8-K: Current report filing
Published on November 5, 2008
PRESS
RELEASE – FOR IMMEDIATE RELEASE
OMEGA
ANNOUNCES THIRD QUARTER 2008 FINANCIAL RESULTS;
REAFFIRMS
FOURTH QUARTER GUIDANCE
TIMONIUM, MARYLAND – November 5, 2008
– Omega Healthcare Investors, Inc. (NYSE:OHI) today announced its results
of operations for the quarter ended September 30, 2008. The Company
also reported Funds From Operations (“FFO”) available to common stockholders for
the three months ended September 30, 2008 of $23.9 million or $0.31 per common
share. The $23.9 million of FFO available to common stockholders for
the third quarter includes a net loss of $1.5 million associated with owned and
operated assets, $0.5 million of non-cash restricted stock expense, a $0.2
million non-cash provision for impairment charge and a $0.1 million reduction in
the Company’s provision for income taxes. 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 $0.34 per common share for the three
months ended September 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, results
of operations of owned and operated facilities during the period, restricted
stock expense, income taxes and non-cash consolidation adjustments due to
Financial Accounting Standards Board Interpretation No. 46R, Consolidation of
Variable Interest Entities (“FIN 46R”) adjustments. For more
information regarding FFO and adjusted FFO, see the “Funds From Operations”
section below.
COMPANY
COMMENTS
“We are
very pleased to have closed the Formation Capital and Genesis Healthcare
transaction, transitioning our former Haven facilities effective September
1st,”
stated Taylor Pickett, Omega’s President and CEO. Mr. Pickett
continued, “Formation Capital is an experienced equity investor in the senior
housing industry with an economic interest in more than 300 healthcare
facilities and 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 our Haven facilities are
located. Our adjusted FFO for the quarter was $0.34 per share with
the Formation lease closing on September 1st; however, on a pro forma basis, if
the lease had closed at the beginning of the quarter, our rent would have been
$1.6 million greater and our third quarter adjusted FFO would have been
approximately $0.36 per share.”
Commenting
on the Company’s capital and liquidity, Mr. Pickett stated, “Omega’s balance
sheet is extremely strong with debt to EBITDA leverage under 3.5x, no bond
maturities prior to 2014 and availability of $213 million on our $255 million
revolving credit facility which matures in March 2010. Having
accessed the capital market by selling 6 million shares of common stock in
mid-September, we will conservatively manage and protect our very strong balance
sheet through the current market turmoil.”
GAAP NET
INCOME
For the
three-month period ended September 30, 2008, the Company reported net income of
$28.1 million, net income available to common stockholders of $25.6 million, or
$0.33 per diluted common share and operating revenues of $60.0
million. This compares to net income of $15.3 million, net income
available to common stockholders of $12.9 million, or $0.19 per diluted common
share, and operating revenues of $39.2 million for the same period in
2007.
For the
nine-month period ended September 30, 2008, the Company reported net income of
$62.4 million, net income available to common stockholders of $55.0 million, or
$0.76 per diluted common share and operating revenues of $144.6
million. This compares to net income of $52.1 million, net income
available to common stockholders of $44.6 million, or $0.69 per diluted common
share, and operating revenues of $120.0 million for the same period in
2007.
The
increases in net income and net income available to common stockholders for the
nine-month period ended September 30, 2008 compared to the prior year were
primarily due to the impact of: i) a net gain of $11.8 million on three sold
facilities; ii) revenue associated with $208 million of new investments
completed since August 2007; and a $3.2 million reduction in interest
expense. This impact was partially offset by: i) increased
depreciation expense associated with the new investments; ii) a $1.5 million net
loss associated with owned and operated assets; iii) a $4.3 million expense for
uncollectible accounts receivable; and iv) the impact of an allowance adjustment
of $5.0 million with respect to straight-line rent recognition recorded in the
first quarter of 2007.
