified buyer. As a result, and pursuant to our rights as
ordered by the bankruptcy court, Haven moved the bankruptcy court to authorize
the Company to credit bid certain of the indebtedness that Haven owed to the
Company in exchange for taking ownership of and transitioning certain of the
assets of Haven to a new entity in which we have a substantial ownership
interest, all of which was approved by the bankruptcy court on July 4,
2008. Effective as of July 7, 2008, the Company took ownership and/or
possession of its 15 facilities and a new operator assumed operations of the
facilities.
On August
6, 2008, subsidiaries of the Company entered into a Master Transaction Agreement
(“MTA”) with affiliates of Formation Capital (“Formation”) whereby Formation has
agreed (subject to certain closing conditions, including the receipt of
licensure) to lease 14 skilled nursing facilities and one assisted living
facility under a Master Lease. These facilities were formerly leased
to Haven. The facilities are located in Connecticut (5), Rhode Island
(4), New Hampshire (3), Vermont (2) and Massachusetts (1). As part of
the transaction, Formation intends to enter into a Management Agreement with
Genesis Healthcare (“Genesis”).
Genesis
is a leading healthcare provider with more than 200 skilled nursing centers and
assisted living communities in 13 eastern states, including each of the five
states in which these facilities are located. Formation Capital is an
experienced equity investor in the senior housing industry with economic
interest in more than 300 healthcare facilities.
The lease
has an initial term of 10 years with initial annual rent of approximately $12
million. In addition, Formation has an option after the initial 12
months of the lease to convert eight (8) of the leased facilities into mortgaged
properties, with economic terms substantially similar to that of the original
lease.
The
transaction is expected to close on or about September 1, 2008 subject to the
closing conditions under the MTA.
CommuniCare
Health Services – On April 18, 2008, the Company completed approximately
$123 million of combined new investments with affiliates of CommuniCare Heath
Services (“CommuniCare”), an existing operator. Effective April 18,
2008, the Company purchased from several unrelated third parties seven (7) SNFs,
one (1) assisted living facility and one (1) rehabilitation hospital, all
located in Ohio, totaling 709 beds for a total investment of $48
million. The facilities were added into an existing master lease
(“Master Lease”) with CommuniCare. Annualized cash rent increasing by
approximately $4.7 million, subject to annual escalators, and two ten-year
renewal options. The term of the Master Lease was extended to April
30, 2018.
Also on
April 18, 2008, and simultaneous with the close of the amended CommuniCare
Master Lease, the Company entered into a first mortgage loan with CommuniCare in
the amount of $74.9 million (the “Loan”). The Loan matures on April
30, 2018 and carries an interest rate of 11% per year. CommuniCare used the
proceeds of the Loan to acquire seven (7) SNFs located in Maryland, totaling 965
beds from several unrelated third parties. The Loan is secured by a
lien on the seven (7) facilities. At the closing, $4.9 million of
Loan proceeds were escrowed pending the acquisition of an additional 90 bed SNF,
also located in Maryland. The loan proceeds held in escrow are
included in Other assets as of June 30, 2008. The facility will be
acquired by CommuniCare within eight months upon the satisfaction of certain
contingencies, including the granting of a lien on such facility to secure the
Loan. If the additional facility in not acquired, CommuniCare will be
obligated to re-pay the $4.9 million of escrowed Loan proceeds.
Sun Healthcare
Group, Inc. – On
February 1, 2008, the Company amended our master lease with Sun Healthcare
Group, Inc. and certain of its affiliates (“Sun”) primarily to: (i) consolidate
three existing master leases into one master lease; (ii) extend the lease terms
of the agreement through September 2017 for facilities acquired in August 2006;
and (iii) allow for the sale of two rehabilitation hospitals currently operated
by Sun. As of June 30, 2008, these facilities had a net book value of
$16.4 million and were included in assets held for sale. On July 1,
2008, the two rehabilitation hospitals were sold for approximately $29.0
million. As a result of the sale, contractual rent will decrease by
$1.7 million annually beginning July 1, 2008.
Advocat Inc.
