8-K: Current report filing

PRESS RELEASE – FOR IMMEDIATE RELEASE

OMEGA ANNOUNCES FIRST QUARTER 2017 FINANCIAL RESULTS

INCREASED DIVIDEND RATE FOR 19^TH CONSECUTIVE QUARTER

HUNT VALLEY, MARYLAND – May 3, 2017 – Omega Healthcare Investors, Inc. (NYSE:OHI) (the "Company" or "Omega") today announced its results of operations for the three-month period ended March 31, 2017.  The Company reported for the three-month period ended March 31, 2017 net income of $109.1 million, or $0.53 per common share, Funds From Operations ("FFO") of $181.0 million or $0.88 per common share, and Funds Available For Distribution ("FAD") of $159.4 million.

FFO for the first quarter of 2017 includes $3.7 million of non-cash stock-based compensation expense and $2.4 million in provisions for uncollectible accounts.  These costs were partially offset by a $10.4 million one-time contractual settlement.  Adjusted FFO is $0.86 per common share for the three-month period ended March 31, 2017.  FFO, Adjusted FFO and FAD are non-GAAP financial measures.  For more information regarding FFO and Adjusted FFO, see the "Funds From Operations" schedule.

For the three-month period ended March 31, 2017, the Company reported net income of $109.1 million, or $0.53 per common share, on operating revenues of $231.7 million.  This compares to net income of $58.2 million, or $0.29 per common share, on operating revenues of $212.9 million, for the same period in 2016.

The increase in net income for the three-month period ended March 31, 2017 compared to the prior year was primarily due to revenue associated with new investments completed in 2016, a one-time contractual settlement in 2017 and the reduction in impairments on real estate assets and acquisition costs.  This increase in net income was partially offset by $7.6 million in increased depreciation and amortization expense, $1.1 million in incremental general and administrative expenses and $1.0 million in increased stock-based compensation expense.

Operating Revenues and Expenses – Operating revenues for the three-month period ended March 31, 2017 totaled $231.7 million which included $18.1 million of non-cash revenue.

Operating expenses for the three-month period ended March 31, 2017 totaled $92.5 million and were comprised of $70.0 million of depreciation and amortization expense, $8.8 million of general and administrative expense, $7.6 million of impairment on real estate properties, $3.7 million of stock-based compensation expense and $2.4 million in provision for uncollectible accounts.  The $7.6 million and $2.4 million charges were primarily the result of the Company's continued effort to exit certain non-strategic facilities.

Other Income and Expense – Other income and expense for the three-month period ended March 31, 2017 was a net expense of $37.1 million, which was primarily comprised of $45.0 million of interest expense and $2.5 million of amortized deferred financing costs.  The expense was offset by a one-time $10.4 million contractual settlement with an unrelated third party related to a 2012 contingent liability obligation that was resolved in the first quarter of 2017.

Funds From Operations – For the three-month period ended March 31, 2017, FFO was $181.0 million, or $0.88 per common share on 206 million weighted-average common shares outstanding, compared to $153.6 million, or $0.77 per common share on 198 million weighted-average common shares outstanding, for the same period in 2016.

The $181.0 million of FFO for the three-month period ended March 31, 2017 includes the impact of $3.7 million of non-cash stock-based compensation expense and $2.4 million in provision for uncollectible accounts, offset by a $10.4 million non-cash contractual settlement.

The $153.6 million of FFO for the three-month period ended March 31, 2016 includes the impact of $5.1 million in provision for uncollectible accounts, $3.8 million of acquisition costs, $2.8 million of non-cash stock-based compensation expense and $0.3 million of interest refinancing costs.

Adjusted FFO was $176.7 million, or $0.86 per common share, for the three months ended March 31, 2017, compared to $165.4 million, or $0.83 per common share, for the same period in 2016.  For further information see the "Funds From Operations" schedule.

$550 Million Senior Notes and $150 Million Senior Notes – On April 4, 2017, Omega issued (i) $550 million aggregate principal amount of its 4.750% Senior Notes due 2028 (the "2028 Notes") and (ii) an additional $150 million aggregate principal amount of  its existing 4.500% Senior Notes due 2025 (the "2025 Notes," and together with the 2028 Notes collectively, the "Notes").  The 2028 Notes mature on January 15, 2028 and the 2025 Notes mature on January 15, 2025.