THIRD QUARTER 2008
HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
|
·
|
On
October 16, 2008, the Company declared the quarterly common dividend of
$0.30 per share.
|
|
·
|
On
October 16, 2008, the Company purchased 400,000 shares of its Series D
Preferred Stock at a 24.4% discount to its liquidation preference or an
11.1% yield.
|
|
·
|
On
September 30, 2008, the Company closed $40.0 million of new investments
yielding 10%.
|
|
·
|
On
September 19, 2008, the Company completed an
underwritten public offering of 6 million shares of its common stock,
generating net cash proceeds of approximately $97
million.
|
|
·
|
On
September 1, 2008, the Company completed the operational transfer of 13
facilities to affiliates of Formation
Capital.
|
|
·
|
On
July 1, 2008, the Company sold two rehabilitation hospitals and on
September 26, 2008, sold one skilled nursing facility generating cash
proceeds of approximately $29.1 million and recorded a gain of $11.8
million.
|
THIRD QUARTER 2008
RESULTS
Operating
Revenues and Expenses – Operating revenues for the three months ended
September 30, 2008, when excluding nursing home revenues of owned and operated
assets, were $40.7 million. Operating expenses for the three months
ended September 30, 2008, when excluding nursing home expenses for owned and
operated assets, totaled $13.2 million, comprised of $10.1 million of
depreciation and amortization expense, $2.4 million of general and
administrative expenses and $0.5 million of restricted stock expense and a
provision for impairment charge of $0.2 million.
Other Income and
Expense – Other income and expense for the three months ended September
30, 2008 was a net expense of $9.8 million; comprised primarily of $9.4 million
of interest expense, $0.5 million of amortization of deferred financing
costs.
Funds From
Operations – For the three months ended September 30, 2008, reportable
FFO available to common stockholders was $23.9 million, or $0.31 per common
share, compared to $22.0 million, or $0.32 per common share, for the same period
in 2007. The $23.9 million of FFO for the quarter includes the impact
of: (i) a $1.5 million net loss associated with owned and operated assets; (ii)
$0.5 million of non-cash restricted stock expense; (iii) a $0.2 million non-cash
provision for impairment; and (iv) $0.1 million reduction in the Company’s
provision for income taxes.
The $22.0
million of FFO for the three months ended September 30, 2007,
includes: i) a $1.6 million non-cash provision for impairment, ii)
$0.5 million of non-cash restricted stock expense, iii) $0.1 million reduction
in the Company’s provision for income taxes; and iv) $0.1 million of non-cash
FIN 46R consolidation adjustments.
When
excluding the above mentioned items in 2008 and 2007, adjusted FFO was $26.0
million, or $0.34 per common share, for the three months ended September 30,
2008, compared to $24.0 million, or $0.35 per common share, for the same period
in 2007. For further information, see the attached “Funds From
Operations” schedule and notes.
FINANCING
ACTIVITIES
6.0 Million Share
Common Stock Offering
– On September 19, 2008,
the Company completed an underwritten public offering of 6.0 million shares of
its common stock at $16.37 per share. The net proceeds, after
deducting underwriting discounts and offering expenses, were approximately $97
million. UBS Investment Bank was the sole book-running manager and
Stifel Nicolaus was the co-manager for the offering. The net proceeds
were used to repay indebtedness under the Company’s senior credit facility and
for working capital and general corporate purposes.
400,000 Series D
Preferred Stock Purchase –
On October 16, 2008, the Company purchased 400,000 shares of its 8.375%
Series D Preferred Stock (NYSE:OHI PrD) at a price of $18.90 per
share. The liquidation preference for the Company’s Series D
Preferred Stock (“Series D”) is $25.00 per share. 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 purchase of the Series D shares will result in a
fourth quarter 2008 gain of approximately $2.4 million. The gain will
be offset by a non-cash charge to net income available to common shareholders of
approximately $0.3 million reflecting the write-off of the pro-rata portion of
the original issuance costs of the Series D.
5.9 Million
Common Share Offering –
On May 6, 2008, the Company issued 5.9 million 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 the Company’s senior
credit facility.
PORTFOLIO
DEVELOPMENTS
Guardian LTC
Management, Inc. – On September 30, 2008, the
Company completed a $40.0 million investment with subsidiaries of Guardian LTC
Management, Inc. (“Guardian”), an existing operator of the
Company. The transaction involved the sale and leaseback of three
skilled nursing facilities (“SNFs”) and a continuing care retirement community
all located in Pennsylvania. The facilities and related $4.0 million
of initial annual rent were added to an existing master lease with
Guardian. The amended and restated master lease now includes 21
facilities and $15.7 million of annual rent, with annual
escalators. In addition, the master lease term was extended from
August 2016 through September 30, 2018.
Acquisition and
Transition of Former Haven Operating Assets – Since November 2007,
affiliates of Haven Eldercare (“Haven”) were operating 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 the
Company’s 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 the Company had 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 (which the
Company consolidates pursuant to FIN 46R) 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
agreed (subject to certain closing conditions, including the receipt of
licensure) to lease the aforementioned facilities under a Master
Lease. 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.