– During
the first quarter of 2008, the Company amended its master lease with Advocat
Inc. (“Advocat”) to allow for the construction of a new facility to replace an
existing facility currently operated by Advocat. Upon completion
(estimated to be in mid-2009), Advocat’s annual cash rent will increase by
approximately $0.7 million. As a result of the Company’s plans to
replace an existing facility, the Company recorded a $1.5 million provision for
impairment loss during the first quarter of 2008.
Other – On
June 25, 2008, a federal jury in Indianapolis awarded damages in the amount of
$6,024,000 to Omega against a former tenant of a Kentucky ICF/MR that was
decertified and closed by the tenant in 1999 in violation of lease
terms. Liability had been determined in a 2006 appeal, so the June
25th
trial was to determine damages. Post trial Motions are pending to add
prejudgment interest and attorney fees to the judgment. An appeal is
expected by the defendant that could delay final resolution of the
case. Since this award represents a contingent gain, it will not be
recorded in the Company’s financial statements until the award is
received.
FIN 46R
Consolidation – In
January 2008, the Company purchased from General Electric Capital Corporation
(“GE Capital”) a $39.0 million mortgage loan on seven facilities operated by
Haven due October 2012. Prior to the acquisition of this mortgage,
the Company had a $22.8 million second mortgage on these facilities, resulting
in a combined $61.8 million mortgage on these facilities immediately following
the purchase from GE Capital. In conjunction with the above noted
mortgage and purchase option and the application of FIN 46R, the Company has
historically and continues to consolidate the financial statements and real
estate of the Haven entity into its financial statements. The
Company’s results of operations reflect the impact of the consolidation of the
Haven entity for the three- and six- month periods ended June 30, 2008 and 2007,
respectively.
DIVIDENDS
Common Dividends
– On July 16, 2008, the Company’s Board of Directors declared a common
stock dividend of $0.30 per share to be paid August 15, 2008 to common
stockholders of record on July 31, 2008. At the date of this release,
the Company had approximately 75.7 million outstanding shares of common
stock.
Series D
Preferred Dividends –
On July 16, 2008, the Company’s Board of Directors declared the regular
quarterly dividends for the Company’s 8.375% Series D Cumulative Redeemable
Preferred Stock (“Series D Preferred Stock”) to stockholders of record on July
31, 2008. The stockholders of record of the Series D Preferred Stock
on July 31, 2008 will be paid dividends in the amount of $0.52344 per preferred
share on August 15, 2008. 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, 2008 through July 31, 2008.
2008 ADJUSTED FFO GUIDANCE
WITHDRAWN
Due to
the difficulty in projecting the operating results of the Haven portfolio, the
Company has withdrawn its previous 2008 adjusted FFO available to common
stockholders guidance range of $1.49 to $1.55 per common
share. Assuming the Formation transaction closes during the third
quarter, the Company projects fourth quarter 2008 adjusted FFO of $0.37 to $0.38
per common share.
The
Company's adjusted FFO guidance for the fourth quarter of 2008 excludes the
impacts of future acquisitions, gains and losses from the sale of assets,
additional divestitures, certain 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. Without limiting the generality of the
foregoing, the completion of acquisitions, divestitures, capital and financing
transactions, variations in restricted stock amortization expense, and the
factors identified under the factors identified below may cause actual results
to vary materially from our current expectations. There can be no assurance that
the Company will achieve its projected results.
CONFERENCE
CALL
The
Company will be conducting a conference call on Thursday, August 7, 2008, at 10
a.m. EDT to review the Company’s 2008 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, 2008, the Company owned
or held mortgages on 252 SNFs and assisted living facilities with approximately
28,794 beds located in 29 states and operated by 26 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) the Company’s ability to maintain
its credit ratings; (vii) competition in the financing of healthcare facilities;
(viii) the Company’s ability to maintain its status as a real estate investment
trust; (ix) the Company’s ability to manage, re-lease or sell any
owned and operated facilities; (x) the Company’s ability to sell closed or
foreclosed assets on a timely basis and on terms that that allow the Company to
realize the carrying value of these assets; (xi) the effect of economic and
market conditions generally, and particularly in the healthcare finance
industry; and (xii) 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)
|
June
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Real
estate properties
|
||||||||
|
Land and
buildings
|
$ | 1,309,422 | $ | 1,274,722 | ||||
|
Less accumulated
depreciation
|
(232,625 | ) | (221,366 | ) | ||||
|
Real estate properties –
net
|
1,076,797 | 1,053,356 | ||||||
|
Mortgage notes receivable –
net
|
101,343 | 31,689 | ||||||
| 1,178,140 | 1,085,045 | |||||||
|
Other
investments – net
|
20,843 | 13,683 | ||||||
| 1,198,983 | 1,098,728 | |||||||
|
Assets
held for sale – net
|
17,380 | 2,870 | ||||||
|
Total
investments
|
1,216,363 | 1,101,598 | ||||||
|
Cash
and cash equivalents
|
2,165 | 1,979 | ||||||
|
Restricted
cash
|
5,091 | 2,104 | ||||||
|
Accounts
receivable – net
|
66,167 | 64,992 | ||||||
|
Other
assets
|
16,956 | 11,614 | ||||||
|
Total assets
|
$ | 1,306,742 | $ | 1,182,287 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Revolving
line of credit
|
$ | 102,000 | $ | 48,000 | ||||
|
Unsecured
borrowings – net
|
485,000 | 485,000 | ||||||
|
Discount
on unsecured borrowings – net
|
(294 | ) | (286 | ) | ||||
|
Other
long–term borrowings
|
1,995 | 40,995 | ||||||
|
Accrued
expenses and other liabilities
|
25,100 | 22,378 | ||||||
|
Income
tax liabilities
|
73 | 73 | ||||||
|
Total
liabilities
|
613,874 | 596,160 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Preferred
stock
|
118,488 | 118,488 | ||||||
|
Common
stock and additional paid-in-capital
|
950,876 | 832,736 | ||||||
|
Cumulative
net earnings
|
396,496 | 362,140 | ||||||
|
Cumulative
dividends paid
|
(772,992 | ) | (727,237 | ) | ||||
|
Total stockholders’
equity
|
692,868 | 586,127 | ||||||
|
Total liabilities and
stockholders’ equity
|
$ | 1,306,742 | $ | 1,182,287 | ||||
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,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
Rental income
|
$ | 39,774 | $ | 36,147 | $ | 77,787 | $ | 76,979 | ||||||||
|
Mortgage interest
income
|
2,550 | 888 | 3,529 | 1,897 | ||||||||||||
|
Other investment income –
net
|
582 | 729 | 1,218 | 1,374 | ||||||||||||
|
Miscellaneous
|
829 | 353 | 2,067 | 490 | ||||||||||||
|
Total
operating revenues
|
43,735 | 38,117 | 84,601 | 80,740 | ||||||||||||
|
Expenses
|
||||||||||||||||
|
Depreciation and
amortization
|
9,713 | 8,821 | 19,109 | 17,609 | ||||||||||||
|
General and
administrative
|
2,446 | 2,456 | 5,014 | 5,003 | ||||||||||||
|
Restricted stock
expense
|
525 | 309 | 1,051 | 335 | ||||||||||||
|
Impairment loss on real estate
properties
|
- | - | 1,514 | - | ||||||||||||
|
Provision for uncollectible
accounts receivable
|
4,268 | - | 4,268 | - | ||||||||||||
|
Total
operating expenses
|
16,952 | 11,586 | 30,956 | 22,947 | ||||||||||||
|
Income
before other income and expense
|
26,783 | 26,531 | 53,645 | 57,793 | ||||||||||||
|
Other
income (expense):
|
||||||||||||||||
|
Interest and other investment
income
|
58 | 58 | 123 | 98 | ||||||||||||
|
Interest
|
(9,745 | ) | (10,073 | ) | (19,430 | ) | (21,917 | ) | ||||||||
|
Interest – amortization of
deferred financing costs
|
(500 | ) | (500 | ) | (1,000 | ) | (959 | ) | ||||||||
|
Litigation
settlements
|
526 | - | 526 | - | ||||||||||||
|
Total
other expense
|
(9,661 | ) | (10,515 | ) | (19,781 | ) | (22,778 | ) | ||||||||
|
Income
before gain on assets sold
|
17,122 | 16,016 | 33,864 | 35,015 | ||||||||||||
|
Gain
on assets sold – net
|
- | - | 46 | - | ||||||||||||
|
Income
from continuing operations
|
17,122 | 16,016 | 33,910 | 35,015 | ||||||||||||
|
Discontinued
operations
|
- | 34 | 446 | 1,694 | ||||||||||||
|
Net
income
|
17,122 | 16,050 | 34,356 | 36,709 | ||||||||||||
|
Preferred
stock dividends
|
(2,481 | ) | (2,481 | ) | (4,962 | ) | (4,962 | ) | ||||||||
|
Net
income available to common
|
$ | 14,641 | $ | 13,569 | $ | 29,394 | $ | 31,747 | ||||||||
|
Income
per common share:
|
||||||||||||||||
|
Basic:
|
||||||||||||||||
|
Income from continuing
operations
|
$ | 0.20 | $ | 0.20 | $ | 0.41 | $ | 0.47 | ||||||||
|
Net income
|
$ | 0.20 | $ | 0.20 | $ | 0.42 | $ | 0.50 | ||||||||
|
Diluted:
|
||||||||||||||||
|
Income from continuing
operations
|
$ | 0.20 | $ | 0.20 | $ | 0.41 | $ | 0.47 | ||||||||
|
Net income
|
$ | 0.20 | $ | 0.20 | $ | 0.41 | $ | 0.50 | ||||||||
|
Dividends
declared and paid per common share
|
$ | 0.30 | $ | 0.27 | $ | 0.59 | $ | 0.53 | ||||||||
|
Weighted-average
shares outstanding, basic
|
72,942 | 67,237 | 70,811 | 63,666 | ||||||||||||
|
Weighted-average
shares outstanding, diluted
|
73,038 | 67,261 | 70,893 | 63,690 | ||||||||||||
|
Components
of other comprehensive income:
|
||||||||||||||||
|
Net
income
|
$ | 17,122 | $ | 16,050 | $ | 34,356 | $ | 36,709 | ||||||||
|
Total
comprehensive income
|
$ | 17,122 | $ | 16,050 | $ | 34,356 | $ | 36,709 | ||||||||
OMEGA
HEALTHCARE INVESTORS, INC.
FUNDS
FROM OPERATIONS
Unaudited
(In
thousands, except per share amounts)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Net
income available to common stockholders
|
$ | 14,641 | $ | 13,569 | $ | 29,394 | $ | 31,747 | ||||||||
|
Add back loss (deduct gain)
from real estate dispositions(1)
|
— | 1 | (477 | ) | (1,596 | ) | ||||||||||
|
Sub-total
|
14,641 | 13,570 | 28,917 | 30,151 | ||||||||||||
|
Elimination of non-cash items
included in net income:
|
||||||||||||||||
|
Depreciation and
amortization(1)
|
9,713 | 8,831 | 19,109 | 17,630 | ||||||||||||
|
Funds
from operations available to common stockholders
|
$ | 24,354 | $ | 22,401 | $ | 48,026 | $ | 47,781 | ||||||||
|
Weighted-average
common shares outstanding, basic
|
72,942 | 67,237 | 70,811 | 63,666 | ||||||||||||
|
Effect of restricted stock
awards
|
84 | 10 | 70 | 5 | ||||||||||||
|
Assumed exercise of stock
options
|
12 | 14 | 12 | 19 | ||||||||||||
|
Weighted-average
common shares outstanding, diluted
|
73,038 | 67,261 | 70,893 | 63,690 | ||||||||||||
|
Fund
from operations per share available to common stockholders
|
$ | 0.33 | $ | 0.33 | $ | 0.68 | $ | 0.75 | ||||||||
|
Adjusted
funds from operations:
|
||||||||||||||||
|
Funds from operations available
to common stockholders
|
$ | 24,354 | $ | 22,401 | $ | 48,026 | $ | 47,781 | ||||||||
|
Deduct litigation
settlements
|
(526 | ) | — | (526 | ) | — | ||||||||||
|
Deduct Advocat straight-line
valuation allowance adjustment
|
— | — | — | (5,040 | ) | |||||||||||
|
Deduct one-time cash
revenue
|
(702 | ) | — | (702 | ) | — | ||||||||||
|
Deduct FIN 46R
adjustment
|
(45 | ) | (77 | ) | (90 | ) | (153 | ) | ||||||||
|
Deduct collection prior
operator’s past due rental obligation
|
— | — | (650 | ) | — | |||||||||||
|
Add back non-cash restricted
stock expense
|
525 | 309 | 1,051 | 335 | ||||||||||||
|
Add back non-cash provision for
uncollectible accounts receivable
|
3,784 | — | 3,784 | — | ||||||||||||
|
Add back non-cash provision for
uncollectible accounts receivable – FIN 46R related
|
484 | — | 484 | — | ||||||||||||
|
Add back non-cash provision for
impairments on real estate properties(1)
|
— | — | 1,514 | — | ||||||||||||
|
Adjusted
funds from operations available to common stockholders
|
$ | 27,874 | $ | 22,633 | $ | 52,891 | $ | 42,923 | ||||||||
(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 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. 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.
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
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.
Adjusted
FFO is calculated as FFO available to common stockholders less non-cash
stock-based compensation and 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
following table presents a reconciliation of our fourth quarter 2008 guidance
regarding FFO and Adjusted FFO to net income available to common
stockholders:
|
Q4
2008 Projected
|
||||||||||||
|
Per
diluted share:
|
||||||||||||
|
Net
income available to common stockholders
|
$ | 0.24 | − | $ | 0.25 | |||||||
|
Adjustments:
|
||||||||||||
|
Depreciation and
amortization
|
0.13 | − | 0.13 | |||||||||
|
Funds
from operations available to common stockholders
|
$ | 0.37 | − | $ | 0.38 | |||||||
|
Adjustments:
|
||||||||||||
|
One-time revenue
|
- | − | - | |||||||||
|
Provision for impairment of real
estate assets
|
- | − | - | |||||||||
|
Provision for uncollectible
accounts receivable
|
- | − | - | |||||||||
|
Restricted stock
expense
|
0.00 | − | 0.00 | |||||||||
|
Adjusted
funds from operations available to common stockholders
|
$ | 0.37 | − | $ | 0.38 | |||||||
The
following table summarizes the results of operations of assets held for sale and
facilities sold during the three months ended June 30, 2008 and 2007,
respectively.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Revenues
|
||||||||||||||||
|
Rental income
|
$ | — | $ | 45 | $ | 15 | $ | 122 | ||||||||
|
Expenses
|
||||||||||||||||
|
Depreciation and
amortization
|
— | 10 | — | 21 | ||||||||||||
|
General and
administrative
|
— | — | — | 3 | ||||||||||||
|
Provision for
impairment
|
— | — | — | — | ||||||||||||
|
Subtotal
expenses
|
— | 10 | — | 24 | ||||||||||||
|
Income
before gain on sale of assets
|
— | 35 | 15 | 98 | ||||||||||||
|
(Loss)
gain on assets sold – net
|
— | (1 | ) | 431 | 1,596 | |||||||||||
|
Discontinued
operations
|
$ | — | $ | 34 | $ | 446 | $ | 1,694 | ||||||||
The
following tables present selected portfolio information, including operator and
geographic concentrations, and revenue maturities for the period ending June 30,
2008.
|
Portfolio
Composition ($000's)
|
||||||||||||||||||||
|
Balance
Sheet Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
||||||||||||||||
|
Real
Property(1)(2)
|
236 | 26,709 | $ | 1,346,540 | 93 | % | ||||||||||||||
|
Loans
Receivable(3)
|
16 | 2,085 | 101,343 | 7 | % | |||||||||||||||
|
Total
Investments
|
252 | 28,794 | $ | 1,447,883 | 100 | % | ||||||||||||||
|
Investment
Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
Investment
per Bed
|
|||||||||||||||
|
Skilled
Nursing Facilities (1) (2)
(3)
|
241 | 27,948 | $ | 1,377,339 | 95 | % | $ | 49 | ||||||||||||
|
Assisted
Living Facilities
|
7 | 516 | 38,148 | 3 | % | 74 | ||||||||||||||
|
Rehab
Hospitals
|
4 | 330 | 32,396 | 2 | % | 98 | ||||||||||||||
| 252 | 28,794 | $ | 1,447,883 | 100 | % | $ | 50 | |||||||||||||
|
(1)
Includes two held for sale facilities and includes $19.2 million for lease
inducement.
(2)
Includes 7 facilities worth $61.8 million resulting from FIN 46R
consolidation.
(3)
Includes $1.3 million of unamortized principal.
|
||||||||||||||||||||
|
Revenue
Composition ($000's)
|
||||||||||||||||
|
Revenue
by Investment Type
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
|
June
30, 2008
|
June
30, 2008
|
|||||||||||||||
|
Rental
Property (1)
|
$ | 39,774 | 93 | % | $ | 77,787 | 94 | % | ||||||||
|
Mortgage
Notes
|
2,550 | 6 | % | 3,529 | 4 | % | ||||||||||
|
Other
Investment Income
|
582 | 1 | % | 1,218 | 2 | % | ||||||||||
| $ | 42,906 | 100 | % | $ | 82,534 | 100 | % | |||||||||
|
Revenue
by Facility Type
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
|
June
30, 2008
|
June
30, 2008
|
|||||||||||||||
|
Skilled
Nursing Facilities (1)
|
$ | 40,966 | 95 | % | $ | 78,864 | 96 | % | ||||||||
|
Assisted
Living Facilities
|
704 | 2 | % | 1,383 | 2 | % | ||||||||||
|
Specialty
Hospitals
|
654 | 2 | % | 1,069 | 1 | % | ||||||||||
|
Other
|
582 | 1 | % | 1,218 | 1 | % | ||||||||||
| $ | 42,906 | 100 | % | $ | 82,534 | 100 | % | |||||||||
|
(1)
Revenue includes $0.8 million reduction for lease
inducement.
|
||||||||||||||||
|
Operator
Concentration ($000's)
|
||||||||||||
|
Concentration
by Investment
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||||
|
CommuniCare
Health Services
|
36 | $ | 317,021 | 22 | % | |||||||
|
Sun
Healthcare Group, Inc. (2)
|
42 | 226,313 | 16 | % | ||||||||
|
Advocat
Inc. (4)
|
40 | 145,059 | 10 | % | ||||||||
|
Signature
Holdings, LLC
|
18 | 140,093 | 10 | % | ||||||||
|
Haven
Eldercare (3)
|
15 | 118,186 | 8 | % | ||||||||
|
Guardian
LTC Management (1)
|
17 | 105,171 | 7 | % | ||||||||
|
Nexion
Health, Inc.
|
20 | 79,777 | 5 | % | ||||||||
|
Essex
Healthcare Corp.
|
13 | 79,354 | 5 | % | ||||||||
|
Alpha
Healthcare Properties, LLC
|
8 | 55,834 | 4 | % | ||||||||
|
Mark
Ide Limited Liability Company
|
8 | 25,595 | 2 | % | ||||||||
|
Remaining
Operators
|
35 | 155,480 | 11 | % | ||||||||
| 252 | $ | 1,447,883 | 100 | % | ||||||||
|
(1) Investment
amount includes a $19.2 million lease inducement.
(2) Includes
two held for sale facilities.
(3) Includes
7 facilities worth $61.8 million resulting from FIN 46R
consolidation.
(4) Includes
$1.3 million of unamortized principal.
|
||||||||||||
|
Concentration
by State
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||||
|
Ohio
|
47 | $ | 332,861 | 23 | % | |||||||
|
Florida
(4)
|
25 | 172,999 | 12 | % | ||||||||
|
Pennsylvania
|
17 | 110,225 | 8 | % | ||||||||
|
Texas
|
21 | 80,305 | 5 | % | ||||||||
|
Maryland
|
7 | 70,028 | 5 | % | ||||||||
|
Louisiana
|
14 | 55,343 | 4 | % | ||||||||
|
West
Virginia (1)
|
8 | 53,775 | 4 | % | ||||||||
|
Colorado
|
8 | 52,709 | 4 | % | ||||||||
|
California
(2)
|
13 | 50,158 | 3 | % | ||||||||
|
Arkansas
|
11 | 44,820 | 3 | % | ||||||||
|
Alabama
|
10 | 43,408 | 3 | % | ||||||||
|
Massachusetts
(3)
|
6 | 38,884 | 3 | % | ||||||||
|
Rhode
Island
|
4 | 38,740 | 3 | % | ||||||||
|
Kentucky
|
10 | 36,537 | 2 | % | ||||||||
|
Connecticut
|
5 | 36,409 | 2 | % | ||||||||
|
Remaining
States
|
46 | 230,682 | 16 | % | ||||||||
| 252 | $ | 1,447,883 | 100 | % | ||||||||
|
(1) Investment
amount includes a $19.2 million lease inducement.
(2) Includes
two held for sale facilities.
(3) Includes
7 facilities worth $61.8 million resulting from FIN 46R
consolidation.
(4) Includes
$1.3 million of unamortized principal.
|
||||||||||||
|
Revenue
Maturities ($000's)
|
|||||||||||||||||
|
Operating
Lease Expirations & Loan Maturities
|
Year
|
Current
Lease Revenue (1)
|
Current
Interest Revenue (1)
|
Lease
and Interest Revenue
|
%
|
||||||||||||
|
2008
|
935 | - | 935 | 1 | % | ||||||||||||
|
2009
|
- | - | - | 0 | % | ||||||||||||
|
2010
|
1,974 | 1,438 | 3,412 | 2 | % | ||||||||||||
|
2011
|
11,676 | 163 | 11,839 | 7 | % | ||||||||||||
|
2012
|
11,425 | - | 11,425 | 7 | % | ||||||||||||
|
Thereafter
|
125,372 | 7,177 | 132,549 | 83 | % | ||||||||||||
| $ | 151,382 | $ | 8,778 | $ | 160,160 | 100 | % | ||||||||||
|
(1)
Based on 2008 contractual rents and interest (assumes no annual
escalators).
|
|||||||||||||||||
|
Selected
Facility Data
|
|||||||||||||||||
|
TTM
ending 3/31/08
|
Coverage
Data
|
||||||||||||||||
|
%
Revenue Mix
|
Before
|
After
|
|||||||||||||||
|
Census
|
Private
|
Medicare
|
Mgmt.
Fees
|
Mgmt.
Fees
|
|||||||||||||
|
Total
Portfolio
|
81.7%
|
9.6 | % | 27.7 | % | 2.2 | x | 1.8 | 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 June 30, 2008.
|
Current
Capitalization ($000's)
|
||||||||
|
Outstanding
Balance
|
%
|
|||||||
|
Borrowings
Under Bank Lines
|
$ | 102,000 | 8 | % | ||||
|
Long-Term
Debt Obligations (1)
|
486,995 | 38 | % | |||||
|
Stockholders’
Equity
|
692,868 | 54 | % | |||||
|
Total
Book Capitalization
|
$ | 1,281,863 | 100 | % | ||||
|
(1)
Excludes net discount of $0.3 million on unsecured
borrowings.
|
||||||||
|
Leverage
& Performance Ratios
|
||||||||
|
Debt
/ Total Book Cap
|
45.9 | % | ||||||
|
Debt
/ Total Market Cap
|
30.1 | % | ||||||
|
Interest
Coverage:
|
||||||||
|
2nd quarter 2008
|
4.03 | x | ||||||
|
Debt
Maturities ($000's)
|
Secured
Debt
|
||||||||||||||||
|
Year
|
Lines
of Credit (1)
|
Other
|
Senior
Notes
|
Total
|
|||||||||||||
|
2008
|
$ | - | $ | 435 | $ | - | $ | 435 | |||||||||
|
2009
|
- | 465 | - | 465 | |||||||||||||
|
2010
|
255,000 | 495 | - | 255,495 | |||||||||||||
|
2011
|
- | 290 | - | 290 | |||||||||||||
|
Thereafter
|
- | 310 | 485,000 | 485,310 | |||||||||||||
| $ | 255,000 | $ | 1,995 | $ | 485,000 | $ | 741,995 | ||||||||||
| (1) Reflected at 100% borrowing capacity. | |||||||||||||||||
The
following table presents investment activity for the three- and six-month
periods ending June 30, 2008.
|
Investment
Activity ($000's)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30, 2008
|
June
30, 2008
|
|||||||||||||||
|
$
Amount
|
%
|
$
Amount
|
%
|
|||||||||||||
|
Funding
by Investment Type:
|
||||||||||||||||
|
Real
Property
|
$ | 48,000 | 38 | % | $ | 53,200 | 39 | % | ||||||||
|
Mortgages
|
74,900 | 59 | % | 74,900 | 55 | % | ||||||||||
|
Other
|
3,660 | 3 | % | 8,994 | 6 | % | ||||||||||
|
Total
|
$ | 126,560 | 100 | % | $ | 137,094 | 100 | % | ||||||||