The 2028 Notes were sold at an issue price of 98.978% of their face value before the underwriters' discount and the 2025 Notes were sold at an issue price of 99.540% of their face value before the underwriters' discount.  The net proceeds from the offering, after deducting underwriting discounts and expenses, were approximately $690.7 million.  The net proceeds from the Notes offering were used to (i) redeem all of the Company's outstanding $400 million aggregate principal amount of 5.875% Senior Notes due 2024 (the "2024 Notes") on April 28, 2017, (ii) prepay a $200 million senior unsecured incremental term loan facility (the "Tranche A-2 Term Loan Facility") on April 5, 2017 that otherwise would have become due on June 27, 2017, and (iii) repay outstanding borrowings under its revolving credit facility.

$400 Million Senior Notes Redemption – On April 28, 2017, the Company redeemed all of its outstanding 2024 Notes.  As a result of the redemption, during the second quarter of 2017, the Company will record approximately $16.5 million in redemption related costs and write-offs, including $11.8 million for the call premium and $4.7 million in net write-offs associated with unamortized deferred financing costs.

Equity Shelf Program and Dividend Reinvestment and Common Stock Purchase Plan – During the three-month period ended March 31, 2017, the Company sold 0.5 million shares of its common stock generating $14.4 million of gross proceeds.  The following table outlines shares of the Company's common stock issued under its Equity Shelf program and its Dividend Reinvestment and Common Stock Purchase Plan in 2017:

 

(in thousands, except price per share)		Equity Shelf (At-the-Market) Program				Dividend Reinvestment and Common Stock Purchase Program
			Q1 2017
Number of shares			228				239
Average price per share		$	31.12			$	30.67
Gross proceeds		$	7,079			$	7,335

 

$38 Million of New Investments in Q1 2017 – In Q1 2017, the Company completed a new $8 million investment and $30 million in capital renovations and new construction consisting of the following:

$8 Million Acquisition – On January 31, 2017, the Company completed a purchase/leaseback of one assisted living facility ("ALF") for $7.6 million.  The 60 bed ALF, located in Virginia, was added to the existing operator's master lease with an initial annual cash yield of 7.5% with 2.5% annual escalators.

$30 Million Capital Renovation Projects – In addition to the new investment outlined above, in Q1 2017, the Company invested approximately $30 million under its capital renovation and construction-in-progress programs.

During the first quarter of 2017, the Company sold 15 facilities for approximately $45.8 million in net cash proceeds recognizing a gain of approximately $7.4 million.  Eleven of the sold facilities were previously classified as assets held for sale.  In addition, the Company recorded approximately $7.6 million of impairments on three facilities, one of which was reclassified to assets held for sale on March 31, 2017.

As of March 31, 2017, the Company had nine facilities, totaling $23.2 million, classified as assets held for sale.  The Company expects to sell these facilities over the next few quarters.

On April 13, 2017, the Board of Directors declared a common stock dividend of $0.63 per share, increasing the quarterly common dividend by $0.01 per share over the prior quarter, to be paid May 15, 2017 to common stockholders of record on May 1, 2017.

The Company affirmed its 2017 annual Adjusted FFO available to common stockholders to be between $3.40 and $3.44 per diluted share.  The Company's 2017 FAD guidance and reconciliation to projected net income can be found in the Company's First Quarter 2017 Financial Supplement located on the Company's website.  The following table presents a reconciliation of Omega's guidance regarding Adjusted FFO to projected GAAP earnings.

Note: All per share numbers rounded to 2 decimals.

The Company's Adjusted FFO guidance for 2017 includes approximately $100 million of planned capital renovation projects; however, it excludes the impact of additional new investments.  It also excludes the impact of gains and losses from the sale of assets, revenue from divestitures, certain revenue and expense items, interest refinancing expense, capital transactions, acquisition costs, provision for uncollectible accounts, and stock-based compensation expense.  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 guidance is based on a number of assumptions, which are subject to change and many of which are outside the Company's control.  If actual results vary from these assumptions, the Company's expectations may change.  Without limiting the generality of the foregoing, the timing and completion of acquisitions, divestitures, capital and financing transactions, and variations in stock-based compensation expense may cause actual results to vary materially from our current expectations. There can be no assurance that the Company will achieve its projected results.