On
September 8, 2008, the Company completed the operational transfer, effective as
of September 1, 2008, of 13 of the facilities to affiliates of Formation, in
accordance with the terms of the MTA. The 13 facilities are located
in Connecticut (5), Rhode Island (4), New Hampshire (3) and Massachusetts
(1). As part of the transaction, Genesis Healthcare (“Genesis”)
entered into a long-term management agreement with Formation, to oversee the
day-to-day operations of each of these facilities. Two remaining facilities in
Vermont will transfer upon the appropriate regulatory approvals expected
sometime in the near future.
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 with CommuniCare 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 “CommuniCare Loan”). The CommuniCare
Loan matures on April 30, 2018 and carries an interest rate of 11% per year.
CommuniCare used the proceeds of the CommuniCare Loan to acquire seven (7) SNFs
located in Maryland, totaling 965 beds from several unrelated third
parties. The CommuniCare Loan is secured by a lien on the seven (7)
facilities. At the closing, $4.9 million of CommuniCare Loan proceeds
were escrowed pending the acquisition of an additional 90 bed SNF, also located
in Maryland. The proceeds held in escrow are included in Other assets
as of September 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 CommuniCare
Loan. If the additional facility is not acquired, CommuniCare will be
obligated to re-pay the $4.9 million of escrowed 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
and contractual rent was decreased by $1.7 million annually.
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.
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
consolidated the financial statements and real estate of the Haven entity into
its financial statements. On July 7, 2008, the Company took ownership
and/or possession of its 15 facilities and a new operator assumed operations of
the facilities. As a result of the Company taking ownership and/or
possession of the Haven facilities, pursuant to FIN 46R, effective July 7, 2008,
the Company was no longer required to consolidate the Haven entity into its
financial statements. However, pursuant to FIN 46R and effective July
7, 2008, the Company is required to consolidate the financial position and
results of operations of the new operator which assumed the operations of these
facilities. Effective September 1, 2008, the operator that the
Company consolidates pursuant to FIN 46R transferred the operations of 13 of the
15 facilities to Formation. Therefore, beginning on September 1,
2008, the operator that the Company consolidates pursuant to FIN 46R includes
only the financial results of the two remaining facilities that are currently
pending state approval prior to the transfer of these
facilities.
DIVIDENDS
Common Dividends
– On October 16, 2008, the Company’s Board of Directors declared a common
stock dividend of $0.30 per share to be paid November 17, 2008 to common
stockholders of record on October 31, 2008. At the date of this
release, the Company had approximately 82.3 million outstanding shares of common
stock.
Series D
Preferred Dividends –
On October 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 October 31, 2008. The stockholders of record of the Series
D Preferred Stock on October 31, 2008 will be paid dividends in the amount of
$0.52344 per preferred share on November 17, 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 August 1, 2008 through
October 31, 2008.
Dividend
Reinvestment and Common Stock Purchase Plan – On October 29, 2008, the
Company announced the suspension of the optional cash purchase component of its
Dividend Reinvestment and Common Stock Purchase Plan until further
notice. Dividend reinvestment and all other features of the Plan will
continue as set forth in the Plan, including sales, transfers and certificate
issuances of stock held in participant accounts.
Stockholders
participating in the Plan who have elected to reinvest dividends will continue
to have cash dividends reinvested in accordance with the Plan. Any checks or other funds
received by Computershare Trust Company, N.A. from Plan participants on, or
after October 15, 2008, for optional cash investments will be returned without
interest. All questions and requests in connection with the Dividend
Reinvestment and Common Stock Purchase Plan should be directed to the Plan’s
administrator, Computershare, at (800) 519-3111.
2008 FOURTH QUARTER ADJUSTED
FFO GUIDANCE AFFIRMED
On August
7, 2008, the Company withdrew its previous 2008 full year adjusted FFO available
to common stockholders guidance range of $1.49 to $1.55 per common share due to
the difficulty in projecting the operating results of the Haven portfolio at
that time. The Company also issued fourth quarter 2008 adjusted FFO of $0.37 to
$0.38 per common share, assuming the Formation transaction would close during
the third quarter. As a result of the September closing of the
Formation transaction, the Company has affirmed its 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 Wednesday, November 5, 2008, at
10 a.m. EST to review the Company’s 2008 third quarter results and current
developments. To listen to the conference call via webcast, log on to
www.omegahealthcare.com
and click the earnings call announcement in the "Upcoming Events"
section 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 September 30, 2008, the Company
owned or held mortgages on 255 SNFs and assisted living facilities with
approximately 29,002 beds located in 29 states and operated by 27 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; (xii) the potential impact of a general economic slowdown on
governmental budgets and healthcare reimbursement expenditures; and (xiii) 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)
|
September
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Real
estate properties
|
||||||||
|
Land and
buildings
|
$ | 1,353,622 | $ | 1,274,722 | ||||
|
Less accumulated
depreciation
|
(242,674 | ) | (221,366 | ) | ||||
|
Real estate properties –
net
|
1,110,948 | 1,053,356 | ||||||
|
Mortgage notes receivable –
net
|
101,148 | 31,689 | ||||||
| 1,212,096 | 1,085,045 | |||||||
|
Other
investments – net
|
23,354 | 13,683 | ||||||
| 1,235,450 | 1,098,728 | |||||||
|
Assets
held for sale – net
|
150 | 2,870 | ||||||
|
Total
investments
|
1,235,600 | 1,101,598 | ||||||
|
Cash
and cash equivalents
|
3,790 | 1,979 | ||||||
|
Restricted
cash
|
5,048 | 2,104 | ||||||
|
Accounts
receivable – net
|
71,817 | 64,992 | ||||||
|
Other
assets
|
20,567 | 11,614 | ||||||
|
Operating
assets for owned properties
|
17,101 | — | ||||||
|
Total assets
|
$ | 1,353,923 | $ | 1,182,287 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Revolving
line of credit
|
$ | 34,000 | $ | 48,000 | ||||
|
Unsecured
borrowings – net
|
485,000 | 485,000 | ||||||
|
Discount
on unsecured borrowings – net
|
(298 | ) | (286 | ) | ||||
|
Other
long–term borrowings
|
1,560 | 40,995 | ||||||
|
Accrued
expenses and other liabilities
|
26,265 | 22,378 | ||||||
|
Income
tax liabilities
|
— | 73 | ||||||
|
Operating
liabilities for owned properties
|
3,798 | — | ||||||
|
Total
liabilities
|
550,325 | 596,160 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Preferred
stock
|
118,488 | 118,488 | ||||||
|
Common
stock and additional paid-in-capital
|
1,058,801 | 832,736 | ||||||
|
Cumulative
net earnings
|
424,568 | 362,140 | ||||||
|
Cumulative
dividends paid
|
(798,259 | ) | (727,237 | ) | ||||
|
Total stockholders’
equity
|
803,598 | 586,127 | ||||||
|
Total liabilities and
stockholders’ equity
|
$ | 1,353,923 | $ | 1,182,287 | ||||
OMEGA
HEALTHCARE INVESTORS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Unaudited
(in
thousands, except per share amounts)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
Rental income
|
$ | 37,265 | $ | 37,113 | $ | 115,052 | $ | 114,092 | ||||||||
|
Mortgage interest
income
|
3,007 | 999 | 6,536 | 2,896 | ||||||||||||
|
Other investment income –
net
|
313 | 962 | 1,531 | 2,336 | ||||||||||||
|
Miscellaneous
|
73 | 150 | 2,140 | 640 | ||||||||||||
|
Nursing home revenues of owned
and operated assets
|
19,341 | - | 19,341 | - | ||||||||||||
|
Total
operating revenues
|
59,999 | 39,224 | 144,600 | 119,964 | ||||||||||||
|
Expenses
|
||||||||||||||||
|
Depreciation and
amortization
|
10,076 | 9,131 | 29,185 | 26,740 | ||||||||||||
|
General and
administrative
|
2,399 | 2,197 | 7,413 | 7,200 | ||||||||||||
|
Restricted stock
expense
|
526 | 545 | 1,577 | 880 | ||||||||||||
|
Impairment loss on real estate
properties
|
170 | 1,636 | 1,684 | 1,636 | ||||||||||||
|
Provision for uncollectible
accounts receivable
|
- | - | 4,268 | - | ||||||||||||
|
Nursing home expenses of owned and
operated assets
|
20,833 | - | 20,833 | - | ||||||||||||
|
Total
operating expenses
|
34,004 | 13,509 | 64,960 | 36,456 | ||||||||||||
|
Income
before other income and expense
|
25,995 | 25,715 | 79,640 | 83,508 | ||||||||||||
|
Other
income (expense):
|
||||||||||||||||
|
Interest and other investment
income
|
74 | 36 | 197 | 134 | ||||||||||||
|
Interest
|
(9,375 | ) | (10,071 | ) | (28,805 | ) | (31,988 | ) | ||||||||
|
Interest – amortization of
deferred financing costs
|
(500 | ) | (500 | ) | (1,500 | ) | (1,459 | ) | ||||||||
|
Litigation
settlements
|
- | - | 526 | - | ||||||||||||
|
Total
other expense
|
(9,801 | ) | (10,535 | ) | (29,582 | ) | (33,313 | ) | ||||||||
|
Income
before gain on assets sold
|
16,194 | 15,180 | 50,058 | 50,195 | ||||||||||||
|
Gain
on assets sold – net
|
11,806 | - | 11,852 | - | ||||||||||||
|
Income
from continuing operations before income taxes
|
28,000 | 15,180 | 61,910 | 50,195 | ||||||||||||
|
Income
taxes
|
72 | 132 | 72 | 132 | ||||||||||||
|
Income
from continuing operations
|
28,072 | 15,312 | 61,982 | 50,327 | ||||||||||||
|
Discontinued
operations
|
- | 37 | 446 | 1,731 | ||||||||||||
|
Net
income
|
28,072 | 15,349 | 62,428 | 52,058 | ||||||||||||
|
Preferred
stock dividends
|
(2,480 | ) | (2,480 | ) | (7,442 | ) | (7,442 | ) | ||||||||
|
Net
income available to common
|
$ | 25,592 | $ | 12,869 | $ | 54,986 | $ | 44,616 | ||||||||
|
Income
per common share:
|
||||||||||||||||
|
Basic:
|
||||||||||||||||
|
Income from continuing
operations
|
$ | 0.33 | $ | 0.19 | $ | 0.75 | $ | 0.66 | ||||||||
|
Net income
|
$ | 0.33 | $ | 0.19 | $ | 0.76 | $ | 0.69 | ||||||||
|
Diluted:
|
||||||||||||||||
|
Income from continuing
operations
|
$ | 0.33 | $ | 0.19 | $ | 0.75 | $ | 0.66 | ||||||||
|
Net income
|
$ | 0.33 | $ | 0.19 | $ | 0.76 | $ | 0.69 | ||||||||
|
Dividends
declared and paid per common share
|
$ | 0.30 | $ | 0.27 | $ | 0.89 | $ | 0.80 | ||||||||
|
Weighted-average
shares outstanding, basic
|
76,590 | 67,952 | 72,737 | 65,094 | ||||||||||||
|
Weighted-average
shares outstanding, diluted
|
76,702 | 67,965 | 72,829 | 65,114 | ||||||||||||
|
Components
of other comprehensive income:
|
||||||||||||||||
|
Net
income
|
$ | 28,072 | $ | 15,349 | $ | 62,428 | $ | 52,058 | ||||||||
|
Total
comprehensive income
|
$ | 28,072 | $ | 15,349 | $ | 62,428 | $ | 52,058 | ||||||||
OMEGA
HEALTHCARE INVESTORS, INC.
FUNDS
FROM OPERATIONS
Unaudited
(In
thousands, except per share amounts)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Net
income available to common stockholders
|
$ | 25,592 | $ | 12,869 | $ | 54,986 | $ | 44,616 | ||||||||
|
(Deduct gain) add back loss
from real estate dispositions(1)
|
(11,806 | ) | 1 | (12,283 | ) | (1,595 | ) | |||||||||
|
Sub-total
|
13,786 | 12,870 | 42,703 | 43,021 | ||||||||||||
|
Elimination of non-cash items
included in net income:
|
||||||||||||||||
|
Depreciation and
amortization(1)
|
10,076 | 9,138 | 29,185 | 26,768 | ||||||||||||
|
Funds
from operations available to common stockholders
|
$ | 23,862 | $ | 22,008 | $ | 71,888 | $ | 69,789 | ||||||||
|
Weighted-average
common shares outstanding, basic
|
76,590 | 67,952 | 72,737 | 65,094 | ||||||||||||
|
Effect of restricted stock
awards
|
100 | — | 80 | 3 | ||||||||||||
|
Assumed exercise of stock
options
|
12 | 13 | 12 | 17 | ||||||||||||
|
Weighted-average
common shares outstanding, diluted
|
76,702 | 67,965 | 72,829 | 65,114 | ||||||||||||
|
Fund
from operations per share available to common stockholders
|
$ | 0.31 | $ | 0.32 | $ | 0.99 | $ | 1.07 | ||||||||
|
Adjusted
funds from operations:
|
||||||||||||||||
|
Funds from operations available
to common stockholders
|
$ | 23,862 | $ | 22,008 | $ | 71,888 | $ | 69,789 | ||||||||
|
Deduct litigation
settlements
|
— | — | (526 | ) | — | |||||||||||
|
Deduct Advocat straight-line
valuation allowance adjustment
|
— | — | — | (5,040 | ) | |||||||||||
|
Deduct one-time cash
revenue
|
— | — | (702 | ) | — | |||||||||||
|
Deduct FIN 46R
adjustment
|
— | (77 | ) | (90 | ) | (230 | ) | |||||||||
|
Deduct nursing home
revenues
|
(19,341 | ) | — | (19,341 | ) | — | ||||||||||
|
Deduct collection
of prior operator’s past due rental obligation
|
— | — | (650 | ) | — | |||||||||||
|
Deduct provision for income
taxes
|
(72 | ) | (132 | ) | (72 | ) | (132 | ) | ||||||||
|
Add back non-cash restricted
stock expense
|
526 | 545 | 1,577 | 880 | ||||||||||||
|
Add back non-cash provision for
uncollectible accounts receivable
|
— | — | 3,784 | — | ||||||||||||
|
Add back non-cash provision for
uncollectible accounts receivable – FIN 46R related
|
— | — | 484 | — | ||||||||||||
|
Add back nursing home
expenses
|
20,833 | — | 20,833 | — | ||||||||||||
|
Add back non-cash provision for
impairments on real estate properties(1)
|
170 | 1,636 | 1,684 | 1,636 | ||||||||||||
|
Adjusted
funds from operations available to common stockholders
|
$ | 25,978 | $ | 23,980 | $ | 78,869 | $ | 66,903 | ||||||||
(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:
|
||||||||||||
|
Nursing home revenue and expense
- net
|
0.00 | − | 0.00 | |||||||||
|
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- and nine- months ended September 30, 2008 and
2007, respectively.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Revenues
|
||||||||||||||||
|
Rental income
|
$ | — | $ | 45 | $ | 15 | $ | 167 | ||||||||
|
Expenses
|
||||||||||||||||
|
Depreciation and
amortization
|
— | 7 | — | 28 | ||||||||||||
|
General and
administrative
|
— | — | — | 3 | ||||||||||||
|
Provision for
impairment
|
— | — | — | — | ||||||||||||
|
Subtotal
expenses
|
— | 7 | — | 31 | ||||||||||||
|
Income
before gain on sale of assets
|
— | 38 | 15 | 136 | ||||||||||||
|
(Loss)
gain on assets sold – net
|
— | (1 | ) | 431 | 1,595 | |||||||||||
|
Discontinued
operations
|
$ | — | $ | 37 | $ | 446 | $ | 1,731 | ||||||||
The
table below reconciles reported revenues and expenses to revenues and expenses
excluding nursing home revenues and expenses of owned and operated
assets.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Total
operating revenues
|
$ | 59,999 | $ | 39,224 | $ | 144,600 | $ | 119,964 | ||||||||
|
Nursing
home revenues of owned and operated assets
|
19,341 | — | 19,341 | — | ||||||||||||
|
Revenues
excluding nursing home revenues of owned and operated
assets
|
$ | 40,658 | $ | 39,224 | $ | 125,259 | $ | 119,964 | ||||||||
|
Total
operating expenses
|
$ | 34,004 | $ | 13,509 | $ | 64,960 | $ | 36,456 | ||||||||
|
Nursing
home revenues and expenses of owned and operated assets
|
20,833 | — | 20,833 | — | ||||||||||||
|
Expenses
excluding nursing home expenses of owned and operated
assets
|
$ | 13,171 | $ | 13,509 | $ | 44,127 | $ | 36,456 | ||||||||
This
press release includes references to revenues and expenses excluding nursing
home and operated assets, which are non-GAAP financial measures. The
Company believes that presentation of the Company's revenues and expenses,
excluding nursing home owned and operated assets, provides a useful measure of
the operating performance of the Company's core portfolio as a real estate
investment trust in view of the disposition of all but two of the Company's
owned and operated assets and short term holding of owned and operated assets.
The table below reconciles reported revenues and expenses to revenues and
expenses excluding nursing home revenues and expenses of owned and operated
assets.
The
following tables present selected portfolio information, including operator and
geographic concentrations, and revenue maturities for the period ending
September 30, 2008.
|
Portfolio
Composition ($000's)
|
||||||||||||||||||||
|
Balance
Sheet Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
||||||||||||||||
|
Real
Property(1)(2)
|
238 | 26,917 | $ | 1,372,822 | 93 | % | ||||||||||||||
|
Loans
Receivable(3)
|
16 | 2,085 | 101,148 | 7 | % | |||||||||||||||
|
Total
Investments
|
254 | 29,002 | $ | 1,473,970 | 100 | % | ||||||||||||||
|
Investment
Data
|
#
of Properties
|
#
Beds
|
Investment
|
%
Investment
|
Investment
per Bed
|
|||||||||||||||
|
Skilled
Nursing Facilities (1) (2)
(3)
|
243 | 28,351 | $ | 1,412,149 | 96 | % | $ | 50 | ||||||||||||
|
Assisted
Living Facilities
|
7 | 439 | 32,207 | 2 | % | 73 | ||||||||||||||
|
Rehab
Hospitals/Other
|
4 | 212 | 29,614 | 2 | % | 140 | ||||||||||||||
| 254 | 29,002 | $ | 1,473,970 | 100 | % | $ | 51 | |||||||||||||
|
(1)
Includes $19.2 million for lease inducement.
(2)
Excludes one facility classified as held for sale.
(3)
Includes $1.2 million of unamortized principal.
|
||||||||||||||||||||
|
Revenue
Composition ($000's)
|
||||||||||||||||
|
Revenue
by Investment Type
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
|
September
30, 2008
|
September
30, 2008
|
|||||||||||||||
|
Rental
Property (1)
|
$ | 37,265 | 92 | % | $ | 115,052 | 94 | % | ||||||||
|
Mortgage
Notes
|
3,007 | 7 | % | 6,536 | 5 | % | ||||||||||
|
Other
Investment Income
|
313 | 1 | % | 1,531 | 1 | % | ||||||||||
| $ | 40,585 | 100 | % | $ | 123,119 | 100 | % | |||||||||
|
Revenue
by Facility Type
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
|
September
30, 2008
|
September
30, 2008
|
|||||||||||||||
|
Skilled
Nursing Facilities (1)
|
$ | 39,679 | 97 | % | $ | 119,988 | 97 | % | ||||||||
|
Assisted
Living Facilities
|
290 | 1 | % | 1,057 | 1 | % | ||||||||||
|
Specialty
Hospitals
|
303 | 1 | % | 543 | 1 | % | ||||||||||
|
Other
|
313 | 1 | % | 1,531 | 1 | % | ||||||||||
| $ | 40,585 | 100 | % | $ | 123,119 | 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 | $ | 317,495 | 21 | % | |||||||
|
Sun
Healthcare Group, Inc.
|
40 | 209,888 | 14 | % | ||||||||
|
Advocat
Inc. (2)
|
40 | 145,525 | 10 | % | ||||||||
|
Guardian
LTC Management (1)
|
23 | 145,171 | 10 | % | ||||||||
|
Signature
Holdings, LLC
|
18 | 141,052 | 10 | % | ||||||||
|
Formation
Capital
|
13 | 104,449 | 7 | % | ||||||||
|
Essex
Healthcare Corp.
|
13 | 79,354 | 5 | % | ||||||||
|
Nexion
Health, Inc.
|
19 | 79,142 | 5 | % | ||||||||
|
Alpha
Healthcare Properties, LLC
|
8 | 55,834 | 4 | % | ||||||||
|
Mark
Ide Limited Liability Company
|
8 | 25,595 | 2 | % | ||||||||
|
Remaining
Operators(3)
|
36 | 170,465 | 12 | % | ||||||||
| 254 | $ | 1,473,970 | 100 | % | ||||||||
|
(1) Investment
amount includes a $19.2 million lease inducement.
(2) Includes
$1.2 million of unamortized principal.
(3) Excludes
one facility classified as held for sale.
|
||||||||||||
|
Concentration
by State
|
#
of Properties
|
Investment
|
%
Investment
|
|||||||||
|
Ohio
|
47 | $ | 333,335 | 23 | % | |||||||
|
Florida
(2)
|
25 | 173,022 | 12 | % | ||||||||
|
Pennsylvania
|
23 | 150,225 | 10 | % | ||||||||
|
Texas
|
20 | 79,590 | 5 | % | ||||||||
|
Maryland
|
7 | 70,028 | 5 | % | ||||||||
|
Louisiana
|
14 | 55,343 | 4 | % | ||||||||
|
West
Virginia (1)
|
8 | 53,775 | 4 | % | ||||||||
|
Colorado
|
8 | 52,709 | 4 | % | ||||||||
|
Arkansas
|
11 | 44,820 | 3 | % | ||||||||
|
Alabama
|
10 | 44,068 | 3 | % | ||||||||
|
Rhode
Island
|
4 | 39,186 | 3 | % | ||||||||
|
Massachusetts
|
6 | 38,916 | 3 | % | ||||||||
|
Kentucky
|
10 | 36,607 | 2 | % | ||||||||
|
Connecticut
|
5 | 36,156 | 2 | % | ||||||||
|
California
|
11 | 34,756 | 2 | % | ||||||||
|
Remaining
States (3)
|
45 | 231,434 | 15 | % | ||||||||
| 254 | $ | 1,473,970 | 100 | % | ||||||||
|
(1) Investment
amount includes a $19.2 million lease inducement.
(2) Includes
$1.2 million of unamortized principal.
(3) Excludes
one facility classified as held for sale.
|
||||||||||||
|
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
|
4,466 | 163 | 4,629 | 3 | % | ||||||||||||
|
2012
|
3,588 | - | 3,588 | 2 | % | ||||||||||||
|
Thereafter
|
134,880 | 7,177 | 142,057 | 92 | % | ||||||||||||
| $ | 145,843 | $ | 8,778 | $ | 154,621 | 100 | % | ||||||||||
|
(1)
Based on 2008 contractual rents and interest (assumes no annual
escalators).
|
|||||||||||||||||
|
Selected
Facility Data
|
|||||||||||||||||
|
TTM
ending 6/30/08
|
Coverage
Data
|
||||||||||||||||
|
%
Revenue Mix
|
Before
|
After
|
|||||||||||||||
|
Census
|
Private
|
Medicare
|
Mgmt.
Fees
|
Mgmt.
Fees
|
|||||||||||||
|
Total
Portfolio
|
81.3%
|
9.2 | % | 27.8 | % | 2.1 | x | 1.7 | 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 September 30, 2008.
|
Current
Capitalization ($000's)
|
||||||||
|
Outstanding
Balance
|
%
|
|||||||
|
Borrowings
Under Bank Lines
|
$ | 34,000 | 3 | % | ||||
|
Long-Term
Debt Obligations (1)
|
486,560 | 37 | % | |||||
|
Stockholders’
Equity(2)
|
805,090 | 60 | % | |||||
|
Total
Book Capitalization
|
$ | 1,325,650 | 100 | % | ||||
|
(1) Excludes
net discount of $0.3 million on unsecured borrowings.
(2) Excludes
earnings related to Owned and Operated Assets
|
||||||||
|
Leverage
& Performance Ratios(1)
|
||||||||
|
Debt
/ Total Book Cap
|
39.3 | % | ||||||
|
Debt
/ Total Market Cap
|
23.3 | % | ||||||
|
Interest
Coverage:
|
||||||||
|
3rd quarter 2008
|
3.88 | x | ||||||
|
(1) Excludes
earnings related to Owned and Operated
Assets
|
||||||||
|
Debt
Maturities ($000's)
|
Secured
Debt
|
|||||||||||||||||
|
Year
|
Lines
of Credit (1)
|
Other
(2)
|
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; actual borrowings of $34 million at September
30, 2008.
(2) Fully
redeemed on October 21, 2008.
|
||||||||||||||||||
The
following table presents investment activity for the three- and nine-month
periods ending September 30, 2008.
|
Investment
Activity ($000's)
|
||||||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30, 2008
|
September
30, 2008
|
|||||||||||||||
|
$
Amount
|
%
|
$
Amount
|
%
|
|||||||||||||
|
Funding by Investment
Type:
|
||||||||||||||||
|
Real
Property
|
$ | 40,000 | 95 | % | $ | 92,610 | 52 | % | ||||||||
|
Mortgages
|
- | 0 | % | 74,900 | 42 | % | ||||||||||
|
Other
|
1,927 | 5 | % | 10,921 | 6 | % | ||||||||||
|
Total
|
$ | 41,927 | 100 | % | $ | 178,431 | 100 | % | ||||||||