The Company will be conducting a conference call on Thursday, May 4, 2017 at 10 a.m. Eastern to review the Company's 2017 first quarter results and current developments.  Analysts and investors within the United States interested in participating are invited to call (877) 511-2891.  The Canadian toll-free dial-in number is (855) 669-9657.  All other international participants can use the dial-in number (412) 902-4140.  Ask the operator to be connected to the "Omega Healthcare's First Quarter 2017 Earnings Call."

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.

*   *   *   *   *   *

Omega is a real estate investment trust investing in and providing financing to the long-term care industry. As of March 31, 2017, Omega has a portfolio of investments that includes approximately 1,000 properties located in 42 states and the United Kingdom and operated by 77 different operators.

FOR FURTHER INFORMATION, CONTACT

Bob Stephenson, CFO at (410) 427-1700

________________________

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding Omega's or its tenants', operators', borrowers' or managers' expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger integration, growth opportunities, expected lease income, continued qualification as a REIT, plans and objectives of management for future operations and statements that include words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will" and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from Omega's expectations. Omega does not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Omega's 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 Omega'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; (iii) changes in the financial position of Omega's operators; (iv) the ability of any of Omega's operators in bankruptcy to reject unexpired lease obligations, modify the terms of Omega's mortgages and impede the ability of 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) changes in Omega's credit ratings and the ratings of its debt securities; (vii) competition in the financing of healthcare facilities; (viii) Omega's ability to maintain its status as a REIT; (ix) Omega's ability to manage, re-lease or sell any owned and operated facilities, if any; (x) Omega's ability to sell closed or foreclosed assets on a timely basis and on terms that allow Omega to realize the carrying value of these assets; (xi) the effect of economic and market conditions generally, and particularly in the healthcare industry; (xii) the potential impact of changes in the SNF and ALF market or local real estate conditions on the Company's ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to redeploy the proceeds therefrom on favorable terms and (xiii) other factors identified in Omega's filings with the Securities and Exchange Commission. Statements regarding future events and developments and Omega's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward looking statements. Omega undertakes no obligation to update any forward-looking statements contained in this announcement.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

OMEGA HEALTHCARE INVESTORS, INC.

FUNDS FROM OPERATIONS

Unaudited

(in thousands, except per share amounts)

Funds From Operations ("FFO"), Adjusted FFO and FAD are non-GAAP financial measures.  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 exclude 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 include 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 (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairments on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.  The Company believes that FFO, Adjusted FFO and FAD are important supplemental measures 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 described 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 excluding the impact of non-cash stock-based compensation and certain revenue and expense items identified above. FAD is calculated as Adjusted FFO less non-cash interest expense and non-cash revenue, such as straight-line rent. The Company believes these measures provide an enhanced measure of the operating performance of the Company's core portfolio as a REIT. The Company's computation of Adjusted FFO and FAD are not comparable to the NAREIT definition of FFO or to similar measures reported by other REITs, but the Company believes that they are appropriate measures for this Company.

The Company uses these non-GAAP measures among the criteria to measure the operating performance of its business.  The Company also uses Adjusted FFO among the performance metrics for performance-based compensation of officers. The Company further believes that by excluding the effect of depreciation, amortization, impairments on real estate assets 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 these measures to assist the users of its financial statements in analyzing its operating performance and not as measures of liquidity or cash flow. These non-GAAP measures are not measures of financial performance under GAAP and should not be considered as measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP.  Investors and potential investors in the Company's securities should not rely on these non-GAAP measures as substitutes for any GAAP measure, including net income.

The following tables present selected portfolio information, including operator and geographic concentrations, and revenue maturities for the period ended March 31, 2017:

The following tables present operator revenue mix, census and coverage data based on information provided by our operators as of December 31, 2016:

(1) Based on available (operating) beds.

The following table presents a debt maturity schedule as of April 30, 2017:

The following table presents investment activity for the three–month period ended March 31, 2017: